14564 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Part 242 

[Release No. 34–74244; File No. S7–34–10] 

RIN 3235–AK80 

Regulation SBSR—Reporting and 

Dissemination of Security-Based Swap 

Information 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Final rule. 

SUMMARY: In accordance with Section 

763 and Section 766 of Title VII (‘‘Title 

VII’’) of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

(the ‘‘Dodd-Frank Act’’), the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) is adopting Regulation 

SBSR—Reporting and Dissemination of 

Security-Based Swap Information 

(‘‘Regulation SBSR’’) under the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’). Regulation SBSR 

provides for the reporting of securitybased swap information to registered 

security-based swap data repositories 

(‘‘registered SDRs’’) or the Commission, 

and the public dissemination of 

security-based swap transaction, 

volume, and pricing information by 

registered SDRs. Registered SDRs are 

required to establish and maintain 

certain policies and procedures 

regarding how transaction data are 

reported and disseminated, and 

participants of registered SDRs that are 

registered security-based swap dealers 

or registered major security-based swap 

participants are required to establish 

and maintain policies and procedures 

that are reasonably designed to ensure 

that they comply with applicable 

reporting obligations. Regulation SBSR 

contains provisions that address the 

application of the regulatory reporting 

and public dissemination requirements 

to cross-border security-based swap 

activity as well as provisions for 

permitting market participants to satisfy 

these requirements through substituted 

compliance. Finally, Regulation SBSR 

will require a registered SDR to register 

with the Commission as a securities 

information processor. 

DATES: Effective Date: May 18, 2015. 

Compliance Date: For Rules 900, 907, 

and 909 of Regulation SBSR, the 

compliance date is the effective date. 

For Rules 901, 902, 903, 904, 905, 906, 

and 908 of Regulation SBSR, 

compliance dates are being proposed in 

a separate release, 34–74245 (February 

11, 2015). 

FOR FURTHER INFORMATION CONTACT: 

Michael Gaw, Assistant Director, at 

(202) 551–5602; Natasha Cowen, Special 

Counsel, at (202) 551–5652; Yvonne 

Fraticelli, Special Counsel, at (202) 551– 

5654; George Gilbert, Special Counsel, 

at (202) 551–5677; David Michehl, 

Special Counsel, at (202) 551–5627; 

Geoffrey Pemble, Special Counsel, at 

(202) 551–5628; Mia Zur, Special 

Counsel, at (202) 551–5638; all of the 

Division of Trading and Markets, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549–7010. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Introduction 

A. Summary of Final Regulation SBSR 

B. Role of Registered SDRs 

C. Unique Identification Codes 

D. Public Dissemination and Block Trades 

E. Cross-Border Issues 

F. Compliance Dates 

II. Information Required To Be Reported 

A. Primary Trade Information—Rule 901(c) 

1. Description of Re-Proposed Rule 

2. Discussion of Final Rule 901(c) and 

Response to Comments 

a. General Approach to Required 

Information 

b. Rule 901(c)(1) 

i. Elimination of the Reference to Equity 

Derivatives 

ii. Product ID 

iii. Rule 901(c)(1)(i) 

iv. Rules 901(c)(1)(ii) and (iii) 

v. Rule 901(c)(1)(iv) 

vi. Rule 901(c)(1)(v) 

c. Rule 901(c)(2) 

d. Rule 901(c)(3) 

e. Rule 901(c)(4) 

f. Rule 901(c)(5) 

g. Rule 901(c)(6) 

h. Rule 901(c)(7) 

B. Rule 901(d)—Secondary Trade 

Information 

1. Description of Proposed and ReProposed Rule 

2. Final Rule 901(d) 

3. Discussion of Final Rule 901(d) and 

Response to Comments 

a. Rule 901(d)(1)—Counterparty IDs 

b. Rule 901(d)(2)—Additional UICs 

i. Branch ID and Execution Agent ID 

ii. Revised Defined Terms in Rule 901(d)(2) 

iii. Response to Comments 

c. Rule 901(d)(3)—Payment Stream 

Information 

d. Rule 901(d)(4)—Titles and Dates of 

Agreements 

e. Rule 901(d)(5)—Other Data Elements 

f. Rule 901(d)(6)—Submission to Clearing 

g. Rule 901(d)(7)—Indication of Use of 

End-User Exception 

h. Rule 901(d)(8)—Description of 

Settlement Terms 

i. Rule 901(d)(9)—Platform ID 

j. Rule 901(d)(10)—Transaction ID of Any 

Related Transaction 

k. Information That Is Not Required by 

Rule 901(d) 

C. Reporting of Historical Security-Based 

Swaps 

1. Statutory Basis and Proposed Rule 

2. Final Rule and Discussion of Comments 

Received 

III. Where To Report Data 

A. All Reports Must Be Submitted to a 

Registered SDR 

B. Duties of Registered SDR Upon 

Receiving Transaction Reports 

1. Rule 901(f)—Time Stamps 

2. Rule 901(g)—Transaction IDs 

IV. How To Report Data—Rules 901(h) and 

907 

A. Introduction 

B. Rules 907(a)(1), 907(a)(2), and 901(h)— 

Data Elements and Formats 

C. Rule 907(a)(6)—Ultimate Parent IDs and 

Counterparty IDs 

V. Who Reports—Rule 901(a) 

A. Proposed and Re-Proposed Rule 901(a) 

B. Final Rule 901(a) 

1. Reporting Hierarchy 

2. Other Security-Based Swaps 

C. Discussion of Comments and Basis for 

Final Rule 

1. Application of the Reporting Hierarchy 

to Sides 

2. Reporting by Agents 

3. Reporting Clearing Transactions 

4. Reporting by a Platform 

5. Reporting of a Security-Based Swap 

Resulting From a Life Cycle Event 

VI. Public Dissemination—Rule 902 

A. Background 

B. Registered SDR’s Duty To Disseminate— 

Rule 902(a) 

1. Format of Disseminated Data 

2. Timing of Public Dissemination 

3. Dissemination of Life Cycle Events 

4. Correction of Minor Drafting Error 

5. Use of Agents by a Registered SDR To 

Carry out the Public Dissemination 

Function 

C. Definition of ‘‘Publicly Disseminate’’ 

D. Exclusions From Public 

Dissemination—Rule 902(c) 

1. Discussion of Final Rule 

2. Other Exclusions From Public 

Dissemination Sought by Commenters 

a. Customized Security-Based Swaps 

b. Inter-Affiliate Transactions 

c. Security-Based Swaps Entered Into in 

Connection With a Clearing Member’s 

Default 

d. Total Return Security-Based Swaps 

e. Transactions Resulting From Portfolio 

Compression 

f. Thinly Traded Products 

E. Dissemination of Block Transactions— 

Rule 902(b) 

F. The Embargo Rule—Rule 902(d) 

G. Condition Flags—Rule 907(a)(4) 

VII. Block Trades and the Interim Phase of 

Regulation SBSR 

A. Proposed Rules Regarding Block Trades 

B. Potential Impact on Liquidity 

1. T+24 Hour Reporting for All 

Transactions 

2. Reporting Timeframe for Trades 

Executed Prior to Weekends or U.S. 

Federal Holidays 

3. Other Revisions To Accommodate the 

Interim Approach 

4. Dissemination of Notional Amount 

5. Analysis Period 

VIII. Reporting and Public Dissemination of 

Security-Based Swaps Involving 

Allocation 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14565 

A. Discussion of Comments Received and 

Application of Regulation SBSR 

B. Example: Reporting and Public 

Dissemination for an Uncleared Bunched 

Order Execution 

1. Reporting the Executed Bunched Order 

2. Reporting the Allocations 

IX. Inter-Affiliate Security-Based Swaps 

A. Background and Summary of Final Rule 

B. Discussion of Comments 

1. Regulatory Reporting of Inter-Affiliate 

Security-Based Swaps 

2. Public Dissemination of Inter-Affiliate 

Security-Based Swaps 

X. Rule 903—Use of Codes 

A. Proposed Treatment of Coded 

Information 

B. Comments Received and Final Rule 903 

1. Relocation of UIC Provisions Into Rule 

903 

2. Comments Regarding UICs and Final 

Rule 903(a) 

3. Comments on Proposed Rule 903 and 

Final Rule 903(b) 

C. Policies and Procedures of Registered 

SDRs Relating to UICs 

XI. Operating Hours of Registered SDRs— 

Rule 904 

XII. Subsequent Revisions to Reported 

Security-Based Swap Information 

A. Reporting Life Cycle Events—Rule 

901(e) 

1. Description of Proposal and Re-Proposal 

2. Final Rules Relating to Life Cycle Events 

and Response to Comments 

a. General Comment and Definition of 

‘‘Life Cycle Event’’ 

b. Final Rule 901(e)(1) 

c. Final Rule 901(e)(2) 

d. Reporting Timeframe for Life Cycle 

Events 

e. Re-Proposed Rule 901(e)(2) 

f. Additional Comments Regarding Life 

Cycle Event Reporting 

B. Error Corrections—Rule 905 

C. Policies and Procedures for Reporting 

Life Cycle Events and Corrections 

XIII. Other Duties of Participants 

A. Duties of Non-Reporting Sides To 

Report Certain Information—Rule 906(a) 

B. Duty To Provide Ultimate Parent and 

Affiliate Information to Registered 

SDRs—Rule 906(b) 

C. Policies and Procedures of Registered 

Security-Based Swap Dealers and Major 

Security-Based Swap Participants To 

Support Reporting—Rule 906(c) 

XIV. Other Aspects of Policies and 

Procedures of Registered SDRs 

A. Public Availability of Policies and 

Procedures 

B. Updating of Policies and Procedures 

C. Provision of Certain Reports to the 

Commission 

XV. Rule 908—Cross-Border Reach of 

Regulation SBSR 

A. General Considerations 

B. Definition of ‘‘U.S. Person’’ 

C. Scope of Security-Based Swap 

Transactions Covered by Requirements 

of Regulation SBSR—Rule 908(a) 

1. Transactions Involving a Direct 

Counterparty That Is a U.S. Person 

2. Transactions Conducted Through a 

Foreign Branch or Office 

3. Transactions Guaranteed by a U.S. 

Person 

4. Transactions Accepted for Clearing by a 

U.S. Clearing Agency 

5. Transactions Involving a Registered 

Security-Based Swap Dealer or 

Registered Major Security-Based Swap 

Participant That Is Not a U.S. Person 

6. No Final Rule Regarding Transactions 

Conducted Within the United States 

D. Limitations on Counterparty Reporting 

Obligations—Rule 908(b) 

E. Substituted Compliance—Rule 908(c) 

1. General Considerations 

2. Substituted Compliance Procedure— 

Rule 908(c)(2)(i) 

3 Security-Based Swaps Eligible for 

Substituted Compliance—Rule 908(c)(1) 

4. Requests for Substituted Compliance— 

Rule 908(c)(2)(ii) 

5 Findings Necessary for Substituted 

Compliance—Rule 908(c)(2)(iii) 

a. Data Element Comparability—Rule 

908(c)(2)(iii)(A) 

b. Timeframe of Reporting and Public 

Dissemination—Rule 908(c)(2)(iii)(B) 

c. Direct Electronic Access—Rule 

908(c)(2)(iii)(C) 

d. Trade Repository Capabilities—Rule 

908(c)(2)(iii)(D) 

e. Memoranda of Understanding—Rule 

908(c)(2)(iv) 

f. Modification or Withdrawal of 

Substituted Compliance Order 

6. Consideration of Regulatory Reporting 

and Public Dissemination in the 

Commission’s Analysis of Substituted 

Compliance 

XVI. Other Cross-Border Issues 

A. Foreign Public Sector Financial 

Institutions 

B. Foreign Privacy Laws Versus Duty To 

Report Counterparty IDs 

C. Antifraud Authority 

D. International Coordination Generally 

XVII. Rule 909—SIP Registration 

XVIII. Constitutional Questions About 

Reporting and Public Dissemination 

XIX. What Happens If There Are Multiple 

SDRs? 

XX. Section 31 Fees 

XXI. Paperwork Reduction Act 

A. Definitions—Rule 900 

B. Reporting Obligations—Rule 901 

1. Summary of Collection of Information 

2. Use of Information 

3. Respondents 

4. Total Initial and Annual Reporting and 

Recordkeeping Burdens 

a. Baseline Burdens 

b. Burdens of Final Rule 901 

5. Recordkeeping Requirements 

6. Collection of Information Is Mandatory 

7. Confidentiality of Responses to 

Collection of Information 

C. Public Dissemination of Transaction 

Reports—Rule 902 

1. Summary of Collection of Information 

2. Use of Information 

3. Respondents 

4. Total Initial and Annual Reporting and 

Recordkeeping Burdens 

5. Recordkeeping Requirements 

6. Collection of Information Is Mandatory 

7. Confidentiality of Responses to 

Collection of Information 

D. Coded Information—Rule 903 

1. Summary of Collection of Information 

2. Use of Information 

3. Respondents 

4. Total Initial and Annual Reporting and 

Recordkeeping Burdens 

5. Recordkeeping Requirements 

6. Collection of Information Is Mandatory 

7. Confidentiality of Responses to 

Collection of Information 

E. Operating Hours of Registered SDRs— 

Rule 904 

1. Summary of Collection of Information 

2. Use of Information 

3. Respondents 

4. Total Initial and Annual Reporting and 

Recordkeeping Burdens 

5. Recordkeeping Requirements 

6. Collection of Information Is Mandatory 

7. Confidentiality of Responses to 

Collection of Information 

F. Correction of Errors in Security-Based 

Swap Information—Rule 905 

1. Summary of Collection of Information 

2. Use of Information 

3. Respondents 

4. Total Initial and Annual Reporting and 

Recordkeeping Burdens 

5. Recordkeeping Requirements 

6. Collection of Information Is Mandatory 

7. Confidentiality of Responses to 

Collection of Information 

G. Other Duties of Participants—Rule 906 

1. Summary of Collection of Information 

2. Use of Information 

3. Respondents 

4. Total Initial and Annual Reporting and 

Recordkeeping Burdens 

a. For Registered SDRs 

b. For Participants 

i. Rule 906(a) 

ii. Rule 906(b) 

iii. Rule 906(c) 

5. Recordkeeping Requirements 

6. Collection of Information Is Mandatory 

7. Confidentiality of Responses to 

Collection of Information 

H. Policies and Procedures of Registered 

SDRs—Rule 907 

1. Summary of Collection of Information 

2. Use of Information 

3. Respondents 

4. Total Initial and Annual Reporting and 

Recordkeeping Burdens 

5. Recordkeeping Requirements 

6. Collection of Information Is Mandatory 

7. Confidentiality of Responses to 

Collection of Information 

I. Cross-Border Matters—Rule 908 

1. Summary of Collection of Information 

2. Use of Information 

3. Respondents 

4. Total Initial and Annual Reporting and 

Recordkeeping Burdens 

5. Recordkeeping Requirements 

6. Collection of Information Is Mandatory 

7. Confidentiality of Responses to 

Collection of Information 

J. Registration of SDRs as Securities 

Information Processors—Rule 909 

XXII. Economic Analysis 

A. Broad Economic Considerations 

B. Baseline 

1. Current Security-Based Swap Market 

a. Security-Based Swap Market 

Participants 

i. Participant Domiciles 

ii. Current Estimates of Dealers and Major 

Participants 

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14566 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

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

2See Public Law 111–203, Preamble. 

3See Securities Exchange Act Release No. 63346 

(November 19, 2010), 75 FR 75207 (December 2, 

2010) (‘‘Regulation SBSR Proposing Release’’). 

4See Securities Exchange Act Release No. 69490 

(May 1, 2013), 78 FR 30967 (May 23, 2013) (‘‘CrossBorder Proposing Release’’). 

5See Securities Exchange Act Release No. 69491 

(May 1, 2013), 78 FR 30799 (May 23, 2013). 

6However, one comment that was specifically 

directed to the comment file for the Regulation 

SBSR Proposing Release exclusively addressed 

issues related to clearing ‘‘debt swaps.’’ See Hamlet 

Letter. Because the subject matter of this comment 

letter is beyond the scope of Regulation SBSR, the 

Commission is not addressing this comment. 

7See Securities Exchange Act Release No. 74246 

(February 11, 2015). 8See Securities Exchange Act Release No. 74245 

(February 11, 2015). 9 15 U.S.C. 78a et seq. All references in this 

release to the Exchange Act refer to the Securities 

Exchange Act of 1934. 

10 If any of the provisions 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. 

11A ‘‘clearing transaction’’ is defined as ‘‘a 

security-based swap that has a registered clearing 

agency as a direct counterparty.’’ See Rule 900(g). 

12A ‘‘platform’’ is defined as a ‘‘national 

securities exchange or security-based swap 

execution facility that is registered or exempt from 

registration.’’ See Rule 900(v); infra note 199 and 

accompanying text (discussing the definition of 

‘‘platform’’). 

iii. Security-Based Swap Data Repositories 

b. Security-Based Swap Transaction 

Activity 

c. Counterparty Reporting 

d. Sources of Security-Based Swap 

Information 

2. Global Regulatory Efforts 

a. Dealer and Major Swap Participant 

Definitions for Cross-Border SecurityBased Swaps 

b. International Regulatory Developments 

3. Cross-Market Participation 

C. Programmatic Costs and Benefits of 

Regulation SBSR 

1. Regulatory Reporting 

a. Programmatic Benefits 

b. Programmatic Costs 

i. Reporting Security-Based Swap 

Transactions to a Registered SDR—Rule 

901 

ii. Registered SDRs—Receipt and 

Processing of Security-Based Swap 

Transactions—Rule 901 

2. Public Dissemination 

a. Programmatic Benefits 

b. Programmatic Costs 

c. Alternative Approaches to Public 

Dissemination 

3. Interim Phase for Reporting and Public 

Dissemination 

a. Programmatic Benefits 

b. Programmatic Costs 

4. Use of UICs 

a. Programmatic Benefits 

b. Programmatic Costs 

5. Cross-Border Aspects of Regulation 

SBSR 

a. Programmatic Benefits 

b. Programmatic Costs 

c. Assessment Costs 

6. Other Programmatic Effects of 

Regulation SBSR 

a. Operating Hours of Registered SDRs— 

Rule 904 

b. Error Reporting—Rule 905 

c. Other Participants’ Duties—Rule 906 

d. Registered SDR Policies and 

Procedures—Rule 907 

e. SIP Registration by Registered SDRs— 

Rule 909 

7. Definitions—Rule 900 

D. Effects on Efficiency, Competition, and 

Capital Formation 

1. Introduction 

2. Regulatory Reporting 

3. Public Dissemination 

4. Implementation of Regulatory Reporting 

and Public Dissemination 

a. Role of Registered SDRs 

b. Interim Phase of Reporting Requirements 

and Block Rules 

c. Use of UICs and Rule 903 

d. Rules Assigning the Duty To Report 

e. Embargo Rule 

5. Impact of Cross-Border Aspects of 

Regulation SBSR 

a. General Considerations 

b. Regulatory Reporting and Public 

Dissemination 

c. Substituted Compliance 

E. Aggregate Quantifiable Total Costs 

XXIII. Regulatory Flexibility Act Certification 

XXIV. Statutory Basis and Text of Final Rules 

I. Introduction 

The Commission is adopting 

Regulation SBSR, which implements the 

requirements for regulatory reporting 

and public dissemination of securitybased swap transactions set forth in 

Title VII of the Dodd-Frank Act.1 The 

Dodd-Frank Act was enacted, among 

other reasons, to promote the financial 

stability of the United States by 

improving accountability and 

transparency in the financial system.2

The 2008 financial crisis highlighted 

significant issues in the over-thecounter (‘‘OTC’’) derivatives markets, 

which experienced dramatic growth in 

the years leading up to the financial 

crisis and are capable of affecting 

significant sectors of the U.S. economy. 

Title VII of the Dodd-Frank Act provides 

for a comprehensive new regulatory 

framework for swaps and security-based 

swaps, by, among other things: (1) 

Providing for the registration and 

comprehensive regulation of swap 

dealers, security-based swap dealers, 

major swap participants, and major 

security-based swap participants; (2) 

imposing clearing and trade execution 

requirements on swaps and securitybased swaps, subject to certain 

exceptions; (3) creating recordkeeping, 

regulatory reporting, and public 

dissemination requirements for swaps 

and security-based swaps; and (4) 

enhancing the rulemaking and 

enforcement authorities of the 

Commission and the Commodity 

Futures Trading Commission (‘‘CFTC’’). 

The Commission initially proposed 

Regulation SBSR in November 2010.3 In 

May 2013, the Commission re-proposed 

the entirety of Regulation SBSR as part 

of the Cross-Border Proposing Release 4

and re-opened the comment period for 

all of its other outstanding Title VII 

rulemakings.5

The Commission received 86 

comments that were specifically 

directed to the comment file (File No. 

S7–34–10) for the Regulation SBSR 

Proposing Release, of which 38 were 

comments submitted in response to the 

re-opening of the comment period.6 Of 

the comments directed to the comment 

file (File No. S7–02–13) for the CrossBorder Proposing Release, six 

referenced Regulation SBSR 

specifically, while many others 

addressed cross-border issues generally, 

without specifically referring to 

Regulation SBSR. The Commission also 

has considered other comments 

germane to regulatory reporting and/or 

public dissemination of security-based 

swaps that were submitted in other 

contexts. The comments discussed in 

this release are listed in the Appendix 

to the release. 

The Commission is now adopting 

Regulation SBSR largely as re-proposed, 

with certain revisions suggested by 

commenters or designed to clarify the 

rules. In addition, in separate releases, 

as discussed below, the Commission 

also is adopting rules relating to SDR 

registration, duties, and core principles 

(the ‘‘SDR Adopting Release’’) 7 and is 

proposing certain rules, amendments, 

and guidance relating to Regulation 

SBSR (‘‘Regulation SBSR Proposed 

Amendments Release’’).8 The principal 

aspects of Regulation SBSR—which, as 

adopted, consists of ten rules, Rules 900 

to 909 under the Exchange Act 9—are 

briefly described immediately below. A 

detailed discussion of each rule within 

Regulation SBSR, as well as how these 

rules interact with the rules in the SDR 

Adopting Release, follows in the body of 

this release.10

A. Summary of Final Regulation SBSR 

Rule 900, as adopted, sets forth the 

definitions used throughout Regulation 

SBSR. The defined terms are discussed 

in connection with the rules in which 

they appear. 

Rule 901(a), as adopted, assigns the 

reporting obligation for all securitybased swaps except for the following: 

(1) Clearing transactions; 11 (2) securitybased swap transactions executed on a 

platform 12 that will be submitted to 

clearing; (3) transactions where there is 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14567 

13A ‘‘registered security-based swap data 

repository’’ is defined as ‘‘a person that is registered 

with the Commission as a security-based swap data 

repository pursuant to Section 13(n) of the 

Exchange Act (15 U.S.C. 78m(n)) and any rules or 

regulations thereunder.’’ See Rule 900(ff). 

14 15 U.S.C. 78m(m)(1)(B). 

15 15 U.S.C. 78m(m)(1)(C). 

based swap dealer, or registered major 

security-based swap participant on 

either side; and (4) transactions where 

there is no registered security-based 

swap dealer or registered major securitybased swap participant on either side 

and there is a U.S. person on only one 

side. For purposes of this release, the 

Commission uses the term ‘‘covered 

transactions’’ to refer to all securitybased swaps other than those listed in 

the four categories above; all covered 

transactions shall be reported in the 

manner set forth in Regulation SBSR, as 

adopted. For covered transactions, Rule 

901(a) assigns the duty to report to one 

side of the transaction (the ‘‘reporting 

side’’). The ‘‘reporting hierarchy’’ 

established in Rule 901(a) is based, 

where possible, on the registration 

status (e.g., registration as a securitybased swap dealer or major securitybased swap participant) of the direct 

and indirect counterparties to the 

transaction. In the Regulation SBSR 

Proposed Amendments Release, the 

Commission is proposing amendments 

to Rule 901(a) that would impose 

reporting obligations for security-based 

swaps in categories one and two above 

(i.e., clearing transactions and securitybased swap transactions executed on a 

platform and that will be submitted to 

clearing). 

Rule 901(b), as adopted, provides that 

if there is no registered security-based 

swap data repository (‘‘SDR’’) that will 

accept the report, the reporting side 

must report the transaction to the 

Commission.13

Rule 901(c) sets forth the primary 

trade information and Rule 901(d) sets 

forth the secondary trade information 

that must be reported. For most 

transactions, the Rule 901(c) 

information will be publicly 

disseminated. Information reported 

pursuant to Rule 901(d) is for regulatory 

purposes only and will not be publicly 

disseminated. 

Rule 901(e) requires the reporting of 

life cycle events to the entity to which 

the original transaction was reported. 

Rule 901(i) requires reporting, to the 

extent the information is available, of 

security-based swaps entered into before 

the date of enactment of the Dodd-Frank 

Act (‘‘pre-enactment security-based 

swaps’’) and security-based swaps 

entered into after the date of enactment 

but before Rule 901 becomes fully 

operative (‘‘transitional security-based 

swaps’’). 

B. Role of Registered SDRs 

Rule 902(a) requires a registered SDR 

to publicly disseminate a transaction 

report immediately upon receipt of 

information about a security-based 

swap, except in certain limited 

circumstances. Pursuant to Rule 902(a), 

the published transaction report must 

consist of all the information reported 

pursuant to Rule 901(c), plus any 

condition flag contemplated by the 

registered SDR’s policies and 

procedures that are required by Rule 

907. Rule 901(f) requires a registered 

SDR to timestamp any information 

submitted to it pursuant to Rule 901(c), 

(d), (e), or (i), and Rule 901(g) requires 

a registered SDR to assign a transaction 

ID to each security-based swap. 

Rule 907(a) requires a registered SDR 

to establish and maintain written 

policies and procedures that detail how 

it will receive and publicly disseminate 

security-based swap transaction 

information. For example, Rule 

907(a)(1) requires policies and 

procedures that enumerate the specific 

data elements of a security-based swap 

that must be reported to the registered 

SDR, including the data elements 

specified in Rules 901(c) and 901(d). 

Rule 907(a)(2) requires policies and 

procedures that specify one or more 

acceptable data formats, connectivity 

requirements, and other protocols for 

submitting information. Rules 907(a)(3) 

and 907(a)(4) require policies and 

procedures for assigning condition flags 

to the appropriate transaction reports. In 

addition, Rule 907(c) requires a 

registered SDR to make its policies and 

procedures available on its Web site. 

Rule 907(e) requires a registered SDR 

to provide to the Commission, upon 

request, information or reports related to 

the timeliness, accuracy, and 

completeness of data reported to it 

pursuant to Regulation SBSR and the 

registered SDR’s policies and 

procedures established thereunder. 

Finally, Rule 909 requires a registered 

SDR also to register with the 

Commission as a securities information 

processor (‘‘SIP’’). 

C. Unique Identification Codes 

Rule 903 requires a registered SDR to 

use ‘‘unique identification codes’’ 

(‘‘UICs’’) to specifically identify a 

variety of persons and things. The 

following UICs are specifically required 

by Regulation SBSR: Counterparty ID, 

product ID, transaction ID, broker ID, 

branch ID, trading desk ID, trader ID, 

platform ID, and ultimate parent ID. 

Rule 906(b) requires each participant 

of a registered SDR to provide the 

registered SDR with information 

sufficient to identify the participant’s 

ultimate parent(s) and any affiliate(s) of 

the participant that are also participants 

of the registered SDR. 

Rule 903(a) provides that, if an 

internationally recognized standardssetting system (‘‘IRSS’’) meeting certain 

criteria is recognized by the 

Commission and has assigned a UIC to 

a person, unit of a person, or product (or 

has endorsed a methodology for 

assigning transaction IDs), that UIC 

must be used by all registered SDRs and 

their participants in carrying out duties 

under Regulation SBSR. If the 

Commission has not recognized an 

IRSS—or if the Commission-recognized 

IRSS has not assigned a UIC to a 

particular person or thing—the 

registered SDR is required to assign a 

UIC using its own methodology. 

Additionally, Rule 903(a) provides that, 

if the Commission has recognized such 

a system that assigns UICs to persons, 

each participant of a registered SDR 

shall obtain a UIC from or through that 

system for identifying itself, and each 

participant that acts as a guarantor of a 

direct counterparty’s performance of 

any obligation under a security-based 

swap that is subject to Rule 908(a) shall, 

if the direct counterparty has not 

already done so, obtain a UIC for 

identifying the direct counterparty from 

or through that system, if that system 

permits third-party registration without 

a requirement to obtain prior permission 

of the direct counterparty. As discussed 

further in Section X(B)(2), infra, the 

Commission recognizes the Global LEI 

System (‘‘GLEIS’’), administered by the 

Regulatory Oversight Committee 

(‘‘ROC’’), as meeting the criteria 

specified in Rule 903. The Commission 

may, on its own initiative or upon 

request, evaluate other IRSSs and decide 

whether to recognize such other 

systems. 

D. Public Dissemination and Block 

Trades 

Section 13(m)(1)(B) of the Exchange 

Act 14 authorizes the Commission ‘‘to 

make security-based swap transaction 

and pricing data available to the public 

in such form and at such times as the 

Commission determines appropriate to 

enhance price discovery.’’ Section 

13(m)(1)(C) of the Exchange Act 15

identifies four categories of securitybased swaps and authorizes the 

Commission ‘‘to provide by rule for the 

public availability of security-based 

swap transaction, volume, and pricing 

data.’’ Section 13(m)(1)(C) further 

provides that, with respect to each of 

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14568 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

16 15 U.S.C. 78m(m)(1)(D). 

17 15 U.S.C. 78m(n)(5)(D)(ii). 

18 15 U.S.C. 13m(m)(1)(E). 

19 15 U.S.C. 13m(m)(1)(E)(iv). 

20As discussed in more detail in Section VII(B), 

infra, if reporting would take place on a nonbusiness day (i.e., a Saturday, Sunday or U.S. 

federal holiday), reporting would instead be 

required by the same time on the next business day. 

21The Commission anticipates seeking further 

public comment on the application of Regulation 

SBSR to: (1) Security-based swaps where there is no 

U.S. person, registered security-based swap dealer, 

or registered major security-based swap participant 

on either side; and (2) transactions where there is 

no registered security-based swap dealer or 

registered major security-based swap participant on 

either side and there is a U.S. person on only one 

side. 

22See also Section II(B)(3) and note 139, infra 

(describing the type of guarantees that could cause 

a transaction to be subject to Regulation SBSR). 

23Thus, Regulation SBSR, as adopted, consists of 

Rules 900 through 909 under the Exchange Act. 

Conforming changes have been made throughout 

Regulation SBSR to replace references to 

‘‘§§ 242.900 through 242.911’’ to ‘‘§§ 242.900 

through 242.909.’’ In addition, the defined terms 

‘‘registration date’’ and ‘‘phase-in period’’ which 

appeared in re-proposed Rules 910 and 911, 

respectively, are not being defined in final Rule 

900. 

these four categories of security-based 

swaps, ‘‘the Commission shall require 

real-time public reporting for such 

transactions.’’ Section 13(m)(1)(D) of the 

Exchange Act 16 provides that the 

Commission may require registered 

entities (such as registered SDRs) to 

publicly disseminate the security-based 

swap transaction and pricing data 

required to be reported under Section 

13(m) of the Exchange Act. Finally, 

Section 13(n)(5)(D)(ii) of the Exchange 

Act 17 requires SDRs to provide securitybased swap information ‘‘in such form 

and at such frequency as the 

Commission may require to comply 

with public reporting requirements.’’ 

Under Rule 902, as adopted, a 

registered SDR must, immediately upon 

receiving a transaction report of a 

security-based swap, publicly 

disseminate the primary trade 

information of that transaction, along 

with any condition flags. 

In addition, Section 13(m)(1)(E) of the 

Exchange Act 18 requires the 

Commission rule for real-time public 

dissemination of cleared security-based 

swaps to: (1) ‘‘specify the criteria for 

determining what constitutes a large 

notional security-based swap 

transaction (block trade) for particular 

markets and contracts’’; and (2) ‘‘specify 

the appropriate time delay for reporting 

large notional security-based swap 

transactions (block trades) to the 

public.’’ Section 13m(1)(E)(iv) of the 

Exchange Act 19 requires the 

Commission rule for real-time public 

dissemination of security-based swaps 

that are not cleared at a registered 

clearing agency but reported to a 

registered SDR to contain provisions 

that ‘‘take into account whether the 

public disclosure [of transaction and 

pricing data for security-based swaps] 

will materially reduce market 

liquidity.’’ 

As discussed in detail below, in 

response to the comments received and 

in light of the fact that the Commission 

has not yet proposed block thresholds, 

the Commission is adopting final rules 

that require all security-based swaps— 

regardless of their notional amount—to 

be reported to a registered SDR at any 

point up to 24 hours after the time of 

execution.20 The registered SDR will be 

required, as with all other 

dissemination-eligible transactions, to 

publicly disseminate a report of the 

transaction immediately and 

automatically upon receipt of the 

information from the reporting side. 

Although the Commission is adopting 

final rules relating to regulatory 

reporting and public dissemination of 

security-based swaps, it intends for the 

rules relating to public dissemination to 

apply only on an interim basis. This 

interim approach is designed to address 

the concerns of commenters who 

believed that a public dissemination 

regime with inappropriately small block 

trade thresholds could harm market 

liquidity, and who argued that market 

participants would need an extended 

phase-in period to achieve real-time 

reporting. In connection with its future 

rulemaking about block thresholds, the 

Commission anticipates seeking public 

comment on issues related to block 

trades. Given the establishment of this 

interim phase, the Commission is not 

adopting any other proposed rules 

relating to block trades. 

E. Cross-Border Issues 

Regulation SBSR, as initially 

proposed, included Rule 908, which 

addressed when Regulation SBSR 

would apply to cross-border securitybased swaps and counterparties of 

security-based swaps. The Commission 

re-proposed Rule 908 with substantial 

revisions as part of the Cross-Border 

Proposing Release. The Commission is 

now adopting Rule 908 substantially as 

re-proposed with some modifications, as 

discussed in Section XV, infra.21

Under Rule 908, as adopted, any 

security-based swap involving a U.S. 

person, whether as a direct counterparty 

or as a guarantor, must be reported to a 

registered SDR, regardless of where the 

transaction is executed.22 Furthermore, 

any security-based swap involving a 

registered security-based swap dealer or 

registered major security-based swap 

participant, whether as a direct 

counterparty or as a guarantor, also 

must be reported to a registered SDR, 

regardless of where the transaction is 

executed. In addition, any securitybased swap that is accepted for clearing 

by a registered clearing agency having 

its principal place of business in the 

United States must be reported to a 

registered SDR, regardless of the 

registration status or U.S. person status 

of the counterparties and regardless of 

where the transaction is executed. 

In the Cross-Border Proposing 

Release, the Commission proposed a 

new paragraph (c) to Rule 908, which 

contemplated a regime for allowing 

‘‘substituted compliance’’ for regulatory 

reporting and public dissemination with 

respect to individual foreign 

jurisdictions. Under this approach, 

compliance with the foreign 

jurisdiction’s rules could be substituted 

for compliance with the Commission’s 

Title VII rules, in this case Regulation 

SBSR. Final Rule 908(c) allows 

interested parties to request a 

substituted compliance determination 

with respect to a foreign jurisdiction’s 

regulatory reporting and public 

dissemination requirements, and sets 

forth the standards that the Commission 

would use in determining whether the 

foreign requirements were comparable. 

F. Compliance Dates 

For Rules 900, 907, and 909 of 

Regulation SBSR, the compliance date is 

the effective date of this release. For 

Rules 901, 902, 903, 904, 905, 906, and 

908 of Regulation SBSR, a new 

compliance schedule is being proposed 

in the Regulation SBSR Proposed 

Amendments Release. Accordingly, 

compliance with Rules 901, 902, 903, 

904, 905, 906, and 908 is not required 

until the Commission establishes 

compliance dates for those rules. 

Rules 910 and 911, as proposed and 

re-proposed, would have established 

compliance dates and imposed certain 

restrictions, respectively, during 

Regulation SBSR’s phase-in period. For 

reasons discussed in the Regulation 

SBSR Proposed Amendments Release, 

the Commission has determined not to 

adopt Rule 910 or 911.23

II. Information Required To Be 

Reported 

A. Primary Trade Information—Rule 

901(c) 

1. Description of Re-Proposed Rule 

Rule 901(c), as re-proposed, would 

have required the reporting of the 

following primary trade information in 

real time, which information would 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14569 

24The first sentence of re-proposed Rule 901(c), 

which would have required real-time public 

dissemination of certain data elements, would have 

stated, in relevant part, ‘‘For any security-based 

swap that must be publicly disseminated pursuant 

to §§ 242.902 and 242.908 and for which it is the 

reporting side, the reporting side shall report the 

following information . . .’’ The information 

required to be reported pursuant to Rule 901(c) 

must be reported for all covered transactions, even 

though Rule 902(c) provides that certain securitybased swap transactions are not subject to public 

dissemination. Accordingly, the Commission is not 

including in final Rule 901(c) the phrase ‘‘For any 

security-based swap that must be publicly 

disseminated pursuant to §§ 242.902 and 242.908 

and for which it is the reporting side . . .’’ In 

addition, as discussed in Section VII(B)(1), infra, 

Rule 901(c), as adopted, provides that the reporting 

side shall report the information specified in Rule 

901(c) within the timeframe specified by Rule 

901(j). 

25See infra Section V. 

26 ISDA IV at 8. 

27See id. at 9. 

28See MarkitSERV I at 10; Barnard I at 2 (also 

supporting the proposed categories of information 

that would be required to be reported for public 

dissemination). 

29See MarkitSERV I at 9–10. The commenter 

stated, for example, that the confirmation for a new 

‘‘standard’’ credit default swap (‘‘CDS’’) would 

contain 35 to 50 data fields, depending on the 

structure of the CDS, and the confirmation for other 

CDS products and life cycle events combined 

would require a total of 160 data fields. See id. at 

note 37. 

30MarkitSERV I at 10. 

31See MarkitSERV I at 10. 

32See id. 

33See ISDA/SIFMA I at 6. 

34See Better Markets I at 2; Cleary II at 3, 21 note 

61 (noting that a consistent approach between the 

two agencies would address the reporting of mixed 

swaps); ISDA/SIFMA I at 6; J.P. Morgan Letter at 14; 

ISDA IV at 1–2 (generally urging that the 

Commission align, wherever possible and practical, 

with the CFTC reporting rules). The last commenter 

also noted that reporting of mixed swaps will be 

difficult if Regulation SBSR requires a different 

reporting counterparty from the CFTC’s swap data 

reporting rules or if transaction identifiers are not 

conformed to the CFTC approach, see ISDA IV at 

4, 11, and urged the Commission to coordinate with 

the CFTC on a uniform approach to the time of 

execution for mixed swaps, see id. at 14. A mixed 

swap is a swap that is subject to both the 

jurisdiction of the CFTC and SEC, and, absent a 

joint order of the CFTC and SEC with respect to the 

mixed swap, as described in Rule 3a67–4(c) under 

Continued 

then be publicly disseminated: (1) The 

asset class of the security-based swap 

and, if the security-based swap is an 

equity derivative, whether it is a total 

return swap or is otherwise designed to 

offer risks and returns proportional to a 

position in the equity security or 

securities on which the security-based 

swap is based; (2) information that 

identifies the security-based swap 

instrument and the specific asset(s) or 

issuer(s) of any security on which the 

security-based swap is based; (3) the 

notional amount(s), and the currenc(ies) 

in which the notional amount(s) is (are) 

expressed; (4) the date and time, to the 

second, of execution, expressed using 

Coordinated Universal Time (UTC); (5) 

the effective date; (6) the scheduled 

termination date; (7) the price; (8) the 

terms of any fixed or floating rate 

payments, and the frequency of any 

payments; (9) whether or not the 

security-based swap will be cleared by 

a clearing agency; (10) if both 

counterparties to a security-based swap 

are registered security-based swap 

dealers, an indication to that effect; (11) 

if applicable, an indication that the 

transaction does not accurately reflect 

the market; and (12) if the securitybased swap is customized to the extent 

that the information in items (1) through 

(11) above does not provide all of the 

material information necessary to 

identify such customized security-based 

swap or does not contain the data 

elements necessary to calculate the 

price, an indication to that effect. 

2. Discussion of Final Rule 901(c) and 

Response to Comments 

a. General Approach to Required 

Information 

Rules 901(c) and 901(d), as adopted, 

require the reporting of general 

categories of information, without 

enumerating specific data elements that 

must be reported, except in limited 

cases. The Commission has made minor 

revisions to the introductory language of 

Rule 901(c).24

In addition, Rule 907(a)(1), as 

adopted, requires each registered SDR to 

establish, maintain, and make publicly 

available policies and procedures that, 

among other things, specify the data 

elements that must be reported.25

Commenters expressed mixed views 

regarding this approach. One 

commenter expressed the view that 

‘‘any required data should be clearly 

established by the Commission in its 

rules and not decided in part by 

[SDRs].’’ 26 This commenter further 

asked the Commission to clarify that 

any additional fields provided by 

registered SDRs for reporting would be 

optional.27 Two commenters, however, 

supported the Commission’s approach 

of providing registered SDRs with the 

authority to define relevant fields on the 

basis of general guidelines as set by the 

SEC.28 One of these commenters noted 

that it would be difficult for the 

Commission to specify the securitybased swap data fields because securitybased swaps are complex products that 

may require a large number of data 

fields to be electronically confirmed.29

In addition, the commenter stated that 

electronic methods for processing 

existing and new security-based swaps 

continue to be developed; accordingly, 

the commenter stated that establishing a 

detailed list of reportable fields for each 

category of security-based swap would 

be impracticable because such a system 

‘‘will be outdated with every new 

product launch or change in market 

practice,’’ and would result in a 

‘‘regulatory scheme that is continuously 

lagging behind the market.’’ 30 The 

commenter cautioned, however, that the 

Commission must assure that there is 

consistency among the data fields 

collected and reported by registered 

SDRs in the same asset class so that it 

would be possible to consolidate the 

data.31

The Commission shares the 

commenter’s concerns about the 

potential difficulties of consolidating 

data if there are multiple registered 

SDRs in the same asset class and each 

establishes different data elements for 

information that must be reported. 

Enumerating specific data elements 

required to be reported could help to 

promote consistency among the data 

fields if there are multiple registered 

SDRs in the same asset class. In 

addition, as discussed more fully below, 

such an approach would be more 

consistent with the approach taken by 

the CFTC’s swap reporting rules. The 

Commission also acknowledges the 

comment that the Commission’s rules, 

rather than the policies and procedures 

of a registered SDR, should specify the 

information required to be reported. 

However, the Commission believes on 

balance that establishing broad 

categories of required information will 

more easily accommodate new types of 

security-based swaps and new 

conventions for capturing and reporting 

transaction data. The Commission 

agrees with the commenter who 

expressed the view that a rule that 

attempted to enumerate the required 

data elements for each category of 

security-based swap could become 

outdated with each new product, 

resulting in a regulatory framework that 

constantly lagged the market and would 

need to be updated.32 The Commission 

believes that a standards-based 

approach will more easily accommodate 

new security-based swap reporting 

protocols or languages, as well as new 

market conventions, including new 

conventions for describing the data 

elements that must be reported. 

One group of commenters noted that 

the CFTC provided greater specificity 

regarding the information to be 

reported.33 Several commenters 

generally urged the Commission and the 

CFTC to establish consistent reporting 

obligations to reduce the cost of 

implementing both agencies’ reporting 

rules.34

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14570 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

the Exchange Act, is subject to the applicable 

reporting and dissemination rules adopted by the 

CFTC and SEC. 

35Rule 907(b)(2)(i), as proposed and re-proposed, 

would have prohibited a registered SDR from 

designating as a block trade any security-based 

swap that is an equity total return swap or is 

otherwise designed to offer risks and returns 

proportional to a position in the equity security or 

securities on which the security-based swap is 

based. As noted in the Regulation SBSR Proposing 

Release, there is no delay in the reporting of block 

transactions for equity securities in the United 

States. Re-proposed Rule 907(b)(2)(i) was designed 

to discourage market participants from evading 

post-trade transparency in the equity securities 

markets by using synthetic substitutes in the 

security-based swap market. See Regulation SBSR 

Proposing Release, 75 FR 75232. 

36See infra Section VII. 

37See Rule 900(bb) (defining ‘‘product ID’’ as ‘‘the 

UIC assigned to a product’’). 

38This definition was re-proposed in the CrossBorder Proposing Release without change as Rule 

900(dd). 

The Commission agrees that it would 

be beneficial to harmonize, to the extent 

practicable, the information required to 

be reported under Regulation SBSR and 

under the CFTC’s swap reporting rules. 

However, the Commission believes that 

it is possible to achieve a significant 

degree of consistency without including 

in final Rule 901 a detailed list of 

required data elements for each 

security-based swap. Rather than 

enumerating a comprehensive list of 

required data elements in the rule itself, 

Rule 901 identifies broad categories of 

information in the rule, and a registered 

SDR’s policies and procedures are 

required to identify specific data 

elements that must be reported. The 

Commission believes that the flexibility 

afforded by Rule 901 will facilitate 

harmonization of reporting protocols 

and elements between the CFTC and 

SEC reporting regimes. In identifying 

the specific data elements that must be 

reported, a registered SDR could, in 

some instances, require reporting of the 

same data elements that are required to 

be reported pursuant to the CFTC’s 

swap reporting rules, provided that 

those data elements include the 

information required under Rules 901(c) 

and 901(d). In some cases, however, the 

differences between the asset classes 

under the Commission’s jurisdiction 

and those under the CFTC’s jurisdiction 

will require a registered SDR’s policies 

and procedures to specify the reporting 

of data elements different from those 

required under the CFTC’s rules. 

The Commission recognizes that 

enumerating the specific data elements 

required to be reported would be more 

consistent with the approach taken by 

the CFTC’s swap reporting rules. 

Nevertheless, the Commission believes 

that the flexibility afforded by the 

category-based approach in adopted 

Rule 901(c) could facilitate 

harmonization. Accordingly, Rule 

901(c), as adopted, continues to require 

the reporting of broad categories of 

security-based swap information to 

registered SDRs, without enumerating 

each data element required to be 

reported (with a few exceptions, 

described below). 

b. Rule 901(c)(1) 

Rule 901(c)(1), as re-proposed, would 

have required reporting of the asset 

class of a security-based swap and, if the 

security-based swap is an equity 

derivative, whether it is a total return 

swap or is otherwise designed to offer 

risks and returns proportional to a 

position in the equity security or 

securities on which the security-based 

swap is based. As described in detail 

below, the Commission is making 

several revisions to Rule 901(c)(1) in 

response to comments. Among other 

things, these revisions clarify the final 

rules and eliminate certain unnecessary 

elements and redundancies. Final Rule 

901(c)(1), however, does not expand on 

the types of data elements that must be 

reported. 

i. Elimination of the Reference to Equity 

Derivatives 

The Commission is eliminating the 

reference to equity derivatives in final 

Rule 901(c)(1). Under Regulation SBSR, 

as proposed and re-proposed, it would 

have been necessary to identify total 

return swaps and other security-based 

swaps designed to offer risks and 

returns proportional to a position in an 

equity security or securities, because 

those security-based swaps would not 

have been eligible for a block trade 

exception.35 However, because the 

Commission is not adopting block 

thresholds or other rules relating to the 

block trade exception at this time, it is 

not necessary to identify security-based 

swaps that are not eligible for a block 

trade exception during the first, interim 

phase of Regulation SBSR.36

Accordingly, the Commission is not 

including in final Rule 901(c)(1) any 

requirement to identify a security-based 

swap as a total return swap or a 

security-based swap otherwise designed 

to offer risks and returns proportional to 

a position in the equity security or 

securities on which the security-based 

swap is based. 

ii. Product ID 

Final Rule 901(c)(1) requires the 

reporting of the product ID 37 of a 

security-based swap, if one is available. 

If the security-based swap has no 

product ID, or if the product ID does not 

include the information enumerated in 

Rule 901(c)(1)(i)–(v), then the 

information specified in subparagraphs 

(i)–(v) of Rule 901(c)(1) (discussed 

below) must be reported. Rule 901(c)(1) 

is designed to simplify the reporting 

process for security-based swaps that 

have a product ID by utilizing the 

product ID in lieu of each of the 

categories of data enumerated in Rule 

901(c)(1)(i)–(v). 

The Commission believes that the 

product ID will provide a standardized, 

abbreviated, and accurate means for 

identifying security-based swaps that 

share certain material economic terms. 

In addition, the reporting and public 

dissemination of the product ID could 

enhance transparency because a 

transaction report that used a single 

identifier for the product traded could 

be easier to read than a transaction 

report that identified the product traded 

through information provided in 

numerous individual data fields. For 

example, market observers would be 

able to discern quickly that transaction 

reports including the same product ID 

related to trades of the same product. 

Product IDs also could facilitate risk 

management and assist relevant 

authorities in analyzing systemic risk 

and conducting market surveillance. 

Furthermore, the Commission believes 

that the development of security-based 

swaps with standardized terms could 

facilitate the development of product 

IDs that would readily identify the 

terms of these transactions. 

Re-proposed Rule 901(c)(2) would 

have required reporting of information 

that identifies the security-based swap 

instrument and the specific asset(s) or 

issuer(s) of any security on which the 

security-based swap is based. Proposed 

Rule 900 defined ‘‘security-based swap 

instrument’’ to mean ‘‘each securitybased swap in the same asset class, with 

the same underlying reference asset, 

reference issuer, or reference index.’’ 38

In the context of final Rule 901(c), the 

requirement to report the product ID, if 

one is available, replaces, among other 

things, the requirement in re-proposed 

Rule 901(c)(2) to report information that 

identifies the security-based swap 

instrument and the specific asset(s) or 

issuer(s) of any security on which the 

security-based swap is based. For a 

security-based swap that has no product 

ID, Rule 901(c)(1)(i), as adopted, 

requires reporting of information that 

identifies the security-based swap, 

including the asset class of the securitybased swap and the specific underlying 

reference asset(s), reference issuer(s), or 

reference index. Because the 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14571 

39Rule 900, as proposed, defined ‘‘product ID’’ to 

mean ‘‘the UIC assigned to a security-based swap 

instrument.’’ As discussed above, Rule 900, as 

proposed, defined ‘‘security-based swap 

instrument’’ to mean ‘‘each security-based swap in 

the same asset class, with the same underlying 

reference asset, reference issuer, or reference 

index.’’ Both of these definitions were re-proposed 

in the Cross-Border Proposing Release without 

change as Rules 900(x) and 900(dd), respectively. 

40Rule 900, as proposed, defined UIC as ‘‘the 

unique identification code assigned to a person, 

unit of a person, or product . . .’’ (emphasis 

added). This definition was re-proposed in the 

Cross-Border Proposing Release without change as 

Rule 900(nn). 

41See TriOptima Letter at 2, 5–6 (explaining the 

portfolio compression process for uncleared swaps). 

42See ISDA/SIFMA at 10 (recommending that the 

definition of ‘‘security-based swap instrument’’ 

provide for more granular distinctions between 

different types of transactions within a single asset 

class). 

43The Commission is not expressing a view as to 

whether products with different tenors might or 

might not be considered together to constitute a 

class of securities required to be registered under 

Section 12 of the Exchange Act. See Section 12(a) 

of the Exchange Act, 15 U.S.C. 78l(a); Section 

12(g)(1) of the Exchange Act, 15 U.S.C. 78l(g); Rule 

12g–1 under the Exchange Act, 17 CFR 240.12g–1. 

44See infra Section X(C) (discussing a registered 

SDR’s policies and procedures relating to UICs). 

information that was included in the 

definition of security-based swap 

instrument—i.e., the asset class and the 

underlying reference asset, issuer, or 

index—will be reported pursuant to 

adopted Rule 901(c)(1)(i) or included in 

the product ID, it is no longer necessary 

to separately define ‘‘security-based 

swap instrument.’’ Thus, final Rule 900 

no longer contains a definition of 

security-based swap instrument. 

Although Rule 900, as proposed, 

defined the term ‘‘product ID,’’ it did 

not separately propose to define the 

term ‘‘product.’’ 39 Moreover, the 

original definition of the term ‘‘unique 

identification code’’ included the term 

‘‘product,’’ again without defining it.40

The Commission is now adopting a 

specific definition of the term 

‘‘product.’’ Final Rule 900(aa) defines 

‘‘product’’ as ‘‘a group of security-based 

swap contracts each having the same 

material economic terms except those 

relating to price and size.’’ Accordingly, 

the definition of ‘‘product ID’’ in 

adopted Rule 900(bb) is revised to mean 

‘‘the UIC assigned to a product.’’ 

The key aspect of the term ‘‘product’’ 

is the classifying together of a group of 

security-based swap contracts that have 

the same material economic terms, other 

than those relating to price and size. 

The assignment of product IDs to groups 

of security-based swaps with the same 

material economic terms, other than 

those relating to price and size, is 

designed to facilitate more efficient and 

accurate transaction reporting by 

allowing reporting of a single product ID 

in place of the separate data categories 

contemplated by Rule 901(c)(1)(i)–(v). 

Product IDs also will make 

disseminated transaction reports easier 

to read, and will assist the Commission 

and other relevant authorities in 

monitoring for systemic risk and 

conducting market surveillance. 

Although the price and size of a 

security-based swap are material terms 

of the transaction—and thus must be 

reported, along with many other 

material terms, to a registered SDR 

pursuant to Rules 901(c) and 901(d)— 

they do not help distinguish one 

product from another. The same product 

can be traded with different prices and 

with different notional amounts. Thus, 

by way of example and not of limitation, 

if otherwise materially similar securitybased swaps have different currencies of 

denomination, underlying assets, or 

settlement terms, they are different 

products for purposes of Regulation 

SBSR and should have different product 

IDs. An indicium of whether two or 

more security-based swaps between the 

same direct counterparties are the same 

product is whether they could be 

compressed or netted together to 

establish a new position (e.g., by a 

clearing agency or portfolio 

compression service).41 If they cannot 

be compressed or netted, this suggests 

that there are material differences 

between the terms of the security-based 

swaps that do not permit the risks to be 

fully offset. 

The fact that the Commission is 

requiring products to be distinguished 

for purposes of regulatory reporting and 

public dissemination even if a single 

material economic term differentiates 

one from another would not prevent the 

Commission and market participants 

from analyzing closely related products 

on a more aggregate basis. For example, 

products that were otherwise identical 

but for different currencies of 

denomination could still be grouped 

together to understand the gross amount 

of exposure created by these related 

products (factoring in exchange rates). 

However, a product ID system that was 

not granular enough to separate 

products based on individual material 

differences would make it difficult or 

impossible to analyze positions based 

solely on those individual differences. 

For example, if a product ID system 

permitted otherwise similar securitybased swaps with different currencies of 

denomination to be considered as the 

same product, it would not be possible 

to observe risk aggregations according to 

their particular currencies.42

Similarly, the Commission believes 

that otherwise materially identical 

security-based swaps with different 

dates of expiration are different 

products and therefore must have 

different product IDs. Delineating 

products by, among other things, date of 

expiration will assist the Commission 

and other relevant authorities in 

developing a more precise analysis of 

risk exposure over time. This feature of 

the ‘‘product’’ definition is different 

from the approach taken in the 

originally proposed definition of 

‘‘security-based swap instrument,’’ 

which specifically rejected distinctions 

based on tenor.43

In connection with these 

requirements, the Commission notes the 

part of the ‘‘product’’ definition 

referring to a product as ‘‘a group of 

security-based swap contracts’’ (plural). 

If a group of security-based swap 

contracts is sufficiently standardized 

such that they all share the same 

material economic terms (other than 

price and size), a registered SDR should 

treat them as the same product and 

assign them the same product ID. A 

product could be evidenced, for 

example, by the fact that a clearing 

agency makes the group of securitybased swap contracts eligible for 

clearing and will net multiple 

transactions in that group of contracts 

into a single open position. In contrast, 

a security-based swap that has a 

combination of material economic terms 

unlike any other security-based swap 

would not be part of a product group, 

and the Commission believes that it 

would be impractical to require 

registered SDRs to assign a product ID 

to each of these unique security-based 

swaps. For such a security-based swap, 

the transaction ID would be sufficient to 

identify the security-based swap in the 

registered SDR’s records and would 

serve the same purpose as a product ID. 

The product ID is one type of UIC. As 

discussed more fully in Section X, infra, 

Rule 903(a), as adopted, requires a 

registered SDR to use a UIC, including 

a product ID, assigned by an IRSS, if an 

IRSS has been recognized by the 

Commission and issues that type of UIC. 

If an IRSS that can issue product IDs has 

not been recognized by the Commission, 

Rule 903(a) requires a registered SDR to 

assign a product ID to that product 

using its own methodology. Similarly, 

final Rule 907(a)(5) requires a registered 

SDR to establish and maintain written 

policies and procedures for assigning 

UICs in a manner consistent with Rule 

903, which establishes standards for the 

use of UICs.44

One commenter noted that, although 

there likely will be global standards for 

identification codes for certain data 

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45See DTCC V at 14. 

46 Id. 

47 Id. The use of identifiers is discussed more 

fully in connection with Rule 903. See infra Section 

X. 

48 In this regard, the Commission notes that one 

commenter stated that a ‘‘newly formed ISDA crossproduct data working group, with representatives 

from sell side and buy side institutions, will look 

at proposed solutions and the practical implications 

of unique identifiers for the derivatives industry.’’ 

The commenters stated, further, that ‘‘ISDA is 

committed to provide product identifiers for OTC 

derivatives products that reflect the FpML standard. 

. . . In the first instance, this work will focus on 

product identifiers for cleared products. ISDA/

FpML is currently working on a pilot project with 

certain derivative clearing houses to provide a 

normalized electronic data representation through a 

FpML document for each OTC product listed and/ 

or cleared. This work will include the assignment 

of unique product identifiers.’’ ISDA/SIFMA I at 8– 

9. In addition, the Commission notes that ISDA has 

issued a white paper that discusses ways of creating 

unique identifiers for individual products. See 

ISDA, ‘‘Product Representation for Standardized 

Derivatives’’ (April 14, 2011), available at http://

www2.isda.org/functional-areas/technologyinfrastructure/data-and-reporting/identifiers/upiand-taxonomies/ (last visited September 22, 2014), 

at 4 (stating that one goal of the white paper is to 

‘‘[s]implif[y] . . . the trade processing and reporting 

architecture across the marketplace for the 

standardized products, as market participants will 

be able to abstract the trade economics through 

reference data instead of having to specify them as 

part of each transaction’’). 

49 ISDA/SIFMA I at 8. 

50 ‘‘Asset class’’ is defined as ‘‘those securitybased swaps in a particular broad category, 

including, but not limited to, credit derivatives and 

equity derivatives.’’ See Rule 900(b), as adopted. As 

proposed and re-proposed, the definition of ‘‘asset 

class’’ also would have included loan-based 

derivatives. However, because loan-based 

derivatives can be viewed as a form of credit 

derivative, the Commission has removed the 

reference to loan-based derivatives as a separate 

asset class and adopted the definition noted above. 

This revision aligns the definition of ‘‘asset class’’ 

used in Regulation SBSR with the definition used 

in the SDR Adopting Release. 

51See 75 FR 75213. 

52See id. at 75214. 

53See id. 

fields, such as the LEI, some global 

identifiers will not exist.45 The 

commenter believed that requiring 

registered SDRs to create identifiers 

would ‘‘result in bespoke 

implementation among’’ registered 

SDRs that would be of limited value 

absent an industry standard.46 The 

commenter recommended that the 

Commission consider postponing a 

requirement to establish identifiers 

‘‘until an international taxonomy exists 

that can be applied consistently.’’ 47

The Commission agrees that a system 

of internationally recognized product 

IDs would be preferable to a process 

under which registered SDRs assign 

their own product IDs to the same 

product. Nonetheless, the Commission 

believes that the use of product IDs, 

even product IDs created by registered 

SDRs rather than by an IRSS, could 

simplify security-based swap 

transaction reporting and facilitate 

regulatory oversight of the securitybased swap market. In addition, the 

Commission believes that the 

requirement for registered SDRs to 

assign product IDs could provide 

additional incentive for security-based 

swap market participants to develop 

industry-wide product IDs.48

One commenter stated that 

‘‘[i]ndustry utilities should be 

considered for assigning unique IDs for 

transactions, products, and legal 

entities/market participants.’’ 49 As 

discussed in Section X(B)(2), infra, the 

Commission is recognizing the Global 

LEI System (‘‘GLEIS’’), an industry 

utility administered by the Regulatory 

Oversight Committee (‘‘ROC’’), as 

meeting the criteria specified in Rule 

903, as adopted. The GLEIS and this 

comment are discussed in Section 

X(B)(2), infra. 

iii. Rule 901(c)(1)(i) 

Rule 901(c)(1) requires that, if a 

security-based swap has no product ID, 

or if the product ID does not include the 

information identified in Rule 

901(c)(1)(i)–(v), the information 

specified in Rule 901(c)(1)(i)–(v) must 

be reported. Final Rule 901(c)(1)(i)–(v) 

incorporates, with some modifications, 

information that would have been 

required under paragraphs (c)(1), (2), 

(5), (6), (8), and (12) of re-proposed Rule 

901, and re-proposed Rule 901(d)(1)(iii). 

Rule 901(c)(1)(i), as adopted, 

generally requires the reporting of 

information that would have been 

required to be reported under reproposed Rules 901(c)(1) and 901(c)(2). 

Re-proposed Rule 901(c)(1) would have 

required, in part, reporting of the asset 

class of a security-based swap.50 Reproposed Rule 901(c)(2) would have 

required the reporting of information 

identifying the security-based swap 

instrument and the specific asset(s) or 

issuer(s) on which the security-based 

swap is based. Re-proposed Rule 

900(dd) would have defined ‘‘securitybased swap instrument’’ as ‘‘each 

security-based swap in the same asset 

class, with the same underlying 

reference asset, reference issuer, or 

reference index.’’ Rule 901(c)(1)(i), as 

adopted, requires the reporting of 

information that identifies the securitybased swap, including the asset class of 

the security-based swap and the specific 

underlying reference asset(s), reference 

issuer(s), or reference index. Although 

the defined term ‘‘security-based swap 

instrument’’ is being deleted from 

Regulation SBSR for the reasons 

discussed in Section VII(B)(3), infra, 

final Rule 901(c)(1)(i) retains the 

requirement to report the underlying 

reference asset(s), reference issuer(s), or 

reference index for the security-based 

swap, as well as the asset class of the 

security-based swap. 

The Commission received no 

comments regarding the information 

required to be reported in Rule 

901(c)(1)(i). As stated in the Regulation 

SBSR Proposing Release, the 

Commission believes that the reporting 

and public dissemination of information 

relating to the asset class of the securitybased swap would provide market 

participants with basic information 

about the type of security-based swap 

(e.g., credit derivative or equity 

derivative) being traded.51 Similarly, the 

Commission believes that information 

identifying the specific reference 

asset(s), reference issuer(s), or reference 

index of any security on which the 

security-based swap is based is 

fundamental to understanding the 

transaction being reported, and that a 

transaction report that lacked such 

information would not be meaningful.52

Accordingly, Rule 901(c)(1)(i), as 

adopted, includes the requirement to 

report this information. 

iv. Rules 901(c)(1)(ii) and (iii) 

Re-proposed Rules 901(c)(5) and 

901(c)(6) would have required the 

reporting of, respectively, the effective 

date of the security-based swap and the 

scheduled termination date of the 

security-based swap. These 

requirements are incorporated into 

adopted Rules 901(c)(1)(ii) and (iii), 

which require the reporting of, 

respectively, the effective date of the 

security-based swap and the scheduled 

termination date of the security-based 

swap. The Commission received no 

comments regarding the reporting of 

this information. As stated in the 

Regulation SBSR Proposing Release, the 

Commission believes that information 

specifying the effective date and the 

scheduled termination date of the 

security-based swap is fundamental to 

understanding the transaction being 

reported, and that a transaction report 

that lacked such information would not 

be meaningful.53 Accordingly, final 

Rules 901(c)(1)(ii) and (iii) include the 

requirement to report the effective date 

and the scheduled termination date, 

respectively, of the security-based swap. 

v. Rule 901(c)(1)(iv) 

Re-proposed Rule 901(c)(8) would 

have required the reporting of any fixed 

or floating rate payments of a securitybased swap, and the frequency of any 

payments. Re-proposed Rule 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14573 

54See id. 

55See Benchmark Letter at 1 (stating that ‘‘[t]he 

reference data set [for a security-based swap] must 

include standard attributes necessary to derive cash 

flows and any contingent claims that can alter or 

terminate payments of these contracts. . . . Without 

these critical pieces of information, users of the 

trade price dissemination service will be unable to 

accurately assess reported values’’). 

56See DTCC II at 10. See also DTCC V at 12 

(requesting additional clarity with respect to the 

requirement to report the contingencies of the 

payments streams of each direct counterparty to the 

other). 

57See DTCC V at 11. 58See supra note 55. 59See DTCC V at 11. 

901(d)(1)(iii) would have required the 

reporting of the amount(s) and 

currenc(ies) of any up-front payment(s) 

and a description of the terms and 

contingencies of the payment streams of 

each direct counterparty to the other. In 

the Regulation SBSR Proposing Release, 

the Commission noted that the terms of 

any fixed or floating rate payments and 

the frequency of any payments are 

among the terms that would be 

fundamental to understanding a 

security-based swap transaction.54 One 

commenter echoed the importance of 

information concerning the payment 

streams of security-based swaps.55

Another commenter stated that 

proposed Rule 901(d)(1)(iii) was unclear 

about the proposed form of the 

description of the terms and 

contingencies of the payment streams, 

and that the requirements of proposed 

Rule 901(d)(1)(iii) appeared to be 

duplicative of proposed Rule 

901(d)(1)(v), which would have required 

reporting of the data elements necessary 

for a person to determine the market 

value of the transaction.56 The 

commenter also suggested that the 

Commission consider the utility of 

requiring reporting of the terms of fixed 

or floating rate payments, as required by 

re-proposed Rule 901(c)(8).57

The Commission continues to believe 

that, for a security-based swap that 

provides for periodic exchange of cash 

flows, information concerning those 

payment streams is fundamental to 

understanding the terms of the 

transaction. The Commission 

acknowledges, however, that reproposed Rules 901(c)(8), 901(d)(1)(iii), 

and 901(d)(v) contained overlapping 

requirements concerning the payment 

streams of a security-based swap. 

Accordingly, the Commission is revising 

Rules 901(c) and 901(d) to streamline 

and clarify the information required to 

be reported with respect to the payment 

streams of a security-based swap. 

Specifically, final Rule 901(c)(1)(iv) 

requires the reporting of any 

standardized fixed or floating rate 

payments, and the frequency of any 

such payments. As discussed more fully 

in Section II(C)(3)(d), infra, final Rule 

901(d)(3) requires the reporting of 

information concerning the terms of any 

fixed or floating rate payments, or 

otherwise customized or nonstandardized payment streams, 

including the frequency and 

contingencies of any such payments, to 

the extent that this information has not 

been reported pursuant to Rule 

901(c)(1). Thus, Rule 901(c)(1)(iv) 

requires the reporting of information 

concerning standardized payment 

streams, while Rule 901(d)(3) requires 

the reporting of information concerning 

customized payment streams. In 

addition, as discussed more fully below, 

final Rule 901(d)(5) requires reporting of 

any additional data elements included 

in the agreement between the 

counterparties that are necessary for a 

person to determine the market value of 

the transaction, to the extent that such 

information has not already been 

reported pursuant to Rule 901(c) or 

other provisions of Rule 901(d). The 

Commission believes that these changes 

to Rules 901(c) and 901(d) will avoid 

potential redundancies in the reporting 

requirements and will clarify the 

information required to be reported with 

respect to the payment streams of a 

security-based swap. 

Like other primary trade information 

reported pursuant to Rule 901(c), 

information about standardized 

payment streams reported pursuant to 

Rule 901(c)(1)(iv) will be publicly 

disseminated. The Commission 

envisions that, rather than 

disseminating such information as 

discrete elements, this information 

could be inherent in the product ID of 

a security-based swap that has a product 

ID. Information concerning nonstandard payment streams that is 

reported pursuant to Rule 901(d)(3), like 

other secondary trade information, will 

be available for regulatory purposes but 

will not be publicly disseminated. Reproposed Rule 901(c)(8) would have 

required reporting of the terms of any 

fixed or floating rate payments, 

standardized or non-standardized, and 

the frequency of such payments, and reproposed Rule 902(a) would have 

required the public dissemination of 

that information. In addition, as noted 

above, one commenter discussed the 

importance of the availability of 

information concerning payment 

streams.58 Nonetheless, the Commission 

believes that public dissemination of the 

non-standard payment terms of a 

customized security-based swap would 

be impractical, because a bespoke 

transaction by definition could have 

such unique terms that it would be 

difficult to reflect the full material terms 

using any standard dissemination 

protocol. In addition, it is not clear that 

the benefits of publicly disseminating 

information concerning these nonstandard payment streams would justify 

the costs of disseminating the 

information. However, the Commission 

will have access to regulatory reports of 

such transactions, which should 

facilitate regulatory oversight and assist 

relevant authorities in monitoring the 

exposures of security-based swap 

market participants. Accordingly, Rule 

901(d)(3), as adopted, requires the 

reporting of information concerning the 

terms of any non-standard fixed or 

floating rate payments, or otherwise 

customized or non-standardized 

payment streams, including the 

frequency and contingencies of any 

such payments. 

One commenter expressed the view 

that, without further clarification, 

market participants could adopt 

different interpretations of the 

requirement in re-proposed Rule 

901(c)(8) to report the terms of fixed or 

floating rate payments, resulting in 

inconsistent reporting to registered 

SDRs; the commenter recommended, 

therefore, limiting the reportable fields 

to tenor and frequency, where 

applicable.59

The Commission shares the 

commenter’s concerns that, without 

guidance, market participants could 

adopt different interpretations of the 

requirement to report the terms of fixed 

or floating rate payments. The 

Commission notes, however, that final 

Rules 907(a)(1) and 907(a)(2) require a 

registered SDR to establish and maintain 

written policies and procedures that 

enumerate the specific data elements 

that must be reported and that specify 

the protocols for submitting 

information, respectively. The 

Commission believes that, read together, 

Rules 907(a)(1) and 907(a)(2) provide 

registered SDRs with flexibility to 

determine the appropriate conventions 

for reporting these data elements, 

including the terms of a security-based 

swap’s fixed or floating rate payments. 

Thus, although Rule 901(c) itself does 

not specify the precise manner for 

reporting a security-based swap’s fixed 

or floating rate payments, the policies 

and procedures of registered SDRs must 

do so. The Commission notes, further, 

that final Rule 906(c), among other 

things, requires SDR participants that 

are registered security-based swap 

dealers and registered major securitybased swap participants to establish, 

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60 DTCC II at 9. 61See id. 62See Cleary II at 16 (recommending ‘‘public 

reporting of a few key terms of a customized 

swap . . . [with] some indication that the 

transaction is customized’’). 

63See Better Markets I at 7. 

64The Commission notes that Rule 901(d)(5) 

requires the reporting of any additional data 

elements included in the agreement between the 

counterparties that is necessary to determine the 

market value of a transaction. Although this 

information will not be publicly disseminated, it 

will be available to the Commission and other 

relevant authorities. Such relevant authorities are 

enumerated in Section 13(n)(5)(G) of the Exchange 

Act, 15 U.S.C. 78m(n)(5)(G), which requires an SDR, 

upon request, to make available all data obtained 

by the SDR, including individual counterparty trade 

and position data, to each appropriate prudential 

regulator, the Financial Stability Oversight Council, 

the CFTC, the Department of Justice, and any other 

person that the Commission determines to be 

appropriate, including foreign financial supervisors, 

foreign central banks, and foreign ministries. 

65See Better Markets I at 7 (‘‘This enhancement 

to the Proposed Rules is particularly important with 

respect to SBS comprised of two swaps grafted 

together. Such composite SBS can be used to avoid 

reporting requirements. Even worse they can be 

used to obfuscate the real financial implications of 

a transaction. Accordingly, if an SBS can be 

disaggregated into two or more transactions, and at 

least one of those disaggregated transactions can be 

reported in a format so that price can be calculated, 

then the rules should require that the SBS be 

disaggregated and reported in that form’’); Better 

Markets II at 3 (stating that complex transactions 

must be broken down into meaningful 

components); Better Markets III at 4–5 (stating that 

the Commission should require reporting of data on 

disaggregated customized security-based swaps). 

66 In addition, as discussed more fully in Section 

VI(G), infra, in developing its policies and 

procedures, a registered SDR should consider 

requiring participants to identify the individual 

component security-based swaps of such a trade as 

part of a package transaction, and should consider 

disseminating reports of the individual securitybased swap components of the package trade with 

a condition flag that identifies them as part of a 

package trade. Absent such a flag, observers of 

public reports of package transactions might obtain 

a distorted view of the market. 

maintain, and enforce written policies 

and procedures that are reasonably 

designed to ensure that they comply 

with any obligations to report 

information to a registered SDR in a 

manner consistent with Regulation 

SBSR. 

vi. Rule 901(c)(1)(v) 

Re-proposed Rule 901(c)(12) would 

have required a reporting side to 

indicate, if applicable, that the 

information reported under 

subparagraphs (1)–(11) of re-proposed 

Rule 901(c) for a customized securitybased swap does not provide all of the 

material information necessary to 

identify the customized security-based 

swap or does not contain the data 

elements necessary to calculate its price. 

The Commission is adopting the 

substance of re-proposed Rule 

901(c)(12) and locating it in final Rule 

901(c)(1)(v). Rule 901(c)(1)(v), as 

adopted, provides that, if a securitybased swap is customized to the extent 

that the information provided in 

paragraphs (c)(1)(i) through (iv) of Rule 

901 does not provide all of the material 

information necessary to identify such 

customized security-based swap or does 

not contain the data elements necessary 

to calculate the price, the reporting side 

must include a flag to that effect. As 

discussed more fully in Section VI(G), 

infra, the registered SDRs should 

develop a condition flag to identify 

bespoke transactions because absent 

such a flag, users of public reports of 

bespoke transactions might receive a 

distorted impression of the market. 

One commenter argued that ‘‘publicly 

disseminated data for trades with a nonstandard feature flag activated will be of 

limited usefulness and could be 

misleading.’’ 60 The commenter 

expressed the view that dissemination 

of information regarding highly 

structured transactions should not occur 

until an analysis regarding the impact 

and potential for misleading the 

investing public has been conducted.61

A second commenter, however, 

endorsed the approach being adopted by 

the Commission.62 The Commission 

acknowledges the concerns that the 

dissemination of transaction reports for 

highly customized trades could be 

misleading or of limited usefulness. 

However, as discussed more fully in 

Section VI(D)(2)(a), infra, the 

Commission believes that public 

dissemination of the key terms of a 

customized security-based swap, even 

without all of the details of the 

transaction, could provide useful 

information to market observers, 

including information concerning the 

pricing of similar products and 

information relating to the relative 

number and aggregate notional amounts 

of transactions in bespoke products 

versus standardized products. In 

addition, the Commission believes that 

the condition flag signaling that the 

transaction is a customized trade, and 

therefore that the reported information 

does not provide all of the details of the 

transaction, will minimize the potential 

for confusion and help to assure that the 

publicly disseminated reports of these 

transactions are not misleading. For 

these reasons, the Commission is 

declining, at this time, to undertake the 

study recommended by the commenter. 

A third commenter indicated that 

Rule 901 should go further and require 

reporting of additional information 

necessary to calculate the price of a 

security-based swap that is so 

customized that the price cannot be 

calculated from the reported 

information.63 The Commission 

generally agrees that transaction reports 

of customized security-based swaps 

should be as informative and useful as 

possible. However, it is not clear that 

the benefits of publicly disseminating 

all of the detailed and potentially 

complex information that would be 

necessary to calculate the price of a 

highly customized security-based swap 

would justify the costs of disseminating 

that information. Accordingly, Rule 

901(c)(1)(v), as adopted, does not 

require reporting of this information, 

and it will not be publicly 

disseminated.64

This commenter also expressed 

concern that a ‘‘composite’’ securitybased swap composed of two swaps 

grafted together could be used to avoid 

reporting requirements; the commenter 

recommended that, if at least one of the 

transactions could be disaggregated and 

reported in a format so that its price 

could be calculated, Regulation SBSR 

should require that the security-based 

swap be disaggregated and the 

component parts be reported 

separately.65 In considering the 

commenter’s concern the Commission 

notes the following: 

To begin, the Commission 

understands that market participants 

may execute so-called ‘‘package trades’’ 

that are composed of multiple 

components, or ‘‘legs,’’ some of which 

may be security-based swaps. Though 

such package trades are executed at a 

single price, each leg is separately 

booked and processed. In these cases, 

Regulation SBSR does in fact require a 

reporting side to separately report (and 

for the SDR to separately disseminate) 

each security-based swap component of 

the package trade.66

However, if a market participant 

combines the economic elements of 

multiple instruments into one securitybased swap contract, Regulation SBSR 

requires a single report of the 

transaction. The Commission 

understands the commenter’s concerns 

regarding potential attempts to evade 

the post-trade transparency 

requirements. Such efforts could 

undermine Regulation SBSR’s goals of 

promoting transparency and efficiency 

in the security-based swap markets and 

impede the Commission’s ability to 

oversee those markets. The Commission 

does not believe, however, that either a 

registered SDR or a reporting side 

should be required to disaggregate a 

customized security-based swap if it 

consists of a single contract 

incorporating elements of what 

otherwise might have been two or more 

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67One commenter stated its view that 

‘‘proprietary baskets’’ should qualify as nondisseminated information, and requested that 

Regulation SBSR specifically recognize this as an 

example of non-disseminated information. See 

ISDA IV at 17 (stating that reportable security-based 

swaps may include customized narrow-based 

baskets that a counterparty deems proprietary to its 

business and for which public disclosure would 

compromise its anonymity and negatively impact 

its trading activity). Rule 902(a), as adopted, 

requires a registered SDR to publicly disseminate, 

for each transaction, the primary trade information 

required to be reported by Rule 901(c), as adopted, 

which includes the specific underlying reference 

asset(s), reference issuer(s), or reference index. The 

Commission continues to believe that the primary 

trading terms of a security-based swap should be 

disseminated to help facilitate price discovery. See 

infra Section VI(A). 

68See infra Section II(B)(3)(e) (discussing 

requirement in Rule 901(d)(5) that, to the extent not 

provided pursuant to other provisions of Rules 

901(c) and 901(d), all data elements included in the 

agreement between the counterparties that are 

necessary for a person to determine the market 

value of the transaction must be reported). 

69See infra Section V(B)(1) (noting that the 

Commission anticipates proposing for public 

comment detailed specifications of acceptable 

formats and taxonomies that would facilitate an 

accurate interpretation, aggregation, and analysis by 

the Commission of security-based swap data 

submitted to it by an SDR); supra Section 

II(A)(2)(b)(v) (explaining that the Commission will 

have access to regulatory reports of bespoke 

security-based swap transactions, which should 

facilitate regulatory oversight and assist relevant 

authorities in monitoring the exposures of securitybased swap market participants). 

70See Better Markets I at 7 (‘‘The Proposed Rules 

also represent a critically important opportunity to 

shed light on the nature of ‘customized’ swaps. 

Since the inception of the debate over disclosure 

and clearing in connection with financial 

regulation, the concept of the ‘customized’ or 

‘bespoke’ transactions has figured prominently, yet 

these terms remain poorly understood in real world 

terms. The Proposed Rules should clearly define the 

meaning of SBS that are so customized that price 

is not ascertainable’’). 

71UTC is defined by the International 

Telecommunication Union (ITU–R) and is 

maintained by the International Bureau of Weights 

and Measures (BIPM). See http://www.itu.int/net/

newsroom/wrc/2012/reports/atomic_time.aspx (last 

visited September 22, 2014). 

72See 75 FR 75213. 

73See id. 

74See re-proposed Rule 900(ff). 

75See Barnard I at 2. 

76Better Markets I at 9. 

77See id. 

security-based swaps. In the absence of 

evidence of a significant amount of such 

‘‘composite’’ security-based swap 

transactions and structuring other than 

through package trades, the Commission 

does not at this time believe that 

devising protocols for disseminating 

them in a disaggregated fashion would 

be practical. Importantly, however, and 

as discussed more fully in Section 

VI(D)(2)(a), infra, the primary trade 

information of any complex or bespoke 

security-based swap, including 

‘‘composite’’ security-based swaps as 

described by the commenter, will be 

publicly disseminated, as required by 

Rule 902(a), including the specific 

underlying reference asset(s), reference 

issuer(s), or reference index for the 

transaction, as required by Rule 

901(c)(1).67 The Commission believes 

that the public dissemination of the 

primary trade information, even without 

all of the material economic terms of the 

transaction that could affect its pricing, 

could provide market observers with 

useful information, including 

information concerning the pricing of 

similar products and the relative 

number and aggregate notional amounts 

of transactions in complex and other 

bespoke transactions versus transactions 

in standardized products. The 

Commission further notes that since all 

of the material economic terms of a 

‘‘composite’’ security-based swap must 

be reported to a registered SDR, 

including the data elements required by 

Rule 901(d),68 the Commission itself 

will have complete access to these 

details.69

The commenter also expressed the 

view that Regulation SBSR should 

clearly define the meaning of a securitybased swap that is so customized that its 

price is not ascertainable.70 The 

Commission does not believe that it is 

necessary to further define the term 

‘‘customized security-based swap’’ for 

purposes of Rule 901(c)(1)(v). The 

condition flag required under adopted 

Rule 901(c)(1)(v) will notify market 

participants that the security-based 

swap being reported does not have a 

product ID and is customized to the 

extent that the information provided in 

Rules 901(c)(1)(i)–(iv) does not provide 

all of the material information necessary 

to identify the security-based swap or 

does not contain the data elements 

necessary to calculate the price. Thus, 

market participants will know that a 

customized security-based swap 

transaction was executed, and that the 

information reported pursuant to Rules 

901(c)(1)(i)–(iv) provides basic but 

limited information about the 

transaction. The Commission believes, 

further, that Rule 901(c)(1)(v) provides 

clear guidance with respect to when a 

transaction is customized to the extent 

that the reporting side must attach a 

condition flag that identifies the 

transaction as a bespoke transaction, 

i.e., when the information reported 

pursuant to Rules 901(c)(1)(i)–(iv) does 

not provide all of the material 

information necessary to identify the 

security-based swap or does not contain 

the data elements necessary to calculate 

the price. Accordingly, the Commission 

does not believe that it is necessary, at 

this time, to further define what 

constitutes a customized security-based 

swap for purposes of Regulation SBSR. 

c. Rule 901(c)(2) 

Re-proposed Rule 901(c)(4) would 

have required reporting of the date and 

time, to the second, of the execution of 

a security-based swap, expressed using 

Coordinated Universal Time (‘‘UTC’’).71

In the Regulation SBSR Proposing 

Release, the Commission stated that 

information concerning the time of 

execution would allow security-based 

swap transactions to be ordered 

properly, and would provide the 

Commission with a detailed record of 

when a security-based swap was 

executed.72 The Commission further 

noted that, without the time of 

execution, market participants and 

relevant authorities would not know 

whether the transaction reports that 

they are seeing reflect the current state 

of the market.73 In both the proposal 

and the re-proposal, the Commission 

defined ‘‘time of execution’’ to mean 

‘‘the point at which the counterparties 

to a security-based swap become 

irrevocably bound under applicable 

law.’’ 74

One commenter expressed the view 

that time of execution should be 

reported at least to the second, and by 

finer increments where practicable.75 A 

second commenter raised timestamp 

issues in connection with proposed 

Rule 901(f), which would have required 

a registered SDR to timestamp 

transaction information submitted to it 

under Rule 901. The commenter stated 

that especially for markets for which 

there are multiple security-based swap 

execution facilities and markets where 

automated, algorithmic trading occurs, 

‘‘the sequencing of trade data for 

transparency and price discovery, as 

well as surveillance and enforcement 

purposes, will require much smaller 

increments of time-stamping.’’ 76 The 

commenter urged the Commission to 

revise proposed Rule 901(f) to require a 

registered SDR to time stamp 

information that it receives in 

increments shorter than one second, 

stating that time stamps shorter than 

one second are technologically feasible, 

affordable, and in use.77

The Commission understands that 

trading in the security-based swap 

market does not yet occur as fast or as 

frequently as in the equities market, 

which makes recording the time of 

security-based swap executions in 

subsecond increments less necessary for 

surveillance purposes. While some 

market participants may have the 

capacity to record trades in subsecond 

intervals, others may not. Given the 

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78However, a registered SDR could, in its policies 

and procedures, allow its participants to report 

using subsecond timestamps. 

79As discussed in Section I(F), supra, the 

Commission is not adopting Rule 910. 

80See 75 FR 75278–79. 

81 ISDA/SIFMA I at 11. 

82 ISDA I at 5. 

83For pre-enactment and transitional securitybased swaps, final Rule 901(i) requires reporting of 

the information required under Rules 901(c) and 

901(d), including the date and time of execution, 

only to the extent that such information is available. 

84See 75 FR 75213. 

85See id. 

86See, e.g., FINRA Rule 6230(c)(8) (requiring 

transactions reported to TRACE to include the time 

of execution); FINRA Rule 6622(c)(5) (requiring 

last-sale reports for transactions in OTC Equity 

Securities and Restricted Securities to include the 

time of execution expressed in hours, minutes, and 

seconds). 

87See 75 FR 75213. 88See ISDA/SIFMA I at 7. 89 Id. 90Cleary II at 6. See also ISDA/SIFMA I at 15 

(‘‘for some transaction types . . . the price or size 

of the transaction cannot be determined at the time 

the swap is negotiated’’); ISDA IV at 10. 

potential costs of requiring all market 

participants to utilize subsecond 

timestamps, the Commission believes 

that it is not necessary or appropriate at 

this time to require reporting of the time 

of execution in subsecond increments.78

Accordingly, the Commission is 

adopting Rule 901(c)(4) as proposed and 

re-proposed, but renumbering it as final 

Rule 901(c)(2). The Commission will 

continue to monitor developments in 

the security-based swap market and 

could in the future reconsider whether 

reporting time of execution in 

subseconds would be appropriate. 

One commenter discussed the time of 

execution for a voice trade in the 

context of proposed Rule 910(a), which 

addressed the reporting of preenactment security-based swaps.79 The 

commenter noted that in the Regulation 

SBSR Proposing Release, the 

Commission stated that ‘‘proposed Rule 

910(a) would not require reporting 

parties to report any data elements (such 

as the time of execution) that were not 

readily available. Therefore, proposed 

Rule 910(a) would not require reporting 

parties to search for or reconstruct any 

missing data elements.’’ 80 The 

commenter disagreed with this assertion 

in the context of voice trades, stating 

that the time of entry of the voice trade 

into the system is typically provided, 

but not the actual execution time of the 

trade. The commenter stated that 

‘‘[p]roviding the actual execution time 

in the case of voice trades would then 

prove extremely challenging and 

invasive for the marketplace.’’ 81

Similarly, one commenter requested 

that the ‘‘Commission clarify that 

participants are not required to provide 

trade execution time information for 

pre-enactment security-based swap 

transactions and that going-forward, 

such information need only be provided 

when industry-wide time stamping 

practices are implemented.’’ 82

With respect to these concerns, the 

Commission notes, first, that it is not 

adopting Rule 910, but is proposing a 

new compliance schedule for Rules 901, 

902, 903, 904, 905, 906, and 908 of 

Regulation SBSR in the Regulation 

SBSR Proposed Amendments Release. 

The Commission emphasizes, however, 

that proposed Rule 910(a) would not 

have required market participants to 

report information for a pre-enactment 

security-based swap that was not readily 

available, or to reconstruct that 

information. Thus, Rule 910(a), as 

proposed, would not have required 

market participants to provide the time 

of execution for an orally negotiated 

pre-enactment security-based swap, 

unless such information was readily 

available. Likewise, final Rule 901(i) 

does not require reporting of the date 

and time of execution for an orally 

negotiated pre-enactment or transitional 

security-based swap, unless such 

information is readily available.83

However, for all other security-based 

swaps, including voice trades, final Rule 

901(c)(2) requires reporting of the date 

and time of execution, to the second, of 

the security-based swap. The 

Commission noted in the Regulation 

SBSR Proposing Release that trades 

agreed to over the phone would need to 

be systematized by being entered in an 

electronic system that assigns a time 

stamp to report the date and time of 

execution of a security-based swap.84

The Commission continues to believe 

that it is consistent with Congress’ 

intent for orally negotiated securitybased swap transactions to be 

systematized as quickly as possible.85

The Commission notes, further, that 

market participants also must report the 

time of execution for voice-executed 

trades in other securities markets (e.g., 

equities and corporate bonds).86

Knowing the date and time of execution 

of a security-based swap is important for 

reconstructing trading activity and for 

market surveillance purposes. 

Accordingly, the Commission continues 

to believe that the regulatory interest in 

having information regarding the date 

and time of execution for all securitybased swaps, including orally 

negotiated security-based swaps, 

justifies the burden on market 

participants of recording and reporting 

this information. 

In addition, the Commission is 

adopting, as proposed and re-proposed, 

the requirement for all times of 

execution reported to and recorded by 

registered SDRs to be in UTC. In the 

Regulation SBSR Proposing Release, the 

Commission explained its reasons for 

proposing to require that the date and 

time of execution be expressed in 

UTC.87 The Commission noted that 

security-based swaps are traded 

globally, and expected that many 

security-based swaps subject to the 

Commission’s reporting and 

dissemination rules would be executed 

between counterparties in different time 

zones. In the absence of a uniform time 

standard, it might not be clear whether 

the date and time of execution were 

being expressed from the standpoint of 

the time zone of the first counterparty, 

the second counterparty, or the 

registered SDR. Mandating a common 

standard for expressing date and time 

would alleviate any potential confusion 

as to when the security-based swap was 

executed. The Commission believed that 

UTC was an appropriate and well 

known standard suitable for purposes of 

reporting the time of execution of 

security-based swaps. The Commission 

received no comments regarding the use 

of UTC for reporting the time of 

execution. For the reasons set out in the 

Regulation SBSR Proposing Release, the 

Commission continues to believe that 

UTC is appropriate for security-based 

swap transaction reporting. 

Accordingly, the Commission is 

adopting this requirement as proposed 

and re-proposed. 

Finally, the Commission is adopting 

the definition of ‘‘time of execution’’ as 

proposed and re-proposed, and 

renumbering it as final Rule 900(ii). One 

commenter stated that the time at which 

a transaction becomes legally binding 

may not be the same for all products.88

The commenter further noted that, in 

some cases primary terms are not 

formed until the security-based swap is 

confirmed, and that the full terms of a 

total return swap might not be formed 

until the end of the day ‘‘and therefore 

the [total return swap] is not executed 

and confirmed until the end of the 

day.’’ 89 A second commenter stated that 

‘‘the obligation to report should not be 

triggered until price, size, and other 

transaction terms required to be 

reported are available.’’ 90 The 

Commission understands the concerns 

of these commenters and believes that 

the definition of ‘‘time of execution’’ 

provides sufficient flexibility to address 

these commenters’ concerns. For 

example, if the key terms of a securitybased swap, such as price or size, are so 

indefinite that they cannot be reported 

to a registered SDR until some time after 

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91MFA I at 5. 

92 15 U.S.C. 78m(m)(1)(A). 

93Cf. Section II(B)(3)(c), infra (describing Rule 

901(d), which enumerates data elements that will 

not be subject to public dissemination). 

94The addition of the reference to currency also 

is consistent with re-proposed Rule 901(c)(3), 

which would have required reporting of the 

notional amount(s) of the security-based swap and 

the currenc(ies) in which the notional amount(s) is 

expressed. 

95See infra Section II(B)(2)(b)(vi)(e). 

96See 75 FR 75214. Final Rule 900(z) defines 

‘‘price’’ to mean ‘‘the price of a security-based swap 

transaction, expressed in terms of the commercial 

conventions used in the asset class.’’ 

97See id. 

98See id. 

99See CCMR I at 4. 

100See id. 

101See ISDA IV at 17. 

the counterparties agree to preliminary 

terms, the counterparties may not have 

executed the security-based swap under 

applicable law. Alternatively, even if 

the counterparties determine that their 

preliminary agreement constitutes an 

execution, the reporting timeframe 

adopted herein, which will allow a 

security-based swap to be reported at 

any point up to 24 hours after the time 

of execution, should address the 

concerns raised by the commenters. 

A third commenter urged the 

Commission to revise the definition to 

equate time of execution with ‘‘the time 

of execution of the confirmation.’’ 91

The Commission declines to do so. 

While confirmation is an important 

aspect of post-trade processing, 

performance of the actions necessary to 

confirm a transaction is within the 

discretion of the counterparties and 

their agents. Defining the ‘‘time of 

execution’’ to mean the time that a 

confirmation is issued could create 

incentives for counterparties to delay 

confirmation and thus the reporting of 

the transaction. The Commission notes 

that Section 13(m)(1)(A) of the Exchange 

Act 92 defines ‘‘real-time public 

reporting’’ as reporting certain securitybased swap data ‘‘as soon as 

technologically practicable after the 

time at which the security-based swap 

transaction has been executed.’’ The 

Commission believes this provision is 

most appropriately implemented by 

linking obligations to the time at which 

the counterparties become bound to the 

terms of the transaction—i.e., the time of 

execution—rather than some indefinite 

point in the future, such as the time 

when the confirmation is issued. 

d. Rule 901(c)(3) 

Re-proposed Rule 901(c)(7) would 

have required the reporting of the price 

of a security-based swap. Re-proposed 

Rule 901(d)(1)(iii) would have required 

the reporting of the ‘‘amount(s) and 

curren(cies) of any up-front payment(s) 

and a description of the terms and 

contingencies of the payment streams of 

each direct counterparty to the other.’’ 

Final Rule 901(c)(3) combines these 

elements and requires the reporting of 

‘‘[t]he price, including the currency in 

which the price is expressed and the 

amount(s) and currenc(ies) of any upfront payments.’’ 93 The Commission 

believes that including in final Rule 

901(c)(3) the explicit requirement to 

report the currency in which the price 

is expressed will help to clarify the 

information required to be reported.94

Re-proposed Rule 901(c)(3) is being renumbered as final Rule 901(c)(4).95

Rule 901(c)(3), as adopted, requires 

the reporting of the amount(s) and 

currenc(ies) of any up-front payments, a 

requirement that was included in reproposed Rule 901(d)(1)(iii). The 

Commission believes that information 

concerning the amount(s) and 

currenc(ies) of any up-front payment(s) 

will help regulators and market 

observers understand the reported price 

of a security-based swap, and that the 

public dissemination of this information 

will further the transparency goals of 

Title VII. The Commission also believes 

that Rule 901(c) will be simpler if all 

considerations relating to the price are 

consolidated into a single provision. 

Accordingly, Rule 901(c)(3), as adopted, 

requires the reporting and public 

dissemination of the amount(s) and 

currenc(ies) of any up-front payment(s) 

along with other pricing information for 

the security-based swap. 

As discussed in the Regulation SBSR 

Proposing Release, the price of a 

security-based swap could be expressed 

in terms of the commercial conventions 

used in that asset class.96 The 

Commission recognized that the price of 

a security-based swap generally might 

not be a simple number, as with stocks, 

but would likely be expressed in terms 

of the quoting conventions of the 

security-based swap. For example, a 

credit default swap could be quoted in 

terms of the economic spread—which is 

variously referred to as the ‘‘traded 

spread,’’ ‘‘quote spread,’’ or ‘‘composite 

spread’’—expressed as a number of 

basis points per annum. Alternately, a 

credit default swap might be quoted in 

terms of prices representing a discount 

or premium over par.97 In contrast, an 

equity or loan total return swap might 

be quoted in terms of a LIBOR-based 

floating rate payment, expressed as a 

floating rate plus a fixed number of 

basis points.98 As discussed further in 

Section IV, infra, final Rule 907(a)(1) 

requires a registered SDR to establish, 

maintain, and make publicly available 

policies and procedures that specify the 

data elements of a security-based swap 

that must be reported, including 

elements that constitute the price. The 

Commission believes that, because of 

the many different conventions that 

exist to express the price in various 

security-based swap markets and new 

conventions that might arise in the 

future, registered SDRs should have 

flexibility to select appropriate 

conventions for denoting the price of 

different security-based swap products. 

One commenter expressed concern 

that disseminating prices of margined 

and unmargined transactions together 

could mislead the market about the 

intrinsic prices of the underlying 

contracts.99 Noting that the CFTC 

proposed a field for ‘‘additional price 

notation’’ that would be used to provide 

information, including margin, that 

would help market participants evaluate 

the price of a swap, the commenter 

recommended that the Commission and 

the CFTC harmonize their approaches to 

assure that the market has an accurate 

picture of prices.100 The Commission 

agrees that publicly disseminated 

transaction reports should be as 

informative as possible. However, the 

Commission believes, at this time, that 

it could be impractical to devise 

additional data fields for describing the 

potentially complex margin 

requirements governing a security-based 

swap. Furthermore, it could be difficult 

if not impossible to attribute a portion 

of the price to a particular margin 

arrangement when the overall price 

represents the aggregation of a number 

of different factors into a single variable. 

The Commission notes that the bespoke 

flag required by Rule 901(c)(1)(v) is 

designed to inform market observers 

when a security-based swap is 

customized to the extent that the other 

data elements required by Rule 901(c)(1) 

do not provide all of the material 

information necessary to identify the 

security-based swap or provide 

sufficient information to calculate the 

price. 

Another commenter expressed 

concern that disseminating the terms of 

the floating rate payment for an equity 

swap, which is often comprised of a 

benchmark rate plus or minus a spread 

and thus contains information about the 

direction of a customer transaction 

(positive spreads indicate a customer 

long swap and negative spreads indicate 

a customer short swap) may harm 

customers by offering other market 

participants the opportunity to 

anticipate their execution strategy.101

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102See id. 

103 In the bond markets, the side of the customer 

is reported on TRACE. See http://www.finra.org/ 

Industry/Compliance/MarketTransparency/TRACE/ 

Announcements/P039007. In the cash equity 

markets, the side of the initiator of a transaction is, 

for many exchanges, provided as a data element on 

direct data feeds. It can also be inferred according 

to whether the trade was executed at the bid or 

offer. 

104 ISDA/SIFMA I at 12. 

105See id. The commenter refers to the guidelines 

included under ‘‘Line Item Instructions for 

Derivatives and Off-Balance-Sheet Item Schedule 

HC–L’’ in the Board of Governors of the Federal 

Reserve System’s ‘‘Instructions for Preparation of 

Consolidated Financial Statements for Bank 

Holding Companies Reporting Form FR Y–9C.’’ See 

ISDA/SIFMA I at 12, note 13. 

106See J.P. Morgan Letter at 12. See also ISDA IV 

at 16 (recommending the use of a notional cap in 

each asset class). 

107TRACE is a FINRA facility to which FINRA 

member firms must report over-the-counter 

transactions in eligible fixed income securities. See 

generally http://www.finra.org/Industry/ 

Compliance/MarketTransparency/TRACE/ (last 

visited September 22, 2014). 

108 Id. at 13. 

109The Commission anticipates soliciting 

comment on issues relating to block trades, 

including the possibility of utilizing masking 

thresholds, at a later date. See infra Section VII. 

110See 75 FR 75214. 

111See id. 

112See Benchmark Letter at 2. The commenter 

also suggested that it would be useful to include an 

entry for ‘‘end user,’’ similar to the ‘‘Producer/

Merchant/Producer/User’’ designation used in 

agricultural futures reports. See id. The 

Commission does not believe, at this time, that it 

is necessary to require a specific end-user 

indication. Under final Rule 901(c)(5), a transaction 

involving two registered security-based swap 

dealers must have an indication to that effect. An 

observer of a transaction report without that 

indicator will be able to infer that the transaction 

involved at least one side that does not have a 

registered security-based swap dealer. 

The commenter believes that the spread 

value should thus be masked for equity 

security-based swaps when disclosing 

the price or terms of the floating rate 

payment.102 As noted above, the 

Commission believes that publicly 

disseminated transaction reports should 

be as informative as possible. The 

floating rate payment of an equity 

security-based swap, including the 

spread, is an important part of the price 

of an equity security-based swap, and as 

such the Commission continues to 

believe that it should be disseminated. 

Not disseminating this information 

would undermine one of the key aspects 

of public dissemination, namely price 

discovery. The Commission further 

understands that in other markets—such 

as the cash equity market and the bond 

market—similar information is 

publically disclosed or can be inferred 

from public market data, which informs 

on the direction of the customer 

transaction.103

e. Rule 901(c)(4) 

Re-proposed Rule 901(c)(3) would 

have required reporting of the notional 

amount(s) and the currenc(ies) in which 

the notional amount(s) is expressed. The 

Commission is adopting this rule as reproposed, but re-numbering it as Rule 

901(c)(4). 

The Commission received two 

comments regarding the reporting and 

public dissemination of the notional 

amount of a security-based swap. One 

commenter believed that, ‘‘in the case of 

some asset classes, there is not a 

universal definition of the notional 

amount of the trade. This is particularly 

the case where the notional amount is 

not confirmable information.’’ 104 To 

address this issue, the commenter 

recommended that the Commission 

provide guidelines, such as those 

developed by the Federal Reserve Bank 

of New York, for reporting the notional 

amount of a security-based swap.105

As discussed below, final Rules 

907(a)(1) and 907(a)(2) require a 

registered SDR to establish and maintain 

written policies and procedures that 

enumerate the specific data elements 

that must be reported and that specify 

the protocols for submitting 

information, respectively. The 

Commission believes that, read together, 

Rules 907(a)(1) and 907(a)(2) provide 

registered SDRs with flexibility to 

determine the appropriate conventions 

for reporting all required data elements, 

including the notional amount. Thus, 

although Rule 901(c) itself does not 

specify the precise manner for reporting 

a security-based swap’s notional 

amount, the policies and procedures of 

registered SDRs must do so. The 

Commission believes that a registered 

SDR could choose to incorporate the 

guidance noted by the commenter, or 

other appropriate guidance, into its 

policies and procedures for reporting 

notional amounts. 

Another commenter suggested that 

the Commission, to mitigate adverse 

impacts on market liquidity, should— 

like the CFTC—adopt masking 

thresholds, rather than requiring public 

dissemination of the precise notional 

amount of a security-based swap 

transaction.106 The commenter noted 

that FINRA’s Trade Reporting and 

Compliance Engine (‘‘TRACE’’) 

system 107 uses masking conventions, 

and suggested applying that approach to 

the swap and security-based swap 

markets by ‘‘computing how much 

market risk is represented by the TRACE 

masking thresholds and using those 

numbers to map the masking thresholds 

into other asset classes.’’ 108

The Commission appreciates the 

commenter’s concerns regarding the 

uncertainty of the potential effects of 

public dissemination of security-based 

swap transaction reports on liquidity in 

the security-based swap market. As 

discussed further in Section VII, infra, 

the rules adopted in this release will 

allow the reporting, on an interim basis, 

of a security-based swap transaction at 

any time up to 24 hours after the time 

of execution (or, if 24 hours after the 

time of execution would fall on a day 

that is not a business day, by the same 

time on the next day that is a business 

day). This timeframe is designed in part 

to minimize potential adverse impacts 

of public dissemination on liquidity 

during the interim phase of Regulation 

SBSR’s implementation, as market 

participants grow accustomed to 

operating in a more transparent 

environment. Accordingly, the 

Commission does not believe that it is 

necessary at this time to adopt a 

masking convention for purposes of 

reporting and publicly disseminating 

the notional amount of security-based 

swap transactions.109

f. Rule 901(c)(5) 

Rule 901(c)(10), as proposed and reproposed, would have required the 

reporting side to indicate whether both 

counterparties to a security-based swap 

are security-based swap dealers. In the 

Regulation SBSR Proposing Release, the 

Commission stated its preliminary belief 

that such an indication would enhance 

transparency and provide more accurate 

information about the pricing of 

security-based swap transactions.110

The Commission noted, further, that 

prices of security-based swap 

transactions involving a dealer and nondealer are typically ‘‘all-in’’ prices that 

include a mark-up or mark-down, while 

interdealer transactions typically do not. 

Thus, the Commission believed that 

requiring an indication of whether a 

security-based swap was an interdealer 

transaction or a transaction between a 

dealer and a non-dealer counterparty 

would enhance transparency by 

allowing market participants to more 

accurately assess the reported price of a 

security-based swap.111

Commenters expressed mixed views 

regarding this proposed requirement. 

One commenter supported a 

requirement to include the counterparty 

type in security-based swap transaction 

reports.112 Another commenter, 

however, recommended that the 

Commission eliminate the interdealer 

indication because ‘‘[e]xcluding this 

field from the information required to be 

reported to [a registered SDR] in real 

time will bring the scope of required 

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113 DTCC V at 11. 

114 ISDA IV at 16. 

115Historical data reviewed by the Commission 

suggest that, among an estimated 300 reporting 

sides, approximately 50 are likely to be required to 

register with the Commission as security-based 

swap dealers. See infra Section XXI(B)(3). 

116See ISDA IV at 16. 

117See infra notes 284 to 285 and accompanying 

text. 

118See 75 FR 75214. 

119See id. 

120Cleary II at 20, note 56. 

121See 75 FR 75214. 

122See id. at 75214–15. 

data in line with existing dissemination 

functionality.’’ 113 A third commenter 

expressed concern that disseminating 

information that both counterparties are 

security-based swap dealers would 

reduce the anonymity of participants, 

ultimately resulting in ‘‘worse pricing 

and reduced liquidity for end-users.’’ 114

The Commission believes that 

publicly disseminating an indication of 

whether both sides of a security-based 

swap are registered security-based swap 

dealers would enhance transparency in 

the security-based swap market by 

helping market participants to assess the 

reported price of a security-based swap. 

Although the Commission understands 

the concerns about potential burdens 

that could result from changes to 

existing dissemination practices, the 

required indicator should not impose 

significant burdens. Furthermore, the 

Commission believes that any potential 

burden created by requiring the 

indicator will be justified by the 

transparency benefits of publicly 

disseminating this information. The 

Commission notes that flagging 

transactions between two registered 

security-based swap dealers does indeed 

provide information to the public that 

the transaction involved two dealers, 

thus restricting the set of possible 

counterparties. However, since a 

majority of security-based swap 

transactions presently have a dealer as 

one of the counterparties, an interdealer 

flag is unlikely to enable market 

observers to identify counterparties to 

particular transactions. Also, although 

there is a limited group of entities that 

likely would be required to register as 

security-based swap dealers that are 

currently active in the security-based 

swap market, this number is more than 

two.115 The Commission also notes that 

in the bond market interdealer 

transactions are flagged as part of 

TRACE’s public dissemination of 

corporate bond trades. Therefore, the 

Commission does not believe that 

flagging transactions between two 

registered security-based swap dealers 

would ultimately result in ‘‘worse 

pricing and reduced liquidity for endusers.’’ 116

The Commission, therefore, is 

adopting this requirement as final Rule 

901(c)(5), with one revision. The 

Commission has added the word 

‘‘registered’’ before the term ‘‘securitybased swap dealer.’’ Therefore, the final 

rule requires an indication only when 

there is a registered security-based swap 

dealer on both sides of the transaction. 

As discussed further below, the 

Commission seeks to avoid imposing 

costs on market participants for 

assessing whether or not they are 

security-based swap dealers solely for 

purposes of Regulation SBSR.117

Therefore, counterparties would have to 

be identified for purposes of Rule 

901(c)(5), as adopted, only if they are 

registered security-based swap dealers. 

g. Rule 901(c)(6) 

Re-proposed Rule 901(c)(9) would 

have required the reporting side to 

indicate whether or not a security-based 

swap would be cleared by a clearing 

agency. This requirement is being 

adopted substantially as proposed but 

numbered as Rule 901(c)(6), with an 

additional clarification, described 

below. In the Regulation SBSR 

Proposing Release, the Commission 

noted that the use of a clearing agency 

to clear a security-based swap could 

affect the price of the security-based 

swap because counterparty credit risk 

might be diminished significantly if the 

security-based swap were centrally 

cleared.118 Thus, the Commission 

preliminarily believed that information 

concerning whether a security-based 

swap would be cleared would provide 

market participants with information 

that would be useful in assessing the 

reported price of the security-based 

swap, thereby enhancing price 

discovery.119 One commenter agreed, 

stating that it ‘‘will likely also be 

necessary to identify whether a price is 

associated with a bilateral trade or a 

cleared trade . . . as these distinctions 

may well have price impacts.’’ 120

The Commission continues to believe 

that information concerning whether a 

security-based swap will be cleared is 

useful in assessing the price of the 

security-based swap and will facilitate 

understanding of how risk exposures 

may change after the security-based 

swap is executed. Accordingly, final 

Rule 901(c)(6) requires the reporting 

side to indicate ‘‘whether the direct 

counterparties intend that the securitybased swap will be submitted to 

clearing.’’ Reporting of whether the 

direct counterparties intend that the 

security-based swap will be submitted 

to clearing, rather than whether the 

security-based swap will be cleared, as 

originally proposed, more accurately 

reflects the process of entering into and 

clearing a security-based swap 

transaction. It may not be known, when 

the transaction is reported, whether a 

registered clearing agency will in fact 

accept the security-based swap for 

clearing. The Commission received no 

comments on this issue. The 

Commission believes, however, that the 

modified language enhances the 

administration of the rule. 

The Commission notes that, in some 

cases, the identity of the registered 

clearing agency that clears a securitybased swap could be included in the 

product ID of a security-based swap. If 

the identity of the registered clearing 

agency is included in the product ID, no 

information would have to be separately 

reported pursuant to Rule 901(c)(6). 

h. Rule 901(c)(7) 

Re-proposed Rule 901(c)(11) would 

have required a reporting side to 

indicate, if applicable, that a securitybased swap transaction does not 

accurately reflect the market. In the 

Regulation SBSR Proposing Release, the 

Commission noted that, in some 

instances, a security-based swap 

transaction might not reflect the current 

state of the market.121 This could occur, 

for example, in the case of a late 

transaction report, which by definition 

would not represent the current state of 

the market, or in the case of an interaffiliate transfer or assignment, where 

the new counterparty might not have an 

opportunity to negotiate the terms, 

including the price, of taking on the 

position.122 The Commission believed 

that there might not be an arm’s length 

negotiation of the terms of the securitybased swap transaction, and 

disseminating a transaction report 

without noting that fact would be 

inimical to price discovery. 

Accordingly, Rule 901(c)(11), as 

proposed and as re-proposed, would 

have required a reporting side to note 

such circumstances in its transaction 

report to the registered SDR. 

Rule 907(a)(4), as proposed and as reproposed, would have required a 

registered SDR to establish and maintain 

written policies and procedures that 

describe, among other things, how a 

reporting side would report securitybased swap transactions that, in the 

estimation of the registered SDR, do not 

accurately reflect the market. The 

Commission noted its expectation that 

these policies and procedures would 

require, among other things, different 

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123See id. at 75215. 

124See Better Markets I at 6. 

125See id. at 7 (‘‘Such disclosure should not be 

left to the discretion of the SDRs, but should instead 

be required by the rules’’). 

126See Rule 907(a)(4)(ii). 

127 15 U.S.C. 78c–3(g). 

128Rule 901(d)(1), as re-proposed, was 

substantially similar to Rule 901(d)(1), as proposed, 

but made several technical changes. Rule 901(d)(1), 

as re-proposed, revised the rule to add references 

to the reporting side, the direct counterparty on the 

reporting side, and secondary trade information. 

129See 75 FR 75217. Furthermore, to the extent 

that the Commission receives information that is 

reported under Rule 901(d), the Commission 

anticipates that it will keep such information 

confidential, to the extent permitted by law. See id. 

at note 59. 

130See id. 

indicators being applied in different 

situations.123

One commenter suggested that Rule 

901 should require the counterparties to 

a security-based swap to disclose 

specific reasons why a security-based 

swap does not accurately reflect the 

market because it would not be possible 

to understand the reported prices 

without that information.124 The 

commenter also stated that the 

Commission, rather than registered 

SDRs, should specify the indicators 

used for such transaction reports.125

The Commission agrees in general 

that an effective regime for public 

dissemination should provide market 

observers with appropriate information 

to assist them in understanding the 

disseminated transaction information. 

The Commission also agrees with the 

commenter that it could be useful to 

market observers to provide more 

specific information about particular 

characteristics of or circumstances 

surrounding a transaction that could 

affect its price discovery value. 

Therefore, after careful consideration, 

the Commission is adopting the 

substance of re-proposed Rule 

901(c)(11), but is modifying the rule text 

to reflect final Rule 907(a)(4), and is 

renumbering the requirement as Rule 

901(c)(7). Rule 901(c)(7), as adopted, 

requires reporting of any applicable 

flag(s) pertaining to the transaction that 

are specified in the policies and 

procedures of the registered SDR to 

which the transaction will be reported. 

Rule 907(a)(4)(i) requires a registered 

SDR to establish and maintain written 

policies and procedures for ‘‘identifying 

characteristic(s) of a security-based 

swap, or circumstances associated with 

the execution of a security-based swap, 

that could, in the fair and reasonable 

estimation of a registered security-based 

swap data repository, cause a person 

without knowledge of these 

characteristic(s) or circumstance(s) to 

receive a distorted view of the market.’’ 

A registered SDR also must establish 

flags to denote these characteristic(s) or 

circumstance(s).126 As discussed in 

Section VI(G), infra, the Commission 

generally believes that a registered SDR 

should consider providing condition 

flags identifying the following: Interaffiliate security-based swaps; 

transactions resulting from netting or 

compression exercises; transactions 

resulting from a ‘‘forced trading 

session’’ conducted by a clearing 

agency; transactions reported late; 

transactions resulting from the default 

of a clearing member; and package 

trades. The Commission believes that 

these condition flags, and others that 

registered SDRs may adopt in the future, 

should provide additional information 

that will help to prevent market 

observers from receiving a distorted 

view of the market. The Commission 

believes, further, that these condition 

flags address the commenter’s 

recommendation that security-based 

swap transaction reports identify the 

specific reasons why a transaction does 

not accurately reflect the market. 

The Commission disagrees, however, 

with the commenter’s suggestion that a 

Commission rule rather than the 

policies and procedures of a registered 

SDR should identify the specific 

characteristics or circumstances that 

must be reported to prevent a 

transaction report from presenting a 

distorted view of the market. The 

Commission continues to believe that 

requiring registered SDRs to develop, 

maintain, and require the use of 

condition flags, and to modify them as 

needed, will facilitate the development 

of a flexible reporting regime that is 

better able to respond quickly to 

changing conditions in the securitybased swap market. This flexibility will 

help to assure that reported transaction 

information remains meaningful as the 

security-based swap market evolves 

over time. 

B. Rule 901(d)—Secondary Trade 

Information 

1. Description of Proposed and ReProposed Rule 

Rule 901(d)(1), as proposed and as reproposed, would have required the 

reporting of certain secondary trade 

information concerning a security-based 

swap. Information reported pursuant to 

Rule 901(d)(1) would be available to 

regulatory authorities only and would 

not be publicly disseminated. Rule 

901(d)(1), as re-proposed, would have 

required the reporting of the following 

secondary trade information to a 

registered SDR: (1) The participant ID of 

each counterparty; (2) as applicable, the 

broker ID, desk ID, and trader ID of the 

direct counterparty on the reporting 

side; (3) the amount(s) and currenc(ies) 

of any up-front payment(s) and a 

description of the terms and 

contingencies of the payment streams of 

each direct counterparty to the other; (4) 

the title of any master agreement, or any 

other agreement governing the 

transaction (including the title of any 

document governing the satisfaction of 

margin obligations), incorporated by 

reference and the date of any such 

agreement; (5) the data elements 

necessary for a person to determine the 

market value of the transaction; (6) if 

applicable, and to the extent not 

provided pursuant to Rule 901(c), the 

name of the clearing agency to which 

the security-based swap will be 

submitted for clearing; (7) if the 

security-based swap is not cleared, 

whether the exception in Section 3C(g) 

of the Exchange Act 127 was invoked; (8) 

if the security-based swap is not cleared, 

a description of the settlement terms, 

including whether the security-based 

swap is cash-settled or physically 

settled, and the method for determining 

the settlement value; and (9) the venue 

where the security-based swap was 

executed.128

As discussed in the Regulation SBSR 

Proposing Release, the Commission 

believed that the information required 

to be reported by proposed Rule 901(d) 

would facilitate regulatory oversight and 

monitoring of the security-based swap 

market by providing comprehensive 

information regarding security-based 

swap transactions and trading 

activity.129 The Commission believed, 

further, that this information would 

assist the Commission in detecting and 

investigating fraud and trading abuses 

in the security-based swap market.130

Re-proposed Rule 901(d)(2) specified 

timeframes for reporting the secondary 

trade information required to be 

reported under Rule 901(d)(1). Rule 

901(d)(2), as re-proposed, would have 

required the reporting of secondary 

trade information promptly, but in no 

event later than: (1) 15 minutes after the 

time of execution of a security-based 

swap that is executed and confirmed 

electronically; (2) 30 minutes after the 

time of execution for a security-based 

swap that is confirmed electronically 

but not executed electronically; or (3) 24 

hours after the time of execution for a 

security-based swap that is not executed 

or confirmed electronically. 

2. Final Rule 901(d) 

As discussed more fully below, the 

Commission is adopting Rules 901(d)(1) 

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131Rule 901(j), which specifies the timeframe for 

reporting of the information enumerated in Rules 

901(c) and 901(d), is discussed in Section VII(B)(1) 

infra. 

132 75 FR 75217. 

133See infra Section X (discussing use of LEIs). 

134The definition of ‘‘participant ID’’ was reproposed, without change, in re-proposed Rule 

900(s). The UIC is the unique identification code 

assigned to a person, unit of a person, product, or 

transaction. See Rule 900(qq). As discussed more 

fully in Section IV, infra, final Rule 907(a)(5) 

requires a registered SDR to establish and maintain 

policies and procedures for assigning UICs in a 

manner consistent with adopted Rule 903. 

135See Cross-Border Proposing Release, 78 FR 

31065 (discussing re-proposed Rule 908(b)). 

substantially as re-proposed, although it 

is making several clarifying and 

technical changes to address issues 

raised by commenters. 

The Commission is not adopting the 

15-minute, 30-minute, and 24-hour 

timeframes in re-proposed Rule 

901(d)(2). Instead, final Rule 901(d) 

requires a reporting side to report the 

information required under Rule 901(d) 

within the timeframes specified by Rule 

901(j).131 Because re-proposed Rule 

901(d)(2) is not being adopted, reproposed Rule 901(d)(1) is renumbered 

as final Rule 901(d), and re-proposed 

Rules 901(d)(1)(i)–(ix), which would 

identify the categories of secondary 

trade information required to be 

reported, are renumbered as final Rules 

901(d)(1)–(9). 

Rule 901(d), as adopted, requires the 

reporting side to report the following 

secondary trade information: (1) The 

counterparty ID or execution agent ID of 

each counterparty, as applicable; (2) as 

applicable, the branch ID, broker ID, 

execution agent ID, trader ID, and 

trading desk ID of the direct 

counterparty on the reporting side; (3) to 

the extent not provided pursuant to 

Rule 901(c)(1), the terms of any fixed or 

floating rate payments, including the 

terms and contingencies of any such 

payments; (4) for a security-based swap 

that is not a clearing transaction, the 

title and date of any master agreement, 

collateral agreement, margin agreement, 

or any other agreement incorporated by 

reference into the security-based swap 

contract; (5) to the extent not provided 

pursuant to Rule 901(c) or other 

provisions of Rule 901(d), any 

additional elements included in the 

agreement between the counterparties 

that are necessary for a person to 

determine the market value of the 

transaction; (6) if applicable, and to the 

extent not provided pursuant to Rule 

901(c), the name of the registered 

clearing agency to which the securitybased swap will be submitted for 

clearing; (7) if the direct counterparties 

do not intend to submit the securitybased swap to clearing, whether they 

have invoked the exception in Section 

3C(g) of the Exchange Act; (8) to the 

extent not provided pursuant to other 

provisions of Rule 901(d), if the direct 

counterparties do not submit the 

security-based swap to clearing, a 

description of the settlement terms, 

including whether the security-based 

swap is cash-settled or physically 

settled, and the method for determining 

the settlement value; (9) the platform ID, 

if applicable; and (10) if the securitybased swap arises from the allocation, 

termination, novation, or assignment of 

one or more existing security-based 

swaps, the transaction ID of the 

allocated, terminated, assigned, or 

novated security-based swap(s), except 

in the case of a clearing transaction that 

results from the netting or compression 

of other clearing transactions. 

3. Discussion of Final Rule 901(d) and 

Response to Comments 

a. Rule 901(d)(1)—Counterparty IDs 

In the Regulation SBSR Proposing 

Release, the Commission expressed the 

view that a registered SDR ‘‘must have 

a systematic means to identify and 

track’’ all persons involved in the 

security-based swap transactions 

reported to that registered SDR.132 The 

Commission intended to accomplish 

this, in part, through proposed Rule 

901(d)(1)(i), which would have required 

the reporting party to report the 

participant ID of each counterparty to a 

registered SDR.133 As proposed in Rule 

900, ‘‘participant ID’’ would have been 

defined as ‘‘the UIC assigned to a 

participant’’ 134 and ‘‘participant’’ 

would have encompassed: (1) A U.S. 

person that is a counterparty to a 

security-based swap that is required to 

be reported to a registered SDR; or (2) 

a non-U.S. person that is a counterparty 

to a security-based swap that is (i) 

required to be reported to a registered 

SDR; and (ii) executed in the United 

States or through any means of 

interstate commerce, or cleared through 

a clearing agency that has its principal 

place of business in the United States. 

Re-proposed Rule 901(d)(1)(i) would 

have required the reporting side to 

report the participant ID of each 

counterparty to a security-based swap. 

Re-proposed Rule 900(s) would have 

defined ‘‘participant’’ as ‘‘a person that 

is a counterparty to a security-based 

swap that meets the criteria of 

§ 242.908(b).’’ Under re-proposed Rule 

900(s), the following types of person 

would have met the criteria of Rule 

908(b): (1) U.S. persons; (2) securitybased swap dealers and major securitybased swap participants; and (3) 

counterparties to a transaction 

‘‘conducted within the United 

States.’’ 135

The Commission received no 

comments on re-proposed Rule 

901(d)(1)(i), but has determined to 

adopt, as final Rule 901(d)(1), a 

modified rule that will, in the 

Commission’s estimation, better 

accomplish the objective of ensuring 

that a registered SDR can identify each 

counterparty to a security-based swap. 

As re-proposed, the reporting side 

would have been required to report the 

participant ID of its counterparty only if 

the counterparty met the definition of 

‘‘participant,’’ which would have been 

limited by Rule 908(b). Under the reproposed definition of ‘‘participant,’’ 

some counterparties to security-based 

swaps would not have become 

participants of the registered SDRs that 

receive reports of those security-based 

swaps under Rule 901(a). For example, 

if a U.S. person security-based swap 

dealer entered into a security-based 

swap with a non-U.S. person private 

fund in a transaction that is not 

conducted within the United States, the 

security-based swap dealer would have 

been a participant of the registered SDR 

to which the security-based swap is 

reported pursuant to Rule 901(a), but 

the private fund would not. In this 

circumstance, Rule 901(d)(1)(i), as reproposed, would not have provided a 

mechanism for the reporting of the 

private fund’s identity to the registered 

SDR; because the private fund would 

not have been a participant of that 

registered SDR it would not have 

received a ‘‘participant ID.’’ 

The Commission believes that it is 

necessary and appropriate for a 

registered SDR to obtain identifying 

information for all counterparties to 

security-based swaps that are subject to 

Regulation SBSR. Without this 

information being reported to a 

registered SDR, the Commission’s 

ability to oversee the security-based 

swap market could be impaired because 

the Commission might not be able to 

determine the identity of each 

counterparty to a security-based swap 

reported to a registered SDR pursuant to 

Regulation SBSR. 

Final Rule 901(d)(1) addresses this 

concern by requiring the reporting side 

to report ‘‘the counterparty ID or the 

execution agent ID of each counterparty, 

as applicable.’’ The Commission is 

adopting, as Rule 900(j), the term 

‘‘counterparty ID,’’ which means ‘‘the 

UIC assigned to a counterparty to a 

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14582 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

136The Commission is not adopting the reproposed definition of ‘‘participant ID’’ as this term 

is not used in Regulation SBSR, as adopted. 137See Rule 900(i). 138See Rule 900(k). 139See Rule 900(p). Re-proposed Rule 900(o) 

would have defined ‘‘indirect counterparty’’ to 

mean ‘‘a guarantor of a direct counterparty’s 

performance of any obligation under a securitybased swap.’’ The Commission is adopting, 

consistent with the approach it took in the crossborder context, a modified definition of ‘‘indirect 

counterparty’’ to clarify the type of guarantor 

relationship that would cause a person to become 

an indirect counterparty for purposes of Regulation 

SBSR. See Securities Exchange Act Release 

No.72472 (June 25, 2014), 79 FR 47278, 47316–17 

(August 12, 2014) (‘‘Cross-Border Adopting 

Release’’). Final Rule 900(p) defines ‘‘indirect 

counterparty’’ to mean a guarantor of a direct 

counterparty’s performance of any obligation under 

a security-based swap such that the direct 

counterparty on the other side can exercise rights 

of recourse against the indirect counterparty in 

connection with the security-based swap; for these 

purposes, a direct counterparty has rights of 

recourse against a guarantor on the other side if the 

direct counterparty has a conditional or 

unconditional legally enforceable right, in whole or 

in part, to receive payments from, or otherwise 

collect from, the guarantor in connection with the 

security-based swap. Thus, under final Rule 900(p), 

a person becomes an indirect counterparty to a 

security-based swap if the guarantee offered by the 

person permits a direct counterparty on the other 

side of the transaction to exercise rights of recourse 

against the person in connection with the securitybased swap. The Commission believes that, if a 

recourse guarantee exists, it is reasonable to assume 

that the other side of the transaction would look 

both to the direct counterparty and its guarantor(s) 

for performance on the security-based swap. If the 

direct counterparty fails to fulfill its payment 

obligations on the security-based swap, its 

guarantor would be obligated to make the required 

payments. As noted in the Cross-Border Adopting 

Release, such rights may arise in a variety of 

contexts. The meaning of the terms ‘‘guarantee,’’ 

‘‘recourse,’’ and any related terms used in 

Regulation SBSR is the same as the meaning of 

those terms in the Cross-Border Adopting Release 

and the rules adopted therein. 

140The process for obtaining UICs, including 

counterparty IDs, is described in Section X, infra. 

141See infra Section II(C)(3)(b)(i) (discussing 

execution agent ID). 

142The Commission believes the reporting side 

may not know the counterparty ID of the other side 

if, for example, the security-based swap will be 

allocated after execution. Section VIII describes 

how Regulation SBSR applies to security-based 

swaps involving allocation. 

143See Rule 901(d)(1); Rule 907(a)(5) (requiring a 

registered SDR to have written policies and 

procedures for assigning UICs in a manner 

consistent with Rule 903). 

144 Institutional Investors Letter at 6. 

145Consequently, the word ‘‘person,’’ as used in 

this release, includes any counterparty to a securitybased swap, including a counterparty that is not a 

legal person. Cf. Cross-Border Adopting Release, 79 

FR 47312 (providing that an account, whether 

discretionary or not, of a U.S. person also is a U.S. 

person—even though accounts generally are not 

considered separate legal persons—and noting that 

this prong of the ‘‘U.S. person’’ definition focuses 

on the party that actually bears the risk arising from 

a security-based swap transaction). 

146Re-proposed Rule 900(s) would have defined 

‘‘participant’’ as ‘‘a person that is a counterparty to 

a security-based swap that meets the criteria of 

§ 242.908(b).’’ 

147See infra Section VI(D)(1) (discussing nonmandatory reports). 

148Assume, for example, that Fund X is a U.S. 

person and engages in a single uncleared securitybased swap with a registered security-based swap 

dealer. Further assume that the registered securitybased swap dealer, who has the duty to report the 

transaction under the reporting hierarchy, elects to 

submit the required transaction report to SDR P, 

and also submits a non-mandatory report of the 

transaction to SDR Q. Fund X is now a participant 

of SDR P but not of SDR Q. Under Rule 900(u), 

Fund X would not become a participant of SDR Q 

unless and until it enters into a future securitybased swap that is reported on a mandatory basis 

to SDR Q. 

security-based swap.’’ 136 A 

‘‘counterparty’’ is a person that is a 

direct or indirect counterparty of a 

security-based swap.137 A ‘‘direct 

counterparty’’ is a person that is a 

primary obligor on a security-based 

swap,138 and an ‘‘indirect counterparty’’ 

is a guarantor of a direct counterparty’s 

performance of any obligation under a 

security-based swap such that the direct 

counterparty on the other side can 

exercise rights of recourse against the 

indirect counterparty in connection 

with the security-based swap; for these 

purposes a direct counterparty has 

rights of recourse against a guarantor on 

the other side if the direct counterparty 

has a conditional or unconditional 

legally enforceable right, in whole or in 

part, to receive payments from, or 

otherwise collect from, the guarantor in 

connection with the security-based 

swap.139 Thus, the definition of 

‘‘counterparty ID’’ encompasses UICs 

that identify all direct and indirect 

counterparties to a security-based swap, 

even if a particular counterparty is not 

a participant of a registered SDR.140

The Commission believes final Rule 

901(d)(1) will accomplish the 

Commission’s objective of obtaining 

identifying information for all 

counterparties to a security-based swap 

and improve regulatory oversight and 

surveillance of the security-based swap 

market. The counterparty ID will allow 

registered SDRs, the Commission, and 

other relevant authorities to track 

activity by a particular market 

participant and facilitate the aggregation 

and monitoring of that market 

participant’s security-based swap 

positions. 

The Commission also is adopting a 

requirement in Rule 901(d)(1)(i) for the 

reporting side to report the ‘‘execution 

agent ID’’ as applicable.141 This 

situation could arise if the identity of a 

counterparty is not known at the time of 

execution.142 In this circumstance, the 

reporting side would report the 

execution agent ID because it would not 

know the counterparty ID. 

Regulation SBSR requires reporting of 

the UIC of each counterparty to a 

security-based swap.143 One commenter 

stated that ‘‘each series or portfolio 

within each trust should be given its 

own LEI/UCI number to address 

possible confusion between series or 

portfolios within the same trust. Each 

portfolio is distinct with its own 

separate assets and liabilities.’’ 144 The 

Commission agrees with this commenter 

and notes that Rule 901(d)(1) requires 

the reporting of the UIC for each 

counterparty to a security-based swap, 

whether not the counterparty is a legal 

person.145 If a counterparty is an entity 

other than a legal person, such as a 

series or portfolio within a trust, or an 

account, Rule 901(d)(1) requires the 

reporting of the UIC that identifies that 

counterparty. 

Finally, the Commission notes that 

although it is not adopting a definition 

of ‘‘participant ID,’’ the concept of a 

‘‘participant’’ is still utilized in 

Regulation SBSR. Rule 900(u), as 

adopted, defines ‘‘participant,’’ with 

respect to a registered SDR, as ‘‘a 

counterparty, that meets the criteria of 

§ 242.908(b), of a security-based swap 

that is reported to that registered 

security-based swap data repository to 

satisfy an obligation under 

§ 242.901(a).’’ 146 The adopted 

definition makes clear that a person 

becomes a participant of a particular 

registered SDR only if the person meets 

the criteria of Rule 908(b) and is a 

counterparty to a security-based swap 

that is reported to that registered SDR 

on a mandatory basis. A counterparty 

would not become a participant of all 

registered SDRs as a result of being a 

counterparty to a security-based swap 

that is subject to Regulation SBSR and 

reported to a particular registered SDR 

as required by Rule 901(a). The adopted 

definition also clarifies that a 

counterparty would not become a 

participant of a registered SDR as a 

result of any non-mandatory report 147

submitted to that registered SDR.148

Similarly, a counterparty that meets the 

criteria of Rule 908(b) would not 

become a participant of any registered 

SDR if the security-based swap is 

reported pursuant to a substituted 

compliance determination under Rule 

908(c), because such a security-based 

swap would not be reported to a 

registered SDR pursuant to Rule 901(a). 

The final definition of ‘‘participant’’ is 

less comprehensive than the reproposed definition because Rule 

908(b), as adopted, is narrower than 

Rule 908(b), as re-proposed. As 

discussed in Section XV(D), infra, final 

Rule 908(b) includes U.S. persons, 

registered security-based swap dealers, 

and registered major security-based 

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149See Regulation SBSR Proposing Release, 75 FR 

75217. 

150See id. 

151As discussed in greater detail in Section 

XIII(A), infra, Rule 906(a), as adopted, requires 

reporting to a registered SDR of the branch ID, 

broker ID, execution agent ID, trader ID, and trading 

desk ID, as applicable, of a direct counterparty to 

a security-based swap that is not the reporting side. 

Thus, Rules 901(d)(2) and 906(a) together require 

reporting, as applicable, of the branch ID, broker ID, 

execution agent ID, trader ID, and trading desk ID 

of each direct counterparty to a security-based 

swap. 

152See Rule 900(d). 

153 ‘‘Broker ID’’ is defined as ‘‘the UIC assigned 

to a person acting as a broker for a participant.’’ See 

Rule 900(e). 

swap participants. The Commission is 

not at this time taking action on the 

prong of re-proposed Rule 908(b) that 

would have caused a person to become 

a participant solely by being a 

counterparty to a security-based swap 

that is a transaction conducted within 

the United States. As a result, fewer 

non-U.S. persons are likely to ‘‘meet the 

criteria of Rule 908(b),’’ as adopted, 

because a non-U.S. person that is a 

counterparty of a security-based swap 

would meet the criteria of final Rule 

908(b) only if that counterparty is a 

registered security-based swap dealer or 

a registered major security-based swap 

participant. Thus, only a U.S. person, a 

registered security-based swap dealer, or 

a registered major security-based swap 

participant could be a ‘‘participant’’ 

under Regulation SBSR. 

b. Rule 901(d)(2)—Additional UICs 

Rule 901(d)(1)(ii), as re-proposed, 

would have required reporting of, as 

applicable, the broker ID, desk ID, and 

trader ID of the direct counterparty on 

the reporting side. The Commission 

preliminarily believed that the reporting 

of this information would help to 

promote effective oversight, 

enforcement, and surveillance of the 

security-based swap market by the 

Commission and other relevant 

authorities.149 The Commission noted, 

for example, that this information 

would allow regulators to track activity 

by a particular participant, a particular 

desk, or a particular trader. In addition, 

relevant authorities would have greater 

ability to observe patterns and 

connections in trading activity, or 

examine whether a trader had engaged 

in questionable activity across different 

security-based swap products. Such 

identifiers also would facilitate 

aggregation and monitoring of the 

positions of security-based swap 

counterparties, which could be of 

significant benefit for systemic risk 

management.150

Adopted Rule 901(d)(2) modifies reproposed Rule 901(d)(1)(ii) in certain 

respects. First, final Rule 901(d)(2) 

replaces the defined term ‘‘desk ID’’ 

with the defined term ‘‘trading desk ID.’’ 

Second, final Rule 901(d)(2) now 

includes a requirement to report the 

branch ID and the execution agent ID of 

the direct counterparty on the reporting 

side, in addition to the broker ID, 

trading desk ID, and trader ID. In 

conjunction with this requirement, final 

Rule 900 includes the new defined 

terms ‘‘branch ID’’ and ‘‘execution agent 

ID.’’ Third, final Rule 900 includes a 

revised definition of ‘‘trader ID.’’ Thus, 

final Rule 901(d)(2) requires reporting 

of, ‘‘[a]s applicable, the branch ID, 

broker ID, execution agent ID, trader ID, 

and trading desk ID of the direct 

counterparty on the reporting side.’’ 151

i. Branch ID and Execution Agent ID 

Rule 901(d)(2), as adopted, requires 

the reporting of, as applicable, the 

branch ID and execution agent ID of the 

direct counterpart on the reporting side, 

in addition to the broker ID, trader ID, 

and trading desk ID of the direct 

counterparty on the reporting side. The 

‘‘branch ID’’ is the ‘‘UIC assigned to a 

branch or other unincorporated office of 

a participant.’’ 152 The Commission did 

not include a requirement to report the 

branch ID in Rule 901(d), as proposed 

or as re-proposed. However, the 

Commission now believes that it is 

appropriate to include in Regulation 

SBSR a new concept of the branch ID 

and require reporting of the branch ID, 

when a transaction is conducted 

through a branch, as part of Rule 

901(d)(2), as adopted. Reporting of the 

branch ID, where applicable, will help 

identify the appropriate sub-unit within 

a large organization that executed a 

security-based swap (if a transaction 

were in fact conducted through that subunit). This information also will 

facilitate the aggregation and monitoring 

of security-based swap transactions by 

branch, at the level of the registered 

SDR and potentially within the firm 

itself. 

Final Rule 901(d)(2) also includes 

another UIC, the ‘‘execution agent ID,’’ 

that was not included in the proposal or 

re-proposal. Rule 900(m), as adopted, 

provides that the execution agent ID is 

the ‘‘UIC assigned to any person other 

than a broker or trader that facilitates 

the execution of a security-based swap 

on behalf of a direct counterparty.’’ The 

Commission initially proposed to 

require reporting of the broker ID in 

order to obtain a record of an agent that 

facilitates a transaction, if there is such 

an agent. The Commission now 

recognizes, however, that entities other 

than registered brokers could act as 

agents in a security-based swap 

transaction. For example, an asset 

manager could be acting as an agent on 

behalf of a fund counterparty but likely 

would not be a broker-dealer. The 

definition of ‘‘execution agent ID’’ is 

designed to encompass the entities in 

addition to brokers that may act as 

agents for security-based swap 

counterparties. The broker ID,153 which 

also must be reported under final Rule 

901(d)(2), will identify a registered 

broker, if any, that intermediates a 

security-based swap transaction 

between two direct counterparties and 

itself is not a counterparty to the 

transaction. 

The Commission believes that 

obtaining information about a broker or 

execution agent, if any, involved in the 

transaction will provide regulators with 

a more complete understanding of the 

transaction and could provide useful 

information for market surveillance 

purposes. The Commission notes that 

some security-based swap transactions 

may involve multiple agents. For 

example, an asset manager could use a 

broker to facilitate the execution of a 

security-based swap on behalf of one or 

more of the funds that it advises. In that 

case, final Rule 901(d) would require 

reporting of the counterparty ID of the 

direct counterparty (the fund), the 

execution agent ID (for the asset 

manager), and the broker ID (of the 

broker that intermediated the 

transaction). 

ii. Revised Defined Terms in Rule 

901(d)(2) 

Rule 901(d)(1)(ii), as re-proposed, 

would have required the reporting of, 

among other things, the desk ID of the 

direct counterparty on the reporting 

side. Rule 900(i), as re-proposed, would 

have defined ‘‘desk ID’’ as the UIC 

assigned to the trading desk of a 

participant or of a broker of a 

participant. Rule 900, as re-proposed, 

did not include a definition of ‘‘desk.’’ 

Final Rule 901(d)(2) requires the 

reporting of the ‘‘trading desk ID,’’ 

rather than the ‘‘desk ID.’’ Accordingly, 

the defined term ‘‘desk ID’’ is being 

replaced in Rule 900 with the defined 

term ‘‘trading desk ID,’’ which Rule 

900(ll) defines as ‘‘the UIC assigned to 

the trading desk of a participant.’’ 

Unlike re-proposed Rule 900, which 

provided no definition of the term 

‘‘desk,’’ final Rule 900(kk) provides a 

definition of the term ‘‘trading desk.’’ 

Specifically, final Rule 900(kk) defines 

‘‘trading desk’’ to mean, ‘‘with respect to 

a counterparty, the smallest discrete 

unit of organization of the participant 

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14584 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

154The trading desk ID also might allow relevant 

authorities to determine whether a particular 

trading desk is engaging in activity that could 

disrupt the security-based swap markets. For 

example, in early 2012, a trading desk of JPMorgan 

Chase and Company known as the Chief Investment 

Office executed transactions in synthetic credit 

derivatives that declined in value by at least $6.2 

billion later in the year. According to the report of 

the United States Senate Permanent Subcommittee 

on Investigations, these trades, which were 

unknown to the bank’s regulators, were ‘‘so large in 

size that they roiled world credit markets.’’ Report 

of the United States Senate Permanent 

Subcommittee on Investigations, JPMorgan Chase 

Whale Trades: A Case History of Derivatives Risks 

and Abuses (March 15, 2013), available at http://

www.hsgac.senate.gov/subcommittees/

investigations/hearings/chase-whale-trades-a-casehistory-of-derivatives-risks-and-abuses (last visited 

October 7, 2014). The existence of a trading desk 

ID could, in the future, facilitate the ability of 

relevant authorities to detect this type of trading 

activity. 

155 GS1 Letter at 39 (also stating that these 

elements ‘‘would be most critical for performing 

trading oversight and compliance functions such as 

trading ahead analysis, assessing trader price 

collusion, analyzing audit trail data from multiple 

derivatives markets as well as underlying cash 

markets . . . Also, lack of unique, unambiguous 

and universal identification of broker, desks and 

traders was one of the significant deterrents to 

analyzing the May 6, 2010 flash crash’’). Another 

commenter generally supported the information 

required to be reported pursuant to Rule 901(d). See 

Barnard I at 2. 

156See DTCC II at 11. 

157See id. 

158See ISDA III at 2; ISDA IV at 8; ISDA/SIFMA 

at 11. 

159 ISDA III at 2; ISDA IV at 8. 

160See ISDA IV at 8 (stating that ‘‘[u]nder EMIR 

rules, broker ID is required, but not desk ID or 

trader ID. In Canada, only broker ID is required, but 

we note that reporting entities are struggling with 

the availability of an LEI to identify brokers that 

have not been subject to a mandate to obtain one’’). 

See also ISDA III at 2. 

161 ISDA/SIFMA at 11. 

162 Id. See also ISDA IV at 8 (‘‘We suggest that the 

Commission eliminate broker ID, desk ID and trader 

ID from the list of reportable secondary trade 

information. If the Commission wants to retain 

these fields we strongly believe a cost-benefit 

analysis should be conducted’’). 

163See infra Section XXII(C)(1) (providing the 

economic analysis of these requirements). 

164Thus, a participant would not be required to 

‘‘re-report’’ a transaction to the registered SDR if, for 

example, the trader who executed the transaction 

leaves the firm some time afterwards. However, the 

participant will be subject to the policies and 

procedures of the registered SDR for, among other 

things, assigning UICs in a manner consistent with 

Rule 903. See infra Section IV. Those policies and 

procedures could include a requirement for the 

participant to regularly notify the registered SDR 

that purchases or sells financial 

instruments for the account of the 

participant or an affiliate thereof.’’ The 

Commission believes that adding a 

definition of ‘‘trading desk’’ will help to 

clarify the rule by describing the type of 

structure within an enterprise that must 

receive a trading desk ID. The ‘‘trading 

desk ID’’ concept is designed to identify, 

within a large organization, the smallest 

discrete unit that initiated a securitybased swap transaction. Requiring the 

reporting of the trading desk ID will 

assist regulators in monitoring the 

activities and exposures of market 

participants. The trading desk ID could, 

among other things, facilitate 

investigations of suspected 

manipulative or abusive trading 

practices.154

Final Rule 901(d)(2) also requires 

reporting of, if applicable, the trader ID 

of the direct counterparty on the 

reporting side. Re-proposed Rule 

900(gg) would have defined ‘‘trader ID’’ 

as ‘‘the UIC assigned to a natural person 

who executes security-based swaps.’’ 

This definition would encompass a 

direct counterparty that executed a 

security-based swap, as well as a trader 

acting as agent that executes a securitybased swap on behalf of a direct 

counterparty. The Commission did not 

intend for the definition of ‘‘trader ID’’ 

to include both direct counterparties 

(whose counterparty IDs must be 

provided pursuant to Rule 901(d)(1)) 

and traders acting in an agency capacity 

that execute security-based swaps on 

behalf of a direct counterparty. To 

narrow the definition of ‘‘trader ID’’ so 

that it includes only traders that execute 

security-based swaps on behalf of direct 

counterparties, final Rule 900(jj) defines 

‘‘trader ID’’ as ‘‘the UIC assigned to a 

natural person who executes one or 

more security-based swaps on behalf of 

a direct counterparty.’’ The direct 

counterparty would be the person, 

account, or fund that is the direct 

counterparty to the security-based swap 

that employs the trader. 

iii. Response to Comments 

One commenter supported the 

proposed requirement for reporting 

broker ID, desk ID, and trader ID, stating 

that these UICs would ‘‘give regulators 

a capability to aggregate position and 

trade data in multiple ways including 

by individual trader to spot 

concentration risk and insider 

trading.’’ 155 A second commenter 

argued that desk structures change 

relatively frequently and personnel 

often rotate or transfer to other firms; 

therefore, the effort to maintain trader 

ID and desk ID information in a 

registered SDR could exceed its 

usefulness.156 The commenter also 

indicated that information regarding the 

desk ID and trader ID would be 

available from a firm’s audit trail.157

The Commission questions whether 

consistent and robust information about 

a firm’s desk and trader activity is 

available from firms’ audit trails. Even 

if it were, the Commission believes that 

reporting of the trader ID and the 

trading desk ID—as well as the branch 

ID, broker ID, and execution agent ID— 

will help to assure that information 

concerning the persons involved in the 

intermediation and execution of a 

security-based swap is readily available 

to the Commission and other relevant 

authorities. This information could 

assist in monitoring and overseeing the 

security-based swap market and 

facilitate investigations of suspected 

manipulative or abusive trading 

practices. 

Two other commenters raised issues 

with requiring reporting of broker, 

trader, and trading desk IDs.158 One of 

these commenters believed that 

reporting these UICs would require 

‘‘great cost and effort’’ from firms, 

including the costs associated with 

establishing and maintaining UICs in 

the absence of a global standard.159 The 

commenter also noted that not all of 

these identifiers are required to be 

reported in other jurisdictions.160 In a 

joint comment letter with another trade 

association, this commenter also stated 

that, because these UICs are not 

currently reported by any participants 

in the OTC derivatives markets, ‘‘[t]he 

industry will need to develop standards 

and appropriate methodology to 

effectively report this information.’’ 161

This comment expressed concern that 

the proposed requirement ‘‘will create 

significant ‘noise’ as a result of booking 

restructuring events (due to either 

technical or desk reorganization 

considerations). We therefore 

recommend that such information be 

either excluded, or that participants 

report the Desk ID and Trader ID 

associated with the actual trade or 

lifecycle events, but not those resulting 

from internal reorganization events.’’ 162

The Commission recognizes that, 

currently, UICs for branches, execution 

agents, trading desks, and individual 

traders are generally not in use. While 

the Commission agrees with the 

commenters that there could be a 

certain degree of cost and effort 

associated with establishing and 

maintaining UICs, the Commission 

believes that such costs have already 

been taken into account when 

determining the costs of Regulation 

SBSR.163 The costs of developing such 

UICs are included in the costs for Rule 

901 (detailing the data elements that 

must be reported) and Rule 907 

(detailing the requirement that SDRs 

develop policies and procedures for the 

reporting of the required data elements). 

The Commission confirms that these 

UICs must be reported pursuant to Rule 

901(d)(2) only in connection with the 

original transaction.164

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14585 

about changes in persons or business units 

requiring a UIC. 

165See Regulation SBSR Proposing Release, 75 FR 

75218, note 62. 

166See id. 

167See DTCC II at 10. 

168See DTCC II at 10; DTCC V at 12. 

169As discussed above, the requirement to report 

the amount(s) and currenc(ies) of any up-front 

payments now appears in Rule 901(c)(3), rather 

than in Rule 901(d). Rule 901(c)(3), as adopted, 

requires reporting of the price of a security-based 

swap, including the currency in which the price is 

expressed and the amount(s) and currenc(ies) of any 

up-front payments. 

170 If information concerning the terms and 

frequency of any regular fixed or floating rate 

payments is included in the product ID for the 

security-based swap, the reporting side is required 

to report only the product ID, and would not be 

required to separately report the terms and 

frequency of any regular fixed or floating rate 

payments in addition to the product ID. See Rule 

901(c)(1); Section III(B)(2)(b)(ii), supra. 

171See Regulation SBSR Proposing Release, 75 FR 

75218. 

172See id. at 75218, note 63. 

173See Better Markets I at 7–8 (arguing that, to 

facilitate oversight, security-based swap 

counterparties should be required to report the core 

data elements of their collateral arrangements, 

including, at a minimum: (1) The parties to the 

agreement; (2) the thresholds for forbearance of 

posted collateral applicable to each party; (3) the 

triggers applicable to each party that would require 

immediate funding (termination of forbearance); 

and (4) the methodology for measuring counterparty 

credit risk); Better Markets III at 4–5. 

c. Rule 901(d)(3)—Payment Stream 

Information 

Rule 901(d)(1)(iii), as proposed and 

re-proposed, would have required the 

reporting side to report the amount(s) 

and currenc(ies) of any up-front 

payment(s) and a description of the 

terms and contingencies of the payment 

streams of each direct counterparty to 

the other. The Commission stated that 

this requirement would include, for a 

credit default swap, an indication of the 

counterparty purchasing protection, the 

counterparty selling protection, and the 

terms and contingencies of their 

payments to each other; and, for other 

security-based swaps, an indication of 

which counterparty is long and which is 

short.165 The Commission noted that 

this information could be useful to 

regulators in investigating suspicious 

trading activity.166

One commenter stated the view that 

proposed Rule 901(d)(1)(iii) was 

duplicative of proposed Rule 

901(d)(1)(v), which would require 

reporting of the data elements necessary 

to determine the market value of a 

transaction.167 The commenter stated, 

further, that proposed Rule 901(d)(1)(iii) 

was unclear about the required form of 

the description of the terms and 

contingencies of the payment streams, 

and requested further clarification of 

this proposed requirement.168

The Commission agrees with the 

commenter’s concerns regarding the 

need to clarify the information required 

to be reported under these provisions of 

Rule 901. Accordingly, the Commission 

is revising adopted Rule 901(d)(3) to 

require the reporting, to the extent not 

provided pursuant to Rule 901(c)(1), of 

the terms of any fixed or floating rate 

payments, or otherwise customized or 

non-standardized payment streams, 

including the frequency and 

contingencies of any such payments.169

As discussed above, adopted Rule 

901(c)(1)(iv) requires the reporting side 

to report the terms of any standardized 

fixed or floating rate payments, and the 

frequency of any such payments.170 To 

the extent that a security-based swap 

includes fixed or floating rate payments 

that do not occur on a regular schedule 

or are otherwise customized or nonstandardized, final Rule 901(d)(3) 

requires the reporting of the terms of 

those payments, including the 

frequency and contingencies of the 

payments. The Commission believes 

that the changes to final Rule 901(d)(3) 

make clear that Rule 901(d)(3) requires 

reporting of customized or nonstandardized payment streams, in 

contrast to the standardized payment 

streams required to be reported 

pursuant to Rule 901(c)(1)(iv). The 

terms required to be reported could 

include, for example, the frequency of 

any resets of the interest rates of the 

payment streams. The terms also could 

include, for a credit default swap, an 

indication of the counterparty 

purchasing protection and the 

counterparty selling protection, and, for 

other security-based swaps, an 

indication of which counterparty is long 

and which counterparty is short. The 

Commission believes that information 

concerning the non-standard payment 

streams of a security-based swap could 

be useful to the Commission or other 

relevant authorities in assessing the 

nature and extent of counterparty 

obligations and risk exposures. The 

Commission believes that the changes 

made to Rule 901(d)(3) will help clarify 

the information required to be reported 

under the rule and will eliminate any 

redundancy between the information 

required to be reported under Rules 

901(c)(1)(iv) and 901(d)(3). 

In addition, as discussed more fully 

below, the Commission is revising reproposed Rule 901(d)(1)(v), which is 

renumbered as final Rule 901(d)(5), to 

indicate that Rule 901(d)(5) requires the 

reporting of additional data elements 

necessary to determine the market value 

of a transaction only to the extent that 

the information has not been reported 

pursuant to Rule 901(c) or other 

provisions of Rule 901(d). The 

Commission believes that these changes 

address the concern that Rule 

901(d)(i)(iii) was duplicative of Rule 

901(d)(1)(v). 

d. Rule 901(d)(4)—Titles and Dates of 

Agreements 

Rule 901(d)(1)(iv), as proposed, would 

have required reporting of the title of 

any master agreement, or any other 

agreement governing the transaction 

(including the title of any document 

governing the satisfaction of margin 

obligations), incorporated by reference 

and the date of any such agreement. 

Rule 901(d)(1)(v), as proposed, would 

have required reporting of the data 

elements necessary for a person to 

determine the market value of the 

transaction. The Commission noted that 

proposed Rule 901(d)(1)(v) would 

require, for a security-based swap that is 

not cleared, information related to the 

provision of collateral, such as the title 

and date of the relevant collateral 

agreement. The Commission 

preliminarily believed that these 

requirements, together with other 

information required to be reported 

under Rule 901(d), would facilitate 

regulatory oversight of counterparties by 

providing information concerning 

counterparty obligations.171 The 

Commission re-proposed Rules 

901(d)(1)(iv) and 901(d)(1)(v) without 

revision in the Cross-Border Proposing 

Release. 

In proposing Rules 901(d)(1)(iv) and 

901(d)(1)(v), the Commission balanced 

the burdens associated with reporting 

entire agreements against the benefits of 

having information about these 

agreements, and proposed to require 

reporting only of the title and date of 

such master agreements and any other 

agreement governing the transaction. 

Similarly, the Commission indicated 

that proposed Rule 901(d)(1)(v) would 

require the reporting of the title and 

date of any collateral agreements 

governing the transaction.172

One commenter disagreed with the 

Commission’s proposed approach. This 

commenter expressed the view that 

Regulation SBSR should be more 

explicit in requiring reports of 

information concerning collateral and 

margin for use by regulators because 

this information would be important for 

risk assessment and other purposes.173

The Commission agrees that it is 

important for regulatory authorities to 

have access to information concerning 

the collateral and margin associated 

with security-based swap transactions. 

The Commission also is mindful, 

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174See ISDA/SIFMA I at 14–15. Specifically, the 

commenter stated that the calculation of exposure 

collateral ‘‘is performed at a netted portfolio level 

and cannot be broken down to the transaction 

level—it is simply not possible to identify the 

specific exposure collateral or the ‘exposure’ 

associated with any particular transaction.’’ See id. 

at 14. The commenter noted, further, that the 

independent amount, an optional additional 

amount of collateral that two counterparties may 

negotiate, ‘‘may be specified at transaction level, at 

portfolio level, at some intermediate level (a 

combination of product type, currency and 

maturity, for instance), and possible a hybrid of all 

three. Therefore it may or may not be possible to 

identify the [independent amount] associated with 

a particular transaction, but as a general matter this 

association cannot be reliably made.’’ See id. at 15. 

175See DTCC II at 11. 

176See ISDA IV at 8. 

177 Id. 

178See id. 

179See DTCC V at 12. 

180See Regulation SBSR Proposing Release, 75 FR 

75218, note 63. 

however, that requiring the reporting of 

detailed information concerning the 

master agreement and other documents 

governing security-based swaps could 

impose significant burdens on market 

participants. In addition, the 

Commission notes that one commenter 

on proposed Regulation SBSR stated 

that it would not be possible, in all 

cases, to identify the collateral 

associated with a particular securitybased swap transaction because 

collateral is calculated, managed, and 

processed at the portfolio level rather 

than at the level of individual 

transactions.174

In light of these considerations, the 

Commission believes that, for securitybased swaps that are not clearing 

transactions, requiring reporting of the 

title and date of any master agreement, 

collateral agreement, margin agreement, 

or any other agreement incorporated by 

reference into the security-based swap 

contract—but not the agreements 

themselves or detailed information 

concerning the agreements—will 

facilitate regulatory oversight of the 

security-based swap market by 

providing regulators with a more 

complete understanding of a securitybased swap counterparty’s obligations 

while not imposing significant burdens 

on market participants. The 

Commission anticipates that, if a 

situation arose where the Commission 

or another relevant authority needed to 

consult information about a transaction 

contained in one of the related 

agreements, the Commission could 

request the agreement from one of the 

security-based swap counterparties. 

Knowing the title and date of the 

agreement will assist relevant 

authorities in identifying the agreement 

and thereby expedite the process of 

obtaining the necessary information. 

One commenter argued that the ‘‘level 

of change’’ necessary to incorporate the 

titles and dates of master agreements 

into individual trade messages was 

excessive and recommended that the 

trade level reference continue to follow 

the current process of referencing the 

lowest level governing document, which 

would permit the identification of all of 

the other relevant documents.175

Another commenter questioned the 

value of requiring reporting of the title 

and date of party level agreements.176

This commenter stated that, because 

other jurisdictions do not require 

reporting of the ‘‘title and date of a 

Credit Support Agreement or other 

similar document (‘‘CSA’’) governing 

the collateral arrangement between the 

parties . . . global trade repositories do 

not currently have fields to support 

separate reporting of data pertaining to 

the CSA from those which define the 

master agreement. Equally challenging 

is firms’ ability to report data pertaining 

to the CSA as the terms of these 

agreements are not readily reportable in 

electronic format nor could this be 

easily or accurately achieved.’’ 177

Noting that other global regulators have 

limited their trade reporting 

requirements to the relevant date and 

type of the master agreement, the 

commenter believed that the 

information required to be reported 

should be limited to the identification of 

party level master agreements that 

govern all of the derivatives transactions 

between the parties, and should not 

include master confirmations or other 

documentation that is used to facilitate 

confirmation of the security-based 

swap.178

The Commission understands that 

reporting the titles and dates of 

agreements for individual securitybased swap transactions may require 

some modification of current practices. 

However, the Commission believes that 

it is important for regulators to know 

such titles and dates so that the 

Commission and other relevant 

authorities would know where to obtain 

further information about the 

obligations and exposures of securitybased swap counterparties, as necessary. 

The Commission believes that requiring 

reporting of the titles and dates of 

master agreements and other agreements 

governing a transaction—but not the 

agreements themselves or detailed 

information concerning the 

agreements—would provide regulators 

with access to necessary information 

without creating an unduly burdensome 

reporting obligation. Therefore, the 

Commission is adopting Rule 

901(d)(1)(iv) substantially as proposed 

and re-proposed, while renumbering it 

final Rule 901(d)(4). With respect to the 

commenter’s concern regarding the 

difficulty of reporting the terms of the 

documentation governing a securitybased swap, the Commission 

emphasizes that final Rule 901(d)(4) 

requires reporting only of the titles and 

dates of the documents specified in Rule 

901(d)(4), but not the terms of these 

agreements. 

The commenter also requested 

additional clarity regarding the 

proposed requirement generally.179 As 

discussed above, Rule 901(d)(1)(iv), as 

proposed and re-proposed, would have 

required reporting of ‘‘the title of any 

master agreement, or any other 

agreement governing the transaction 

(including the title of any document 

governing the satisfaction of margin 

obligations), incorporated by reference 

and the date of any such agreement.’’ 

The proposed rule also would have 

required reporting of the title and date 

of any collateral agreements governing 

the transaction.180 Although the rule, as 

proposed and re-proposed, would have 

required reporting of the title and date 

of any master agreement, margin 

agreement, collateral agreement, and 

any other document governing the 

transaction that is incorporated by 

reference, the Commission agrees that it 

would be useful to state more precisely 

the information required to be reported 

and to clarify the scope of the rule. Rule 

901(d)(4), as adopted, requires reporting 

of, ‘‘[f]or a security-based swap that is 

not a clearing transaction, the title and 

date of any master agreement, collateral 

agreement, margin agreement, or any 

other agreement incorporated by 

reference into the security-based swap 

contract.’’ The new language makes 

clear that Rule 901(d)(4) applies only to 

security-based swaps that are not 

clearing transactions (i.e., security-based 

swaps that do not have a registered 

clearing agency as a direct 

counterparty). Any such agreements 

relating to a clearing transaction would 

exist by operation of the rules of the 

registered clearing agency, and therefore 

do not need to be reported pursuant to 

Regulation SBSR because the 

Commission could obtain information 

from the registered clearing agency as 

necessary. 

e. Rule 901(d)(5)—Other Data Elements 

Rule 901(d)(1)(v), as re-proposed, 

would have required reporting of the 

data elements necessary for a person to 

determine the market value of a 

transaction. The Commission is 

adopting Rule 901(d)(1)(v) substantially 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14587 

181See DTCC II at 10. 

182See DTCC V at 12. 

183 ISDA IV at 9. 

184 Id. 

185See id. 

186 In contrast, the CFTC’s swap data reporting 

rules require reporting parties to report the market 

value of swap transactions to a CFTC-registered 

swap data repository on a daily basis. See 17 CFR 

45.4(a)(2). 

187This could include—by way of example and 

not of limitation—information about interest rate 

features, commodities, or currencies that are part of 

the security-based swap contract. 188See DTCC II at 10. 

as re-proposed, but renumbering it as 

Rule 901(d)(5) and making certain 

technical and clarifying changes in 

response to comments. 

As discussed above, re-proposed Rule 

901(d)(1)(iii) would have required 

reporting of the amount(s) and 

currenc(ies) of any up-front payments 

and the terms and contingencies of the 

payment streams of each direct 

counterparty to the other. One 

commenter believed that re-proposed 

Rule 901(d)(1)(iii) was duplicative of reproposed Rule 901(d)(1)(v),181 and 

asked the Commission to provide 

additional clarity on what re-proposed 

Rule 901(d)(1)(v) requires.182 To address 

these comments, the Commission is 

revising adopted Rule 901(d)(5) to 

require the reporting, to the extent not 

required pursuant to Rule 901(c) or 

other provisions of Rule 901(d), of any 

additional data elements included in the 

agreement between the counterparties 

that are necessary for a person to 

determine the market value of the 

transaction. 

Another commenter expressed 

concern that the requirements of reproposed Rule 901(d)(1)(v) were vague, 

‘‘leaving reporting parties and trade 

repositories with the task of establishing 

the reportable data with potentially 

different result.’’ 183 This commenter 

recommended that Commission revise 

the rule to clarify the requirement to 

report ‘‘(i) the mark-to-market value and 

currency code and (ii) the date and time 

of the valuation in Coordinated 

Universal Time . . .’’ 184 Further, 

because information necessary to 

determine the market value of a 

transaction ‘‘is determined as part of 

end of day processes,’’ the commenter 

requested that the timeframe for 

reporting data pertaining to market 

value be based on the end of the day on 

which the relevant data was 

determined.185

In response to these concerns, the 

Commission emphasizes that neither 

Regulation SBSR, as proposed and reproposed, nor Regulation SBSR, as 

adopted, requires the reporting of the 

market value of a security-based swap 

(although the negotiated price of the 

actual transaction is required to be 

reported), either on a one-time or 

ongoing basis.186 As noted above, final 

Rule 901(d)(5) requires reporting, to the 

extent not required pursuant to Rule 

901(c) or other provisions of Rule 

901(d), of any additional data elements 

included in the agreement between the 

counterparties that are necessary to 

determine the market value of the 

transaction. This refers to all of the 

contractual terms and conditions of a 

security-based swap that a party would 

need to perform its own calculation of 

the market value of the security-based 

swap using its own market data. 

Although the reporting side must 

include, as part of the initial transaction 

report, the information necessary to 

determine the market value of the 

transaction, Regulation SBSR does not 

require the reporting side to take the 

additional step of calculating and 

reporting the market value of the 

transaction, nor does it require the 

reporting side to provide any market 

data that would be needed to calculate 

the market value of the transaction. 

Rule 901(d)(5) is designed to help to 

ensure that all of the material terms of 

the agreement between the 

counterparties that is necessary to 

determine the market value of a 

security-based swap are available to the 

Commission and other relevant 

authorities.187 The Commission 

continues to believe that this 

requirement will facilitate regulatory 

oversight by giving relevant authorities 

the information necessary to value an 

entity’s security-based swap positions 

and calculate the exposure resulting 

from those positions. However, the final 

language of Rule 901(d)(5) is designed to 

eliminate any overlap with other 

provisions of Rule 901(c) or 901(d). For 

example, if a security-based swap has a 

product ID, the Commission presumes 

that all information necessary to 

identify the security-based swap and 

determine the market value of the 

transaction could be derived from the 

product ID (or the identification 

information behind that particular 

product ID). Therefore, it would not be 

necessary to report any additional 

information pursuant to Rule 901(d)(5) 

for a security-based swap for which a 

product ID is reported. 

In addition, the Commission is further 

clarifying the rule by making a technical 

change to indicate that final Rule 

901(d)(5) requires the reporting only of 

data elements ‘‘included in the 

agreement between the counterparties.’’ 

The Commission believes that the rule 

as proposed and re-proposed—which 

did not include this phrase—could have 

been interpreted to require the reporting 

of information external to the agreement 

between the counterparties that could 

have helped determine the market value 

of the security-based swap (e.g., the 

levels of supply and demand in the 

market for the security-based swap). The 

Commission intended, however, to 

require reporting only of information 

included in the agreement between the 

counterparties, not of general market 

information. Accordingly, final Rule 

901(d)(5) requires the reporting only of 

data elements ‘‘included in the 

agreement between the counterparties’’ 

that are necessary for a person to 

determine the market value of the 

transaction. 

Finally, one commenter believed that 

proposed Rule 901(d)(1)(v) should 

require reporting only of the full terms 

of a security-based swap as laid out in 

the trade confirmation.188 Although the 

Commission agrees that the full terms of 

a trade confirmation could, in some 

cases, provide the data elements 

included in the agreement between the 

counterparties that are necessary to 

determine the market value of a 

transaction, the Commission notes that 

the information required to be reported 

pursuant Rule 901(d)(5) would not 

necessarily be limited to information 

included in the trade confirmation. Not 

all market participants observe the same 

conventions for confirming their trades. 

The Commission understands that 

confirmations for some types of trades 

are significantly more standardized than 

others. Some trades may have critical 

terms included in other documentation, 

such as master confirmation agreements 

or credit support annexes. Moreover, 

confirmation practices in the future may 

differ from current confirmation 

practices. The Commission believes, 

therefore, that restricting information 

reported in accordance with Rule 

901(d)(5) to the information included in 

the confirmation would not provide the 

Commission and other relevant 

authorities with sufficient information 

regarding the market value of a securitybased swap. 

f. Rule 901(d)(6)—Submission to 

Clearing 

Rule 901(d)(1)(vi), as re-proposed, 

would have required reporting of the 

following data element: ‘‘If the securitybased swap will be cleared, the name of 

the clearing agency.’’ This information 

would allow the Commission to verify, 

if necessary, that a security-based swap 

was cleared, and to identify the clearing 

agency that cleared the transaction. The 

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14588 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

189 15 U.S.C. 78c–3(g). Section 3C(g)(1) of the 

Exchange Act provides that the general clearing 

mandate set forth in Section 3C(a)(1) of the 

Exchange Act will not apply to a security-based 

swap if one of the counterparties to the securitybased swap: (1) Is not a financial entity; (2) is using 

security-based swaps to hedge or mitigate 

commercial risk; and (3) notifies the Commission, 

in a manner set forth by the Commission, how it 

generally meets if financial obligations associated 

with entering into non-cleared security-based 

swaps. The application of Section 3C(g)(1) is solely 

at the discretion of the security-based swap 

counterparty that satisfies these conditions. See 

Securities Exchange Act Release No. 63556 

(December 15, 2010), 75 FR 79992 (December 21, 

2010). 

190 15 U.S.C. 78c–3(g)(6). 191See Regulation SBSR Proposing Release, 75 FR 

75218. 

192Cravath Letter at 3. 

193 Id. at 4. 

194See 75 FR 75218. 

195See DTCC V at 12. 

196See Regulation SBSR Proposing Release, 75 FR 

75218. 

197See DTCC II at 15–16. 

Commission received no comments on 

this provision and is adopting it 

substantially as re-proposed, with minor 

clarifying changes and renumbered as 

Rule 901(d)(6). Rule 901(d)(6), as 

adopted, requires reporting of the 

following: ‘‘If applicable, and to the 

extent not provided pursuant to 

paragraph (c) of this section, the name 

of the clearing agency to which the 

security-based swap will be submitted 

for clearing.’’ 

For some security-based swaps, the 

name of the clearing agency that clears 

the security-based swap could be 

inherent in the product ID. Rule 

901(d)(6), as adopted, clarifies that the 

name of the clearing agency to which 

the security-based swap will be 

submitted for clearing need not be 

reported if that information is inherent 

in the product ID. In addition, the new 

language regarding whether the 

security-based swap will be submitted 

for clearing reflects the possibility that 

a clearing agency could reject the 

security-based swap for clearing after it 

has been submitted. The Commission 

believes that it would be useful to know 

the name of the clearing agency to 

which the transaction is submitted, even 

if the clearing agency rejects the 

transaction. 

g. Rule 901(d)(7)—Indication of Use of 

End-User Exception 

Rule 901(d)(1)(vii), as re-proposed, 

would have required reporting of 

whether a party to the transaction 

invoked the so-called ‘‘end user 

exception’’ from clearing, which is 

contemplated in Section 3C(g) of the 

Exchange Act.189 Section 3C(g)(6) of the 

Exchange Act 190 provides for the 

Commission to request information from 

persons that invoke the exception. The 

Commission preliminarily believed that 

requiring reporting of whether the 

exception was invoked in the case of a 

particular security-based swap would 

assist the Commission in monitoring use 

of the exception.191

One commenter argued that the 

Commission should not use the trade 

reporting mechanism ‘‘to police the enduser exception.’’ 192 The commenter 

expressed concern with an end user 

having to certify eligibility with each 

transaction and stated that ‘‘it is 

illogical that filings by swap dealers 

should determine the eligibility of the 

end user.’’ 193 The Commission 

acknowledges the commenter’s 

concerns but believes that they are 

misplaced. Re-proposed Rule 

901(d)(1)(vii) would not require 

reporting of any information as to the 

end user’s eligibility to invoke the 

exception for a specific transaction; 

instead, it would require reporting only 

of the fact of the exception being 

invoked. The Commission could then 

obtain information from a registered 

SDR regarding instances of the 

exception being invoked and could 

determine, as necessary, whether to 

further evaluate whether the exception 

had been invoked properly. The 

Commission does not believe that it is 

necessary or appropriate to require 

information about the end user’s 

eligibility to invoke the exception to be 

reported under Rule 901(d). Therefore, 

the Commission has determined to 

adopt Rule 901(d)(1)(vii) as re-proposed, 

but is renumbering it as Rule 901(d)(7). 

h. Rule 901(d)(8)—Description of 

Settlement Terms 

Rule 901(d)(1)(viii), as re-proposed, 

would have required, for a securitybased swap that is not cleared, a 

description of the settlement terms, 

including whether the security-based 

swap is cash-settled or physically 

settled, and the method for determining 

the settlement value. In the Regulation 

SBSR Proposing Release, the 

Commission stated its preliminary belief 

that this information would assist 

relevant authorities in monitoring the 

exposures and obligations of securitybased swap market participants.194 One 

commenter expressed the view that the 

settlement terms could be derived from 

other data fields and thus recommended 

deletion of this data element, or in the 

alternative, requested additional clarity 

on what would be required pursuant to 

this provision.195

Re-proposed Rule 901(d)(1)(viii) is 

being adopted substantially as reproposed but renumbered as final Rule 

901(d)(8) and now includes certain 

revisions that respond to the commenter 

and clarify the operation of the rule. 

Rule 901(d)(8), as adopted, requires: 

‘‘[t]o the extent not provide pursuant to 

other provisions of this paragraph (d), if 

the direct counterparties do not submit 

the security-based swap to clearing, a 

description of the settlement terms, 

including whether the security-based 

swap is cash-settled or physically 

settled, and the method for determining 

the settlement value.’’ The Commission 

believes that the final rule makes clear 

that there is no requirement to report 

information concerning the settlement 

terms of an uncleared security-based 

swap if the information was reported 

pursuant to another provision of Rule 

901(d). Similarly, there is no 

requirement to report the settlement 

terms pursuant to Rule 901(d)(8) if the 

settlement terms are inherent in the 

product ID. Final Rule 901(d)(8) is 

designed to facilitate regulatory 

oversight by providing the Commission 

and other relevant authorities with 

information necessary to understand the 

exposures of security-based swap 

counterparties. 

i. Rule 901(d)(9)—Platform ID 

Rule 901(d)(1)(ix), as re-proposed, 

would have required reporting of the 

venue where a security-based swap was 

executed. This would include, if 

applicable, an indication that a securitybased swap was executed bilaterally in 

the OTC market.196 This information 

could be useful for a variety of 

purposes, including studying the 

development of security-based swap 

execution facilities (‘‘SB SEFs’’) or 

conducting more detailed surveillance 

of particular security-based swap 

transactions. In the latter case, the 

Commission or another relevant 

authority would find it helpful to know 

the execution venue, from which it 

could obtain additional information as 

appropriate. 

One commenter, in discussing the 

entity that should assign transaction 

IDs, suggested that linking a trade to a 

particular platform potentially could 

result in the unintentional disclosure of 

the identities of the counterparties.197

The Commission notes that information 

concerning the venue where a securitybased swap was executed, like all 

secondary trade information reported 

under Rule 901(d), is not required to be, 

and thus may not be, publicly 

disseminated. Because the platform ID 

may not be publicly disseminated, there 

is no potential for it to unintentionally 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14589 

198See ISDA IV at 9. 

199The Commission believes that transactions 

occurring on a registered SB SEF as well as an 

exempt SB SEF should be reported to a registered 

SDR. Certain entities that currently meet the 

definition of ‘‘security-based swap execution 

facility’’ are not yet registered with the Commission 

and will not have a mechanism for registering until 

the Commission adopts final rules governing the 

registration and core principles of SB SEFs. These 

entities currently operate pursuant to an exemption 

from certain otherwise applicable provisions of the 

Exchange Act. See Securities Exchange Act Release 

No. 34–64678 (June 15, 2011), 76 FR 36287, 36292– 

93 (June 22, 2011) (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). In addition, the 

Commission has raised the possibility of granting 

exemptions to certain foreign security-based swap 

markets that otherwise would meet the definition 

of ‘‘security-based swap execution facility.’’ See 

Cross-Border Proposing Release, 78 FR 31056 (‘‘The 

Commission preliminarily believes that it may be 

appropriate to consider an exemption as an 

alternative approach to SB SEF registration 

depending on the nature or scope of the foreign 

security-based swap market’s activities in, or the 

nature or scope of the contacts the foreign securitybased swap market has with, the United States’’). 

The adopted definition of ‘‘platform’’ requires such 

entities to be identified in SDR transaction reports 

and thus will enable the Commission and other 

relevant authorities to observe transactions that 

occur on such exempt SB SEFs. 

200Consistent with Rule 901(d)(9), a registered 

SDR could create a single identifier for transactions 

that are not executed on a national securities 

exchange or a SB SEF that is registered or exempt 

from registration. 201See 75 FR 75220. The Commission re-affirmed 

the importance of life cycle event reporting for 

security-based swaps in the Cross-Border Proposing 

Release. See 75 FR 31068. 202See infra Section XXI(A) (discussing the 

definition of ‘‘life cycle events’’). 203Certain terminations, such as the termination 

of an alpha upon acceptance for clearing, result in 

the creation of new security-based swaps (e.g., the 

beta and gamma). Similarly, security-based swaps 

that are terminated during netting or compression 

exercises result in the creation of new securitybased swaps. Regardless of the circumstances, if a 

security-based swap arises from the termination of 

an existing security-based swap, the reporting side 

for the new security-based swap must report the 

transaction to a registered SDR as required by Rule 

901(a). 

204See infra Section VIII (explaining the 

application of Regulation SBSR to security-based 

swaps involving allocations). 

205See infra Section V(B) (discussing the 

definition of ‘‘clearing transaction’’). 

206See 75 FR 75218 (question 39). 

207See ISDA/SIFMA I at 12. See also Barnard I 

at 2 (stating that the commenter was ‘‘not 

convinced’’ that the Commission should require 

reporting of the purpose of a security-based swap 

transaction). 

identify the counterparties to the 

transaction. 

The Commission continues to believe 

that information identifying the venue 

where a security-based swap was 

executed, whether on a trading platform 

or in the OTC market, is necessary 

information for relevant authorities to 

conduct surveillance in the securitybased swap market and understand 

developments in the security-based 

swap market generally. Therefore, the 

Commission is adopting the rule 

substantially as re-proposed and 

renumbering it as final Rule 901(d)(9). 

One commenter asked the 

Commission to clarify that re-proposed 

Rule 901(d)(1)(ix) would require 

reporting only of execution platforms 

required to register with the 

Commission or the CFTC.198 The 

Commission believes that final Rule 

901(d)(9) largely accomplishes this 

result. Specifically, the Commission has 

revised Rule 901(d)(9) to require 

reporting, if applicable, of the ‘‘platform 

ID,’’ rather than the ‘‘execution venue’’ 

more broadly. To implement this 

requirement, the Commission also is 

adopting a definition of ‘‘platform.’’ 

Final Rule 900(v) defines a ‘‘platform’’ 

as ‘‘a national securities exchange or a 

security-based swap execution facility 

that is registered or exempt from 

registration.’’ 199 Rule 900(w) defines 

‘‘platform ID’’ as the UIC assigned to the 

platform on which a security-based 

swap is executed. The platform ID, like 

other UICs, must be assigned as 

provided in Rule 903. The Commission 

believes that this approach makes clear 

that other entities that may be involved 

in executing transactions, such as interdealer brokers, are not considered 

platforms for purposes of this reporting 

requirement.200

j. Rule 901(d)(10)—Transaction ID of 

Any Related Transaction 

Regulation SBSR, as proposed and reproposed, was designed to obtain 

complete and accurate reporting of 

information regarding a security-based 

swap from its execution through its 

termination or expiration. In the 

Regulation SBSR Proposing Release, the 

Commission noted that maintaining an 

accurate record of the terms of a 

security-based swap would require 

reporting of life cycle event information 

to a registered SDR.201 The term ‘‘life 

cycle event’’ includes terminations, 

novations, and assignments of existing 

security-based swaps.202 As discussed 

in greater detail in Sections V(C)(5) and 

VIII(A), infra, a new security-based 

swap may arise following the allocation, 

termination, novation, or assignment of 

an existing security-based swap, and 

that the reporting side for the new 

security-based swap must report the 

transaction to a registered SDR.203 The 

Commission believes that it should be 

able to link any new security-based 

swaps that arise from the termination, 

novation, or assignment of an existing 

security-based swap to the original 

transaction. For example, when a single 

security-based swap is executed as a 

bunched order and then allocated 

among multiple counterparties, the 

Commission and other relevant 

authorities should be able to link the 

allocations to the executed bunched 

order.204 The ability to link a securitybased swap that arises from an 

allocation, termination, novation, or 

assignment back to the original securitybased swap(s) will help to assure that 

the Commission and relevant authorities 

have an accurate and current 

representation of counterparty 

exposures. 

To facilitate the Commission’s ability 

to map a resulting security-based swap 

back to the original transaction— 

particularly if the original transaction 

and the resulting transaction(s) are 

reported to different registered SDRs— 

the Commission is adopting Rule 

901(d)(10), which requires the reporting 

side for a security-based swap that 

arises from an allocation, termination, 

novation, or assignment of one or more 

existing security-based swaps, to report 

‘‘the transaction ID of the allocated, 

terminated, assigned, or novated 

security-based swap(s), except in the 

case of a clearing transaction that results 

from the netting or compression of other 

clearing transactions.’’ 205 The 

Commission does not believe that it is 

necessary to require reporting of the 

transaction ID for clearing transactions 

that result from other clearing 

transactions because clearing 

transactions occur solely within the 

registered clearing agency and are used 

by the registered clearing agency to 

manage the positions of clearing 

members and, possibly their clients. 

Thus, it would not be necessary for 

regulatory authorities to have the ability 

to link together clearing transactions 

that result from other clearing 

transactions. 

k. Information That Is Not Required by 

Rule 901(d) 

One commenter, responding to a 

question in the Regulation SBSR 

Proposing Release,206 stated that the 

Commission should not require 

reporting of the purpose of a securitybased swap because it could reveal 

proprietary information, and because 

the parties to a security-based swap 

often will have several reasons for 

executing the transaction.207 The 

Commission agrees that counterparties 

could have multiple reasons for entering 

into a security-based swap, and that 

requiring reporting of a particular 

reason could be impractical. 

Furthermore, different sides to the same 

transactions would likely have different 

reasons for entering into it. The 

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14590 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

208See DTCC II at 10; Markit I at 3. A third 

commenter, discussing the Commission’s proposed 

rules governing recordkeeping and reporting 

requirements for security-based swap dealers, major 

security-based swap participants, and brokerdealers (Securities Exchange Act Release No. 34– 

71958 (April 17, 2014), 79 FR 25194 (May 2, 2014)), 

urged the Commission to provide guidance 

regarding the methods these entities should use to 

produce valuation information). See Levin Letter at 

3–4. A fourth commenter asked the Commission to 

confirm that there is no requirement to report 

valuation data on a daily basis, provided that there 

has been no change in the data. See ISDA IV at 11. 

209See also Section II(B)(3)(e), supra. 

210See Rule 901(d)(5) (requiring reporting of any 

additional data elements included in the agreement 

between the counterparties, to the extent not 

already provided under another provision of Rule 

901(c) or 901(d), that are necessary for a person to 

determine the market value of the transaction); 

Regulation SBSR Proposing Release, 75 FR 75218 

(‘‘the reporting of data elements necessary to 

calculate the market value of a transaction would 

allow regulators to value an entity’s [security-based 

swap] positions and calculate the exposure 

resulting from those provisions’’). 

211 15 U.S.C. 78c–3(e)(1). 

212See 75 FR 75223–24. 

213 15 U.S.C. 78c 3(e)(2). 

214See Regulation SBSR Proposing Release, 75 FR 

75224. See also re-proposed Rule 900(kk) (defining 

‘‘transitional security-based swap’’ to mean ‘‘any 

security-based swap executed on or after July 21, 

2010, and before the effective reporting date’’). 

215See Rule 900(y). 

216The term ‘‘effective reporting date’’ was used 

in the compliance schedule set out in re-proposed 

Rule 910, which the Commission is not adopting. 

The ‘‘effective reporting date,’’ would have been 

defined to mean, with respect to a registered [SDR], 

the date six months after the registration date. The 

‘‘registration date’’ would have been defined to 

mean, with respect to a registered SDR, ‘‘the date 

on which the Commission registers the securitybased swap data repository, or, if the Commission 

registers the security-based swap data repository 

before the effective date of §§ 242.900 through 

242.911, the effective date of §§ 242.900 through 

242.911.’’ See re-proposed Rules 900(l) and 900(bb), 

respectively. The Commission is making a 

conforming change to delete the defined terms 

‘‘effective reporting date’’ and ‘‘registration date’’ 

from final Rule 900. As noted in Section I(F) above, 

the Commission is proposing a new compliance 

schedule for Rules 901, 902, 903, 904, 905, 906, and 

Commission notes, further, that it did 

not propose to require reporting of the 

purpose of the security-based swap and 

Rule 901, as adopted, does not include 

a requirement to report this information. 

Two commenters recommended that 

the Commission require reporting of 

valuation data on an ongoing basis.208

The Commission emphasizes that it did 

not propose to require the reporting of 

valuation data in either the Regulation 

SBSR Proposing Release or the CrossBorder Proposing Release, and that it is 

not adopting such a requirement at this 

time.209 However, the Commission will 

continue to assess the reporting and 

public dissemination regime under 

Regulation SBSR and could determine 

to propose additional requirements, 

such as the reporting of valuations, as 

necessary or appropriate. In addition, 

the Commission notes that the data 

elements required under Rules 901(c) 

and 901(d) are designed to allow the 

public, the Commission, other relevant 

authorities, or a data analytics firm 

engaged by a relevant authority, to 

calculate the market value of a securitybased swap at the time of execution of 

the trade.210

C. Reporting of Historical SecurityBased Swaps 

1. Statutory Basis and Proposed Rule 

Section 3C(e)(1) of the Exchange 

Act 211 requires the Commission to 

adopt rules providing for the reporting 

to a registered SDR or to the 

Commission of security-based swaps 

entered into before the date of 

enactment of Section 3C (i.e., July 21, 

2010). By its terms, this provision is not 

limited to security-based swaps that 

were still open as of the date of 

enactment of the Dodd-Frank Act. In the 

Regulation SBSR Proposing Release, the 

Commission took the preliminary view 

that an attempt to collect many years’ 

worth of transaction-level securitybased swap data (including data on 

terminated or expired security-based 

swaps) would not enhance the goal of 

price discovery, nor would it be 

particularly useful to relevant 

authorities or market participants in 

implementing a forward-looking 

security-based swap reporting and 

dissemination regime.212 The 

Commission also took the preliminary 

view that collecting, reporting, and 

processing all such data would involve 

substantial costs to market participants 

with little potential benefit. 

Accordingly, the Commission proposed 

to limit the reporting of security-based 

swaps entered into prior to the date of 

enactment to only those security-based 

swaps that had not expired as of the 

date of enactment of the Dodd-Frank 

Act (‘‘pre-enactment security-based 

swaps’’). 

In addition, Section 3C(e)(2) of the 

Exchange Act 213 requires the 

Commission to adopt rules that provide 

for the reporting of security-based swaps 

entered into on or after the date of 

enactment of Section 3C (‘‘transitional 

security-based swaps’’).214

The Commission proposed Rule 901(i) 

to implement both of these statutory 

requirements. Rule 901(i), as proposed, 

would have required a reporting party to 

report all of the information required by 

Rules 901(c) and 901(d) for any preenactment security-based swap or 

transitional security-based swap 

(collectively, ‘‘historical security-based 

swaps’’), to the extent such information 

was available. Thus, Rule 901(i), as 

proposed and re-proposed, would have 

required the reporting only of securitybased swaps that were open on or 

executed after the date of enactment 

(July 21, 2010). The Commission further 

proposed that historical security-based 

swaps would not be subject to public 

dissemination. In the Cross-Border 

Proposing Release, the Commission reproposed Rule 901(i) in its entirety with 

only one technical revision, to replace 

the term ‘‘reporting party’’ with 

‘‘reporting side.’’ 

2. Final Rule and Discussion of 

Comments Received 

As adopted, Rule 901(i) states: ‘‘With 

respect to any pre-enactment securitybased swap or transitional securitybased swap in a particular asset class, 

and to the extent that information about 

such transaction is available, the 

reporting side shall report all of the 

information required by [Rules 901(c) 

and 901(d)] to a registered securitybased swap data repository that accepts 

security-based swaps in that asset class 

and indicate whether the security-based 

swap was open as of the date of such 

report.’’ In adopting Rule 901(i), the 

Commission is making minor changes to 

the rule as re-proposed in the CrossBorder Proposing Release. The 

Commission has added the clause ‘‘in a 

particular asset class’’ following 

‘‘transitional security-based swap’’ and 

the clause ‘‘to a registered securitybased swap data repository that accepts 

security-based swaps in that asset 

class.’’ The security-based swap market 

is segregated into different asset classes, 

and an SDR might choose to collect and 

maintain data for only a single asset 

class. These new clauses clarify that a 

reporting side is not obligated to report 

historical security-based swaps in a 

particular asset class to a registered SDR 

that does not accept security-based 

swaps in that asset class. A reporting 

side’s duty to report a historical 

security-based swap in a particular asset 

class arises only when there exists a 

registered SDR that accepts securitybased swaps in that asset class. 

The Commission also is adopting the 

definition of ‘‘pre-enactment securitybased swap’’ as proposed and reproposed.215 Further, the Commission is 

adopting the definition of ‘‘transitional 

security-based swap’’ substantially as 

proposed and re-proposed, with one 

clarifying change and a technical 

revision to eliminate the obsolete term 

‘‘effective reporting date.’’ 216 Rule 

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908 of Regulation SBSR in the Regulation SBSR 

Proposed Amendments Release. 

217See ISDA I at 2, note 1. 

218 Id. at 4. 

219 ISDA I at 5. 

220See DTCC II at 17. 

221The Commission notes that Rule 901(i) by its 

terms requires the reporting of historical securitybased swaps only ‘‘to the extent such information 

is available.’’ Thus, if information about terminated 

or expired transitional security-based swaps no 

longer exists, it would not be required to be 

reported under Rule 901(i). 

222 DTCC II at 17. See also ISDA I at 5 (requesting 

that the Commission clarify that market participants 

are not required to provide trade execution time 

information for pre-enactment security-based swap 

transactions). 

223See Roundtable Letter at 11 (stating that ‘‘any 

effort to alter the terms or documentation of existing 

swaps would be resource intensive with potentially 

significant negative consequences’’). 

224 Deutsche Bank Letter at 2. 

225 Id. at 3. 

900(nn), as adopted, defines 

‘‘transitional security-based swap’’ to 

mean ‘‘a security-based swap executed 

on or after July 21, 2010, and before the 

first date on which trade-by-trade 

reporting of security-based swaps in that 

asset class to a registered security-based 

swap data repository is required 

pursuant to §§ 242.900 through 

242.909.’’ Thus, only those securitybased swaps that were open as of the 

date of enactment (July 21, 2010) or 

opened thereafter must be reported. The 

Commission continues to believe that 

the costs of reporting security-based 

swaps that terminated or expired before 

July 21, 2010, would not justify any 

potential benefits, particularly given the 

difficulty of assembling records 

concerning these transactions after 

many years. One commenter specifically 

agreed with the Commission’s proposal 

to limit reporting of security-based 

swaps entered into prior to the date of 

enactment only to those that had not 

expired as of that date.217

However, this commenter also 

expressed concern that a blanket 

requirement to report all pre-enactment 

security-based swaps ‘‘risks doublecounting and presenting a distorted 

view of certain markets.’’ 218 In 

particular, the commenter indicated that 

compression exercises and tri-party 

novations raised concerns regarding the 

potential for double-counting. The 

Commission shares the commenter’s 

concern that double-counting could 

create a distorted view of the securitybased swap market. Therefore, the 

Commission is adding new language at 

the end of the Rule 901(i) which 

provides that the reporting side of a preenactment or transitional security-based 

swap must ‘‘indicate whether the 

security-based swap was open as of the 

date of such report.’’ This information is 

necessary to allow a registered SDR to 

calculate a participant’s open positions 

established before the time trade-bytrade reporting becomes mandatory for 

a particular asset class. 

The commenter also stated that 

‘‘inter-affiliate security-based swaps 

should not be subject to reporting.’’ 219

The Commission disagrees with this 

suggestion. As described in Section IX, 

infra, the Commission believes 

generally that inter-affiliate securitybased swaps should be subject to 

regulatory reporting and public 

dissemination. The Commission thus 

believes that pre-enactment interaffiliate security-based swaps also 

should be subject to regulatory 

reporting, assuming that such securitybased swaps were opened after the date 

of enactment or still open as of the date 

of enactment. The Commission notes, 

however, that no information reported 

pursuant to Rule 901(i) will be publicly 

disseminated. 

Having access to information 

regarding historical security-based 

swaps will help the Commission and 

other relevant authorities continue to 

develop a baseline understanding of 

positions and risk in the security-based 

swap market, starting on the date of 

enactment of the Dodd-Frank Act, 

which contemplates the regime for 

regulatory reporting of all security-based 

swaps. These transaction reports will 

provide a benchmark against which to 

assess the development of the securitybased swap market over time, and help 

the Commission to prepare reports that 

it is required to provide to Congress. 

One commenter, while generally 

supporting the Commission’s proposal 

to require reporting of historical 

security-based swaps to a registered 

SDR, argued that only open contracts 

should be reported.220 The Commission 

partially agrees with this comment and 

thus, as noted above, is requiring 

reporting of only pre-enactment 

security-based swaps that were open as 

of the date of enactment. However, the 

Commission believes that all securitybased swaps entered into on or after the 

date of enactment should be reported— 

even if they expired or were terminated 

before trade-by-trade reporting becomes 

mandatory—and that the reporting side 

should indicate whether the securitybased swap was open as of the date of 

such report. While reporting of 

terminated or expired transitional 

security-based swaps is not necessary 

for the calculation of market 

participants’ open positions, this 

information will assist the Commission 

and other relevant authorities to create, 

for surveillance purposes, at least a 

partial audit trail 221 of transactions 

executed after the date of enactment 

and, more generally, to analyze market 

developments since the date of 

enactment. 

This commenter also argued that 

security-based swaps ‘‘only [in] their 

current state should need to be reported, 

without additional information like 

execution time.’’ 222 A second 

commenter expressed concern that the 

reporting requirements for historical 

security-based swaps could require 

parties to modify existing trades that 

occurred in a heretofore unregulated 

market in order to comply with Rule 

901(i).223 A third commenter expressed 

concern that ‘‘[t]he submission of nonelectronic transaction confirmations [for 

pre-enactment security-based swaps] 

will be extremely burdensome for 

reporting entities,’’ 224 and 

recommended instead that the 

Commission ‘‘permit the reporting in a 

common electronic format of the 

principal electronic terms’’ of each such 

pre-enactment security-based swap.225

For several reasons, the Commission 

believes that Rule 901(i) strikes a 

reasonable balance between the burdens 

placed on security-based swap 

counterparties and the policy goal of 

enabling the Commission and other 

relevant authorities to develop a 

baseline understanding of 

counterparties’ security-based swap 

positions. First, the Commission notes 

that Rule 901(i) requires reporting of the 

data elements set forth in Rules 901(c) 

and 901(d) only to the extent such 

information is available. The 

Commission does not expect, nor is it 

requiring, reporting sides to create or recreate data related to historical securitybased swaps. Thus, if the time of 

execution of a historical security-based 

swap was not recorded by the 

counterparties, it is not required to be 

reported under Rule 901(i). Similarly, 

Rule 901(i) does not require 

counterparties to modify existing 

transactions in any way to ensure that 

all data fields are complete. By limiting 

the reporting requirement to only that 

information that is available, the 

Commission is acknowledging that, for 

historical security-based swaps, certain 

information contemplated by Rules 

901(c) and 901(d) may not be available. 

The Commission generally believes that 

the benefits of requiring security-based 

swap counterparties to reconstruct the 

missing data elements—including, for 

example, the time of execution— 

potentially several years after the time 

of execution—would not justify the 

costs. 

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226 Deutsche Bank Letter at 2–3. 

227One commenter, DTCC, noted that the Trade 

Information Warehouse could provide an affiliate 

that will seek registration as an SDR with 

information related to security-based swaps that 

were previously reported to the Trade Information 

Warehouse. See DTCC II at 17. 

228See infra note 956. 

229 15 U.S.C. 78m–1(a)(1). 

230 15 U.S.C. 78m(m)(1)(G). 

231See DTCC II at 14–15 (noting the potential for 

fragmentation of data and overstatement of net open 

interest and net exposure if security-based swaps in 

the same asset class are reported to multiple 

registered SDRs); ISDA/SIFMA I at note 12 (stating 

that the designation of a single registered SDR per 

asset would provide valuable efficiencies because 

there would be no redundancy of platforms or need 

for additional data aggregation, which would 

reduce the risk of errors associated with 

transmitting, aggregating, and analyzing data from 

multiple sources). 

232See MFA I at 6. 

233Rule 901(b), as re-proposed, would have 

required reporting of the security-based swap 

transaction information required under Regulation 

SBSR ‘‘to a registered security-based swap data 

repository or, if there is no registered security-based 

swap data repository that would accept the 

information, to the Commission.’’ Final Rule 901(b) 

provides: ‘‘If there is no registered security-based 

swap data repository that will accept the report 

required by § 242.901(a), the person required to 

make such report shall instead provide the required 

information to the Commission.’’ 

234See Regulation SBSR Proposing Release, 75 FR 

75221. 

235Better Markets I at 9. 

236 Id. 

The Commission agrees with the 

commenter who argued that providing 

large volumes of non-electronic 

confirmations to registered SDRs is not 

desirable, and that the Commission 

instead should require reporting in a 

‘‘common electronic format.’’ 226 As 

discussed in Section IV, infra, Rules 

907(a)(1) and 907(a)(2) require 

registered SDRs to establish and 

maintain policies and procedures that 

enumerate the specific data elements 

and the acceptable data formats for 

transaction reporting, including of 

historical security-based swaps. The 

Commission expects that registered 

SDRs and their participants will consult 

regarding the most efficient and cost 

effective ways to report the transaction 

information required by Rule 901(i). 

Furthermore, to the extent that 

information regarding a historical 

security-based swap already has been 

reported to a person that will register 

with the Commission as an SDR—or to 

a person that itself will not seek 

registration as an SDR but will transfer 

the historical security-based swap 

information to an affiliate that registers 

as an SDR—Rule 901(i) would be 

satisfied, and would not require 

resubmission of that information to the 

registered SDR.227

Finally, the Commission notes an 

issue relating to the reporting of the 

counterparty ID of historical securitybased swaps. As commenters have 

discussed,228 certain foreign 

jurisdictions have privacy laws or 

blocking statutes that may prohibit the 

disclosure of the identity of a 

counterparty to a financial transaction, 

such as a security-based swap 

transaction. Thus, the reporting side of 

a cross-border security-based swap 

could face a dilemma: Comply with 

Regulation SBSR and report the identity 

of the counterparty and thereby violate 

the foreign law, or comply with the 

foreign law by withholding the identity 

of the counterparty and thereby violate 

Regulation SBSR. As discussed in 

Section XVI(B), infra, the Commission 

will consider requests for exemptions 

from the requirement under Rule 901(i) 

to report the identity of a counterparty 

with respect to historical security-based 

swaps. 

III. Where To Report Data 

A. All Reports Must Be Submitted to a 

Registered SDR 

Section 13A(a)(1) of the Exchange 

Act 229 provides that ‘‘[e]ach securitybased swap that is not accepted for 

clearing by any clearing agency or 

derivatives clearing organization shall 

be reported to—(A) a registered securitybased swap data repository described in 

Section 13(n); 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.’’ Section 13(m)(1)(G) of 

the Exchange Act 230 provides that 

‘‘[e]ach security-based swap (whether 

cleared or uncleared) shall be reported 

to a registered security-based swap data 

repository.’’ Rule 901(b) implements 

these statutory requirements. 

Rule 901(b), as re-proposed, would 

have required reporting of the securitybased swap transaction information 

required under Regulation SBSR ‘‘to a 

registered security-based swap data 

repository or, if there is no registered 

security-based swap data repository that 

would accept the information, to the 

Commission.’’ In addition, Rule 13n– 

5(b)(1)(ii) under the Exchange Act, 

adopted as part of the SDR Adopting 

Release, requires an SDR that accepts 

reports for any security-based swap in a 

particular asset class to accept reports 

for all security-based swaps in that asset 

class that are reported to the SDR in 

accordance with certain SDR policies 

and procedures. In view of this 

requirement under Rule 13n–5(b)(1)(ii) 

and the statutory requirement in Section 

13(m)(1)(G) that all security-based 

swaps, whether cleared or uncleared, 

must be reported to a registered SDR, 

the Commission does not anticipate that 

any security-based swaps will be 

reported directly to the Commission. 

Some commenters noted the potential 

advantages of designating a single 

registered SDR for each asset class.231

Another commenter, however, believed 

that a diverse range of options for 

reporting security-based swap data 

would benefit the market and market 

participants.232 These comments 

concerning the development of multiple 

registered SDRs are discussed in Section 

XIX, infra. No commenters opposed 

Rule 901(b), and the Commission is 

adopting Rule 901(b) with technical 

modifications to clarify the rule.233

B. Duties of Registered SDR Upon 

Receiving Transaction Reports 

1. Rule 901(f)—Time Stamps 

Rule 901(f), as re-proposed, provided 

that ‘‘[a] registered security-based swap 

data repository shall time stamp, to the 

second, its receipt of any information 

submitted to it pursuant to paragraph 

(c), (d), (e), or (i) of this section.’’ The 

Commission preliminarily believed that 

this requirement would help regulators 

to evaluate certain trading activity.234

For example, a reporting side’s pattern 

of submitting late transaction reports 

could be an indicator of weaknesses in 

the reporting side’s internal compliance 

processes. Accordingly, the Commission 

preliminarily believed that the ability to 

compare the time of execution with the 

time of receipt of the report by the 

registered SDR could be an important 

component of surveillance activity 

conducted by relevant authorities. 

One commenter, noting that proposed 

Rule 901(f) would require timestamping to the nearest second, argued 

that ‘‘[t]ime-stamping increment should 

be as small as technologically 

practicable, but in any event no longer 

than fractions of milliseconds.’’ 235 The 

commenter expressed the view that, 

especially in markets with multiple SB 

SEFs or where algorithmic trading 

occurs, ‘‘the sequencing of trade data for 

transparency and price discovery, as 

well as surveillance and enforcement 

purposes, will require much smaller 

increments of time-stamping.’’ 236 The 

Commission notes, however, that Rule 

901(f) is designed to allow the 

Commission to learn when a transaction 

has been reported to a registered SDR, 

not when the transaction was executed. 

The interim phase of applying 

Regulation SBSR allows transactions to 

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237See supra notes 76 and 77 and accompanying 

text. 

238See Regulation SBSR Proposing Release, 75 FR 

75221. 

239See id. 

240See id. 

241See GS1 Proposal at 42; DTCC II at 15. 

242See GS1 Proposal at 42 (also stating that 

transaction IDs would benefit internal compliance 

departments and self-regulatory organizations). 

243See DTCC II at 15. Another commenter 

believed that proposed Regulation SBSR would 

require public dissemination of the transaction ID, 

and argued that the transaction ID should not be 

publicly disseminated, as it could compromise the 

identity of the counterparties to the security-based 

swap. The commenter suggested instead that an 

SDR could create a separate identifier solely for 

purposes of public dissemination. See ISDA IV at 

17. Under Regulation SBSR, as adopted, the 

transaction ID is not a data element of securitybased swap transaction that is required to be 

publicly disseminated. Thus, registered SDRs must 

identify transactions in public reports without 

using the transaction ID. See infra Section XII(C) 

(discussing requirement for registered SDRs to 

establish and maintain policies and procedures for 

disseminating life cycle events). 

244See Tradeweb Letter at 5. 

245 DTCC II at 16 (arguing that this approach 

would ‘‘eliminate any unintentional disclosure 

issues which stem from linking a trade to a specific 

SEF, potentially increasing the instances of 

unintended identification of the trade parties’’). 

246See DTCC V at 14. 

247See GS1 Proposal at 42–43 (recommending an 

identification system that would allow 

counterparties, participants, SB SEFs, and 

registered SDRs to assign transaction IDs to specific 

transactions). 

248See ISDA III at 2. 

249See id. In a subsequent comment letter, this 

commenter indicated that it ‘‘strongly believe[s] the 

party reporting the SBS should assign or provide 

the Transaction ID’’ rather than a registered SDR. 

ISDA IV at 11 (stating that ‘‘many SBS already have 

been reported to other global jurisdictions for which 

a . . . UTI (including a CFTC Unique Swap 

Identifier) has already been assigned by one of the 

parties or a central execution, affirmation or 

confirmation platform in accordance with industry 

standard practices for trade identifiers that have 

developed in the absence of a global regulatory 

standard. For the sake of efficiency and in 

consideration of global data aggregation, we 

recommend that the Commission allow a reporting 

party to use the UTI already established for a SBS 

for further reporting under SBSR and acknowledge 

that trades subject to reporting under SBSR may be 

assigned a trade identifier in accordance with 

existing industry UTI practices’’). 

250See re-proposed Rule 900(jj). 

be reported up to 24 hours after time of 

execution. The Commission believes 

that no purpose would be served by 

knowing the moment of reporting to the 

subsecond. Instead, the Commission 

believes that this comment is germane 

instead to the reporting of time of 

execution. Therefore, the Commission 

has considered this comment in 

connection with Rule 901(c)(2) rather 

than with Rule 901(f).237

The Commission continues to believe 

that requiring a registered SDR to 

timestamp, to the second, its receipt of 

any information pursuant to paragraphs 

(c), (d), (e), or (i) of Rule 901 is 

appropriate, and is adopting Rule 901(f) 

as re-proposed. Rule 901(f) will allow 

the Commission to compare the time of 

execution against the time of receipt by 

the registered SDR to ascertain if a 

transaction report has been submitted 

late. 

2. Rule 901(g)—Transaction IDs 

Rule 901(g), as proposed and reproposed, would have provided that 

‘‘[a] registered security-based swap data 

repository shall assign a transaction ID 

to each security-based swap.’’ The 

transaction ID was defined in both the 

proposal and re-proposal as ‘‘the unique 

identification code assigned by a 

registered security-based swap data 

repository to a specific security-based 

swap.’’ The Commission preliminarily 

believed that a unique transaction ID 

would allow registered SDRs, regulators, 

and counterparties to more easily track 

a security-based swap over its duration 

and would facilitate the reporting of life 

cycle events and the correction of errors 

in previously reported security-based 

swap information.238 The transaction ID 

of the original security-based swap 

would allow for the linking of the 

original report to a report of a life cycle 

event. Similarly, the transaction ID 

would be required to be included on an 

error report to identify the transaction to 

which the error report pertained. 

In proposing Rule 901(g), the 

Commission preliminarily believed that, 

because each transaction is unique, it 

would not be necessary or appropriate 

to look to an internationally recognized 

standards setting body for assigning 

such identifiers.239 Instead, proposed 

Rule 901(g) would have required a 

registered SDR to use its own 

methodology for assigning transaction 

IDs.240

Two commenters generally supported 

use of the transaction ID.241 One 

commenter stated that transaction IDs 

would allow for a complete audit trail, 

permit the observation of concentrations 

of trading and risk exposure at the 

transaction level, and facilitate more 

timely analysis of market events.242 The 

second commenter agreed that a 

transaction ID would be essential for 

reporting life cycle event and secondary 

trade information, as well as corrections 

to reported information.243

Commenters expressed mixed views 

regarding the entity that should assign 

the transaction ID. One commenter 

stated that a platform should assign the 

transaction ID to assure that the 

identifier is assigned at the earliest 

point in the life of a transaction.244 A 

second commenter suggested that 

registered SDRs should assign 

transaction IDs,245 or have the flexibility 

to accept transaction IDs already 

generated by the reporting side or to 

assign transaction IDs when requested 

to do so.246 A third commenter 

expressed concern that registered SDRs 

would assign transaction IDs in a nonstandard manner, which could hinder 

regulators’ ability to gather transaction 

data across registered SDRs to 

reconstruct an audit trail.247 A fourth 

commenter, a trade association, 

recommended that security-based swaps 

be identified by a Unique Trade 

Identifier (‘‘UTI’’) created either by the 

reporting side or by a platform 

(including an execution venue or an 

affirmation or middleware or electronic 

confirmation platform) on behalf of the 

parties.248 This commenter noted that it 

has worked with market participants to 

develop a standard for creating and 

exchanging a single unique transaction 

identifier suitable for global 

reporting.249

After careful consideration, the 

Commission has determined to adopt 

Rule 901(g) with modifications to 

respond to concerns raised by the 

commenters. Final Rule 901(g) provides 

that a registered SDR ‘‘shall assign a 

transaction ID to each security-based 

swap, or establish or endorse a 

methodology for transaction IDs to be 

assigned by third parties.’’ The 

Commission is also making a 

conforming change to the definition of 

‘‘transaction ID.’’ Final Rule 900(mm) 

defines ‘‘transaction ID’’ as ‘‘the UIC 

assigned to a specific security-based 

swap transaction.’’ As re-proposed, 

‘‘transaction ID’’ would have been 

defined as ‘‘the unique identification 

code assigned by a registered securitybased swap data repository to a specific 

security-based swap.’’ 250 By eliminating 

the reference to a UIC ‘‘assigned by a 

registered security-based swap data 

repository,’’ the revised definition 

contemplates that a third party could 

assign a transaction ID under Regulation 

SBSR. However, because the 

Commission believes that the registered 

SDR is in the best position to promote 

the necessary uniformity for UICs that 

will be reported to it, the reporting side 

would be permitted to report a 

transaction ID generated by a third party 

only if the third party had employed a 

methodology for generating transaction 

IDs that had been established or 

endorsed by the registered SDR. 

Rule 901(g), as adopted, provides 

flexibility by requiring a registered SDR 

either to assign a transaction ID itself or 

to establish or endorse a methodology 

for assigning transaction IDs. Thus, 

under adopted Rule 901(g), an SB SEF, 

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251This approach will allow a platform to assign 

the transaction ID in certain cases, as recommended 

by a commenter. See Tradeweb Letter at 5. 

252Thus, the Commission only partially agrees 

with the commenter who believed that the 

registered SDR should assign transaction IDs, in 

order to ‘‘eliminate any unintentional disclosure 

issues which stem from linking a trade to a specific 

SEF, potentially increasing the instances of 

unintended identification of the trade parties.’’ 

DTCC II at 16. The Commission shares the 

commenter’s concern that the transaction ID not 

result in the unintended identification of the 

counterparties. However, this would not require 

that the registered SDR itself issue the transaction 

ID in all cases; the registered SDR could allow 

submission of transaction IDs generated by third 

parties (such as SB SEFs or counterparties), 

provided that the registered SDR endorsed the 

methodology whereby third parties can generate 

transaction IDs. Furthermore, the Commission notes 

that the transaction ID is not a data element 

required by Rule 901(c) and thus it should not be 

publicly disseminated—so market observers should 

not be able to learn the transaction ID in any case. 

253See 15 U.S.C. 13m(m)(1)(G). 

254See proposed Rules 907(c) and 907(d). 

255As initially proposed, Rule 907 used the term 

‘‘reporting party.’’ As described in the Cross-Border 

Proposing Release, the term ‘‘reporting party’’ was 

replaced with ‘‘reporting side’’ in Rule 907 and 

throughout Regulation SBSR. 

256See DTCC IV at 5. See also Barnard I at 3. 

257See DTCC IV at 5. 

258As initially proposed, Rule 907(a)(1) would 

have required policies and procedures that 

enumerate the specific data elements of a securitya counterparty, or another entity could 

assign a transaction ID, provided that it 

assigned the transaction ID using a 

methodology established or endorsed by 

the registered SDR. This approach will 

allow market participants to determine 

the most efficient and effective 

procedures for assigning transaction IDs 

and will accommodate the use of 

different processes that might be 

appropriate in different 

circumstances.251 For example, an SB 

SEF might generate the transaction ID 

for a security-based swap executed on 

its facilities (provided the SB SEF does 

so using a methodology established or 

endorsed by the registered SDR252), 

while a registered SDR or security-based 

swap dealer counterparty might 

generate the transaction ID for a 

security-based swap that is not executed 

on an SB SEF. 

IV. How To Report Data—Rules 901(h) 

and 907 

A. Introduction 

Designing a comprehensive system of 

transaction reporting and post-trade 

transparency for security-based swaps 

involves a constantly evolving market, 

thousands of participants, and 

potentially millions of transactions. The 

Commission does not believe that it is 

necessary or appropriate to specify by 

rule every detail of how this system 

should operate. On some matters, there 

may not be a single correct approach for 

carrying out the purposes of Title VII’s 

requirements for regulatory reporting 

and public dissemination of securitybased swap transactions. 

The Commission believes that 

registered SDRs will play an important 

role in developing, operating, and 

improving the system for regulatory 

reporting and public dissemination of 

security-based swaps. Registered SDRs 

are at the center of the market 

infrastructure, as the Dodd-Frank Act 

requires all security-based swaps, 

whether cleared or uncleared, to be 

reported to them.253 Accordingly, the 

Commission believes that some 

reasonable flexibility should be given to 

registered SDRs to carry out their 

functions—for example, to specify the 

formats in which counterparties must 

report transaction data to them, 

connectivity requirements, and other 

protocols for submitting information. 

Furthermore, the Commission 

anticipates that counterparties will 

make suggestions to registered SDRs for 

altering and improving their practices, 

or developing new policies and 

procedures to address new products or 

circumstances, consistent with the 

requirements set out in Regulation 

SBSR. 

Accordingly, proposed Rule 907 

would have required each registered 

SDR to establish and maintain written 

policies and procedures addressing 

various aspects of security-based swap 

transaction reporting. Proposed Rules 

907(a)(1) and 907(a)(2) would have 

required a registered SDR to establish 

policies and procedures enumerating 

the specific data elements that must be 

reported, the acceptable data formats, 

connectivity requirements, and other 

protocols for submitting information; 

proposed Rule 907(a)(3) would have 

required a registered SDR to establish 

policies and procedures for reporting 

errors and correcting previously 

submitted information; proposed Rule 

907(a)(4) would have required a 

registered SDR to establish policies and 

procedures for, among other things, 

reporting and publicly disseminating 

life cycle events and transactions that 

do not reflect the market; proposed Rule 

907(a)(5) would have required a 

registered SDR to establish policies and 

procedures for assigning UICs; proposed 

Rule 907(a)(6) would have required a 

registered SDR to establish policies and 

procedures for obtaining ultimate parent 

and affiliate information from its 

participants; and proposed Rule 907(b) 

would have required a registered SDR to 

establish policies and procedures for 

calculating and publicizing block trade 

thresholds. The Commission also 

proposed to require registered SDRs to 

make their policies and procedures 

publicly available on their Web sites, 

and to update them at least annually.254

Rule 901(h), as proposed and reproposed, would have required reports 

to be made to a registered SDR ‘‘in a 

format required by the registered 

security-based swap data repository, 

and in accordance with any applicable 

policies and procedures of the registered 

security-based swap data repository.’’ 

Furthermore, because all securitybased swaps must be reported to a 

registered SDR, registered SDRs are 

uniquely positioned to know of any 

instances of untimely, inaccurate, or 

incomplete reporting. Therefore, 

proposed Rule 907(e) would have 

required registered SDRs to have the 

capacity to provide the Commission 

with reports related to the timeliness, 

accuracy, and completeness of the data 

reported to them. 

The Commission re-proposed Rule 

907 as part of the Cross-Border 

Proposing Release with only minor 

conforming changes.255 Rule 901(h) was 

re-proposed without revision. 

B. Rules 907(a)(1), 907(a)(2), and 

901(h)—Data Elements and Formats 

The comments addressing Rule 907 

were generally supportive of providing 

flexibility to registered SDRs to develop 

policies and procedures.256 One 

commenter stated, for example, that 

overly prescriptive rules for how data is 

reported will almost certainly result in 

less reliable or redundant data flowing 

into an SDR when higher quality data is 

available. In this commenter’s view, the 

Commission should not prescribe the 

exact means of reporting for SDRs to 

meet regulatory obligations, and SDRs 

should be afforded the flexibility to 

devise the most efficient, effective, and 

reliable methods of furnishing the 

Commission with the complete set of 

data necessary to fulfill regulatory 

obligations.257 The Commission is 

adopting Rule 907 with some revisions 

noted below. 

Final Rule 907(a)(1) requires a 

registered SDR to establish and maintain 

written policies and procedures that 

‘‘enumerate the specific data elements 

of a security-based swap that must be 

reported, which shall include, at a 

minimum, the data elements specified 

in [Rules 901(c) and 901(d)].’’ The 

Commission revised Rule 907(a)(1) to 

make certain non-substantive changes 

and to move the requirement to 

establish policies and procedures for life 

cycle event reporting from final Rule 

907(a)(1) to final Rule 907(a)(3).258 Final 

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based swap or life cycle event that a reporting party 

must report. In addition, proposed Rule 907(a)(4) 

would have required a registered SDR to establish 

policies and procedures for reporting and publicly 

disseminating life cycle events, among other things. 

The Commission is consolidating the requirements 

to establish policies and procedures for reporting 

life cycle events in final Rule 907(a)(3). See infra 

Section XII(C). The Commission also revised Rule 

907(a)(1) so that the final rule text refers to the data 

elements ‘‘that must be reported,’’ rather than the 

data elements that a reporting side must report. 

259While an SDR would have flexibility regarding 

the data elements and the protocols for reporting to 

the SDR, pursuant to Rule 13n–4(a)(5), which is 

being adopted in the SDR Adopting Release, the 

data provided by an SDR to the Commission must 

‘‘be in a form and manner acceptable to the 

Commission. . . .’’ The Commission anticipates 

that it will specify the form and manner that will 

be acceptable to it for the purposes of direct 

electronic access. 

260See DTCC II at 20. 

261 Id. 

262See DTCC V at 11. 

263See Better Markets I at 4. 

264See DTCC II at 16; ISDA I at 4; ISDA/SIFMA 

I at 8. 

265But see infra note 268. 

266See Barnard Letter at 3. 

267One commenter argued that the Commission 

should not require registered SDRs to support all 

connectivity methods, as the costs to do so would 

be prohibitive. See DTCC II at 20. Under Rule 

907(a)(2), as adopted, a registered SDR need not 

support all connectivity methods or data formats. A 

registered SDR may elect to support only one data 

format, provided that it is ‘‘an open-source 

structured data format that is widely used by 

participants.’’ 

268See SDR Adopting Release, Section 

VI(D)(2)(c)(ii) (‘‘data provided by an SDR to the 

Commission must be in a form and manner 

acceptable to the Commission . . . [T]he 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 in a particular format. 

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 [security-based swap] data by the 

Commission. The Commission intends to maximize 

the use of any applicable current industry standards 

for the description of [security-based swap] data, 

build upon such standards to accommodate any 

Continued 

Rule 907(a)(2) requires 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.’’ The 

Commission is adopting Rule 907(a)(2) 

as re-proposed. 

The Commission continues to believe 

that it is neither necessary nor 

appropriate to mandate a fixed schedule 

of data elements to be reported, or a 

single format or language for reporting 

such elements to a registered SDR. The 

Commission anticipates that industry 

standards for conveying information 

about security-based swap transactions 

will evolve over time, and the approach 

taken in Rule 907 is designed to allow 

Regulation SBSR’s reporting 

requirements to evolve with them. The 

Commission further anticipates that 

security-based swap products with 

novel contract terms could be developed 

in the future. Establishing, by 

Commission rule, a fixed schedule of 

data elements risks becoming obsolete, 

as new data elements—as yet 

unspecified—could become necessary to 

reflect the material economic terms of 

such products. Final Rules 907(a)(1) and 

907(a)(2) give registered SDRs the duty, 

but also the flexibility, to add, remove, 

or amend specific data elements or to 

adjust the required reporting protocols 

over time in a way that captures all of 

the material terms of a security-based 

swap while minimizing the reporting 

burden on its participants.259 One 

commenter supported this approach, 

stating that ‘‘[a] registered SDR should 

have the flexibility to specify acceptable 

formats, connectivity requirements and 

other protocols for submitting 

information.’’ 260 The commenter added 

that ‘‘[m]arket practice, including the 

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.’’ 261 The Commission 

anticipates that feedback and ongoing 

input from participants will help 

registered SDRs to craft appropriate 

policies and procedures regarding data 

elements and reporting protocols. 

The same commenter, in a subsequent 

comment letter, expressed concern that 

market participants could adopt 

different interpretations of the 

requirement to report payment stream 

information, which could result in 

inconsistent reporting to registered 

SDRs.262 The Commission notes that 

final Rule 907(a)(1) requires a registered 

SDR to enumerate the specific data 

elements of a security-based swap that 

must be reported, and final 907(a)(2) 

requires a registered SDR, among other 

things, to specify acceptable data 

formats for submitting required 

information. Because Rules 907(a)(1) 

and 907(a)(2) provide a registered SDR 

with the authority to identify the 

specific data elements that must be 

reported with respect to the payment 

streams of a security-based swap and 

the format for reporting that 

information, the Commission does not 

believe that market participants will 

have flexibility to adopt inconsistent 

interpretations of the information 

required to be reported with respect to 

payment streams. Instead, persons with 

the duty to report transactions will be 

required to provide the payment stream 

information using the specific data 

elements and formats specified by the 

registered SDR. 

One commenter argued that a uniform 

electronic reporting format is essential, 

and was concerned that Rules 901(h) 

and 907(a)(2) would permit multiple 

formats and connectivity requirements 

for the submission of data to a registered 

SDR.263 The Commission considered the 

alternative of requiring a single 

reporting language or protocol for 

conveying information to registered 

SDRs, and three commenters 

encouraged the use of the FpML 

standard.264 While FpML could be a 

standard deemed acceptable by a 

registered SDR pursuant to Rule 

907(a)(2), the Commission does not 

believe that it is necessary or 

appropriate at this time for the 

Commission itself to require FpML as 

the only permissible standard by which 

reporting sides report transaction data to 

a registered SDR.265 The Commission is 

concerned that adopting a regulatory 

requirement for a single standard for 

reporting security-based swap 

transaction information to registered 

SDRs could result in unforeseen adverse 

consequences, particularly if that 

standard proves incapable of being used 

to carry information about all of the 

material data elements of all securitybased swaps, both those that exist now 

and those that might be created in the 

future. Thus, the Commission has 

adopted an approach that permits 

registered SDRs to select their own 

standards for how participants must 

report data to those SDRs. The 

Commission agrees with the commenter 

who recommended that all acceptable 

data formats should be open-source 

structured data formats.266 The 

Commission believes that any reporting 

languages or protocols adopted by 

registered SDRs must be open-source 

structured data formats that are widely 

used by participants, and that 

information about how to use any such 

language or protocol is freely and 

openly available.267

The Commission believes that, 

however registered SDRs permit their 

participants to report security-based 

swap transaction data to the SDRs, those 

SDRs should be able to provide to the 

Commission normalized and uniform 

data, so that the transaction data can 

readily be used for regulatory purposes 

without the Commission itself having to 

cleanse or normalize the data.268

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additional data fields as may be required, and 

develop such formats and taxonomies in a 

timeframe consistent with the implementation of 

[security-based swap] data reporting by SDRs. The 

Commission recognizes that as the [security-based 

swap] market develops, new or different data fields 

may be needed to accurately represent new types 

of [security-based swaps], 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’’). 

269Regulation SBSR, as proposed and reproposed, contemplated two ‘‘waves’’ of reporting: 

The Rule 901(c) information would have been 

required to be reported in real time, while the Rule 

901(d) information could have been provided later 

(depending on the type of transaction, perhaps as 

much as one day after time of execution). However, 

because Regulation SBSR, as adopted, requires both 

sets of information to be reported within 24 hours 

of execution, the Commission anticipates that many 

reporting sides will choose to report both sets of 

information in only a single transaction report. 

Under Rule 901, as adopted, a reporting side is not 

prohibited from reporting the Rule 901(c) 

information before the Rule 901(d) information, 

provided that the policies and procedures of the 

registered SDR permit this outcome, and both sets 

of information are reported within the timeframes 

specified in Rule 901(j). 

270See supra note 263 and accompanying text. 

271As noted above, 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 by the Commission of 

security-based swap data submitted to it by an SDR. 

See supra note 268. 

272See GS1 Proposal at 44. 

273 15 U.S.C. 78m(m)(1)(F). 

274 15 U.S.C. 78m(m)(1)(G). 

275 15 U.S.C. 78mA(a)(3). 

However, it does not follow that 

information must be submitted to a 

registered SDR using a single electronic 

reporting format. The Commission 

believes that a registered SDR should be 

permitted to make multiple reporting 

formats available to its participants if it 

chooses, provided that the registered 

SDR can quickly and easily normalize 

and aggregate the reported data in 

making it accessible to the Commission 

and other relevant authorities. If a 

registered SDR is not willing or able to 

normalize data submitted pursuant to 

multiple data formats, then its policies 

and procedures under Rule 907(a)(2) 

should prescribe a single data format for 

participants to use to submit data to the 

registered SDR. 

The Commission believes that the 

policies and procedures of a registered 

SDR, required by Rule 907(a)(1), likely 

will need to explain the method for 

reporting if all the security-based swap 

transaction data required by Rules 

901(c) and 901(d) are being reported 

simultaneously, and how to report if 

responsive data are being provided at 

separate times.269 One way to 

accomplish this would be for the 

registered SDR to link the two reports by 

the transaction ID, which could be done 

by providing the reporting side with the 

transaction ID after the reporting side 

reports the information required by Rule 

901(c). The reporting side would then 

include the transaction ID with its 

submission of data required by Rule 

901(d), thereby allowing the registered 

SDR to match the report of the Rule 

901(c) data and the subsequent report of 

the Rule 901(d) data. 

Finally, Rule 901(h), as re-proposed, 

would have provided: ‘‘A reporting side 

shall electronically transmit the 

information required under this section 

in a format required by the registered 

security-based swap data repository, 

and in accordance with any applicable 

policies and procedures of the registered 

security-based swap data repository.’’ 

The Commission received only one 

comment on Rule 901(h), which is 

addressed above.270 The Commission is 

adopting Rule 901(h) as re-proposed, 

with two minor revisions to clarify the 

rule. First, the rule text has been revised 

to refer to ‘‘A’’ reporting side instead of 

‘‘The’’ reporting side. Accordingly, the 

Commission has revised Rule 901(h) to 

refer to the registered SDR to which a 

reporting side reports transactions. 

Second, Rule 901(h), as adopted, does 

not include the phrase ‘‘and in 

accordance with any applicable policies 

and procedures of the registered 

security-based swap data repository.’’ 

The Commission believes that it is 

sufficient for the rule to state that the 

reporting side must report the 

transaction information ‘‘in a format 

required by’’ the registered SDR.271

C. Rule 907(a)(6)—Ultimate Parent IDs 

and Counterparty IDs 

As originally proposed, Rule 907(a)(6) 

would have required a registered SDR to 

establish and maintain written policies 

and procedures ‘‘[f]or periodically 

obtaining from each participant 

information that identifies the 

participant’s ultimate parent(s) and any 

other participant(s) with which the 

counterparty is affiliated, using ultimate 

parent IDs and participant IDs’’ 

(emphasis added). The Commission reproposed Rule 907(a)(6) with the word 

‘‘participant’’ in place of the word 

‘‘counterparty.’’ Re-proposed Rule 

907(a)(6) would have required a 

registered SDR to establish and maintain 

written policies and procedures for 

periodically obtaining from each 

participant information that identifies 

the participant’s ultimate parent(s) and 

any other participant(s) with which the 

counterparty is affiliated, using ultimate 

parent IDs and participant IDs. The 

Commission received one comment 

relating to Rule 907(a)(6), which 

suggested that parent and affiliate 

information could be maintained by a 

market utility rather than by one or 

more registered SDRs.272

The Commission notes that 

Regulation SBSR neither requires nor 

prohibits the development of a market 

utility for parent and affiliate 

information. Regulation SBSR requires a 

registered SDR to obtain parent and 

affiliate information from its 

participants and to maintain it, whether 

or not a market utility exists. Regulation 

SBSR does not prohibit SDR 

participants from storing parent and 

affiliate information in a market utility 

or from having the market utility report 

such information to a registered SDR as 

agent on their behalf, so long as the 

information is provided to the registered 

SDR in a manner consistent with 

Regulation SBSR and the registered 

SDR’s policies and procedures. 

The Commission is adopting Rule 

907(a)(6) substantially as re-proposed, 

with a technical change to replace the 

word ‘‘counterparty’’ with the word 

‘‘participant’’ and a conforming change 

to replace the reference to ‘‘participant 

IDs’’ with a reference to ‘‘counterparty 

IDs.’’ Thus, final Rule 907(a)(6) requires 

a registered SDR to establish and 

maintain written policies and 

procedures ‘‘[f]or periodically obtaining 

from each participant information that 

identifies the participant’s ultimate 

parent(s) and any participant(s) with 

which the participant is affiliated, using 

ultimate parent IDs and counterparty 

IDs’’ (emphasis added). 

V. Who Reports—Rule 901(a) 

A. Proposed and Re-Proposed Rule 

901(a) 

Section 13(m)(1)(F) of the Exchange 

Act 273 provides that parties to a 

security-based swap (including agents of 

parties to a security-based swap) shall 

be responsible for reporting securitybased swap transaction information to 

the appropriate registered entity in a 

timely manner as may be prescribed by 

the Commission. Section 13(m)(1)(G) of 

the Exchange Act 274 provides that each 

security-based swap, ‘‘whether cleared 

or uncleared,’’ shall be reported to a 

registered SDR. Section 13A(a)(3) of the 

Exchange Act 275 specifies the party 

obligated to report a security-based 

swap that is not accepted for clearing by 

any clearing agency or derivatives 

clearing organization. Rule 901(a), as 

adopted, assigns to specific persons the 

duty to report certain security-based 

swaps to a registered SDR, thereby 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14597 

276See proposed Rules 901(a)(1)–(3); Regulation 

SBSR Proposing Release, 75 FR 75211. 

277See Regulation SBSR Proposing Release, 75 FR 

75211. 

278See re-proposed Rule 900(ee); Cross-Border 

Proposing Release, 78 FR 31211. The Commission 

is adopting this term in Rule 900(hh) with a minor 

modification to more clearly incorporate the 

definition of ‘‘indirect counterparty.’’ Final 900(hh) 

defines ‘‘side’’ to mean ‘‘a direct counterparty and 

any guarantor of that direct counterparty’s 

performance who meets the definition of indirect 

counterparty in connection with the security-based 

swap.’’ Final Rule 900(p) defines ‘‘indirect 

counterparty’’ to mean ‘‘a guarantor of a direct 

counterparty’s performance of any obligation under 

a security-based swap such that the direct 

counterparty on the other side can exercise rights 

of recourse against the indirect counterparty in 

connection with the security-based swap; for these 

purposes a direct counterparty has rights of 

recourse against a guarantor on the other side if the 

direct counterparty has a conditional or 

unconditional legally enforceable right, in whole or 

in part, to receive payments from, or otherwise 

collect from, the guarantor in connection with the 

security-based swap.’’ 

279However, Rule 901(a) does not address who 

has the reporting duty for the following types of 

security-based swaps: (1) A clearing transaction; (2) 

a security-based swap that is executed on a platform 

and that will be submitted to clearing; (3) a 

security-based swap where neither side includes a 

registered security-based swap dealer, a registered 

major security-based swap participant, or a U.S. 

person; and (4) a security-based swap where one 

side consists of a non-registered U.S. person and the 

other side consists of a non-registered non-U.S. 

person. 

280Final Rule 900(gg) defines ‘‘reporting side’’ to 

mean ‘‘the side of a security-based swap identified 

by § 242.901(a)(2).’’ Rule 900(cc), as re-proposed, 

would have defined ‘‘reporting side’’ to mean ‘‘the 

side of a security-based swap having the duty to 

report information in accordance with §§ 242.900 

through 911 to a registered security-based swap 

data repository, or, if there is no registered securitybased swap data repository that would receive the 

information, to the Commission.’’ Final Rule 

900(gg) modifies the definition to define the 

reporting side by reference to final Rule 901(a), 

which identifies the person that will be obligated 

to report a security-based swap to a registered SDR 

under various circumstances. 

implementing Sections 13(m)(1)(F), 

13(m)(1)(G), and 13A(a)(3) of the 

Exchange Act. In addition, in the 

Regulation SBSR Proposed 

Amendments Release, the Commission 

is proposing revisions to Rule 901(a), as 

adopted, to further implement these 

provisions of the Exchange Act as they 

apply to clearing transactions (as 

defined below) and transactions 

executed on platforms and that will be 

submitted to clearing. 

As originally proposed, Rule 901(a) 

would have assigned reporting duties 

exclusively to one of the direct 

counterparties to a security-based swap 

based on the nationality of the 

counterparties. The original proposal 

contemplated three scenarios: Both 

direct counterparties are U.S. persons, 

only one direct counterparty is a U.S. 

person, or neither direct counterparty is 

a U.S. person.276 Under the original 

proposal, if only one counterparty to a 

security-based swap is a U.S. person, 

the U.S. person would have been the 

reporting party. If neither counterparty 

is a U.S. person (and assuming the 

security-based swap is subject to 

Regulation SBSR), the counterparties 

would have been required to select the 

reporting party. Where both 

counterparties to a security-based swap 

are U.S. persons, the reporting party 

would have been determined according 

to the following hierarchy: 

(i) If only one counterparty is a 

security-based swap dealer or major 

security-based swap participant, the 

security-based swap dealer or major 

security-based swap participant would 

be the reporting party. 

(ii) If one counterparty is a securitybased swap dealer and the other 

counterparty is a major security-based 

swap participant, the security-based 

swap dealer would be the reporting 

party. 

(iii) With respect to any other 

security-based swap, the counterparties 

to the security-based swap would be 

required to select the reporting party. 

Under Rule 901(a) as originally 

proposed, for a security-based swap 

between: (1) A non-registered U.S. 

person; and (2) a security-based swap 

dealer or major security-based swap 

participant that is a non-U.S. person, the 

non-registered U.S. person would have 

been the reporting party. The 

Commission preliminarily believed that, 

as between a U.S. person and a non-U.S. 

person, it was more appropriate to 

assign the duty to report to the U.S. 

person, even if the non-U.S. person was 

a security-based swap dealer or major 

security-based swap participant.277

In the Cross-Border Proposing 

Release, the Commission revised 

proposed Rule 901(a) in two significant 

ways. First, the Commission proposed 

to expand the scope of Regulation SBSR 

to require reporting (and, in certain 

cases, public dissemination) of any 

security-based swap that has a U.S. 

person acting as guarantor of one of the 

direct counterparties, even if neither 

direct counterparty is a U.S. person. To 

effectuate this requirement, the CrossBorder Proposing Release added the 

following new defined terms: ‘‘direct 

counterparty,’’ ‘‘indirect counterparty,’’ 

‘‘side,’’ and ‘‘reporting side.’’ A ‘‘side’’ 

was defined to mean a direct 

counterparty of a security-based swap 

and any indirect counterparty that 

guarantees the direct counterparty’s 

performance of any obligation under the 

security-based swap.278 The 

Commission revised proposed Rule 

901(a) to assign the duty to report to a 

‘‘reporting side,’’ rather than a specific 

counterparty. Re-proposed Rule 901(a) 

generally preserved the reporting 

hierarchy of Rule 901(a), as originally 

proposed, while incorporating the 

‘‘side’’ concept to reflect the possibility 

that a security-based swap might have 

an indirect counterparty that is better 

suited for carrying out the reporting 

duty than a direct counterparty. Thus, 

Rule 901(a), as re-proposed in the CrossBorder Proposing Release, would have 

assigned the reporting obligation based 

on the status of each person on a side 

(i.e., whether any person on the side is 

a security-based swap dealer or major 

security-based swap participant), rather 

than the status of only the direct 

counterparties. Second, the Commission 

proposed to expand the circumstances 

in which a security-based swap dealer 

or major security-based swap 

participant that is not a U.S. person 

would incur the duty to report a 

security-based swap. 

Under Rule 901(a), as originally 

proposed, a non-U.S. person that is a 

direct counterparty to a security-based 

swap that was not executed in the 

United States or through any means of 

interstate commerce never would have 

had a duty to report the security-based 

swap, even if the non-U.S. person was 

a security-based swap dealer or major 

security-based swap participant or was 

guaranteed by a U.S. person. As reproposed in the Cross-Border Proposing 

Release, Rule 901(a) re-focused the 

reporting duty primarily on the status of 

the counterparties, rather than on their 

nationality or place of domicile. Under 

re-proposed Rule 901(a), the nationality 

of the counterparties would determine 

who must report only if neither side 

included a security-based swap dealer 

or major security-based swap 

participant. In such case, if one side 

included a U.S. person while the other 

side did not, the side with the U.S. 

person would have been the reporting 

side. Similar to the original proposal, 

however, if both sides included a U.S. 

person or neither side included a U.S. 

person, the sides would have been 

required to select the reporting side. 

B. Final Rule 901(a) 

Rule 901(a), as adopted, establishes a 

‘‘reporting hierarchy’’ that specifies the 

side that has the duty to report a 

security-based swap.279 The reporting 

side, as determined by the reporting 

hierarchy, is required to submit the 

information required by Regulation 

SBSR to a registered SDR.280 The 

reporting side may select the registered 

SDR to which it makes the required 

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281The Commission notes that Rule 901(a), as 

adopted, does address how the reporting duty is 

assigned when both sides include a U.S. person and 

neither side includes a registered security-based 

swap dealer or a registered major security-based 

swap participant. In that case, the sides would be 

required to select which is the reporting side. See 

Rule 901(a)(2)(ii)(E)(1). 

282See supra notes 11–12 and accompanying text. 

283This provision, as set forth in the Cross-Border 

Proposing Release, would have provided: ‘‘If 

neither side of the security-based swap includes a 

security-based swap dealer or major security-based 

swap participant: (i) If both sides include a U.S. 

person or neither side includes a U.S. person, the 

sides shall select the reporting side. (ii) If only one 

side includes a U.S. person, that side shall be the 

reporting side.’’ The Commission anticipates 

seeking further comment on how Title VII should 

apply to non-U.S. persons who engage in certain 

security-based swap activities in the United States, 

particularly dealing activities. Accordingly, the 

Commission is not deciding at this time how 

Regulation SBSR will apply to (1) transactions 

where there is no U.S. person, registered securitybased swap dealer, or registered major securitybased swap participant on either side; and (2) 

transactions where there is no registered securitybased swap dealer or registered major securitybased swap participant on either side and there is 

a U.S. person on only one side. One commenter 

recommended that this proposed part of the 

hierarchy be revised to refer only to cases where 

both sides are U.S. persons, as the commenter did 

not believe that a security-based swap for which 

neither party is a security-based swap dealer, major 

security-based swap participant, or a U.S. person 

would be subject to reporting under Regulation 

SBSR. See ISDA IV at 19. As discussed, the 

Commission is not adopting this provision of 

proposed Rule 901(a). The Commission anticipates 

seeking further comment on how Title VII should 

apply to non-U.S. persons who engage in certain 

security-based swap activities in the United States, 

particularly dealing activities, and is not deciding 

at this time how Regulation SBSR will apply to 

transactions where there is no U.S. person, 

registered security-based swap dealer, or registered 

major security-based swap participant on either 

side. The Commission notes that, under final Rule 

908(a)(1)(ii), a security-based swap is subject to 

regulatory reporting and public dissemination if it 

was accepted for clearing by a clearing agency 

having its principal place of business in the United 

States. See infra Section XV(C)(4). 

284See Section 3(a)(71) of the Exchange Act, 15 

U.S.C. 78c(a)(71) (defining ‘‘security-based swap 

dealer’’); Section 3(a)(67) of the Exchange Act, 15 

U.S.C. 78c(a)(67) (defining ‘‘major security-based 

swap participant’’). See also 17 CFR 240.3a71–2 

(describing the time at which a person will be 

deemed to be a security-based swap dealer); 17 CFR 

240.3a67–8 (describing the time at which a person 

will be deemed to be a major security-based swap 

participant). 

report. However, with respect to any 

particular transaction, all information 

required to be reported by Rule 

901(a)(2)(ii), as adopted, must be 

reported to the same registered SDR. In 

the Regulation SBSR Proposed 

Amendments Release, issued as a 

separate release, the Commission is 

proposing additional provisions of Rule 

901(a) that would assign reporting 

responsibilities for clearing transactions 

and platform-executed security-based 

swaps that will be submitted to clearing. 

The Commission also anticipates 

soliciting further comment on reporting 

duties for a security-based swap where 

neither side includes a registered 

security-based swap dealer or major 

security-based swap participant and 

neither side includes a U.S. person or 

only one side includes a U.S. person.281

1. Reporting Hierarchy 

Final Rule 901(a)(2)(ii) adopts the 

reporting hierarchy largely as proposed 

in the Cross-Border Proposing Release, 

but limits its scope. The reporting 

hierarchy in Rule 901(a), as proposed 

and as re-proposed in the Cross-Border 

Proposing Release, did not contain 

separate provisions to address reporting 

responsibilities for two kinds of 

security-based swaps that are described 

in the Regulation SBSR Proposed 

Amendments Release: Clearing 

transactions and security-based swaps 

that are executed on a platform and that 

will be submitted to clearing. The 

Regulation SBSR Proposed 

Amendments Release solicits comment 

on proposed rules that address the 

reporting of these types of securitybased swaps. The reporting hierarchy in 

Rule 901(a)(2)(ii), as adopted, applies to 

security-based swaps that are covered 

transactions.282 The reporting hierarchy 

is designed to locate the duty to report 

with counterparties who are most likely 

to have the resources and who are best 

able to support the reporting function. 

Specifically, final Rule 901(a)(2)(ii) 

provides that, for a covered transaction, 

the reporting side will be as follows: 

(A) If both sides of the security-based 

swap include a registered security-based 

swap dealer, the sides shall select the 

reporting side. 

(B) If only one side of the securitybased swap includes a registered 

security-based swap dealer, that side 

shall be the reporting side. 

(C) If both sides of the security-based 

swap include a registered major 

security-based swap participant, the 

sides shall select the reporting side. 

(D) If one side of the security-based 

swap includes a registered major 

security-based swap participant and the 

other side includes neither a registered 

security-based swap dealer nor a 

registered major security-based swap 

participant, the side including the 

registered major security-based swap 

participant shall be the reporting side. 

(E) If neither side of the securitybased swap includes a registered 

security-based swap dealer or registered 

major security-based swap participant: 

(1) If both sides include a U.S. person, 

the sides shall select the reporting side. 

(2) [Reserved].283

The following examples explain the 

operation of final Rule 901(a)(2)(ii). For 

each example, assume that the relevant 

security-based swap is not executed on 

a platform. 

• Example 1. A non-registered U.S. 

person executes a security-based swap 

with a registered security-based swap 

dealer that is a non-U.S. person. Neither 

side has a guarantor. The registered 

security-based swap dealer is the 

reporting side. 

• Example 2. Same facts as Example 

1, except that the non-registered U.S. 

person is guaranteed by a registered 

security-based swap dealer. Because 

both sides include a person that is a 

registered security-based swap dealer, 

the sides must select which is the 

reporting side. 

• Example 3. Two private funds 

execute a security-based swap. Both 

direct counterparties are U.S. persons, 

neither is guaranteed, and neither is a 

registered security-based swap dealer or 

registered major security-based swap 

participant. The sides must select which 

is the reporting side. 

In Rule 901(a)(2)(ii), as adopted, the 

Commission has included the word 

‘‘registered’’ before each instance of the 

terms ‘‘security-based swap dealer’’ and 

‘‘major security-based swap 

participant.’’ A person is a securitybased swap dealer or major securitybased swap participant if that person 

meets the statutory definition of that 

term, regardless of whether the person 

registers with the Commission.284 A 

person meeting one of those statutory 

definitions must register with the 

Commission in that capacity. However, 

persons meeting one of the statutory 

definitions cannot register in the 

appropriate capacity until the 

Commission adopts registration rules for 

these classes of market participant. The 

Commission has proposed but not yet 

adopted registration rules for securitybased swap dealers and major securitybased swap participants. Thus, 

currently, there are no registered 

security-based swap dealers even 

though many market participants act in 

a dealing capacity in the security-based 

swap market. 

Including the word ‘‘registered’’ 

before each instance of the terms 

‘‘security-based swap dealer’’ and 

‘‘major security-based swap participant’’ 

in final Rule 901(a)(2)(ii) means that it 

will not be necessary for a person to 

evaluate whether it meets the definition 

of ‘‘security-based swap dealer’’ or 

‘‘major security-based swap participant’’ 

solely in connection with identifying 

which counterparty must report a 

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285As the Commission noted in the Cross-Border 

Adopting Release, the assessment costs for making 

such evaluations are likely to be substantial. See 

Cross-Border Adopting Release, 79 FR 47330–34. 

The Commission’s approach here is consistent with 

the approach described in the Cross-Border 

Adopting Release, where the Commission noted 

that security-based swap dealers and major 

security-based swap participants ‘‘will not be 

subject to the requirements applicable to those 

dealers and major participants until the dates 

provided in the applicable final rules.’’ 79 FR 

47368. See also Intermediary Definitions Adopting 

Release, 77 FR 30700. 

286See 75 FR 75211. 

287See id. 

288See id. 

289See infra Section V(C) for an overview of these 

comments. A detailed summary of and response to 

these comments appears in the Regulation SBSR 

Proposed Amendments Release. 

290 In connection with the definition of ‘‘clearing 

transaction,’’ the Commission is adopting a 

definition of ‘‘registered clearing agency.’’ Final 

Rule 900(ee) defines ‘‘registered clearing agency’’ to 

mean ‘‘a person that is registered with the 

Commission as a clearing agency pursuant to 

section 17A of the Exchange Act (15 U.S.C. 

78q–1) and any rules or regulations thereunder.’’ In 

addition, the Commission is not adopting reproposed Rule 900(h), which would have defined 

the term ‘‘derivatives clearing organization’’ to have 

the same meaning as provided under the 

Commodity Exchange Act. This term is not used in 

Regulation SBSR, as adopted, so the Commission is 

not including a definition of the term in Rule 900. 

291Under Rule 900(g), a security-based swap that 

results from clearing is an independent securitybased swap and not a life cycle event of a securitybased swap that is submitted to clearing. Thus, Rule 

901(e), which addresses the reporting of life cycle 

events, does not address what person has the duty 

to report the clearing transactions that arise when 

a security-based swap is accepted for clearing. 

292 If both direct counterparties to the alpha are 

clearing members, the direct counterparties would 

submit the transaction to the clearing agency 

directly and the resulting beta would be between 

the clearing agency and one clearing member, and 

the gamma would be between the clearing agency 

and the other clearing member. The Commission 

understands, however, that, if the direct 

counterparties to the alpha are a clearing member 

and a non-clearing member (a ‘‘customer’’), the 

customer’s side of the trade would be submitted for 

clearing by a clearing member acting on behalf of 

the customer. When the clearing agency accepts the 

alpha for clearing, one of the resulting swaps—in 

this case, assume the beta—would be between the 

clearing agency and the customer, with the 

customer’s clearing member acting as guarantor for 

the customer’s trade. The other resulting swap—the 

gamma—would be between the clearing agency and 

the clearing member that was a direct counterparty 

to the alpha. See, e.g., Byungkwon Lim and Aaron 

J. Levy, ‘‘Contractual Framework for Cleared 

Derivatives: The Master Netting Agreement 

Between a Clearing Customer Bank and a Central 

Counterparty,’’ 10 Pratt’s Journal of Bankruptcy 

Law (October 2014) 509, 515–17 (describing the 

clearing model for swaps in the United States). 

293 In the principal model of clearing, which the 

Commission understands is used in certain foreign 

swap markets, a customer is not a direct 

counterparty of the clearing agency. Under this 

model, a clearing member would clear a securitybased swap for a customer by entering into a backto-back swap with the clearing agency: The clearing 

member would become a direct counterparty to a 

swap with the customer, and then would become 

a counterparty to an offsetting swap with the 

clearing agency. In this circumstance, unlike in the 

agency model of clearing, the swap between the 

direct counterparties might not terminate upon 

acceptance for clearing. 

294This release does not address the application 

of Section 5 of the Securities Act of 1933, 15 U.S.C. 

77a et seq. (‘‘Securities Act’’), to security-based 

swap transactions that are intended to be submitted 

to clearing (e.g., alpha transactions, in the agency 

model of clearing). Rule 239 under the Securities 

Act, 17 CFR 230.239, provides an exemption for 

certain security-based swap transactions involving 

an eligible clearing agency from all provisions of 

the Securities Act, other than the Section 17(a) antifraud provisions. This exemption does not apply to 

security-based swap transactions not involving an 

eligible clearing agency, including a transaction that 

is intended to be submitted to clearing, regardless 

of whether the security-based swaps subsequently 

are cleared by an eligible clearing agency. See 

Exemptions for Security-Based Swaps Issued By 

Certain Clearing Agencies, Securities Act Release 

No. 33–9308 (March 30, 2012), 77 FR 20536 (April 

5, 2012). 

security-based swap under Regulation 

SBSR.285

A result of the Commission’s 

determination to apply duties in Rule 

901(a)(2)(ii) based on registration status 

rather than on meeting the statutory 

definition of ‘‘security-based swap 

dealer’’ or ‘‘major security-based swap 

participant’’ is that, until such persons 

register with the Commission as such, 

all covered transactions will fall within 

Rule 901(a)(2)(ii)(E). In other words, 

under the adopted reporting hierarchy, 

because neither side of the securitybased swap includes a registered 

security-based swap dealer or registered 

major security-based swap participant, 

the sides shall select the reporting side. 

2. Other Security-Based Swaps 

Rule 901(a), as proposed and reproposed in the Cross-Border Proposing 

Release, did not differentiate between 

platform-executed security-based swaps 

and other types of security-based swaps 

in assigning the duty to report. 

Similarly, the proposed and re-proposed 

rule would have assigned reporting 

obligations without regard to whether a 

particular security-based swap was 

cleared or uncleared.286 In the 

Regulation SBSR Proposing Release, the 

Commission expressed a preliminary 

view that cleared and uncleared 

security-based swaps should be subject 

to the same reporting procedures.287

The Commission preliminarily believed 

that security-based swap dealers and 

major security-based swap participants 

generally should be responsible for 

reporting security-based swap 

transactions of all types, because they 

are more likely than other 

counterparties to have appropriate 

systems in place to facilitate 

reporting.288

Commenters raised a number of 

concerns about the application of the 

reporting hierarchy to platformexecuted security-based swaps that will 

be submitted to clearing and clearing 

transactions.289 The Commission has 

determined that final resolution of these 

issues would benefit from further 

consideration and public comment. 

Accordingly, in the Regulation SBSR 

Proposed Amendments Release, the 

Commission is proposing amendments 

to Rule 901(a) that would assign the 

reporting obligation for clearing 

transactions and platform-executed 

security-based swaps that will be 

submitted to clearing. 

To differentiate between securitybased swaps that are subject to the 

reporting hierarchy in Rule 901(a)(2)(ii) 

and those that are not, the Commission 

is defining a new term, ‘‘clearing 

transaction,’’ in Rule 900(g). A ‘‘clearing 

transaction’’ is ‘‘a security-based swap 

that has a registered clearing agency as 

a direct counterparty.’’ 290 This 

definition encompasses all securitybased swaps that a registered clearing 

agency enters into as part of its securitybased swap clearing business. The 

definition includes, for example, any 

security-based swaps that arise if a 

registered clearing agency accepts a 

security-based swap for clearing, as well 

as any security-based swaps that arise as 

part of a clearing agency’s internal 

processes, such as security-based swaps 

used to establish prices for cleared 

products and security-based swaps that 

result from netting other clearing 

transactions of the same product in the 

same account into an open position.291

Two models of clearing—an agency 

model and a principal model—are 

currently used in the swap markets. In 

the agency model, which predominates 

in the U.S. swap market, a swap that is 

accepted for clearing—often referred to 

in the industry as an ‘‘alpha’’—is 

terminated and replaced with two new 

swaps, known as ‘‘beta’’ and ‘‘gamma.’’ 

The Commission understands that, 

under the agency model, one of the 

direct counterparties to the alpha 

becomes a direct counterparty to the 

beta, and the other direct counterparty 

to the alpha becomes a direct 

counterparty to the gamma. The clearing 

agency would be a direct counterparty 

to each of the beta and the gamma.292

This release uses the terms ‘‘alpha,’’ 

‘‘beta,’’ and ‘‘gamma’’ in the same way 

that they are used in the agency model 

of clearing in the U.S. swap market.293

The Commission notes that, under 

Regulation SBSR, an alpha is not a 

‘‘clearing transaction,’’ even though it is 

submitted for clearing, because it does 

not have a registered clearing agency as 

a direct counterparty.294

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14600 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

295See ISDA/SIFMA I at 19; DTCC II at 8; ICI I 

at 5 (stating that security-based swap dealers are the 

only market participants that currently have the 

standardization necessary to report the required 

security-based swap data); SIFMA I at 3 (arguing 

that an end user should not incur higher transaction 

costs or potential legal liabilities depending on the 

domicile of its counterparty); Vanguard Letter at 6 

(stating that non-U.S. person security-based swap 

dealers and major security-based swap participants 

would be more likely to have appropriate systems 

in place to facilitate reporting than unregistered 

counterparties). 

296See Cross-Border Proposing Release, 78 FR 

31066. See also note 295, supra (describing the 

relevant comments). 

297See re-proposed Rule 901(a); Cross-Border 

Proposing Release, 78 FR 31066, 31212. 

298See IIB Letter at 26. 

299See id. 

300See id. 

301See JSDA Letter at 6; ISDA III; ISDA IV at 

3–4. 

302See JSDA Letter at 6. 

303See ISDA IV at 4 (recommending that the 

Commission should not include non-U.S. person 

guarantors in the definition of ‘‘indirect 

counterparty’’). 

304Section XV(C)(5), infra, explains why the 

Commission has determined that security-based 

swaps having non-U.S. person guarantors that are 

registered as security-based swap dealers or major 

C. Discussion of Comments and Basis 

for Final Rule 

The Commission requested and 

received comment on a wide range of 

issues related to Rule 901(a), as 

proposed and re-proposed in the CrossBorder Proposing Release. As described 

in more detail below, commenters 

addressed a number of topics, including 

the application of Rule 901(a) to sides 

rather than direct counterparties, the 

role of agents in the reporting process, 

the application of Rule 901(a) to cleared 

security-based swaps, and the types of 

entities that should be required to report 

security-based swaps. 

1. Application of the Reporting 

Hierarchy to Sides 

The Commission received a number 

of comments on the reporting hierarchy 

in proposed Rule 901(a).295 As 

described in the Cross-Border Proposing 

Release, a number of commenters 

objected to the reporting hierarchy in 

Rule 901(a), as originally proposed, on 

the grounds that it would unfairly 

impose reporting burdens on nonregistered U.S.-person counterparties 

that enter into security-based swaps 

with non-U.S.-person security-based 

swap dealers or major security-based 

swap participants.296 In the CrossBorder Proposing Release, the 

Commission re-proposed a modified 

reporting hierarchy in response to the 

commenters’ concerns.297

The Commission believes that a nonregistered person should not incur the 

duty to report a security-based swap 

when a registered security-based swap 

dealer or registered major security-based 

swap participant, directly or indirectly, 

is on the other side of the transaction, 

and is adopting the reporting hierarchy 

in Rule 901(a)(2)(ii) to effect this result. 

Rule 901(a), as adopted, is designed to 

assign reporting duties to the person 

best positioned to discharge those 

duties. The Commission believes that 

registered security-based swap dealers 

and registered major security-based 

swap participants, regardless of whether 

they are U.S. persons, will have greater 

technological capability than nonregistered persons to report securitybased swaps as required by Regulation 

SBSR. Accordingly, the Commission is 

adopting the reporting hierarchy in Rule 

901(a)(2)(ii) largely as re-proposed to 

give registered security-based swap 

dealers and registered major securitybased swap participants reporting 

obligations, regardless of whether they 

are U.S. persons. Furthermore, the 

Commission believes that it is 

appropriate to assign the duty to report 

to the side that includes a non-U.S. 

person registered security-based swap 

dealer or major security-based swap 

participant, even as an indirect 

counterparty, if neither the direct or 

indirect counterparty on the other side 

includes a registered security-based 

swap dealer or a registered major 

security-based swap participant. The 

fact that a person is a registered 

security-based swap dealer or registered 

major security-based swap participant 

implies that the person has substantial 

contacts with the U.S. security-based 

swap market and thus would 

understand that it could incur 

significant regulatory duties arising 

from its security-based swap business, 

or has voluntarily registered and chosen 

to undertake the burdens associated 

with such registration. The fact that a 

person is a registered security-based 

swap dealer or registered major securitybased swap participant also implies that 

the person has devoted substantial 

infrastructure and administrative 

resources to its security-based swap 

business, and thus would be more likely 

to have the capability to carry out the 

reporting function than a non-registered 

counterparty. 

In response to the Cross-Border 

Proposing Release, one commenter 

raised concerns about burdens that the 

re-proposed reporting hierarchy might 

place on U.S. persons.298 This 

commenter noted that certain non-U.S. 

persons might engage in security-based 

swap dealing activities in the United 

States below the de minimis threshold 

for security-based swap dealer 

registration. The commenter expressed 

the view that an unregistered non-U.S. 

person that is acting in a dealing 

capacity likely would have ‘‘greater 

technological capability and resources 

available to fulfill the reporting 

function’’ than an unregistered U.S. 

person that is not acting in a dealing 

capacity.299 The commenter suggested 

that, when an unregistered U.S. person 

enters into a security-based swap with 

an unregistered non-U.S. person that is 

acting in a dealing capacity, it ‘‘would 

be more efficient and fair’’ to allow the 

counterparties to choose the reporting 

side than to assign the reporting 

obligation to the unregistered U.S. 

person.300

The Commission acknowledges these 

comments. The Commission did not 

propose, and is not adopting, rules that 

would permit counterparties to choose 

to impose reporting burdens on the 

unregistered non-U.S. person that is 

acting in a dealing capacity in this 

scenario. The Commission believes that 

the issue of whether the counterparties 

should be able to choose the reporting 

side when an unregistered non-U.S. 

person acts in a dealing capacity with 

respect to a security-based swap 

involving an unregistered U.S. person 

would benefit from further comment. 

Accordingly, Rule 901(a)(2)(ii), as 

adopted, does not assign a reporting 

side for security-based swaps involving 

an unregistered non-U.S. person and an 

unregistered U.S. person. 

Other commenters focused on the 

Commission’s proposal to introduce the 

‘‘side’’ concept to the reporting 

hierarchy. In response to the CrossBorder Proposing Release, three 

comments recommended that direct 

counterparties bear reporting duties, 

rather than sides (i.e., that guarantors of 

direct counterparties not incur reporting 

responsibilities).301 One of these 

commenters recommended that a nonU.S. company that provides its U.S. 

affiliate with a guarantee should not be 

subject to reporting responsibilities 

because the non-U.S. company would 

be outside the Commission’s 

jurisdiction.302 Another commenter 

noted that non-U.S. guarantors should 

not cause a security-based swap to 

become reportable.303 The Commission 

generally agrees with these comments. 

As discussed in more detail in Section 

XV(C)(5), infra, Rule 908(a) of 

Regulation SBSR makes clear that a nonU.S. person guarantor would not cause 

a security-based swap to become 

reportable, unless the guarantor is a 

registered security-based swap dealer or 

a registered major security-based swap 

participant.304 Moreover, Rule 908(b) 

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security-based swap participants should be 

reportable under Regulation SBSR. 

305 If the non-U.S. person guarantor is a registered 

security-based swap dealer or major security-based 

swap participant, the exclusion in Rule 908(b) 

would not apply, and both the direct and indirect 

counterparties would jointly incur the duty to 

report. 

306Rule 908(a) describes when Regulation SBSR 

applies to a security-based swap having at least one 

side that includes a non-U.S. person. See infra 

Section XV(C). 

307 78 FR 31066 (citing Regulation SBSR 

Proposing Release, 75 FR 75265). 

308See ISDA III; ISDA IV at 3–4 (noting also that 

Canada’s swap data reporting regime resembles the 

CFTC’s swap data reporting regime in so far as it 

does not consider the status of indirect 

counterparties). 

309See ISDA III. 

310 Id. See also ISDA IV at 3–4. 

311See infra Section XV. 

312See Cross-Border Adopting Release, 79 FR 

47293 (noting that transactions between two ISDArecognized dealers represent the bulk of trading 

activity in the single-name credit default swap 

market). 

313Assume, for example, that a security-based 

swap dealer executes a transaction with a nonregistered person, and that current industry 

practices default the reporting obligation to the 

security-based swap dealer. This result is consistent 

with Rule 901(a)(2)(ii)(B), which states that the side 

including the registered security-based swap dealer 

will be the reporting side for such transactions. 

Assume, however, that the non-registered direct 

counterparty is guaranteed by another registered 

security-based swap dealer. Because both sides 

include a registered security-based swap dealer, 

Rule 901(a)(2)(ii)(A) requires the sides to select the 

reporting side. Agreeing to follow current industry 

practices—and locating the duty on the side that 

has the direct counterparty that is a registered 

security-based swap dealer—would be consistent 

with Rule 901(a)(2)(ii)(A). 

provides that, notwithstanding any 

other provision of Regulation SBSR, a 

non-U.S. person guarantor of a securitybased swap that is reportable would not 

incur any obligation under Regulation 

SBSR, including a reporting obligation 

under Rule 901(a)(2)(ii), unless the 

guarantor is a registered security-based 

swap dealer or a registered major 

security-based swap participant. Thus, 

for a security-based swap involving, on 

one side, the guaranteed U.S. affiliate of 

an unregistered non-U.S. person, only 

the guaranteed U.S. affiliate could incur 

reporting obligations under Regulation 

SBSR.305

The Commission disagrees with the 

broader point made by the commenters, 

however, and continues to believe that 

it is appropriate to adopt a final rule 

that places the reporting duty on the 

reporting side, rather than on a specific 

counterparty on the reporting side. The 

Commission notes that Rule 908(b)— 

which is discussed in more detail in 

Section XV, infra—limits the types of 

counterparties that incur obligations 

under Regulation SBSR to U.S. persons, 

registered security-based swap dealers, 

and registered major security-based 

swap participants. A person that does 

not fall within one of the categories 

enumerated in Rule 908(b) incurs no 

duties under Regulation SBSR. 

Accordingly, there may be situations 

where the direct counterparty on the 

reporting side—rather than the indirect 

counterparty, as in the commenter’s 

example—would not fall within Rule 

908(b) and therefore would incur no 

obligation under Regulation SBSR.306

There will be cases where all 

counterparties on the reporting side fall 

within Rule 908(b). In these cases, Rule 

901(a)(2)(ii), as adopted, provides 

reasonable flexibility to the 

counterparties on the reporting side to 

determine the specific person who will 

carry out the function of reporting the 

security-based swap on behalf of the 

reporting side. As stated in the CrossBorder Proposing Release, the 

Commission ‘‘understands that many 

reporting parties already have 

established linkages to entities that may 

register as registered SDRs, which could 

significantly reduce the out-of-pocket 

costs associated with establishing the 

reporting function.’’ 307 A reporting side 

could leverage these existing linkages, 

even if the entity that has established 

connectivity to the registered SDR is an 

indirect counterparty to the transaction. 

The other commenters argued that 

incorporating indirect counterparties 

into current reporting practices could 

take considerable effort, because these 

practices, developed for use with the 

CFTC’s swap data reporting regime, do 

not consider the registration status of 

indirect counterparties.308 The 

commenter recommended that the 

industry should be permitted to use 

existing reporting party determination 

logic because negotiating the identity of 

the reporting side on a trade-by-trade 

basis would not be feasible.309

Furthermore, one commenter noted that 

there is no industry standard source for 

information about indirect 

counterparties. As a result, ‘‘despite the 

requirement for participants to [provide] 

this information to [a registered SDR], 

there is a chance that the parties . . . 

could come up with a different answer 

as to which of them is associated with 

an indirect counterparty.’’ 310

The Commission acknowledges these 

commenters’ concerns, but continues to 

believe that it is appropriate for the 

reporting hierarchy to take into account 

both the direct and indirect 

counterparties on each side. Even 

without an industry standard source for 

information about indirect 

counterparties, counterparties to 

security-based swaps will need to know 

the identity and status of any indirect 

counterparties on a trade-by-trade basis 

to determine whether the transaction is 

subject to Regulation SBSR under final 

Rule 908(a).311 By considering the status 

of indirect counterparties when 

assigning reporting obligations, 

Regulation SBSR is designed to reduce 

reporting burdens on non-registered 

persons without imposing significant 

new costs on other market participants, 

even though market participants may 

need to modify their reporting 

workflows. The Commission believes 

that market participants could adapt the 

mechanisms they develop for purposes 

of adhering to Rule 908(a) to facilitate 

compliance with the reporting hierarchy 

in Rule 901(a)(2)(ii). For example, the 

documentation for the relevant securitybased swap could alert both direct 

counterparties to the fact that one 

counterparty’s obligations under the 

security-based swap are guaranteed by a 

registered security-based swap dealer or 

registered major security-based swap 

participant. The counterparties can use 

that information to identify which side 

would be the reporting side for purposes 

of Regulation SBSR. 

The Commission further believes that 

incorporating indirect counterparties 

into current reporting workflows is 

unlikely to cause substantial disruption 

to existing reporting logic because the 

status of an indirect counterparty likely 

will alter reporting practices in few 

situations. Most transactions in the 

security-based swap market today 

involve at least one direct counterparty 

who is likely to be a security-based 

swap dealer.312 In such case, the current 

industry practice of determining the 

reporting side based only on the status 

of direct counterparties is likely to 

produce a result that is consistent with 

Rule 901.313 The Commission 

understands that, in the current 

security-based swap market, market 

participants that are likely to be nonregistered persons transact with each 

other only on rare occasions. In these 

circumstances, the status of an indirect 

counterparty could cause one side to 

become the reporting side, rather than 

leaving the choice of reporting side to 

the counterparties. For example, if a 

registered security-based swap dealer or 

registered major security-based swap 

participant guarantees one side of such 

a trade, the side including the nonregistered person and the guarantor 

would, under Rule 901(a)(2), be the 

reporting side. The Commission 

believes that, if a registered securitybased swap dealer or registered major 

security-based swap participant is 

willing to accept the responsibility of 

guaranteeing the performance of duties 

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314See Better Markets I at 10. 

315See 75 FR 75211. 

316See Barnard I at 2; DTCC II at 7; DTCC III at 

13 (allowing third-party service providers to report 

security-based swaps would reduce the regulatory 

burden on counterparties and would assure prompt 

compliance with reporting obligations); ISDA/

SIFMA I at 17 (noting that portions of the OTC 

derivatives market likely would rely on third-party 

agents to meet their reporting obligations); 

MarkitSERV I at 9; MarkitSERV II at 7–8; 

MarkitSERV III at 4–5. 317See ISDA/SIFMA I at 17 (explaining that there 

likely would be competition to provide reporting 

services and that market participants would be able 

to contract with appropriate vendors to obtain the 

most efficient allocation of reporting 

responsibilities). 318See SIFMA I at 2, note 3. 319See MarkitSERV IV at 3. 320See Tradeweb Letter at 4–5. 

321See SIFMA I at 2, note 3. 

322See DTCC VI at 8–9; MarkitSERV III at 4–5. 

See also DTCC VII passim (suggesting operational 

difficulties that could arise if a person who is not 

a counterparty to a security-based swap has the 

duty to report); DTCC VIII (noting that ‘‘there has 

been a long held view that the SEC proposed model 

[for security-based swap data reporting] provides 

for a better defined process flow approach that 

achieves data quality, assigns proper ownership of 

who should report, and provides the most cost 

efficiencies for the industry as a whole’’). 

323See DTCC VI at 8–9; MarkitSERV III at 3–5. 

324See CME/ICE Letter at 2–4; ICE Letter at 2–5; 

CME II at 4; ISDA IV at 5. 

under a security-based swap contract, it 

should also be willing to accept the 

responsibility of having to report that 

security-based swap to satisfy 

Regulation SBSR. In any event, the 

Commission believes that, if a 

guarantor’s security-based swap 

activities are extensive enough that it 

must register as a security-based swap 

dealer or major security-based swap 

participant, it would have systems in 

place to ensure that it complies with the 

regulatory obligations attendant to such 

registration, including any reporting 

obligations for security-based swaps. 

Finally, one commenter requested 

that the Commission provide guidance 

that reporting parties could follow when 

the reporting hierarchy instructs them to 

select the reporting side.314 The 

Commission does not believe at this 

time that it is necessary or appropriate 

for the Commission itself to provide 

such guidance, because the 

determination of which counterparty is 

better positioned to report these 

security-based swaps is likely to depend 

on the facts and circumstances of the 

particular transaction and the nature of 

the counterparties. Rule 901(a)(2)(ii), as 

adopted, instructs the sides to select the 

reporting side only when the two sides 

are of equal status (i.e., when both sides 

include a registered security-based swap 

dealer or when neither side includes a 

registered security-based swap dealer or 

registered major security-based swap 

participant). The Commission 

understands that, under existing 

industry conventions, market 

participants who act in a dealing 

capacity undertake the reporting 

function. Thus, the Commission 

believes that Rule 901(a)(2)(ii), as 

adopted, is not inconsistent with these 

current industry practices. Furthermore, 

the Commission would not be averse to 

the development and use of new or 

additional industry standards that create 

a default for which side would become 

the reporting side in case of a ‘‘tie,’’ 

provided that both sides agree to use 

such standards. 

2. Reporting by Agents 

In the Regulation SBSR Proposing 

Release, the Commission noted that 

Rule 901(a) would not prevent a 

reporting party from entering into an 

agreement with a third party to report a 

security-based swap on behalf of the 

reporting party.315 Several commenters 

strongly supported the use of third-party 

agents to report security-based swaps.316

Four commenters addressed the types 

of entities that may wish to report 

security-based swaps on behalf of 

reporting parties. One commenter stated 

that platforms, clearing agencies, 

brokers, and stand-alone data reporting 

vendors potentially could provide 

reporting services to security-based 

swap counterparties.317 Another 

commenter requested that the 

Commission clarify that a security-based 

swap counterparty that was not the 

reporting party under Rule 901(a) would 

be able to agree contractually to report 

a security-based swap on behalf of the 

reporting party under Rule 901(a).318 A 

third commenter noted that many 

market participants will look to thirdparty service providers to streamline the 

reporting process.319 One commenter, 

however, recommended that the 

Commission should consider limiting 

the use of third-party reporting service 

providers to SB SEFs or other reporting 

market intermediaries, such as 

exchanges, because allowing 

unregulated third parties with 

potentially limited experience could 

lead to incomplete or inaccurate 

security-based swap reporting.320

Although the Commission agrees that 

security-based swap transaction 

information must be reported in a 

timely and accurate manner to fulfill the 

transparency and oversight goals of Title 

VII, the Commission does not believe 

that it is necessary, at this time, to allow 

only regulated intermediaries to perform 

reporting services on behalf of a 

reporting side. The Commission 

believes that reporting sides have a 

strong incentive to ensure that agents 

who report on their behalf have the 

capability and dedication to perform 

this function. In this regard, the 

Commission notes that any reporting 

side who contracts with a third party, 

including the non-reporting side, to 

report a security-based swap transaction 

on its behalf would retain the obligation 

to ensure that the information is 

provided to a registered SDR in the 

manner and form required under 

Regulation SBSR. Thus, a reporting side 

could be held responsible if its agent 

reported a security-based swap 

transaction to a registered SDR late or 

inaccurately. 

In addition, the Commission believes 

that allowing entities other than 

regulated intermediaries to provide 

reporting services to reporting persons 

could enhance competition and foster 

innovation in the market for post-trade 

processing services. This could, in turn, 

encourage more efficient reporting 

processes to develop over time as 

technology improves and the market 

gains experience with security-based 

swap transaction reporting. 

Accordingly, Rule 901(a), as adopted, 

does not limit the types of entities that 

may serve as reporting agents on behalf 

of reporting sides of security-based 

swaps. Furthermore, nothing in Rule 

901(a), as adopted, prohibits the 

reporting side from using the nonreporting side to report as agent on its 

behalf.321

3. Reporting Clearing Transactions 

In establishing proposed reporting 

obligations, Regulation SBSR, as 

proposed and as re-proposed, did not 

differentiate between cleared and 

uncleared security-based swaps. 

Accordingly, cleared and uncleared 

security-based swaps would have been 

treated in the same manner for purposes 

of reporting transactions to a registered 

SDR. Multiple commenters addressed 

the reporting of cleared and uncleared 

security-based swaps. Two commenters 

supported the Commission’s proposal to 

assign reporting obligations for cleared 

security-based swaps through the 

reporting hierarchy in all 

circumstances.322 These commenters 

noted that the Commission’s proposal 

would allow security-based swap 

counterparties, rather than clearing 

agencies, to choose the registered SDR 

that receives data about their securitybased swaps.323 Other commenters 

objected to the proposal on statutory 

and operational grounds.324 Two 

commenters argued that Title VII’s 

security-based swap reporting 

provisions and Regulation SBSR should 

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325See CME/ICE Letter at 2, 4; CME II at 4. 

326CME/ICE Letter at 3–4. See also ICE Letter at 

2–5 (arguing that a clearing agency would be wellpositioned to issue a termination message for a 

swap that has been accepted for clearing and 

subsequently report the security-based swaps that 

result from clearing); DTCC X (arguing for allowing 

the reporting side to determine which SDR to report 

to for cleared security-based swaps); ISDA IV at 5 

(expressing the view that ‘‘the clearing agency is 

best-positioned to report cleared [security-based 

swaps] timely and accurately as an extension of the 

clearing process’’). 

327As stated above, a clearing transaction is a 

security-based swap that has a registered clearing 

agency as a direct counterparty. 

328Rule 901(a), as adopted, reserves Rule 

901(a)(2)(i) for assigning reporting obligations for 

clearing transactions. 

329Reporting requirements for platform-executed 

alphas are discussed in Section V(C)(4), infra, and 

in the Regulation SBSR Proposed Amendments 

Release. 

330 ISDA IV at 6. 

331 Id. 

332 Id. 

333See ICI I at 5; Tradeweb Letter at 3–4; 

Vanguard Letter at 2, 7. 

334See Tradeweb Letter at 3. This commenter also 

stated that the counterparties to a transaction 

executed on a platform should be relieved of any 

reporting obligations because they would not be in 

a position to control or confirm the accuracy of the 

information reported or to control the timing of the 

platform’s reporting. See id. at 3–4. 

335See Vanguard Letter at 7. 

336See ISDA/SIFMA I at 18; ISDA IV at 7; 

MarkitSERV III at 4; WMBAA II at 6. 

337See ISDA/SIFMA I at 18; ISDA IV at 7; 

WMBAA II at 6. 

338See id. 

339See WMBAA II at 6 (observing that it would 

take a platform at least 30 minutes to gather and 

confirm the accuracy of all required information 

and recommending that the reporting party should 

be able to contract with a SB SEF to report a 

security-based swap on its behalf); ISDA/SIFMA I 

at 17–18 (noting that a platform may not know 

whether a security-based swap submitted for 

clearing had been accepted for clearing); ISDA IV 

at 7 (noting that certain aspects of the CFTC regime 

for reporting bilateral swaps executed on facility 

have been challenging due to the difficulty for SEFs 

to know and report certain trade data that is not 

essential to the trade execution, and because of the 

shared responsibility for reporting since the SEF/

DCM is responsible for the initial creation data 

reporting and the SD/MSP is responsible for the 

continuation data reporting). 

340See MarkitSERV III at 4. 

not extend to clearing transactions.325 In 

the alternative, they argued that, if the 

Commission requires clearing 

transactions to be reported to a 

registered SDR, the clearing agency that 

clears a security-based swap should 

have the duty to report the associated 

clearing transactions to a registered SDR 

of its choice because, ‘‘in contrast to 

uncleared [security-based swaps], the 

Clearing Agency is the sole party who 

holds the complete and accurate record 

of transactions and positions for cleared 

[security-based swaps] and in fact is the 

only entity capable of providing 

accurate and useful positional 

information on cleared [security-based 

swaps] for systemic risk monitoring 

purposes.’’326

After careful consideration of the 

comments, the Commission has 

determined not to apply the reporting 

hierarchy in Rule 901(a)(2)(ii), as 

adopted, to clearing transactions.327 In 

the Regulation SBSR Proposed 

Amendments Release, the Commission 

is proposing to revise Rule 901(a) to 

assign reporting duties for clearing 

transactions.328 However, the reporting 

hierarchy in Rule 901(a)(2)(ii), as 

adopted, applies to alpha transactions 

that are not executed on a platform.329

One commenter expressed the view 

that reporting the alpha ‘‘adds little or 

no value to an analysis of market 

exposure since it is immediately 

replaced by the beta and gamma and 

cannot exist unless the swap is 

cleared.’’ 330 This commenter argued, 

therefore, that alpha transactions should 

not be reported to registered SDRs. The 

Commission disagrees with this 

comment, and believes instead that 

having a record of all alphas at 

registered SDRs will ensure that 

registered SDRs receive complete 

information about security-based swap 

transactions that are subject to the Title 

VII reporting requirement. This 

requirement is designed, in part, to 

provide valuable information about the 

types of counterparties active in the 

security-based swap market. 

Reconstructing this information from 

records of betas and gammas would be 

less efficient and potentially more prone 

to error than requiring reports of the 

alpha in the first instance. Furthermore, 

requiring reporting of the alpha 

transaction eliminates the need to 

address issues that would arise if there 

is a delay between the time of execution 

of the alpha and the time that it is 

submitted to clearing, or if the 

transaction is rejected by the clearing 

agency. 

This commenter also stated that, if the 

alpha is reported, the ‘‘key to improving 

data quality is to have a single party 

responsible for reporting a cleared 

transaction, and thus with respect to 

whether reporting for purposes of public 

dissemination and/or reporting to a 

[registered SDR], the clearing agency 

should be responsible for the alpha once 

it is accepted for clearing.’’ 331 This 

commenter believed that this approach 

allows the data pertaining to the 

execution of the alpha to be more easily 

and accurately linked to the resulting 

beta and gamma.332 The Commission 

also sees the importance in being able 

to link information about the alpha to a 

related beta and gamma. However, the 

Commission does not believe that 

relying solely on the clearing agency to 

report transaction information is the 

only or the more appropriate way to 

address this concern. As discussed in 

Section II(B)(3)(j), supra, the 

Commission is adopting in Rule 

901(d)(10) a requirement that the reports 

of new security-based swaps (such as a 

beta and gamma) that result from the 

allocation, termination, novation, or 

assignment of one or more existing 

security-based swaps (such as an alpha) 

must include the transaction ID of the 

allocated, terminated, assigned, or 

novated security-based swap(s). This 

requirement is designed to allow the 

Commission and other relevant 

authorities to link related transactions 

across different registered SDRs. 

4. Reporting by a Platform 

Commenters expressed mixed views 

regarding reporting by platforms. Some 

commenters, addressing Rule 901(a) as 

originally proposed, recommended that 

the Commission require a platform to 

report security-based swaps executed on 

or through its facilities.333 One of these 

commenters stated that a platform 

would be in the best position to ensure 

the accurate and timely reporting of a 

transaction executed on its facilities.334

Another commenter expressed the view 

that having platforms report securitybased swaps would facilitate economies 

in the marketplace by reducing the 

number of reporting entities.335

Four commenters, however, 

recommended that the Commission not 

impose reporting requirements on 

platforms.336 Three of these commenters 

argued that certain practical 

considerations militate against assigning 

reporting duties to platforms.337

Specifically, these commenters believed 

that a platform might not have all of the 

information required to be reported 

under Rules 901(c) and 901(d).338 These 

commenters further noted that, even if 

a platform could report the execution of 

a security-based swap, it would lack 

information about life cycle events.339

The third commenter stated that it could 

be less efficient for a platform to report 

than to have counterparties report.340

After careful consideration of the 

issues raised by the commenters, the 

Commission has determined not to 

apply the reporting hierarchy in Rule 

901(a)(2)(ii), as adopted, to platformexecuted transactions that will be 

submitted to clearing. In the Regulation 

SBSR Proposed Amendments Release, 

the Commission is proposing to assign 

reporting duties for platform-executed 

security-based swaps that will be 

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341Rule 901(a), as adopted, reserves Rule 

901(a)(1) for assigning reporting obligations for 

platform-executed security-based swaps that will be 

submitted to clearing. 

342See ISDA IV at 7 (recommending that for a 

bilateral transaction executed on a platform that is 

not intended for clearing, one of the counterparties 

should be responsible for reporting, per the 

proposed reporting hierarchy). 

343Market participants typically are unwilling to 

accept the credit risk of an unknown counterparty 

and therefore generally would not execute a 

security-based swap anonymously, unless the 

transaction would be cleared. Based on discussions 

with market participants, however, the Commission 

understands that certain temporarily registered 

CFTC SEFs offer ‘‘work-up’’ sessions that allow for 

anonymous execution of uncleared swaps in a 

limited circumstance. In a ‘‘work-up’’ session, after 

a trade is executed, other SEF participants may be 

given the opportunity to execute the same product 

at the same price. In a typical work-up session, the 

SEF would ‘‘flash’’ the execution to other SEF 

participants, who could then submit long or short 

interest to trade at the same price. The Commission 

understands that such interest could be submitted 

anonymously, and that a participant in a work-up 

session must agree to accept the credit risk of any 

other participant, if the work-up is conducted in a 

product that is not cleared. The Commission 

understands that the platform will inform each 

participant that executes a trade of the identity of 

its counterparty shortly after completion of the 

work-up session. 

344However, a reporting side is not required to 

report whether or not a security-based swap has 

been accepted for clearing. See infra Section XII(A) 

(discussing life cycle event reporting). 

345Security-based swaps resulting from an 

allocation are discussed in greater detail in Section 

VIII(A) infra. 

346As re-proposed, paragraphs (1) and (2) of Rule 

901(e) would have identified the reporting side for 

a security-based swap resulting from a life cycle 

event, if the reporting side for the initial securitybased swap ceased to be a counterparty to the 

security-based swap resulting from the life cycle 

event. The Commission believes that these 

proposed provisions are unnecessary in light of the 

reporting hierarchy in Rule 901(a). Therefore, as 

described above, the Commission has determined 

that security-based swap counterparties should use 

the reporting hierarchy in Rule 901(a) to determine 

the reporting side for all security-based swaps, 

including security-based swaps that result from a 

life cycle event to another security-based swap. 

347As proposed, this introductory language read 

‘‘[t]he reporting party shall be as follows.’’ In the 

Cross-Border Proposing Release, the Commission 

proposed to modify this language to be ‘‘[t]he 

reporting side for a security-based swap shall be as 

follows.’’ 

348See ISDA IV at 7. 

349Assume, for example, that a registered 

security-based swap dealer and a hedge fund 

execute a security-based swap. The execution does 

not occur on a platform and the transaction will not 

be submitted to clearing. Under Rule 

901(a)(2)(ii)(B), as adopted, the registered securitybased swap dealer is the reporting side for the 

transaction. Assume further that three days after 

execution the registered security-based swap dealer 

and the hedge fund agree that the registered 

security-based swap dealer will step out of the trade 

through a novation and will be replaced by a 

registered major security-based swap participant. 

Pursuant to Rule 901(e), as adopted, the registered 

security-based swap dealer would be required to 

report the novation to the same registered SDR that 

received the initial report of the security-based 

swap. At this point, the transaction between the 

registered security-based swap dealer and the hedge 

fund is complete and the registered security-based 

swap dealer would have no further reporting 

obligations with respect to the transaction. Under 

Rule 901(a)(2)(ii)(D), as adopted, the registered 

major security-based swap participant is the 

reporting side for the security-based swap that 

results from the novation of the transaction between 

the registered security-based swap dealer and the 

hedge fund. The registered major security-based 

swap participant is the reporting side for the 

resulting transaction. 

350 If the time that is 24 hours after the time of 

the creation of the new security-based swap would 

fall on a day that is not a business day, the report 

of the new security-based swap would be due by 

the same time on the next day that is a business 

day. See Rule 901(j). 

351Rule 901(d)(10) provides that if a ‘‘securitybased swap arises from the allocation, termination, 

novation, or assignment of one or more existing 

security-based swaps,’’ the reporting side must 

report ‘‘the transaction ID of the allocated, 

terminated, assigned, or novated security-based 

swap(s), except in the case of a clearing transaction 

that results from the netting or compression of other 

clearing transactions.’’ See supra Section II(C)(3)(k) 

(discussing Rule 901(d))(10)). 

submitted to clearing.341 If the securitybased swap will not be submitted to 

clearing, the platform would have no 

reporting obligation, and the reporting 

hierarchy in final Rule 901(a)(2)(ii) 

would apply.342 The Commission notes 

that Section 13A(a)(3) of the Exchange 

Act provides that, for a security-based 

swap not accepted by any clearing 

agency, one of the counterparties must 

report the transaction. The reporting 

hierarchy of final Rule 901(a)(2)(ii) 

implements that provision and clarifies 

which side has the duty to report. The 

Commission believes that, in the case of 

security-based swaps that will not be 

submitted to clearing, the counterparties 

either will know each other’s identity at 

the time of execution or the they will 

learn this information from the platform 

immediately or shortly after 

execution,343 which will allow them to 

determine which side will incur the 

duty to report under Rule 901(a)(2)(ii), 

as adopted. 

5. Reporting of a Security-Based Swap 

Resulting From a Life Cycle Event 

Rule 901(e)(1)(i) requires the reporting 

side for a security-based swap to report 

a life cycle event of that security-based 

swap—such as a termination, novation, 

or assignment—to the registered SDR to 

which it reported the original 

transaction.344 Certain life cycle events 

may result in the creation of a new 

security-based swap. The Commission is 

modifying Rule 901(a) to identify the 

reporting side for this new securitybased swap.345

Rule 901(e), as adopted, identifies the 

reporting side for a life cycle event. Rule 

901(e) does not, however, address who 

will be the reporting side for a new 

security-based swap that arises from a 

life cycle event (such as a termination) 

of an existing security-based swap.346

To identify the reporting side for the 

new security-based swap, the 

Commission is modifying the 

introductory language of final Rule 

901(a) to provide that a ‘‘security-based 

swap, including a security-based swap 

that results from the allocation, 

termination, novation, or assignment of 

another security-based swap, shall be 

reported’’ as provided in the rest of the 

rule.347 This change responds to a 

commenter who suggested that 

reporting obligations be reassessed upon 

novation based on the current 

registration status of the remaining party 

and the new party to the security-based 

swap.348 The reporting side designated 

by Rule 901(a) for the new transaction 

could be different from the reporting 

side for the original transaction.349 The 

reporting side for the new securitybased swap would be required to report 

the transaction within 24 hours of the 

time of creation of the new securitybased swap.350

Rule 901(d)(10) requires the reporting 

side for the new security-based swap to 

report the transaction ID of the original 

security-based swap as a data element of 

the transaction report for the new 

security-based swap.351 The 

Commission believes that this 

requirement will allow the Commission 

and other relevant authorities to link the 

report of a new security-based swap that 

arises from the allocation, termination, 

novation, or assignment of an existing 

security-based swap to the original 

security-based swap. As a result of these 

links, the Commission believes that it is 

not necessary or appropriate to require 

that a security-based swap that arises 

from the allocation, termination, 

novation, or assignment of an existing 

security-based swap be reported to the 

same registered SDR that received the 

transaction report of the original 

transaction. Thus, the reporting side for 

a security-based swap that arises as a 

result of the allocation, termination, 

novation, or assignment of an existing 

security-based swap could report the 

resulting new security-based swap to a 

registered SDR other than the registered 

SDR that received the report of the 

original security-based swap. 

VI. Public Dissemination—Rule 902 

A. Background 

In addition to requiring regulatory 

reporting of all security-based swaps, 

Regulation SBSR seeks to implement 

Congress’s mandate for real-time public 

dissemination of all security-based 

swaps. Section 13(m)(1)(B) of the 

Exchange Act authorizes the 

Commission ‘‘to make security-based 

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352 15 U.S.C. 78m(m)(1)(B). Section 13m(1)(E) of 

the Exchange Act, 15 U.S.C. 78m(m)(1)(E), requires 

the Commission rule for real-time public 

dissemination of security-based swap transactions 

to: (1) ‘‘specify the criteria for determining what 

constitutes a large notional security-based swap 

transaction (block trade) for particular markets and 

contracts’’ and (2) ‘‘specify the appropriate time 

delay for reporting large notional security-based 

swap transactions (block trades) to the public.’’ The 

treatment of block trades is discussed in Section 

VII, infra. 

353 15 U.S.C. 78m(m)(1)(C). 

354 15 U.S.C. 78c–3(g). 

355Section 3C(a)(1) of the Exchange Act, 15 

U.S.C. 78c–3(a)(1), provides that it shall be 

unlawful for any person to engage in a securitybased swap unless that person submits such 

security-based swap for clearing to a clearing 

agency that is registered under the Exchange Act or 

a clearing agency that is exempt from registration 

under the Exchange Act if the security-based swap 

is required to be cleared. Section 3C(g)(1) of the 

Exchange Act, 15 U.S.C. 78c–3(g)(1), provides that 

requirements of Section 3C(a)(1) will not apply to 

a security-based swap if one of the counterparties 

to the security-based swap (1) is not a financial 

entity; (2) is using security-based swaps to hedge or 

mitigate commercial risk; and (3) notifies the 

Commission, in a manner set forth by the 

Commission, how it generally meets its financial 

obligations associated with entering into noncleared security-based swaps. 

356The reference in Section 13(m)(1)(C)(iii) of the 

Exchange Act to Section 3C(a)(6) of the Exchange 

Act is incorrect. Section 3C of the Exchange Act 

does not contain a paragraph (a)(6). See generally 

Am. Petroleum Institute v. SEC, 714 F.3d 1329, 

1336–37 (DC Cir 2013) (explaining that ‘‘[t]he Dodd 

Frank Act is an enormous and complex statute, and 

it contains’’ a number of ‘‘scriveners’ errors’’). 

357Section 3C(b)(1) of the Exchange Act requires 

the Commission to review on an ongoing basis each 

security-based swap, or any group, category, type, 

or class of security-based swap to make a 

determination that such security-based swap, or 

group, category, type, or class of security-based 

swap should be required to be cleared. 

358 15 U.S.C. 78m(m)(1)(D). 

359 15 U.S.C. 78m(n)(5)(D)(ii). 

360See 75 FR 75227. 

361See Barnard I at 3 (recommending full posttrade transparency as soon as technologically and 

practically feasible, with an exemption to permit 

delayed reporting of block trades); CII Letter at 2 

(‘‘the transparency resulting from the 

implementation of the proposed rules would not 

only lower systemic risk and strengthen regulatory 

oversight, but also, importantly for investors, 

enhance the price discovery function of the 

derivatives market’’); DTCC II at 17–18 (noting that 

the proposed rules are designed to balance the 

benefits of post-trade transparency against the 

potentially higher costs of transferring or hedging 

a position following the dissemination of a report 

of a block trade); Ethics Metrics Letter at 3 (last-sale 

reporting of security-based swap transactions will 

‘‘provide material information to eliminate 

inefficiencies in pricing [financial holding 

company] debt and equity in the U.S. capital 

markets’’); FINRA Letter at 1 (stating that the 

proposed trade reporting and dissemination 

structure, and the information it would provide to 

regulators and market participants, are vital to 

maintaining market integrity and investor 

protection); Getco Letter at 3 (noting that in the 

absence of accurate and timely post-trade 

transparency for most security-based swap 

transactions only major dealers will have pricing 

information and therefore new liquidity providers 

will not participate in the security-based swap 

market); ICI I at 1–2 (stating that market 

transparency is a key element in assuring the 

integrity and quality of the security-based swap 

market); Markit I at 4 (stating that security-based 

swap data should be made available on a non-delay 

basis to the public, media, and data vendors); MFA 

I at 1 (supporting the reporting of security-based 

swap transaction data to serve the goal of market 

transparency); SDMA I at 4 (‘‘Post-trade 

transparency is not only a stated goal of the DoddFrank Act it is also an instrumental component in 

establishing market integrity. By creating real time 

access to trade information for all market 

participants, confidence in markets increases and 

this transparency fosters greater liquidity’’); 

ThinkNum Letter passim; Shatto Letter passim. 

362See infra notes 377 to 386 and accompanying 

text and Section VI(D). 

363See infra Section XXII(C)(2)(a). See also infra 

note 1255 (discussing implicit transaction costs). 

swap transaction and pricing data 

available to the public in such form and 

at such times as the Commission 

determines appropriate to enhance price 

discovery.’’ 352 Section 13(m)(1)(C) of 

the Exchange Act 353 authorizes the 

Commission to provide by rule for the 

public availability of security-based 

swap transaction, volume, and pricing 

data as follows: 

(1) With respect to those securitybased swaps that are subject to the 

mandatory clearing requirement 

described in Section 3C(a)(1) of the 

Exchange Act (including those securitybased swaps that are excepted from the 

requirement pursuant to Section 3C(g) 

of the Exchange Act),354 the 

Commission shall require real-time 

public reporting for such 

transactions; 355

(2) With respect to those securitybased swaps that are not subject to the 

mandatory clearing requirement 

described in Section 3C(a)(1) of the 

Exchange Act, but are cleared at a 

registered clearing agency, the 

Commission shall require real-time 

public reporting for such transactions; 

(3) With respect to security-based 

swaps that are not cleared at a registered 

clearing agency and which are reported 

to a SDR or the Commission under 

Section 3C(a)(6),356 the Commission 

shall require real-time public reporting 

for such transactions, in a manner that 

does not disclose the business 

transactions and market positions of any 

person; and 

(4) With respect to security-based 

swaps that are determined to be 

required to be cleared under Section 

3C(b) of the Exchange Act but are not 

cleared, the Commission shall require 

real-time public reporting for such 

transactions.357

Furthermore, Section 13(m)(1)(D) of 

the Exchange Act 358 authorizes the 

Commission to require registered 

entities (such as registered SDRs) to 

publicly disseminate the security-based 

swap transaction and pricing data 

required to be reported under Section 

13(m) of the Exchange Act. Finally, 

Section 13(n)(5)(D)(ii) of the Exchange 

Act 359 requires SDRs to provide 

security-based swap information ‘‘in 

such form and at such frequency as the 

Commission may require to comply 

with public reporting requirements.’’ 

In view of these statutory provisions, 

the Commission proposed Rule 902— 

Public Dissemination of Transaction 

Reports. In the Regulation SBSR 

Proposing Release, the Commission 

expressed its belief that the best 

approach would be to require market 

participants to report transaction 

information to a registered SDR and 

require registered SDRs to disseminate 

that information to the public.360 Many 

commenters expressed general support 

for public dissemination of securitybased swap information.361 In addition, 

as discussed more fully below, the 

Commission received a large number of 

comments addressing specific aspects of 

public dissemination of transaction 

reports.362

The current market for security-based 

swaps is opaque. Dealers know about 

order flow that they execute, and may 

know about other dealers’ transactions 

in certain instances, but information 

about executed transactions is not 

widespread. Market participants— 

particularly non-dealers—have to rely 

primarily on their understanding of the 

market’s fundamentals to arrive at a 

price at which they would be willing to 

assume risk. The Commission believes 

that, by reducing information 

asymmetries between dealers and nondealers and providing more equal access 

to all post-trade information in the 

security-based swap market, post-trade 

transparency could help reduce implicit 

transaction costs and promote greater 

price efficiency.363 The availability of 

post-trade information also could 

encourage existing market participants 

to increase their activity in the market 

and encourage new participants to join 

the market—and, if so, increase 

liquidity and competition in the 

security-based swap market. In addition, 

all market participants will have more 

comprehensive information with which 

to make trading and valuation 

determinations. 

Security-based swaps are complex 

derivative products, and there is no 

single accepted way to model a securitybased swap for pricing purposes. The 

Commission believes that post-trade 

pricing and volume information will 

allow valuation models to be adjusted to 

reflect how other market participants 

have valued a security-based swap 

product at a specific moment in time. 

Public dissemination of last-sale 

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364Final Rule 902(d) provides that ‘‘[n]o person 

shall make available to one or more persons (other 

than a counterparty or post-trade processor) 

transaction information relating to a security-based 

swap before the primary trade information about 

the security-based swap is submitted to a registered 

security-based swap data repository.’’ 

365The Commission recognized, however, that 

there may be circumstances when a registered 

SDR’s systems might be unavailable for publicly 

disseminating transaction data. In such cases, 

proposed Rule 902(a) would have required a 

registered SDR to disseminate the transaction data 

immediately upon its re-opening. See Regulation 

SBSR Proposing Release, 75 FR 75228. Rule 904 of 

Regulation SBSR deals with hours of operation of 

registered SDRs and related operational procedures. 

See infra Section XI. 

366This carve-out was necessitated by reproposed Rule 908(a), which contemplated 

situations where a security-based swap would be 

required to be reported to a registered SDR but not 

publicly disseminated. See 78 FR 31060. 

367See FINRA Letter at 5; DTCC II at 18 (stating 

that SDRs should be able to disseminate data 

effectively and should be the sole source of data 

dissemination); DTCC IV at 4; MarkitSERV I at 

7–8 (stating that only registered SDRs, or their 

agents, should be permitted to disseminate securitybased swap data); Thomson Reuters Letter at 6–7 

(stating that publication and dissemination of 

security-based swap transaction information should 

be the responsibility of registered SDRs rather than 

SB SEFs). 

368See DTCC II at 18. 

369See DTCC IV at 4. 

370See ISDA IV at 6 (stating that ‘‘as regards 

public dissemination of relevant pricing data for a 

SBS subject to clearing, such reporting should be 

done by the clearing agency when a SBS is accepted 

for clearing and the clearing agency reports for the 

beta and gamma’’). 

371See infra Section XXII(B)(2). 

372 15 U.S.C. 78m(m)(1)(G). 

373See 75 FR 75227. 

374See id. 

375See id. at 75213. 

information also will aid dealers in 

deriving better quotations, because they 

will know the prices at which other 

market participants have traded. Lastsale information also will aid end users 

and other non-registered entities in 

evaluating current quotations by 

allowing them to request additional 

information if a dealer’s quote differs 

from the prices of the most recent 

transactions. Furthermore, smaller 

market participants that view last-sale 

information will be able to test whether 

quotations offered by dealers before the 

last sale were close to the price at which 

the last sale was executed. In this 

manner, post-trade transparency will 

promote price competition and more 

efficient price discovery in the securitybased swap market. 

The Commission is adopting Rule 902 

with certain modifications and technical 

changes discussed in more detail below. 

Final Rule 902(a) sets forth the basic 

duty of a registered SDR to publicly 

disseminate transaction reports. Final 

Rule 902(c) sets forth certain types of 

security-based swaps and certain other 

information about security-based swaps 

that a registered SDR shall not publicly 

disseminate. Final Rule 902(d), the socalled ‘‘Embargo Rule,’’ is designed to 

promote fair access to information about 

executed security-based swaps.364

Rule 902(b), as proposed and reproposed, would have established a 

mechanism for registered SDRs to 

publicly disseminate transaction reports 

of block trades. As discussed in more 

detail in Section VII, infra, the 

Commission is not adopting thresholds 

for determining what constitutes a block 

trade. Accordingly, the Commission 

believes that it is not necessary or 

appropriate at this time to adopt rules 

specifically addressing the public 

dissemination of block trades. 

B. Registered SDR’s Duty To 

Disseminate—Rule 902(a) 

Rule 902(a), as proposed and reproposed, would have required a 

registered SDR to publicly disseminate 

a transaction report of any securitybased swap immediately upon receipt of 

transaction information about the 

security-based swap, except in the case 

of a block trade.365 Further, Rule 902(a), 

as initially proposed, provided that the 

transaction report would consist of ‘‘all 

the information reported by the 

reporting party pursuant to § 242.901, 

plus any indicator or indicators 

contemplated by the registered securitybased swap data repository’s policies 

and procedures that are required by 

§ 242.907.’’ Rule 902(a) was revised and 

re-proposed as part of the Cross-Border 

Proposing Release to add that a 

registered SDR would not have an 

obligation to publicly disseminate 

certain types of cross-border securitybased swaps that are required to be 

reported but not publicly 

disseminated.366

Commenters generally were 

supportive of the Commission’s 

approach of requiring registered SDRs to 

be responsible for public dissemination 

of security-based swap transaction 

reports.367 One commenter, for example, 

stated that allowing other types of 

entities to have the regulatory duty to 

disseminate data could lead to undue 

complications for market 

participants.368 In addition, the 

commenter expressed the view that realtime public dissemination of securitybased swap data is a ‘‘core function’’ of 

registered SDRs, and that permitting 

only registered SDRs to publicly 

disseminate security-based swap data 

would help to assure the accuracy and 

completeness of the data.369 However, 

one commenter appeared to recommend 

that a clearing agency should be 

responsible for public dissemination of 

‘‘relevant pricing data for a securitybased swap subject to clearing.’’ 370

The Commission has carefully 

analyzed the comments and is adopting 

the approach of requiring public 

dissemination through registered SDRs. 

The Commission believes that this 

approach will promote efficiency in the 

security-based swap market, or at least 

limit inefficiency.371 Section 

13(m)(1)(G) of the Exchange Act 372

provides that ‘‘[e]ach security-based 

swap (whether cleared or uncleared) 

shall be reported to a registered 

security-based swap data repository.’’ 

Thus, security-based swaps would have 

to be reported to registered SDRs 

regardless of the mechanism that the 

Commission chooses for public 

dissemination. By requiring registered 

SDRs to carry out the task of public 

dissemination, the Commission will not 

require reporting steps beyond those 

already required by the Exchange Act. 

Furthermore, the Commission believes 

that assigning registered SDRs the duty 

to publicly disseminate will help 

promote efficiency and consistency of 

post-trade information. Market 

observers will not have to obtain market 

data from potentially several other 

sources—such as SB SEFs, clearing 

agencies, or the counterparties 

themselves—to have a full view of 

security-based swap market activity. 

1. Format of Disseminated Data 

In the Regulation SBSR Proposing 

Release, the Commission acknowledged 

that multiple uniquely formatted data 

feeds could impair the ability of market 

participants to receive, understand, or 

compare security-based swap 

transaction data and thus undermine its 

value.373 Furthermore, the Commission 

suggested that one way to address that 

issue would be to dictate the exact 

format and mode of providing required 

security-based swap data to the public, 

while acknowledging various problems 

with that approach.374 The Commission 

proposed, however, to identify in 

proposed Rules 901(c) and 901(d) the 

categories of information that would be 

required to be reported, and to require 

registered SDRs to establish and 

maintain policies and procedures that, 

among other things, would specify the 

data elements that would be required to 

be reported.375 The Commission 

preliminarily believed that this 

approach would promote the reporting 

of uniform, material information for 

each security-based swap, while 

providing flexibility to account for 

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376See id. 

377See Barnard I at 2 (stating that the categories 

of information required to be reported under the 

proposed rules should be ‘‘complete and sufficient 

so that its dissemination will enhance transparency 

and price discovery’’); MarkitSERV I at 10 

(expressing support for the Commission’s ‘‘proposal 

to provide [registered] SDRs with the authority to 

define the relevant fields on the basis of general 

guidelines as set out by the SEC’’). 

378See ISDA/SIFMA I at 10. See also ISDA IV at 

9 and Section II(2)(a), supra, for a response. 

379Better Markets II at 2–3 (also arguing that the 

Commission should require disclosure of the 

component parts of a complex transaction to 

prevent market participants from avoiding 

transparency by creating complex composite 

transactions). 

380See Better Markets I at 3; Better Markets II 

at 4. 

381The Commission notes that final Rule 902(a) 

references ‘‘condition flags,’’ rather than ‘‘indicator 

or indicators,’’ as was proposed, to conform with 

Rule 907, as adopted. 

382Markit I at 4. 

383See infra Section XI (discussing Rule 904, 

which deals with hours of operation of registered 

SDRs and related operational procedures). 

384Regulation SBSR Proposing Release, 75 FR 

75237. 

385See ISDA/SIFMA I at 12. See also ISDA IV at 

13 (arguing that only life cycle events that result in 

a change to the price of a security-based swap 

should be subject to public dissemination, and 

requesting that ‘‘any activity on a [security-based 

swap] that does not affect the price of the reportable 

[security-based swap]’’ be excluded from public 

dissemination). 

386To enhance the usefulness of a public 

transaction report of a life cycle event, final Rule 

907(a)(3) requires a registered SDR to have policies 

and procedures for appropriately flagging public 

reports of life cycle events. See infra Section XII(C). 

This requirement is designed to promote 

transparency by allowing market observers to 

distinguish original transactions from life cycle 

events. 

changes to the security-based swap 

market over time.376

Two commenters generally supported 

the Commission’s approach of providing 

registered SDRs with the flexibility to 

define the relevant data fields.377

However, one commenter stated that the 

final rules should clearly identify the 

data fields that will be publicly 

disseminated.378 Another commenter 

emphasized the importance of 

presenting security-based swap 

information in a format that is useful for 

market participants, and expressed 

concern that proposed Regulation SBSR 

did ‘‘nothing to ensure that the data 

amassed by individual SDRs is 

aggregated and disseminated in a form 

that is genuinely useful to traders and 

regulators and on a nondiscriminatory 

basis.’’ 379 This commenter further 

believed that to provide meaningful 

price discovery, data must be presented 

in a format that allows market 

participants to view it in near-real time, 

fits onto the limited space available on 

their trading screens, and allows them 

to view multiple markets 

simultaneously.380

The Commission has carefully 

considered these comments and 

continues to believe that it is not 

necessary or appropriate at this time for 

the Commission to dictate the format 

and mode of public dissemination of 

security-based swap transaction 

information by registered SDRs. 

Therefore, Rule 902(a), as adopted, 

provides registered SDRs with the 

flexibility to set the format and mode of 

dissemination through its policies and 

procedures, as long as the reports of 

security-based swaps that it publicly 

disseminates include the information 

required to be reported by Rule 901(c), 

plus any ‘‘condition flags’’ 

contemplated by the registered SDR’s 

policies and procedures under Rule 

907.381 The Commission notes that it 

anticipates proposing for public 

comment detailed specifications of 

acceptable formats and taxonomies that 

would facilitate an accurate 

interpretation, aggregation, and analysis 

by the Commission of security-based 

swap data submitted to it by an SDR. 

The Commission intends to maximize 

the use of any applicable current 

industry standards for the description of 

security-based swap data, and build 

upon such standards to accommodate 

any additional data fields as may be 

required. 

2. Timing of Public Dissemination 

Rule 902(a), as re-proposed, would 

have required a registered SDR to 

publicly disseminate a transaction 

report of a security-based swap 

immediately upon (1) receipt of 

information about the security-based 

swap from a reporting side, or (2) reopening following a period when the 

registered SDR was closed, unless the 

security-based swap was a block trade 

or a cross-border security-based swap 

that was required to be reported but not 

publicly disseminated. One commenter 

agreed with the proposed requirement, 

stating that reported security-based 

swap transaction information ‘‘should 

be made available on a non-delayed 

basis to the public, media, and data 

vendors.’’ 382

The Commission is adopting the 

requirement contained in Rule 902(a), as 

re-proposed, that a registered SDR must 

disseminate a transaction report of a 

security-based swap ‘‘immediately upon 

receipt of information about the 

security-based swap, or upon re-opening 

following a period when the registered 

security-based swap data repository was 

closed.’’ 383 ‘‘Immediately,’’ as used in 

this context, implies a wholly 

automated process to accept the 

incoming information, process the 

information to assure that only 

information required to be disseminated 

is disseminated, and disseminate a trade 

report through electronic means. 

3. Dissemination of Life Cycle Events 

Rule 902(a), as adopted, provides that, 

in addition to transaction reports of 

security-based swaps, a registered SDR 

‘‘shall publicly disseminate . . . a life 

cycle event or adjustment due to a life 

cycle event.’’ Rule 902(a), as proposed 

and re-proposed, did not specifically 

refer to such information, but, as noted 

in the Regulation SBSR Proposing 

Release, proposed Rule 907(a)(4) would 

have required a registered SDR to 

‘‘establish and maintain written policies 

and procedures describing how 

reporting parties shall report—and, 

consistent with the enhancement of 

price discovery, how the registered SDR 

shall publicly disseminate—reports of, 

and adjustments due to, life cycle 

events.’’ 384 One commenter argued that 

the Commission should limit public 

dissemination to new trading activity 

and should exclude maintenance or life 

cycle events.385 The Commission 

disagrees, and believes instead that, if 

information about a security-based swap 

is publicly disseminated but 

subsequently one or more of the 

disseminated data elements is revised 

due to a life cycle event (or an 

adjustment due to a life cycle event), the 

revised information would provide 

market observers a more accurate 

understanding of the market. The 

Commission, therefore, is clarifying 

Rule 902(a) to make clear the 

requirement to disseminate life cycle 

events. Final Rule 902(a) provides, in 

relevant part, that a registered SDR 

‘‘shall publicly disseminate a 

transaction report of the security-based 

swap or a life cycle event or adjustment 

due to a life cycle event immediately 

upon receipt.’’ 386

4. Correction of Minor Drafting Error 

Rule 902(a), as initially proposed and 

re-proposed, provided that the 

transaction report that is publicly 

disseminated ‘‘shall consist of all the 

information reported pursuant to Rule 

901, plus any indicator or indicators 

contemplated by the registered securitybased swap data repository’s policies 

and procedures that are required by 

Rule 907’’ (emphasis added). However, 

in the Regulation SBSR Proposing 

Release, the Commission specified that 

the transaction report that is 

disseminated should consist of all the 

information reported pursuant to Rule 

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387See 75 FR 75212–13. 

388Two comments specifically noted this lack of 

clarity. See ISDA/SIFMA I at 12; ISDA IV at 14. 

389See MarkitSERV I at 7–8. 

390See supra Section VII(B)(1). 

391See supra Section VII(B)(2). 

392 15 U.S.C. 13m(m)(1)(E)(i). This section is 

applicable to security-based swaps that are subject 

to Sections 13(m)(1)(C)(i) and (ii) of the Exchange 

Act—i.e., security-based swaps that are subject to 

the mandatory clearing requirement in Section 

3C(a)(1) and security-based swaps that are not 

subject to the mandatory clearing requirement in 

Section 3C(a)(1) but are cleared. 

393See Deutsche Bank Letter at 6 (asking the SEC 

and CFTC to impose strict requirements on an 

SDR’s handling, disclosure, and use of identifying 

information); DTCC II at 9 (noting that trading 

volume in most single name credit derivatives is 

‘‘extremely thin’’ and disclosing small data 

samples, particularly from narrow time periods, 

may not preserve the anonymity of the trading 

parties); ISDA/SIFMA I at 12; MFA I at 2 (arguing 

that participant IDs should not be included in any 

publicly disseminated transaction report to protect 

identities and proprietary trading strategies of 

security-based swap market participants). 

394Re-proposed Rule 902(c)(1) would have 

prohibited a registered SDR from publicly 

disseminating the identity of either counterparty to 

a security-based swap. Final Rule 902(c)(1) 

prohibits a registered SDR from publicly 

disseminating the identity of any counterparty to a 

security-based swap. Final Rule 900(i) defines 

counterparty to mean ‘‘a person that is a direct 

counterparty or indirect counterparty of a securitybased swap.’’ This conforming change to Rule 

902(c)(1) makes clear that a registered SDR may not 

publicly disseminate the identity of any 

counterparty—direct or indirect—of a securitybased swap. 

395See infra Section VI(D)(1)(f) (discussing public 

dissemination of thinly-traded products). 

396 15 U.S.C. 13(m)(1)(C)(iii). 

397 Deutsche Bank Letter at 6. 

901(c).387 The statement from the 

preamble of the Regulation SBSR 

Proposing Release is correct. The 

Commission did not intend for all of the 

information reported pursuant to Rule 

901 to be publicly disseminated;388 this 

would include, for example, regulatory 

data reported pursuant to Rule 901(d) 

and information about historical 

security-based swaps reported pursuant 

to Rule 901(i). The Commission is 

correcting this drafting error so that 

final Rule 902(a) explicitly states that 

the ‘‘transaction report shall consist of 

all the information reported pursuant to 

§ 242.901(c), plus any condition flags 

contemplated by the registered securitybased swap data repository’s policies 

and procedures that are required by 

§ 242.907’’ (emphasis added). 

5. Use of Agents by a Registered SDR To 

Carry Out the Public Dissemination 

Function 

One commenter discussed the 

appropriateness of third-party service 

providers carrying out the public 

dissemination function on behalf of 

registered SDRs.389 The Commission 

believes that, in the same way that 

reporting sides may engage third-party 

agents to report transactions on their 

behalf, registered SDRs may engage 

third-party providers to carry out the 

public dissemination function on their 

behalf. In both cases, the entity with the 

legal duty would remain responsible for 

compliance with Regulation SBSR if its 

agent failed to carry out the function in 

a manner stipulated by Regulation 

SBSR. Thus, reporting sides and 

registered SDRs should engage only 

providers that have the capacity and 

reliability to carry out those duties. 

C. Definition of ‘‘Publicly Disseminate’’ 

In the Regulation SBSR Proposing 

Release, the Commission defined 

‘‘publicly disseminate’’ in Rule 900 to 

mean ‘‘to make available through the 

Internet or other electronic data feed 

that is widely accessible and in 

machine-readable electronic format.’’ 

The Commission re-proposed this 

definition renumbering it Rule 900(y), 

in the Cross-Border Proposing Release. 

The Commission received no 

comment letters directly discussing the 

proposed definition, although as noted 

above many commenters commented on 

various other aspects of public 

dissemination, including the format of 

disseminated data 390 and timing of 

public dissemination.391 The 

Commission is adopting the definition 

of ‘‘publicly disseminate’’ as proposed 

and re-proposed. The Commission 

continues to believe that, to satisfy the 

statutory mandate for public 

dissemination, security-based swap 

transaction data must be widely 

accessible in a machine-readable 

electronic format. These data are too 

numerous and complex for direct 

human consumption and thus will have 

practical use only if they can be 

downloaded and read by computers. 

The definition of ‘‘publicly 

disseminate’’ recognizes the Internet as 

one, but not the only, possible 

electronic medium to make these data 

available to the public. 

D. Exclusions From Public 

Dissemination—Rule 902(c) 

1. Discussion of Final Rule 

Rule 902(c), as proposed and reproposed, set forth three kinds of 

information that a registered SDR would 

be prohibited from disseminating. First, 

in Rule 902(c)(1), the Commission 

proposed that a registered SDR would 

be prohibited from disseminating the 

identity of any counterparty to a 

security-based swap. This would 

implement Section 13(m)(1)(E)(i) of the 

Exchange Act,392 which requires the 

Commission’s rule providing for the 

public dissemination of security-based 

swap transaction and pricing 

information to ensure that ‘‘such 

information does not identify the 

participants.’’ The Commission received 

three comments that generally urged the 

Commission to ensure the anonymity of 

security-based swap counterparties, 

either through non-dissemination of the 

identity of any counterparty or by 

limiting public dissemination of other 

data elements they believed could lead 

to disclosure of counterparties’ 

identities.393 To address the 

commenters’ concerns, the Commission 

is adopting Rule 902(c)(1) as proposed 

and re-proposed, with one conforming 

change.394 Final Rule 902(c)(1) 

explicitly prohibits a registered SDR 

from disseminating the identity of any 

counterparty. Further, Rule 902(a) 

explicitly provides for the public 

dissemination of a transaction report 

that consists only of ‘‘the information 

reported pursuant to § 242.901(c), plus 

any condition flags contemplated by the 

registered security-based swap data 

repository’s policies and procedures 

that are required by § 242.907.’’ Limiting 

the publicly disseminated trade report 

to these specific data elements is 

designed to further avoid disclosure of 

any counterparty’s identity, including 

the counterparty ID of a counterparty, 

even in thinly-traded markets.395

Second, the Commission proposed in 

Rule 902(c)(2) that, with respect to a 

security-based swap that is not cleared 

at a clearing agency and that is reported 

to a registered SDR, a registered SDR 

would be prohibited from disseminating 

any information disclosing the business 

transactions and market positions of any 

person. This would implement Section 

13(m)(1)(C)(iii) of the Exchange Act,396

which provides that, with respect to the 

security-based swaps that are not 

cleared and which are reported to an 

SDR or the Commission, ‘‘the 

Commission shall require real-time 

public reporting . . . in a manner that 

does not disclose the business 

transactions and market positions of any 

person.’’ The Commission received no 

comments that directly addressed 

proposed Rule 902(c)(2), although one 

commenter noted that ‘‘all market 

participants have legitimate interests in 

the protection of their confidential and 

identifying financial information.’’ 397

By prohibiting a registered SDR from 

disseminating any information 

disclosing the business transactions and 

market positions of any person, the 

Commission believes that Rule 902(c)(2) 

will help preserve the confidential 

information of market participants, in 

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398 75 FR 75286. 

399See Regulation SBSR Proposed Amendments 

Release, Section VII (proposing a new compliance 

schedule for Regulation SBSR). 

400For example, a termination of a historical 

security-based swap—occurring after public 

dissemination in that asset class becomes 

required—would have to be publicly disseminated. 

A termination represents the change in the notional 

amount of the transaction from a positive amount 

to zero. Because the notional amount is a Rule 

901(c) element, the termination of the historical 

security-based swap would have to be publicly 

disseminated. 

401This second exception was necessitated by 

revisions to Rule 908 made in the Cross-Border 

Proposing Release that would have provided that 

certain cross-border security-based swaps would be 

subject to regulatory reporting but not public 

dissemination. See 78 FR 31215. 

402See infra Section XIX (explaining how a 

registered SDR can determine whether the report it 

receives is a non-mandatory report). 

403See infra Section XV(A). 

404Rule 900(f) defines ‘‘clearing transaction’’ as 

‘‘a security-based swap that has a registered clearing 

agency as a direct counterparty.’’ 

addition to implementing Section 

13(m)(1)(C)(iii) of the Exchange Act. 

Accordingly, the Commission is 

adopting Rule 902(c)(2) as proposed and 

re-proposed. 

Third, the Commission preliminarily 

believed that it would be impractical 

and unnecessary for a registered SDR to 

publicly disseminate reports of 

historical security-based swaps reported 

pursuant to Rule 901(i), and therefore 

included this exclusion in proposed 

Rule 902(c)(3).398 The Commission 

received no comments regarding 

proposed Rule 902(c)(3). The 

Commission continues to believe that it 

would be impractical for a registered 

SDR to publicly disseminate reports of 

historical security-based swaps reported 

pursuant to Rule 901(i). Accordingly, 

the Commission is adopting Rule 

902(c)(3) as proposed and re-proposed. 

The Commission calls particular 

attention to the relationship between 

Rules 901(i), 901(e), and 902. Rule 

901(i) requires reporting of historical 

security-based swaps to a registered 

SDR. Rule 902(c)(3) provides that the 

initial transaction reported pursuant to 

Rule 901(i) shall not be publicly 

disseminated. A historical securitybased swap might remain open after 

market participants are required to 

begin complying with the requirement 

in Rule 901(e) to report life cycle 

events.399 If a life cycle event of a 

historical security-based swap relating 

to any of the primary trade 

information—i.e., the data elements 

enumerated in Rule 901(c)—occurs after 

public dissemination is required for 

security-based swaps in a particular 

asset class, Rule 902(a) would require 

the registered SDR to publicly 

disseminate a report of that life cycle 

event, plus any condition flags required 

by the registered SDR’s policies and 

procedures under Rule 907. In other 

words, Rule 902(c)(3)’s exclusion from 

public dissemination for historical 

security-based swaps applies only to the 

initial transaction, not to any life cycle 

event of that historical security-based 

swap relating to the primary trade 

information that occurs after public 

dissemination in that asset class is 

required. Therefore, life cycle events 

relating to the primary trade information 

of historical security-based swaps must, 

after the public dissemination 

requirement goes into effect, be publicly 

disseminated.400

At the same time, correcting an error 

in the Rule 901(c) information relating 

to a historical security-based swap 

would not trigger public dissemination 

of a corrected report. Rule 905 applies 

to all information reported pursuant to 

Regulation SBSR, including historical 

security-based swaps that must be 

reported pursuant to Rule 901(i). Rule 

905(b)(2) requires the registered SDR to 

publicly disseminate a correction of a 

transaction only if the corrected 

information falls within Rule 901(c) and 

the transaction previously was subject 

to a public dissemination requirement. 

Historical security-based swaps are not 

subject to the public dissemination 

requirement; therefore, corrections to 

Rule 901(c) information in historical 

security-based swaps are not subject to 

public dissemination either. 

Rule 902(a), as proposed, would have 

provided that a registered SDR shall 

publicly disseminate a transaction 

report of a security-based swap reported 

to it, ‘‘[e]xcept in the case of a block 

trade.’’ Rule 902(a), as re-proposed, 

would have retained the exception for 

block trades and added a second 

exception, for ‘‘a trade that is required 

to be reported but not publicly 

disseminated.’’ 401 In final Regulation 

SBSR, the Commission is revising Rules 

902(a) and 902(c) to consolidate into a 

single rule—Rule 902(c)—all the types 

of security-based swaps and the kinds of 

information that a registered SDR is 

prohibited from disseminating. 

Therefore, Rule 902(a), as adopted, now 

provides that a registered SDR shall 

publicly disseminate a transaction 

report of a security-based swap ‘‘except 

as provided in paragraph (c) of this 

section.’’ 

In addition to adopting subparagraphs 

(1), (2), and (3) of Rule 902(c), as 

proposed and re-proposed, the 

Commission is modifying Rule 902(c) to 

expand the number of exclusions from 

public dissemination from three to 

seven. First, the Commission is adding 

Rule 902(c)(4), which prohibits a 

registered SDR from disseminating a 

non-mandatory report, and is adding a 

new Rule 900(r) to define ‘‘nonmandatory report’’ as any information 

provided to a registered SDR by or on 

behalf of a counterparty other than as 

required by Regulation SBSR. Situations 

may arise when the same transaction 

may be reported to two separate 

registered SDRs. This could happen, for 

example, if the reporting side reports a 

transaction to one registered SDR, as 

required by Rule 901, but the other side 

elects to submit the same transaction 

information to a second registered SDR. 

The Commission has determined that 

any non-mandatory report should be 

excluded from public dissemination 

because the mandatory report of that 

transaction will have already been 

disseminated, and the Commission 

seeks to avoid distorting the market by 

having two public reports issued for the 

same transaction.402

Second, the Commission is adding 

Rule 902(c)(5), which prohibits a 

registered SDR from disseminating any 

information regarding a security-based 

swap that is subject to regulatory 

reporting but not public dissemination 

under final Rule 908(a) of Regulation 

SBSR.403 Rule 902(a), as re-proposed, 

would have prohibited a registered SDR 

from publicly disseminating 

information concerning a cross-border 

security-based swap that is required to 

be reported but not publicly 

disseminated. The Commission received 

no comments on this specific provision, 

and is relocating it from re-proposed 

Rule 902(a) to final Rule 902(c)(5). Rule 

902(c)(5), as adopted, will prohibit a 

registered SDR from disseminating 

‘‘[a]ny information regarding a securitybased swap that is required to be 

reported pursuant to §§ 242.901 and 

242.908(a)(1) but is not required to be 

publicly disseminated pursuant to 

§ 242.908(a)(2).’’ 

Third, the Commission is adding Rule 

902(c)(6), which prohibits a registered 

SDR from disseminating any 

information regarding certain types of 

clearing transactions.404 Regulation 

SBSR, as proposed and re-proposed, did 

not provide any exemption from public 

dissemination for clearing transactions. 

However, the Commission has 

determined that publicly disseminating 

reports of clearing transactions that arise 

from the acceptance of a security-based 

swap for clearing by a registered 

clearing agency or that result from 

netting other clearing transactions 

would be unlikely to further Title VII’s 

transparency objectives. Any securitybased swap transaction, such as an 

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14610 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

405The size in which a transaction is executed 

could significantly affect the price of the securitybased swap. Thus, all other things being equal, the 

price negotiated for a large trade could be 

significantly different from the price negotiated for 

a small trade. Publicly disseminating the prices of 

small trades that are allocated from the bunched 

order execution might not provide any price 

discovery value for another small trade if it were 

to be negotiated individually. Nor does the 

Commission believe that publicly disseminating the 

prices and sizes of the allocations would provide 

any more price discovery than a single print of the 

bunched order execution, because the allocations 

result from a single negotiation for the bunched 

order size. However, if ‘‘child’’ transactions of a 

larger ‘‘parent’’ transaction are priced differently 

from the parent transaction, these child transactions 

would not fall within the exclusion in Rule 

902(c)(7). 

406See infra Section IX (discussing requirements 

for public dissemination of inter-affiliate securitybased swaps). 

407See MFA I at 2–3 (‘‘we are concerned that 

post-allocation [security-based swap] data, if 

publicly disseminated, will allow any of the fund’s 

counterparties to identify transactions that the fund 

executed with others. Counterparties are often 

aware of an investment manager’s standard fund 

allocation methodology and therefore, reporting 

transactions at the allocated level with trade 

execution time will make evident an allocation 

scheme that other participants can easily associate 

with a particular investment manager’’). 

408Ordinarily, the termination of a security-based 

swap that has been publicly disseminated would 

itself be an event that must be publicly 

disseminated. See Rule 902(a) (generally providing 

that a registered SDR shall publicly disseminate a 

transaction report of a security-based swap ‘‘or a life 

cycle event or adjustment due to a life cycle event’’ 

immediately upon receiving an appropriate 

transaction report). 

409For the reasons noted above, the Commission 

believes that it is necessary or appropriate in the 

public interest, and is consistent with the 

protection of investors, to exclude these types of 

information from public dissemination under 

Regulation SBSR. 

410Rule 907(a)(4) provides registered SDRs with 

some discretion in determining how a reporting 

side must flag reported data that will be excluded 

from public dissemination. See infra Section VI(G). 

411See Barclays Letter at 3; Cleary II at 6, 16 

(stating that public reporting of customized 

security-based swaps would not aid price 

discovery, and that the Commission should require 

the public dissemination of key terms of a 

customized transaction and an indication that it is 

customized); DTCC II at 9 (noting the difficulty of 

comparing price data across transactions that are 

non-standard and have different terms); ISDA/

SIFMA I at 11 (stating that customized securitybased swaps provide little to no price discovery 

value and should not be subject to public 

dissemination); MFA I at 3 (arguing that Congress 

did not intend to require public dissemination of 

comprehensive information for customized 

security-based swaps and that price discovery 

serves a purpose only if there is a broad market for 

the relevant transaction, which is not the case with 

customized security-based swaps). 

412See Better Markets I at 7; Better Markets II at 

3 (stating that many transactions characterized as 

too complex for reporting or dissemination are, in 

fact, composites of more straightforward 

transactions, and that there should be disclosure of 

information concerning these components to 

provide meaningful transparency and to prevent 

market participants from avoiding disclosure by 

creating composite transactions). 

413 15 U.S.C. 13(m)(1)(C)(iii). 

alpha, that precedes a clearing 

transaction must be publicly 

disseminated. Clearing transactions, 

such as the beta and the gamma, that 

result from clearing a security-based 

swap or from netting clearing 

transactions together do not have price 

discovery value because they are 

mechanical steps taken pursuant to the 

rules of the clearing agency. Therefore, 

the Commission believes that nondissemination of these clearing 

transactions is appropriate in the public 

interest and consistent with the 

protection of investors. 

Fourth, the Commission is adding 

Rule 902(c)(7), which prohibits a 

registered SDR from disseminating any 

information regarding the allocation of a 

security-based swap. As discussed in 

more detail in Section VIII, infra, the 

Commission has determined that, to 

comply with this prohibition, a 

registered SDR will satisfy its public 

dissemination obligations for a securitybased swap involving allocation by 

disseminating only the aggregate 

notional amount of the executed 

bunched order that is subsequently 

allocated. The Commission believes that 

this is an appropriate means of public 

dissemination, because the price and 

size of the executed bunched order were 

negotiated as if the transaction were a 

single large trade, rather than as 

individual smaller trades. In the 

Commission’s view, public 

dissemination of the allocations would 

not enhance price discovery because the 

allocations are not individually 

negotiated.405 Furthermore, although 

the Commission has taken the approach 

in other situations of requiring public 

dissemination of the transaction but 

with a condition flag to explain the 

special circumstances related to the 

transaction,406 for the reasons stated 

above, the Commission does not believe 

that this approach is appropriate here. 

Rule 902(c)(7)’s exception to public 

dissemination for the individual 

allocations also is designed to address 

commenter concerns that publicly 

disseminating the sizes of individual 

allocations could reveal the identities or 

business strategies of fund groups that 

execute trades on behalf of multiple 

client funds.407 For similar reasons, 

Rule 902(c)(7), as adopted, prohibits a 

registered SDR from publicly 

disseminating the fact that an initial 

security-based swap has been 

terminated and replaced with several 

smaller security-based swaps as part of 

the allocation process.408 The 

Commission believes that any marginal 

benefit of publicly disseminating this 

type of termination event would not be 

justified by the potential risk to the 

identity or business strategies of fund 

groups that execute trades on behalf of 

multiple client funds.409

Registered SDRs will need to rely on 

the information provided by reporting 

sides to determine whether Rule 902(c) 

excludes a particular report from public 

dissemination. As described in more 

detail in Section VI(G), Rule 

907(a)(4)(iv) requires a registered SDR, 

among other things, to establish and 

maintain written policies and 

procedures directing its participants to 

apply to the transaction report a 

condition flag designated by the 

registered SDR to indicate when the 

report of a transaction covered by Rule 

902(c) should not be publicly 

disseminated.410 A registered SDR 

would not be liable for a violation of 

Rule 902(c) if it disseminated a report of 

a transaction that fell within Rule 902(c) 

if the reporting side for that transaction 

failed to appropriately flag the 

transaction as required by Rule 

907(a)(4). 

2. Other Exclusions From Public 

Dissemination Sought by Commenters 

Several commenters advanced 

arguments against public dissemination 

of various types of security-based 

swaps. The Commission notes at the 

outset that the statutory provisions that 

require public dissemination of 

security-based swap transactions state 

that all security-based swaps shall be 

publicly disseminated. 

a. Customized Security-Based Swaps 

Several commenters expressed the 

view that transaction information 

regarding customized security-based 

swaps should not be publicly 

disseminated because doing so would 

not enhance price discovery, would be 

of limited use to the public, or could be 

confusing or misleading to market 

observers.411 However, one commenter 

urged the Commission to require public 

dissemination of all of the information 

necessary to calculate the price of a 

customized security-based swap.412

Section 13(m)(1)(C) of the Exchange 

Act413 authorizes the Commission to 

provide by rule for the public 

availability of security-based swap 

transaction, volume, and pricing data 

for four types of security-based swaps, 

which together comprise the complete 

universe of potential security-based 

swaps. With respect to ‘‘security-based 

swaps that are not cleared at a registered 

clearing agency and which are reported 

to a security-based swap data 

repository’’—which category would 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14611 

414See supra note 411. 

415See LCH.Clearnet Letter at 2 (explaining that, 

to manage a defaulting clearing member’s portfolio, 

a clearing agency would rely on its non-defaulting 

members to provide liquidity for a small number of 

large transactions that would be required to hedge 

the defaulting member’s portfolio, and the ability of 

non-defaulting members to provide liquidity for 

these transactions would be impaired if the 

transactions were reported publicly before the 

members had an opportunity to mitigate the risks 

of the transactions). 

416See Rule 901(j); Section VII(B), infra. If 24 

hours after the time of execution would fall on a 

day that is not a business day, reporting would be 

required by the same time on the next day that is 

a business day. 

417See Barclays Letter at 2–3; Cleary II at 13–14; 

ISDA/SIFMA I at 13. 418 ISDA/SIFMA I at 13. 419See Cleary II at 13–14. The primary concern 

of this commenter with respect to equity TRSs was 

the proposed exclusion of equity TRSs from the 

reporting delay for block trades. See id. The 

Commission expects to consider this comment in 

connection with its consideration of rules for block 

trades. 420See Barclays Letter at 3. The commenter also 

expressed more general concerns regarding the 

potential consequences of reduced liquidity in the 

equity TRS market, noting that if liquidity in the 

equity TRS market is impaired, liquidity takers 

could migrate away from a diversified universe of 

security-based swap counterparties to a more 

concentrated group of prime brokers, which could 

increase systemic risk by concentrating large risk 

positions with a small number of prime brokers. See 

Barclays Letter at 8. 

based swaps—Section 13(m)(1)(C) 

provides that ‘‘the Commission shall 

require real-time public reporting for 

such transactions, in a manner that does 

not disclose the business transactions 

and market positions of any person’’ 

(emphasis added). 

The Commission does not believe that 

the commenters who argued against 

disseminating reports of bespoke 

transactions have provided sufficient 

justification for an exception to public 

dissemination. To the contrary, the 

Commission believes that dissemination 

of transaction reports of customized 

security-based swaps could still provide 

useful information to market observers. 

Although all of the material elements of 

a bespoke transaction necessary to 

understand the market value might not 

be publicly disseminated, it is an 

overstatement to argue categorically that 

bespoke transactions would have no 

price discovery value, as certain 

commenters suggested.414 The 

disseminated price could, for example, 

still have an anchoring effect on price 

expectations for future negotiations in 

similar or related products, even in 

thinly-traded markets. Furthermore, 

even if it is difficult to compare price 

data across customized transactions, by 

disseminating reports of all bespoke 

transactions, market observers can 

understand the relative number and 

aggregate notional amounts of 

transactions in bespoke products versus 

standardized products. 

The Commission recognizes, however, 

that market observers should have 

information that permits them to readily 

distinguish transactions in standardized 

products from transactions in bespoke 

security-based swaps. Accordingly, Rule 

901(c)(1)(v) provides that, when 

reporting a transaction to a registered 

SDR, the reporting side must attach a 

flag to indicate whether a security-based 

swap is customized to the extent that 

the other information provided pursuant 

to Rule 901(c) does not provide all of 

the material information necessary to 

identify the security-based swap or does 

not contain the data elements necessary 

to calculate the price of the securitybased swap. In addition, final Rule 

907(a)(4) requires a registered SDR to 

establish policies and procedures 

concerning the use of appropriate flags 

on disseminated transaction reports that 

are designed to assist market observers 

in interpreting the relevance of a 

transaction. 

b. Inter-Affiliate Transactions 

Several commenters argued that the 

Commission should not require public 

dissemination of inter-affiliate securitybased swaps. Issues relating to 

regulatory reporting and public 

dissemination of inter-affiliate 

transactions are discussed in Section IX, 

infra. 

c. Security-Based Swaps Entered Into in 

Connection With a Clearing Member’s 

Default 

One commenter argued that reports of 

security-based swaps effected in 

connection with a clearing agency’s 

default management processes following 

the default of a clearing member should 

not be publicly disseminated in real 

time.415 This commenter believed that 

public dissemination of these 

transactions could undermine a clearing 

agency’s default management processes 

and have a negative effect on market 

stability, particularly because a default 

likely would occur during stressed 

market conditions. Accordingly, the 

commenter recommended that reports 

of security-based swaps entered into in 

connection with a clearing agency’s 

default management processes be made 

available to the Commission in real time 

but not publicly disseminated until after 

the default management processes have 

been completed, as the Commission 

determines appropriate. 

The Commission believes that, at 

present, the commenter’s concerns are 

addressed by the Commission’s 

approach for the interim phase of 

Regulation SBSR, which offers reporting 

sides up to 24 hours after the time of 

execution to report a security-based 

swap.416 The Commission believes that 

this approach strikes an appropriate 

balance between promoting post-trade 

transparency and facilitating the default 

management process, and is broadly 

consistent with the commenter’s 

suggestion to allow for public 

dissemination after the default 

management process has been 

completed. Further, the commenter 

suggested that such transactions 

typically occur in large size; thus, 

transactions entered into by surviving 

clearing members might qualify for any 

block exception, if the Commission 

were to promulgate such an exception 

in the future. The Commission intends 

to revisit the commenter’s concern in 

connection with its consideration of 

block thresholds and other potential 

rules relating to block trades. 

d. Total Return Security-Based Swaps 

Three commenters argued that there 

should be no public dissemination of 

total return security-based swaps 

(‘‘TRSs’’), which offer risks and returns 

proportional to a position in a security, 

securities, or loan(s) on which a TRS is 

based.417 One of these commenters 

argued that ‘‘TRS pricing information is 

of no value to the market because it is 

driven by many considerations 

including the funding levels of the 

counterparties to the TRS and therefore 

may not provide information about the 

underlying asset for the TRS.’’ 418

Another commenter suggested that the 

fact that TRSs are hedged in the cash 

market, where trades are publicly 

disseminated, would mitigate the 

incremental price discovery benefit of 

public dissemination of the TRSs.419

Similarly, a third commenter argued 

that requiring public dissemination of 

an equity TRS transaction would not 

enhance transparency, and could 

confuse market participants, because the 

hedging transactions are already 

publicly disseminated.420

The Commission has carefully 

considered these comments but believes 

that these commenters have not 

provided sufficient justification to 

support a blanket exclusion from public 

dissemination for TRSs. The 

Commission believes, rather, that 

market observers should be given an 

opportunity to decide how to interpret 

the relevance of a disseminated trade to 

the state of the market, and reiterates 

that relevant statutory provisions state 

that all security-based swaps shall be 

publicly disseminated. These statutory 

provisions do not by their terms 

distinguish such public dissemination 

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14612 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

421See Barclays Letter at 3. 

422For example, a trade in a listed single-stock 

option is frequently hedged by a trade in the 

underlying stock. Each trade is disseminated via the 

relevant consolidated tape. 

423For example, a difference in prices between an 

equity TRS and the underlying securities might 

suggest mispricing of either leg of the trade, 

signaling to market participants the existence of 

economic rents they could subsequently compete 

away. Additionally, price discrepancies also could 

be related to fees or liquidity premiums charged by 

equity TRS dealers. See infra Section XXII(B)(2)(a). 

424See Barclays Letter at 8. 

425See ISDA/SIFMA I at 12. See also DTCC II at 

20 (stating, with respect to portfolio compression 

activities, that ‘‘an exact pricing at individual trade 

level between parties is not meaningful and, 

therefore, these transactions should not be 

disseminated’’); ISDA IV at 13. 

426See ISDA I at 4–5. 

427See Bachus/Lucas Letter at 2; ISDA IV at 14; 

UBS Letter at 1. These comments also are discussed 

in Section VII(B) infra. 

428UBS Letter at 1, note 5. 

429See Bachus/Lucas Letter at 2. 

430See ISDA IV at 14 (expressing concern that the 

combination of name-attributed runs and a rapidly 

disseminated set of post-trade information would 

make it relatively easy for many participants to 

reconstruct the identity of parties to a particular 

transaction, which may reduce dealers’ willingness 

to disseminate pre-trade price information in the 

form of runs, thereby reducing pre-trade 

transparency). 

431See id. 

based on particular characteristics of a 

security-based swap. 

The Commission also has considered 

the argument advanced by one of the 

commenters that requiring 

instantaneous public dissemination of 

an equity TRS transaction could confuse 

market participants, because the 

hedging transactions are already 

publicly disseminated.421 The 

Commission disagrees that 

dissemination of both transactions (i.e., 

the initial transaction and the hedge) 

would cause confusion. In other 

securities markets, public dissemination 

of initial transactions and their hedges 

occur on a regular basis.422 Valuable 

information could be obtained by 

observing whether transactions in 

related products executed close in time 

have the same or different prices.423 The 

commenter who expressed concerns 

about potential negative consequences 

of reduced liquidity in the equity TRS 

market provided no evidence to support 

its claim.424

e. Transactions Resulting From Portfolio 

Compression 

One group of commenters argued that 

transactions resulting from portfolio 

compression exercises do not reflect 

trading activity, contain no market 

information, and thus should be 

excluded from public dissemination.425

One member of that group requested 

clarification that only trades 

representing the end result of a netting 

or compression would need to be 

reported. This commenter expressed the 

view that publicly disseminating 

original transactions as well as the 

transactions that result from netting or 

compression would result in doublecounting and could present a distorted 

view of the market.426

The Commission recognizes that 

portfolio compression is designed to 

mitigate risk between counterparties by 

reducing gross exposures, and any new 

security-based swaps executed as a 

result reflect existing net exposures and 

might not afford market participants an 

opportunity to negotiate new terms. 

Nevertheless, there may be some value 

in allowing market observers to see how 

often portfolio compressions occur and 

how much net exposure is left after 

much of the gross exposure is 

terminated. Furthermore, it is possible 

that new positions arising from a 

compression exercise could be repriced, 

and thus offer new and useful pricing 

information to market observers. 

Therefore, the Commission is not 

convinced that there would be so little 

value in disseminating such 

transactions that they all should be 

excluded from public dissemination, 

even though the original transactions 

that are netted or compressed may 

previously have been publicly 

disseminated. With respect to the 

commenter’s concern regarding doublecounting, the Commission notes that 

Rule 907(a)(4) requires a registered SDR 

to have policies and procedures for 

flagging special circumstances 

surrounding certain transactions, which 

could include transactions resulting 

from portfolio compression. The 

Commission believes that market 

observers should have the ability to 

assess reports of transactions resulting 

from portfolio compressions, and that a 

condition flag identifying a transaction 

as the result of a portfolio compression 

exercise would help to avoid doublecounting. 

f. Thinly Traded Products 

Three commenters expressed concern 

about the potential impact of real-time 

public dissemination on thinly traded 

products.427 One of these commenters 

suggested that ‘‘security-based swaps 

traded by fewer than ten market makers 

per month should be treated as illiquid 

and subject to public reporting only on 

a weekly basis.’’ 428 The Commission 

disagrees with this suggestion. In other 

classes of securities—e.g., listed equity 

securities, OTC equity securities, listed 

options, corporate bonds, municipal 

bonds—all transactions are 

disseminated in real time, and there is 

no delayed reporting for products that 

have only a limited number of market 

makers. The Commission is not aware of 

characteristics of the security-based 

swap market that are sufficiently 

different from those other markets to 

warrant delayed reporting because of 

the number of market makers. 

Furthermore, given the high degree of 

concentration in the U.S. security-based 

swap market, many products have fewer 

than ten market makers. Thus, the 

commenter’s suggestion—if accepted by 

the Commission—could result in 

delayed reporting for a substantial 

percentage of security-based swap 

transactions, which would run counter 

to Title VII’s goal of having real-time 

public dissemination for all securitybased swaps (except for block trades). 

Finally, as noted above, the Title VII 

provisions that mandate public 

dissemination on a real-time basis do 

not make any exception for securitybased swaps based on the number of 

market makers. 

Another commenter expressed 

concern that mandating real-time 

reporting of thinly-traded products and 

illiquid markets could increase the price 

of entering into a derivatives contract to 

hedge risk by facilitating speculative 

front-running.429 Another commenter 

expressed concern about the impact of 

real-time post-trade transparency for 

illiquid security-based swaps on pretrade transparency that currently exists 

in the form of indicative prices provided 

by dealers to their clients (known as 

‘‘runs’’).430 This commenter requested 

that the Commission provide illiquid 

security-based swaps with an exception 

from real-time reporting and instead 

allow for delays roughly commensurate 

with the trading frequency of the 

security-based swap.431 Under the 

adopted rules, counterparties generally 

will have up to 24 hours after the time 

of execution to report security-based 

swap transactions. This reporting 

timeframe is designed, in part, to 

minimize the potential for market 

disruption resulting from public 

dissemination of any security-based 

swap transaction during the interim 

phase of Regulation SBSR. The 

Commission anticipates that, during the 

interim period, it will collect and 

analyze data concerning the sizes of 

transactions that potentially affect 

liquidity in different segments of the 

market in connection with considering 

block thresholds. 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14613 

432The only difference between Rule 902(b) as 

proposed and as re-proposed was that the term 

‘‘reporting party’’ was changed to ‘‘reporting side.’’ 

433See Markit II at 4 (stating that if SB SEFs were 

permitted to disseminate data elements of a 

security-based swap transaction, confusion and data 

fragmentation would inevitably result, which 

would ultimately undermine the goal of increased 

transparency); Barnard I at 4 (stating that market 

participants should be prohibited from distributing 

their market data prior to the dissemination of that 

data by a registered SDR to prevent the 

development of a two-tier market); ISDA IV at 17 

(stating that ‘‘it is unclear why any person should 

be allowed to make the data available to another 

market data source ahead of the time that [an SDR] 

is allowed to publicly disseminate such 

transaction,’’ and recommending that proposed 

Rule 902(d) be revised to refer only to the time that 

an SDR disseminates a report of the security-based 

swap). 

434See GFI Letter at 2; SDMA II at 4; WMBAA 

Letter at 8–9. 

435See GFI Letter at 3 (‘‘A typical workup 

transaction begins when two market participants 

agree to transact at a certain price and quantity. The 

transaction does not necessarily end there, 

however, and the two participants then have the 

opportunity to transact further volume at the 

already-established price. Thereafter, other market 

participants may join the trade and transact with 

either the original counterparties to the trade or 

with other firms if they agree to trade further 

volume at the established price’’); SDMA II at 3 

(‘‘Trade work ups are a common practice in which 

the broker looks for additional trading interest at 

the same time a trade is occurring—or ‘‘flashing’’ 

on the screen—in the same security at the same 

price. The ability to view the price of a trade as it 

is occurring is critical to broker’s ability to locate 

additional trading interest. The immediate flash to 

the marketplace increases the probability that 

additional buyers and sellers, of smaller or larger 

size, will trade the same security at the same time 

and price’’); WMBAA II at 3 (‘‘Work-up enables 

traders to assess the markets in real-time and make 

real-time decisions on trading activity, without the 

fear of moving the market one way or another’’). 

436See GFI Letter at 3; SDMA II at 3 (if ‘‘the SB 

SEF is prohibited from ‘flashing’ the price of a trade 

as it occurs and the brokers must wait until after 

the SB SDR has disclosed the price, the broker’s 

window of opportunity to locate additional trading 

interest will close’’); WMBAA II at 3. 

437See GFI Letter at 3. 

E. Dissemination of Block 

Transactions—Rule 902(b) 

Rule 902(b), as proposed and reproposed, would have required a 

registered SDR to publicly disseminate 

a transaction report for a block trade 

(except for the notional amount of the 

transaction) immediately upon receipt 

of the information about the block trade 

from the reporting party, along with the 

transaction ID and an indicator that the 

report represented a block trade. Rule 

902(b) would further have required the 

registered SDR to disseminate a 

complete transaction report for the 

block trade, including the full notional 

amount of the transaction, within 

specified timeframes ranging from eight 

to 26 hours after execution, depending 

on the time when the security-based 

swap was executed. Thus, under Rule 

902(b), as proposed and re-proposed, 

market participants would learn the 

price of a security-based swap block 

trade in real time, and would learn the 

full notional amount of the transaction 

on a delayed basis.432

For the reasons discussed in detail in 

Section VII(B), infra, the Commission is 

not adopting Rule 902(b). 

F. The Embargo Rule—Rule 902(d) 

Rule 902(d), as proposed, would have 

provided that ‘‘[n]o person other than a 

registered security-based swap data 

repository shall make available to one or 

more persons (other than a 

counterparty) transaction information 

relating to a security-based swap before 

the earlier of 15 minutes after the time 

of execution of the security-based swap; 

or the time that a registered securitybased swap data repository publicly 

disseminates a report of that securitybased swap.’’ In other words, the 

information about the security-based 

swap transaction would be 

‘‘embargoed’’ until a registered SDR has 

in fact publicly disseminated a report of 

the transaction (or until such time as a 

transaction should have been publicly 

disseminated). Rule 902(d) is also 

referred to as the ‘‘Embargo Rule.’’ Rule 

902(d) was not revised as part of the 

Cross-Border Proposing Release, and 

was re-proposed in exactly the same 

form as had been initially proposed. 

Under Regulation SBSR, only 

registered SDRs must publicly 

disseminate security-based swap 

transaction data to the public. However, 

other persons with knowledge of a 

transaction—the counterparties 

themselves or the venue on which a 

transaction is executed—also might 

wish to disclose information about the 

transaction to third parties (whether for 

commercial benefit or otherwise). An 

unfair competitive advantage could 

result if some market participants could 

obtain security-based swap transaction 

information before others. Regulation 

SBSR, by carrying out the Congressional 

mandate to publicly disseminate all 

security-based swap transactions, is 

intended to reduce information 

asymmetries in the security-based swap 

market and to provide all market 

participants with better information— 

and better access to information—to 

make investment decisions. Therefore, 

the Commission proposed Rule 902(d), 

which would have imposed a partial 

and temporary restriction on sources of 

security-based swap transaction 

information other than registered SDRs. 

Three commenters supported the 

view that market participants (including 

SB SEFs) should not be permitted to 

distribute their security-based swap 

transaction information before such 

information is disseminated by a 

registered SDR.433 However, three other 

commenters strongly opposed the 

proposed Embargo Rule.434 Other 

commenters expressed a concern that 

the proposed Embargo Rule would make 

it more difficult for SB SEFs to offer 

‘‘work-up’’ 435 functionality.436 This 

‘‘work-up’’ process, according to one of 

the commenters, is designed to foster 

liquidity in the security-based swap 

market and to facilitate the execution of 

larger-sized transactions.437

The Commission has carefully 

reviewed the comments received and 

has determined to revise the Embargo 

Rule to provide that the act of sending 

a report to a registered SDR—not the act 

of the registered SDR actually 

disseminating it—releases the embargo. 

Rule 902(d), as adopted, provides: ‘‘No 

person shall make available to one or 

more persons (other than a counterparty 

or a post-trade processor) transaction 

information relating to a security-based 

swap before the primary trade 

information about the security-based 

swap is sent to a registered securitybased swap data repository’’ (emphasis 

added). 

The Commission agrees with the 

majority of commenters that it would be 

beneficial for security-based swap 

market participants to have the ability to 

disseminate and receive transaction data 

without being constrained by the time 

when a registered SDR disseminates the 

transaction information. The 

Commission understands that, in some 

cases, entities that are likely to become 

SB SEFs may want to broadcast trades 

executed electronically across their 

platforms to all subscribers, because 

knowing that two counterparties have 

executed a trade at a particular price 

can, in some cases, catalyze trading by 

other counterparties at the same price. 

Allowing dissemination of transaction 

information to occur simultaneously 

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14614 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

438See Barnard I at 4. 

439See WMBAA II at 8; Tradeweb Letter II at 6. 

440WMBAA II at 8. 

441Tradeweb Letter II at 6. 

442SDR Adopting Release, Section VI(D)(3)(c)(iii) 

(citing difficulties associated with determining 

ownership of data as one of several reasons for not 

adopting, at this time, a rule prohibiting an SDR 

and its affiliates from using, for commercial 

purposes, security-based swap data that the SDR 

maintains without obtaining express written 

consent from both counterparties to the securitybased swap transaction or the reporting party). See 

also Securities Exchange Act Release 63825 

(February 2, 2011), 76 FR 10948 (February 28, 2011) 

at 10961–7 (‘‘SB SEF Proposing Release’’) 

(discussing the proposed imposition of certain 

requirements on SB SEFs with respect to services 

provided and fees charged). 

443See SDR Adopting Release, Section III(D) 

(discussing business models of SDRs). 

444See BlackRock Letter at 9; ISDA IV at 17 

(recommending a carve-out from Rule 902(d) for 

third-party service providers that one or both 

counterparties use for execution, confirmation, 

trade reporting, portfolio reconciliation and other 

services that do not include the public 

dissemination of security-based swap data). 

445See 75 FR 75211–12. 446 ISDA IV at 17. 

447See Rule 900(x) (defining ‘‘post-trade 

processor’’ as ‘‘any person that provides 

affirmation, confirmation, matching, reporting, or 

clearing services for a security-based swap 

transaction’’). 

with transmission to a registered SDR 

will allow SB SEF participants to see 

last-sale information for the particular 

markets on which they are trading, 

which could facilitate the work-up 

process and thus enhance price 

discovery. 

One commenter expressed concern, 

however, that permitting the 

distribution of market data prior to 

dissemination of the information by a 

registered SDR could result in the 

development of a two-tier market.438

Although the Commission generally 

shares the commenter’s concern about 

information asymmetries, the 

Commission does not believe that Rule 

902(d), as adopted, raises that concern. 

Certain market participants might learn 

of a completed transaction before others 

who rely on public dissemination 

through a registered SDR. However, the 

time lag is likely to be very small 

because Rule 902(a) requires a registered 

SDR to publicly disseminate a 

transaction report ‘‘immediately upon 

receipt of information about the 

security-based swap.’’ The Commission 

understands that, under the current 

market structure, trading in securitybased swaps occurs for the most part 

manually (rather than through 

algorithmic means) and infrequently. 

Thus, obtaining knowledge of a 

completed transaction through private 

means a short time before others learn 

of the transaction from a registered SDR 

is unlikely, for the foreseeable future, to 

provide a significant advantage. 

Furthermore, as discussed above 

regarding the ‘‘work-up’’ process, the 

most likely recipients of direct 

information about the completed 

transaction are other participants of the 

SB SEF. Thus, an important segment of 

the market—i.e., competitors of the 

counterparties to the original 

transaction in the work up who are most 

likely to have an interest in trading the 

same or similar products—are still 

benefitting from post-trade 

transparency, even if it comes via the 

work-up process on the SB SEF rather 

than through a registered SDR. 

Two commenters raised arguments 

related to the ownership of the securitybased swap transaction data and were 

concerned that the proposed Embargo 

Rule would place improper restrictions 

on the use of security-based swap 

market data.439 One of these 

commenters recommended that the 

Commission revise the Embargo Rule 

‘‘in such a way that . . . the securitybased swap counterparties and SB SEFs 

[would] continue to have the ability to 

market and commercialize their own 

proprietary data.’’ 440 The other 

commenter recommended that the 

Commission make clear that nothing in 

the final rules is intended ‘‘to impose or 

imply any limit on the ability of market 

participants . . . to use and/or 

commercialize data they create or 

receive in connection with the 

execution or reporting of swap data.’’ 441

The Commission declines to revise 

Rule 902(d) in the manner suggested by 

these commenters. As the Commission 

notes in the SDR Adopting Release, ‘‘the 

issue of who owns the data is not 

particularly clear cut, particularly when 

value is added to it.’’ 442 If the 

Commission were to revise the rule in 

the manner suggested by commenters, it 

would seem to make a presumption 

about who owns the data, which may be 

viewed as the Commission favoring one 

business model over another. As further 

noted in the SDR Adopting Release, the 

Commission does not support any 

particular business model 443 and, 

therefore, does not believe it is 

necessary or appropriate to revise the 

rule as suggested by these commenters. 

As originally proposed, the Embargo 

Rule had an exception for disseminating 

the transaction information to 

counterparties, as the counterparties to 

the transaction should be allowed to 

receive information about their own 

security-based swap transactions 

irrespective of whether such 

information has been reported to or 

disseminated by a registered SDR. 

However, two commenters noted that 

SB SEFs also will need to provide 

transaction data to entities involved in 

post-trade processing, irrespective of 

whether the embargo has been lifted.444

The Commission recognizes that, after a 

trade is executed, there are certain 

entities that perform post-trade 

services—such as matching, 

confirmation, and reporting—that may 

need to receive the transaction 

information before it is sent to a 

registered SDR. For example, a third 

party could not act as agent in reporting 

a transaction to a registered SDR on 

behalf of a reporting side if it could not 

receive information about the executed 

transaction before it was submitted to 

the registered SDR. In the Regulation 

SBSR Proposing Release, the 

Commission stated that counterparties 

to a security-based swap could rely on 

agents to report security-based swap 

data on their behalf.445 Without an 

exception, such use of agents could be 

impeded, an action the Commission did 

not intend. Accordingly, the 

Commission is revising the Embargo 

Rule to add an explicit exception for 

‘‘post-trade processors.’’ The 

Commission is also adding a new 

paragraph (x) to final Rule 900, which 

defines ‘‘post-trade processor’’ as ‘‘any 

person that provides affirmation, 

confirmation, matching, reporting, or 

clearing services for a security-based 

swap transaction.’’ 

Finally, one commenter 

recommended a carve-out from Rule 

902(d) not only for counterparties, but 

also for their affiliates, ‘‘to allow for 

internal communication of SBS 

data.’’ 446 Rule 902(d)—as proposed, reproposed, and adopted—includes a 

carve-out for counterparties, which 

could include affiliates, to the extent 

that an affiliate is an indirect 

counterparty as defined in Rule 900. 

The Commission continues to believe 

that it is necessary for counterparties to 

know when they have executed a trade. 

The Commission further notes that Rule 

902(d), as adopted, contains an 

exception for post-trade processors,447

which could include post-trade 

processors that are affiliates of the 

counterparties. Thus, Rule 902(d) would 

not prohibit a counterparty to a securitybased swap transaction from providing 

the transaction information to an 

affiliate before providing it to a 

registered SDR, if that affiliate will serve 

as the counterparty’s agent for reporting 

the transaction to the registered SDR. 

However, Rule 902—as proposed, reproposed, and adopted—includes no 

broad carve-out for all affiliates of the 

counterparties. The Commission does 

not see a basis for allowing such a broad 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14615 

448The Commission changed the words 

‘‘reporting parties’’ to ‘‘reporting sides’’ and 

‘‘depository’’ to ‘‘repository.’’ 449See Barnard I at 3. 450See MarkitSERV I at 10. 451See DTCC II at 20. 

452See supra Section II(B)(2)(b)(vi). 

453See infra Section XX(B). 

454This revision to Rule 907(a)(4) also removes 

the references to public dissemination of life cycle 

events that were proposed and re-proposed. These 

references have been relocated to final Rule 

907(a)(3). Rule 907(a)(3), as proposed and reproposed, addressed only the reporting and public 

dissemination of error reports. Life cycle events are 

similar to error reports in that they reflect new 

information that relates to a previously executed 

security-based swap. Therefore, Rule 907(a)(3), as 

adopted, now requires a registered SDR to have 

policies and procedures for ‘‘specifying procedures 

for reporting life cycle events and corrections to 

previously submitted information, making 

corresponding updates or corrections to transaction 

records, and applying an appropriate flag to the 

transaction report to indicate that the report is an 

error correction required to be disseminated by 

[Rule 905(b)(2)] or is a life cycle event, or any 

adjustment due to a life cycle event, required to be 

disseminated by [Rule 902(a)].’’ See infra Section 

XII(C). 

455See Barnard I at 3. 

456See MarkitSERV I at 10. 

457See Regulation SBSR Proposing Release, 75 FR 

75234–35. 

exception for all affiliates, which could 

undermine the purpose of Rule 902(d), 

as discussed above. 

G. Condition Flags—Rule 907(a)(4) 

Rule 907(a)(4), as originally proposed, 

would have required a registered SDR to 

establish and maintain written policies 

and procedures ‘‘describing how 

reporting parties shall report and, 

consistent with the enhancement of 

price discovery, how the registered 

security-based swap depository shall 

publicly disseminate, reports of, and 

adjustments due to, life cycle events; 

security-based swap transactions that do 

not involve an opportunity to negotiate 

any material terms, other than the 

counterparty; and any other securitybased swap transactions that, in the 

estimation of the registered securitybased swap data depository, do not 

accurately reflect the market.’’ The 

Commission re-proposed Rule 907(a)(4) 

in the Cross-Border Proposing Release 

with only minor technical revisions.448

One commenter expressed the view 

that a registered SDR should have the 

flexibility to determine and apply 

special indicators.449 Another 

commenter suggested that, to be 

meaningfully transparent, securitybased swap transaction data should 

include ‘‘condition flags’’ comparable to 

those used in the bond market.450 As 

discussed more fully below, the 

Commission agrees that such ‘‘condition 

flags’’ could provide additional 

transparency to the security-based swap 

market. The Commission believes that 

the condition flags that registered SDRs 

will develop pursuant to final Rule 

907(a)(4) could provide information 

similar to the information provided by 

the condition flags used in the bond 

market. The registered SDR’s condition 

flags could include, for example, flags 

indicating that a security-based swap 

was an inter-affiliate transaction or a 

transaction entered into as part of a 

trade compression. 

A third commenter suggested that a 

registered SDR should not have 

discretion to determine whether a 

particular transaction reflects the 

market, as the registered SDR may not 

have sufficient information to make 

such a determination.451 The 

Commission agrees with the commenter 

that a registered SDR may not have 

sufficient information to ascertain 

whether a particular transaction ‘‘do[es] 

not accurately reflect the market,’’ as 

would have been required under Rule 

907(a)(4), as originally proposed. 

Therefore, the Commission will not 

require the registered SDR to have 

policies and procedures for attaching an 

indicator that merely conveys that the 

transaction, in the estimation of the 

registered SDR, does not accurately 

reflect the market. 

Instead, the Commission believes that 

requiring the registered SDR to provide 

information about any special 

circumstances associated with a 

transaction report could help market 

observers better understand the report 

and enhance transparency. For example, 

Rule 901(c)(1)(v), as adopted, requires a 

reporting side to attach a flag if a 

security-based swap is customized to 

the extent that other information 

provided for the swap does not provide 

all of the material information necessary 

to identify the customized securitybased swap or does not contain the data 

elements necessary to calculate the 

price.452 In addition, Rule 905(b)(2), as 

adopted, requires a registered SDR that 

receives a correction to information that 

it previously disseminated publicly to 

publicly disseminate a corrected 

transaction report with an indication 

that the report relates to a previously 

disseminated transaction.453

The Commission, therefore, is 

adopting Rule 907(a)(4) with certain 

additional language to respond to the 

comments and to clarify how Rule 

907(a)(4) should apply in circumstances 

contemplated by but not fully addressed 

in the original proposal or the reproposal. The Commission has revised 

Rule 907(a)(4) as follows: New 

subparagraph (i) requires the registered 

SDR to have policies and procedures for 

‘‘identifying characteristic(s) of a 

security-based swap, or circumstances 

associated with the execution or 

reporting of the security-based swap, 

that could, in the fair and reasonable 

estimation of the registered securitybased swap data repository, cause a 

person without knowledge of these 

characteristic(s) or circumstances to 

receive a distorted view of the market.’’ 

This language retains the idea that the 

appropriate characteristics or 

circumstances remain ‘‘in the estimation 

of’’ the registered SDR, but requires the 

SDR’s exercise of this discretion to be 

‘‘fair and reasonable’’ to emphasize that 

the estimation should not result in flags 

that would not allow market observers 

to better understand the transaction 

reports that are publicly disseminated. 

Rule 907(a)(4)(i), as adopted, also 

widens the scope of transactions to 

which the provision applies.454 This 

provision grants a registered SDR the 

flexibility to determine which special 

circumstances require flags and to 

change that determination over time, if 

warranted.455 Subparagraph (ii) 

provides that the registered SDR’s 

policies and procedures must 

‘‘establish[ ] flags to denote such 

characteristic(s) or circumstance(s),’’ 

explicitly incorporating the concept of 

condition flags suggested by the 

commenter.456 Subparagraph (iii) 

requires policies and procedures 

‘‘directing participants to apply such 

flags, as appropriate, in their reports’’ to 

the registered SDR. Finally, 

subparagraph (iv) requires these policies 

and procedures to address, in part, 

‘‘applying such flags to disseminated 

reports to help to prevent a distorted 

view of the market.’’ 

The Commission also is adopting Rule 

907(a)(4) with certain additional 

language in subparagraph (iv) that 

clarifies the handling of security-based 

swap information that is required to be 

reported under Rule 901 but which a 

registered SDR is required by Rule 

902(c) not to publicly disseminate. As 

noted above, even in the initial 

proposal, the Commission contemplated 

that certain information would fall into 

this category.457 Rule 907(a), as 

originally proposed, would have 

required a registered SDR to establish 

and maintain policies and procedures 

that addressed, among other things, the 

public dissemination of security-based 

swap data. Carrying out that duty in a 

manner consistent with Rule 902—and, 

in particular, with Rule 902(c)—will 

necessarily require a registered SDR to 

differentiate reported information that is 

required to be publicly disseminated 

from reported information that is 

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14616 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

458One commenter noted its view that Rule 

907(a)(4), as proposed, seemed to delegate to the 

discretion of the SDR whether and how certain 

security-based swap activity would be publicly 

disseminated, and requested that the Commission 

clearly establish in Regulation SBSR that certain 

security-based swap activity is not subject to public 

dissemination. See ISDA IV at 13. The Commission 

believes that the rules as adopted do clearly 

establish what security-based swap activity is not 

subject to public dissemination. Rule 902(a), as 

adopted, requires the registered SDR to publicly 

disseminate a transaction report of a security-based 

swap, or a life cycle event or adjustment due to a 

life cycle event, immediately upon receipt of 

information about the security-based swap, except 

as provided in Rule 902(c). Rule 902(c) provides a 

list of information and types of security-based swap 

transactions that a registered security-based swap 

shall not disseminate. See supra Section VI(D). 

459Under Rule 907(a)(4)(iv), the registered SDR’s 

policies and procedures must direct the reporting 

side to apply appropriate flags to transaction 

reports. In the case of a report falling within Rule 

902(c), the reporting side for the relevant 

transaction is required to use the flag that signals 

to the registered SDR that the report should not be 

publicly disseminated. The Commission notes that 

Rule 907(a)(4) affords registered SDRs some 

discretion to determine precisely how a reporting 

side must flag reported data that will be excluded 

from public dissemination under Rule 902(c). For 

example, a registered SDR may determine not to 

require a specific ‘‘do not disseminate’’ tag for 

historical security-based swaps if it is clear from 

context that they are historical security-based swaps 

and not current transactions. As described in 

Section VI(D) above, the Commission does not 

believe that a registered SDR would violate Rule 

902(c) if it disseminated a report of a transaction 

that fell within Rule 902(c) if the reporting side fails 

to appropriately flag the transaction. 

460This applies only to transactions resulting 

from netting or compression exercises other than 

through a registered clearing agency. Security-based 

swaps resulting from netting or compression 

exercises carried out by a registered clearing agency 

are not subject to public dissemination. See Rule 

902(c)(6). See also supra Section VI(D)(1) 

(explaining Rule 902(c)(6)); Section VI(D)(2)(v) 

(explaining why the Commission believes that 

transactions resulting from portfolio compression— 

other than clearing transactions—should be 

publicly disseminated). 

461Entities that the Commission previously 

exempted from certain Exchange Act requirements, 

including clearing agency registration, have 

informed the Commission that they undertake 

‘‘forced trading’’ sessions in order to promote 

accuracy in the end-of-day valuation process. See, 

e.g., Securities Exchange Act Release No. 59527 

(March 6, 2009), 74 FR 10791, 10796 (March 12, 

2009) (Order Granting Temporary Exemptions 

Under the Securities Exchange Act of 1934 in 

Connection With Request on Behalf of ICE U.S. 

Trust LLC Related to Central Clearing of Credit 

Default Swaps, and Request for Comments) 

(describing ‘‘forced trading sessions’’ conducted by 

a clearing agency as follows: ‘‘ICE Trust represents 

that, in connection with its clearing and risk 

management process, it will calculate an end-of-day 

settlement price for each Cleared CDS in which an 

ICE Trust Participant has a cleared position, based 

on prices submitted by ICE Trust Participants. As 

part of this mark-to-market process, ICE Trust will 

periodically require ICE Trust Participants to 

execute certain CDS trades at the applicable endof-day settlement price. Requiring ICE Trust 

Participants to trade CDS periodically in this 

manner is designed to help ensure that such 

submitted prices reflect each ICE Trust Participant’s 

best assessment of the value of each of its open 

positions in Cleared CDS on a daily basis’’). 

462 15 U.S.C. 78m(m)(1)(E). 

463 15 U.S.C. 78m(m)(1)(E)(iv). 

464These statutory mandates apply only with 

respect to cleared security-based swaps. The DoddFrank Act does not require the Commission to 

specify block thresholds or dissemination delays or 

to take into account how public disclosure will 

materially reduce market liquidity with respect to 

uncleared security-based swaps. For security-based 

swaps that are not cleared but are reported to an 

SDR or the Commission under Section 3C(a)(6) of 

the Exchange Act, ‘‘the Commission shall require 

real-time public reporting for such transactions, in 

a manner that does not disclose the business 

transactions and market positions of any person.’’ 

15 U.S.C. 78m(1)(C)(iii). 

required not to be publicly 

disseminated.458 The new language in 

final Rule 907(a)(4)(iv)(B) calls attention 

to this particular requirement. Rule 

907(a)(4)(iv)(B), as adopted, requires the 

registered SDR to have policies and 

procedures for suppressing from public 

dissemination a transaction referenced 

in Rule 902(c).459

In addition to the requirements for 

indications in the case of error reports 

or bespoke transactions, the 

Commission believes that registered 

SDRs generally should include the 

following in its list of condition flags: 

• Inter-affiliate security-based swaps. 

As discussed in detail in Section VI(D), 

infra, the Commission is not exempting 

inter-affiliate transactions from public 

dissemination. However, the 

Commission believes it could be 

misleading if market observers did not 

understand that a transaction involves 

affiliated counterparties. 

• Transactions resulting from netting 

or compression exercises.460 The 

Commission believes that market 

observers should be made aware that 

these transactions are related to 

previously existing transactions and 

generally do not represent new risks 

being assumed by the counterparties. 

• Transactions resulting from a 

‘‘forced trading session’’ conducted by a 

clearing agency.461 The Commission 

believes that it would be helpful for 

market observers to understand that 

such transactions may not be available 

to market participants outside of the 

forced trading session. 

• Transactions reported more than 24 

hours after execution. The Commission 

believes that there is price discovery 

value in disseminating the transaction 

report, particularly in cases where there 

are few or no other recent last-sale 

reports in that product. However, all 

market observers should understand 

that the report is no longer timely and 

thus may not reflect the current market 

at the time of dissemination. 

• Transactions resulting from default 

of a clearing member. The Commission 

believes that the fact that the transaction 

was necessitated by a clearing agency’s 

need to have surviving clearing 

members assume the positions of a 

defaulting clearing member is important 

information about understanding the 

transaction and market conditions 

generally. 

• Package trades. ‘‘Package trade’’ is 

a colloquial term for a multi-legged 

transaction of which a security-based 

swap constitutes one or more legs. 

Market observers should be made aware 

that the reported price of a securitybased swap that is part of a package 

trade might reflect other factors—such 

as the exchange of an instrument that is 

not a security-based swap—that are not 

reflected in the transaction report of the 

security-based swap itself. 

This list is by way of example and not 

of limitation. There are likely to be other 

types of transactions or circumstances 

associated with particular transactions 

that may warrant a condition flag. The 

Commission anticipates that each 

registered SDR will revise its list over 

time as the security-based swap market 

evolves and registered SDRs and market 

participants gain greater insight into 

how to maximize the effectiveness of 

publicly disseminated transaction 

reports. 

VII. Block Trades and the Interim 

Phase of Regulation SBSR 

Section 13m(1)(E) of the Exchange 

Act 462 requires the Commission rule for 

real-time public dissemination of 

security-based swap transactions to: (1) 

‘‘Specify the criteria for determining 

what constitutes a large notional 

security-based swap transaction (block 

trade) for particular markets and 

contracts’’ and (2) ‘‘specify the 

appropriate time delay for reporting 

large notional security-based swap 

transactions (block trades) to the 

public.’’ In addition, Section 

13m(1)(E)(iv) of the Exchange Act 463

requires the Commission rule for realtime public dissemination of securitybased swap transactions to contain 

provisions that ‘‘take into account 

whether the public disclosure [of 

transaction and pricing data for 

security-based swaps] will materially 

reduce market liquidity.’’ 464

As discussed further below, the 

Commission is neither proposing nor 

adopting rules relating to block trades at 

this time. However, the rules, as 

adopted, establish an interim phase of 

Regulation SBSR. During this first 

phase, as described below, reporting 

sides—with certain minor exceptions— 

will have up to 24 hours (‘‘T+24 hours’’) 

after the time of execution to report a 

transaction. The registered SDR that 

receives the transaction information 

would then be required to publicly 

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465See ‘‘Inventory risk management by dealers in 

the single-name credit default swap market’’ 

(October 17, 2014) at 5, available at http://

www.sec.gov/comments/s7-34-10/s73410-184.pdf 

(‘‘Hedging Analysis’’). 

466See Regulation SBSR Proposing Release, 75 FR 

75228. 

467 Id. at 75228–29. 

468 Id. at 75229. 

469See id. 

470See id. 

471See id. 

472The Commission considered several tests 

including a percentage test (the top N-percent of 

trade would be considered block) and set forth data 

from the Depository Trust Clearing Corporation 

(‘‘DTCC’’) regarding single-name corporate CDS and 

single name sovereign CDS. The Commission noted 

that the observed trade sizes would suggest certain 

cut-off points when considering single-name 

corporate CDS or sovereigns as a whole. The 

Commission also noted, however, that there may 

still be differences in liquidity between individual 

corporates and sovereigns, as well as linkages 

between the underlying cash markets and the CDS 

markets that a simple percentage or threshold test 

would not capture. In addition, the Commission’s 

Division of Risk, Strategy, and Financial Innovation 

(which has been renamed the Division of Economic 

and Risk Analysis) prepared an analysis of several 

different block trade criteria in January 2011, based 

on the same DTCC data. The analysis examined 

fixed minimum notional amount thresholds; 

dynamic volume-based thresholds based on the 

aggregate notional amount of all executions in a 

CDS instrument over the past 30 calendar days; and 

a combination of dynamic volume-based thresholds 

and fixed minimum thresholds of $10 and $25 

million, respectively. See id. at 75230–31. 

473See id. 

474See id. 

disseminate a report of the transaction 

immediately thereafter. 

The Commission recognizes that the 

introduction of mandated post-trade 

transparency in the security-based swap 

market could have a significant impact 

on market participant behavior and the 

provision of liquidity. The interim 

phase is designed, among other things, 

to generate information about how 

market participants behave in an 

environment with post-trade 

transparency. Furthermore, once the 

first phase is implemented, reporting 

sides will be required under Regulation 

SBSR to report, among other things, the 

time of execution of their security-based 

swap transactions. As described in a 

staff analysis of the inventory 

management of dealers in the market for 

single-name CDS based on transaction 

data from DTCC–TIW, security-based 

swap transaction data currently stored 

in DTCC–TIW include the time of 

reporting, but not the time of the 

execution.465 Having the execution time 

instead of only the reporting time will 

enable staff to perform a more robust 

and granular analysis of any hedging 

that may or may not occur within the 

first 24-hour period after execution. 

After collecting and analyzing data that 

are more granular and reflect the 

reactions of market participants to T+24 

hour post-trade transparency, the 

Commission anticipates that it will 

undertake further rulemaking to propose 

and adopt rules related to block trades 

and the reporting and public 

dissemination timeframe for non-block 

trades. 

A. Proposed Rules Regarding Block 

Trades 

The Commission did not propose 

specific thresholds for block trades in 

the Regulation SBSR Proposing Release. 

Instead, the Commission described 

general criteria that it would consider 

when setting specific block trade 

thresholds in the future.466 The 

Commission stated that it ‘‘preliminarily 

believes that the general criteria for 

what constitutes a large notional 

security-based swap transaction must be 

specified in a way that takes into 

account whether public disclosure of 

such transactions would materially 

reduce market liquidity, but presumably 

should be balanced by the general 

mandate of Section 13(m)(1) of the 

Exchange Act, which provides that data 

on security-based swap transactions 

must be publicly disseminated in real 

time, and in a form that enhances price 

discovery.’’ 467 The Commission further 

stated: ‘‘For post-trade transparency to 

have a negative impact on liquidity, 

market participants would need to be 

affected in a way that either: (1) 

Impacted their desire to engage in 

subsequent transactions unrelated to the 

first; or (2) impacted their ability to 

follow through with further actions after 

the reported transaction has been 

completed that they feel are a necessary 

consequence of the reported 

transaction.’’ 468

The Commission noted, with respect 

to the first case, that post-trade 

dissemination of transaction prices 

could lead to narrower spreads and 

reduce participants’ willingness to 

trade. However, the Commission noted 

that liquidity could be enhanced if 

market participants increased their 

trading activity as a result of the new 

information. Because it would be 

difficult, if not impossible, to estimate 

with certainty which factor would 

prevail in the evolving security-based 

swap market, the Commission was 

guided by the general mandate of 

Section 13(m)(1) and the Commission’s 

preliminary belief that even in illiquid 

markets, transaction prices form the 

foundation of price discovery.469

Therefore, the Commission proposed 

that prices for block trades be 

disseminated in the same fashion as 

prices for non-block transactions. 

The Commission noted that, in the 

second case, counterparties may intend 

to take further action after an initial 

transaction for hedging purposes. The 

Commission believed that, for a 

transaction that was sufficiently large, 

disseminating the size of such a 

transaction could signal to the market 

that there is the potential for another 

large transaction in a particular securitybased swap or related security.470

Therefore, in order to give the market 

time to absorb any subsequent 

transactions, the Commission stated that 

it preliminarily believed that the size of 

a sufficiently large transaction should be 

suppressed for a certain period of time 

to provide time for subsequent 

transactions.471

In the Regulation SBSR Proposing 

Release, the Commission noted a variety 

of metrics that could be used to 

determine whether a security-based 

swap transaction should be considered 

a block trade.472 They included: (1) The 

absolute size of the transaction; (2) the 

size of the transaction relative to other 

similar transactions; (3) the size of the 

transaction relative to some measure of 

overall volume for that security-based 

swap instrument; and (4) the size of the 

transaction relative to some measure of 

overall volumes for the security or 

securities underlying the security-based 

swap.473 The Commission stated that 

the metric should be chosen in a way 

that minimizes inadvertent signaling to 

the market of potential large follow-on 

transactions.474

Although the Commission did not 

propose block thresholds, the 

Commission did propose two ‘‘waves’’ 

of public dissemination of block trades 

for when it had adopted block 

thresholds. Rule 902(b), as proposed 

and re-proposed, would have required a 

registered SDR to publicly disseminate 

a transaction report of a security-based 

swap that constitutes a block trade 

immediately upon receipt of 

information about the block trade from 

the reporting party. The transaction 

report would have been required to 

consist of all the information reported 

pursuant to Rule 901(c)—except for the 

notional amount—plus the transaction 

ID and an indicator that the report 

represents a block trade. The second 

wave would have required the 

registered SDR to publicly disseminate 

a complete transaction report for the 

block trade (including the transaction ID 

and the full notional amount) between 

8 and 26 hours after the execution of the 

block trade. Thus, under Rule 902(b), as 

proposed and re-proposed, market 

participants would have learned the 

price and all other primary trade 

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14618 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

475Rule 902(b)(3), as proposed and re-proposed, 

would have provided that, if a registered SDR was 

closed when it otherwise would be required to 

disseminate information concerning a block trade, 

the registered SDR would be required to 

disseminate the information immediately upon reopening. 476See Regulation SBSR Proposing Release, 75 FR 

75228. 477 15 U.S.C. 78m(m)(1)(C)(iv) (‘‘With respect to 

security-based swaps that are determined to be 

required to be cleared under section 78c–3(b) of this 

title but are not cleared, the Commission shall 

require real-time public reporting for such 

transactions’’). 

478See Barnard I at 2. 

479UBS Letter at 1. 

480Bachus/Lucas Letter at 2. 

481 Id. 

482See ISDA IV at 14 (expressing concern that the 

combination of name-attributed runs and a rapidly 

disseminated set of post-trade information would 

make it relatively easy for many participants to 

reconstruct the identity of parties to a particular 

transaction, which might reduce dealers’ 

willingness to disseminate pre-trade price 

information in the form of runs, thereby reducing 

pre-trade transparency). 

483See id., note 21 (stating, for example, that a 

24-hour delay would be appropriate for a securitybased swap that trades, on average, once per day, 

and security-based swap that trades 10 times per 

day could be reported in real time). 

484See Barclays Letter at 8; BlackRock Letter at 

8, note 10; Cleary I at 10–11; Cleary II at 2; 

Institutional Investors Letter at 4; ISDA/SIFMA I at 

2; ISDA/SIFMA Block Trade Study at 6; ISDA/

SIFMA II at 8; J.P. Morgan Letter at 5; WMBAA I 

at 3. 

485See ISDA/SIFMA I at 2. 

486See Barclays Letter at 8 (stating that overly 

broad block trade thresholds could adversely 

impact the liquidity and pricing of security-based 

swaps); J.P. Morgan Letter at 5 (stating that liquidity 

may be significantly reduced if too few trades 

receive block treatment); BlackRock Letter at 8, note 

10 (expressing concern that it could become 

infeasible for market participants to enter into block 

trades for some products if the Commissions fail to 

balance liquidity and price transparency correctly); 

Institutional Investors Letter at 4 (noting, with 

specific reference to the CFTC’s proposed rules, that 

the benefits of large trades could be negated, and 

institutional investors’ costs increased, if block 

trade sizes were set too high); ISDA/SIFMA II at 8 

(stating that an overly restrictive definition of block 

trade has great potential to adversely affect the 

ability to execute and hedge large transactions); 

WMBAA I at 3 (expressing the view that block trade 

thresholds ‘‘be set at such a level that trading may 

continue without impacting market participants’ 

ability to exit or hedge their trades’’). 

487See Cleary II at 2. 

488See GETCO Letter at 1–2. 

489 15 U.S.C. 78m(m)(1)(E). However, this 

mandate applies only with respect to cleared 

security-based swaps. No provision of Title VII 

requires the Commission to specify block 

thresholds or dissemination delays, or to take into 

account how public disclosure will materially 

reduce market liquidity, for uncleared securitybased swaps. 

information (except notional amount) 

about a block trade in real time, and the 

full notional amount of the transaction 

on a delayed basis.475 Registered SDRs 

would have been responsible for 

calculating the specific block thresholds 

based on the formula established by the 

Commission and publicizing those 

thresholds, but the Commission 

emphasized that a registered SDR would 

be performing ‘‘mechanical, nonsubjective calculations’’ when 

determining block trade thresholds.476

The Commission proposed and reproposed a variety of other provisions 

related to block trades. Proposed Rule 

900 defined ‘‘block trade’’ to mean a 

large notional security-based swap 

transaction that satisfied the criteria in 

Rule 907(b). Proposed Rule 907(b) 

would have required a registered SDR to 

establish and maintain written policies 

and procedures for calculating and 

publicizing block trade thresholds for 

security-based swaps in accordance 

with the criteria and formula for 

determining block size specified by the 

Commission. Proposed Rule 907(b)(2) 

also would have provided that a 

registered SDR should not designate as 

a block trade: (1) Any security-based 

swap that is an equity total return swap 

or is otherwise designed to offer risks 

and returns proportional to a position in 

the equity security or securities on 

which the security-based swap is based; 

or (2) any security-based swap 

contemplated by Section 13(m)(1)(C)(iv) 

of the Exchange Act.477

B. Potential Impact on Liquidity 

The Commission received several 

comments addressing the issue of 

timing for public dissemination and the 

potential impact of public 

dissemination on liquidity. The 

commenters vary significantly in their 

views on this issue. One commenter 

stated that the proposed timeframes for 

publicly disseminating security-based 

swap transaction reports would not 

materially reduce market liquidity.478

Another commenter, however, 

expressed the view that ‘‘[t]here is 

insufficient liquidity in the single-name 

credit default swap market to support 

real-time public dissemination of nonblock transaction data for all but a 

handful of instruments without creating 

price moving events.’’ 479 A third 

commenter expressed concern that realtime security-based swap reporting, ‘‘if 

implemented without adequate 

safeguards, could unnecessarily increase 

the price of entering into a derivatives 

contract to hedge risk’’ 480 and 

cautioned that requiring real-time 

reporting of thinly traded products in 

illiquid markets in an effort to compel 

derivatives to trade similarly to 

exchange-listed products represented ‘‘a 

fundamentally flawed approach that 

demonstrates a lack of understanding of 

the existing market structure.’’ 481 A 

fourth commenter expressed concern 

about the impact of real-time post-trade 

transparency for illiquid security-based 

swaps on pre-trade transparency that 

currently exists in the form of indicative 

prices provided by dealers to their 

clients (known as ‘‘runs’’).482 This 

commenter requested that the 

Commission provide illiquid securitybased swaps with an exception from 

real-time reporting and instead allow for 

delays roughly commensurate with the 

trading frequency of the security-based 

swap.483

In addition, several commenters 

raised concerns about the effect of an 

improperly designed block trade 

regime.484 One commenter stated that 

an appropriate block exemption is 

critical to the successful 

implementation of Title VII.485 Several 

commenters expressed the view that 

improper block thresholds or definitions 

would adversely impact liquidity.486

One commenter noted that the SEC and 

CFTC’s proposed block trade rules 

would adversely impact liquidity.487 By 

contrast, one commenter recommended 

that the Commission consider that 

increased transparency of trades that are 

large relative to the liquidity of the 

product may attract new entrants to the 

market and may result in increased 

liquidity.488

The Commission has considered these 

comments as well as the statutory 

requirement that the Commission rule 

for public dissemination of securitybased swap transactions contain 

provisions that ‘‘take into account 

whether the public disclosure [of 

transaction and pricing data for 

security-based swaps] will materially 

reduce market liquidity.’’ 489 The 

Commission is adopting these final 

rules for regulatory reporting and public 

dissemination of security-based swaps 

with a view toward implementing 

additional rules in one or more 

subsequent phases to define block 

thresholds and to revisit the timeframes 

for reporting and public dissemination 

of block and non-block trades. This 

approach is designed to increase posttrade transparency in the security-based 

swap market—even in its initial phase— 

while generating new data that could be 

studied in determining appropriate 

block thresholds after the initial phase. 

The Commission also considered 

several comments related to the timing 

of public dissemination and believes 

that at present the commenters’ 

concerns are appropriately addressed by 

the Commission’s adoption of T+24 

hour reporting during the interim phase. 

During this phase, the reporting side 

will have up to 24 hours after the time 

of execution of a security-based swap 

transaction to report it to a registered 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14619 

490For a security-based swap that is subject to 

regulatory reporting and public dissemination 

solely by operation of Rule 908(a)(1)(ii), however, 

a reporting side is required to report the 

information required under Rules 901(c) and 901(d) 

within 24 hours of acceptance for clearing. See Rule 

901(j); Section XV(C)(4), infra. 

491See Rule 902(c) (setting forth certain types of 

security-based swaps that are not to be publicly 

disseminated). 

492See ‘‘Analysis of post-trade transparency 

under the CFTC regime’’ (October 17, 2014), 

available at http://www.sec.gov/comments/s7-34- 

10/s73410-183.pdf (‘‘Analysis of Post-Trade 

Transparency’’). See also infra Sections 

XXII(C)(2)(b), XXII(C)(2)(c), XXII(C)(3)(a), and 

XXII(D)(4)(b). The one comment that the 

Commission received on the Analysis of Post-Trade 

Transparency did not directly address the staff’s 

analysis. This comment is discussed in notes 688 

and 1011, infra. 

493See Analysis of Post-Trade Transparency at 1 

(‘‘While we acknowledge that there are significant 

differences between the index [credit default swap] 

market and the security-based swap market, the 

data analysis presented here may enhance the 

Commission’s understanding of the potential 

economic effects of mandated post-trade 

transparency in the security-based swap market’’). 

494See Rules 901(c) and 900 (definition of ‘‘real 

time’’), as originally proposed. 

495Rule 902(b)(1), as proposed and re-proposed, 

would have provided: ‘‘If the security-based swap 

was executed on or after 05:00 UTC and before 

23:00 UTC of the same day, the transaction report 

[for the block trade] (including the transaction ID 

and the full notional amount) shall be disseminated 

at 07:00 UTC of the following day.’’ Proposed Rule 

902(b)(2) would have provided: ‘‘If the securitybased swap was executed on or after 23:00 UTC and 

up to 05:00 UTC of the following day, the 

transaction report (including the transaction ID and 

the full notional size) shall be disseminated at 13:00 

UTC of that following day.’’ Those block trades 

executed at the end of each window would receive 

an 8 hour dissemination delay and those blocks 

executed at 5:00 UTC would receive a 26 hour 

dissemination delay. The delay for all other block 

trades would vary between 8 and 26 hours, 

depending on the time of execution. 

496See FINRA Letter at 2 (supporting the 

Commission’s proposal to require reporting as soon 

as technologically practicable, but in no event later 

than 15 minutes after the time of execution); 

Barnard I at 3 (recommending full post-trade 

transparency as soon as technologically and 

practicably feasible, with an exemption permitting 

delayed reporting for block trades). 

497See DTCC II at 9–10; ICI I at 4–5; ISDA III at 

1 (‘‘Not all market participants have the ability to 

report within 15 or 30 minutes of execution’’); 

MarkitSERV I at 9 (‘‘complying with a strict 15- 

minute deadline even for non-electronically 

executed or confirmed trades will require 

significant additional implementation efforts by the 

industry at a time when resources are already 

stretched in order to meet other requirements under 

the [Dodd-Frank Act]’’); MFA I at 5. 

498See MFA I at 5. 

499 ICI I at 4. 

500See Barnard I at 4; CCMR I at 2; Cleary II at 

18–21; DTCC II at 9–10, 24–25; DTCC III at 10; 

DTCC IV at 8–9; Roundtable Letter at 4–9; FINRA 

Letter at 4–5; Institutional Investors Letter at 3; 

ISDA/SIFMA I at 9–10; ISDA/SIFMA Block Trade 

Study at 2, 7; MarkitSERV I at 9–10; MFA 

Recommended Timeline at 1; UBS Letter at 2–3; 

WMBAA III at 4–6. Based on its experience with 

industry-wide processes, one commenter suggested 

that there could be a ‘‘shake-out’’ period during 

which problems with reported data could surface. 

The commenter urged the Commission to consider 

this possibility and provide a means to assure that 

information is of high quality before dissemination 

is permitted. See DTCC II at 9–10. 

501See FINRA Letter at 5. See also ISDA/SIFMA 

Block Trade Study at 2 (stating that phased 

implementation would provide regulators with time 

to test and refine preliminary standards). 

502See CCMR I at 2; Cleary II at 19; ISDA/SIFMA 

Block Trade Study at 2; UBS Letter at 2. 

503See ICI I at 3; SIFMA I at 5 (‘‘a 24-hour delay 

would better ensure that block liquidity providers 

are able to offset their risk regardless of the time 

during the trading day at which the block is 

executed’’); Vanguard Letter at 4; Viola Letter at 2 

(‘‘At a minimum, the data in question should be 

delayed from the public reporting requirements at 

least one (1) day after the trade date’’). Cf. Phoenix 

Letter at 4 (recommending end-of-day 

dissemination of block trades). 

504See ISDA IV at 16. 

505See ICI I at 3–4; Vanguard Letter at 4, note 3. 

506See Better Markets I at 5–6 and at 4–5 (stating 

that no compelling economic justification exists for 

delaying the immediate public dissemination of any 

data regarding block trades, and that the minimum 

duration of any delay in reporting block trades 

Continued 

SDR, regardless of its notional 

amount.490 The registered SDR will be 

required, for all dissemination-eligible 

transactions,491 to publicly disseminate 

a report of the transaction immediately 

upon receipt of the information. Even 

with the T+24 reporting of transactions, 

the Commission anticipates being able 

to collect significant new information 

about how market participants behave 

in an environment with post-trade 

transparency, which will inform the 

Commission’s analysis and effort to 

determine what block thresholds and 

time delays may be appropriate. 

In developing a regulatory regime for 

post-trade transparency in the securitybased swap market, the Commission is 

cognizant of rules adopted by the CFTC 

to provide for post-trade transparency in 

the swap market. Commission staff 

analyzed the effect of the adoption of 

post-trade transparency in the swap 

market, which is regulated by the 

CFTC.492 That analysis shows no 

discernible empirical evidence of 

economically meaningful effects of the 

introduction of post-trade transparency 

in the swap market at this time. In 

particular, the study did not find 

negative effects such as reduced trading 

activity. Based on this analysis, the 

Commission believes that post-trade 

transparency does not seem to have a 

negative effect on liquidity and market 

activity in the swap market.493

1. T+24 Hour Reporting for All 

Transactions 

The Commission initially proposed to 

require reporting to a registered SDR of 

the primary trade information of all 

security-based swaps ‘‘as soon as 

technologically practicable, but in no 

event later than 15 minutes after the 

time of execution of the security-based 

swap transaction.’’ 494 For all 

dissemination-eligible transactions 

other than block trades, the registered 

SDR would have been required to 

publicly disseminate a report of the 

transaction immediately and 

automatically upon receipt of the 

transaction. As proposed, block trades 

would have been subject to two-part 

dissemination: (1) An initial report with 

suppressed notional amount 

disseminated in real-time; and (2) a full 

report including notional amount 

disseminated between 8 to 26 hours 

after execution.495

Commenters expressed mixed views 

regarding the proposed reporting 

timeframes. Two commenters generally 

supported them.496 However, several 

commenters stated that, at least in the 

near term, it would be difficult to 

comply with the reporting timeframes as 

proposed.497 One of these commenters 

argued, for example, that the benefits of 

providing security-based swap 

information within minutes of 

execution did not outweigh the 

infrastructure costs of building a 

mechanism to report in real time, 

particularly given the likelihood of 

errors.498 Another commenter expressed 

concern that ‘‘the 15 minute limit is not 

technologically practicable under 

existing communications and data 

infrastructure.’’ 499

Commenters also advocated that the 

Commission phase-in reporting 

deadlines over time, similar to the 

implementation model for TRACE, to 

allow regulators to assess the impact of 

post-trade transparency on the securitybased swap market.500 One commenter 

noted that phased-in implementation 

would allow regulators to assess the 

impact of transparency on the securitybased swap market and make 

adjustments, if necessary, to the timing 

of dissemination and the data that is 

disseminated.501 Other commenters 

echoed the belief that a phased 

approach would allow the Commission 

to assess the impact of public reporting 

on liquidity in the security-based swap 

market, monitor changes in the market, 

and adjust the reporting rules, if 

necessary.502

Three commenters recommended a 

24-hour delay for reporting block 

trades,503 and one recommended a delay 

of at least five days with an indefinite 

delay of full notional size.504 Of those 

commenters, two also suggested that the 

delay could be reduced or refined after 

the Commission gathers additional 

information about the security-based 

swap market.505 In contrast, two 

commenters recommended block delays 

as short as 15 minutes.506 In addition, 

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14620 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

should be ‘‘far shorter’’ than the delays included in 

Regulation SBSR); Better Markets III at 4–5; SDMA 

Letter at 2. 

507See Cleary II at 12 (even without disclosure of 

the notional amount, observers may be able to infer 

information about a trade and predict subsequent 

hedging activity); Goldman Sachs Letter at 6 

(disclosure of the fact that a block trade occurred 

could still impact liquidity); ICI I at 2 

(recommending a delay of all block trade 

information); ISDA/SIFMA I at 3 (delaying 

disclosure of notional amount is only a ‘‘partial 

solution’’); SIFMA I at 3–4 (all block trade 

information should be delayed, otherwise 

immediate trade signaling could harm end users); 

Vanguard Letter at 2, 4 (all block trades should be 

delayed 24 hours, and establishment of a block 

regime should be delayed until the Commission has 

had time to assess how reporting affects the 

market). 

508See Institutional Investors Letter at 4; MFA 

Recommended Timeline at 4. 

509See Hedging Analysis. 

510See Kathryn Chen, et al., Federal Reserve Bank 

of New York Staff Report, An Analysis of CDS 

Transactions: Implications for Public Reporting 

(September 2011), available at http:// 

www.newyorkfed.org/research/staff_reports/

sr517.html, last visited September 22, 2014. See 

also http://www.dtcc.com/repository-otc-data.aspx, 

last visited September 22, 2014. This study uses an 

earlier sample of DTCC–TIW transaction data to 

identify hedging of transactions in single-name 

CDS. They find little evidence of hedging via 

offsetting trades in the same instrument and 

conclude by saying that ‘‘requiring same day 

reporting of CDS trading activity may not 

significantly disrupt same day hedging activity, 

since little such activity occurs in the same 

instrument.’’ 

511See ISDA IV at 15 (stating that ‘‘participants 

may enter into risk mitigating transactions using 

other products that are more readily available at the 

time of the initial trade (for example CD index 

product [sic], CDS in related reference entities, 

bonds or loans issued by the reference entity or a 

related entity, equities or equity options)’’). In 

addition, the commenter stated that it ‘‘interprets 

the data in the study to imply that such temporary 

hedges in other asset classes (rather than offsetting 

transactions in the precise reference entity 

originally traded) are the norm for an illiquid 

market.’’ See id. 

512See Chen et al., supra note 510, at 6. Like the 

Chen et al. report, which was cited by the 

commenter, the Commission staff analysis did not 

incorporate data that would allow it to identify 

hedging in corporate bonds or equities, because 

appropriate data were not available. The commenter 

did not provide any analysis, rationale, or data 

demonstrating how public dissemination of a 

single-name CDS transaction within 24 hours 

would negatively impact a dealer from being able 

to hedge this exposure in another market, such as 

a broad-based CDS index. 

513Although two commenters advocated shorter 

block trade delays, the Commission believes that it 

would be prudent to allow for the accumulation of 

additional data about the effect of post-trade 

transparency on the security-based swap market 

before considering shorter reporting and 

dissemination timeframes for block trades. The 

Commission may consider shorter timeframes in the 

future but believes that it is neither necessary nor 

appropriate to adopt these commenters’ 

recommendations at this time. 

514See Rule 902(b), as proposed and re-proposed. 

515As discussed in more detail in Section 

VII(B)(3), infra, if 24 hours after the time of 

execution would fall on a non-business day (i.e., a 

Saturday, Sunday, or U.S. federal holiday), 

reporting would instead be required by the same 

time on the next business day. 

several commenters opposed two-part 

transaction reporting for block trades. 

These commenters believed that all 

information about a block trade, 

including the notional amount of the 

transaction, should be subject to a 

dissemination delay to provide liquidity 

providers with adequate time to hedge 

their positions.507 Two commenters 

recommended initially setting block 

sizes low and over time collecting data 

to determine an appropriate block trade 

size.508

In addition, Commission staff has 

undertaken an analysis of the inventory 

management of dealers in the market for 

single-name CDS based on transaction 

data from DTCC–TIW.509 The analysis, 

in line with prior studies of hedging in 

this market,510 shows that, after most 

large transactions between a dealer and 

customer are executed, dealers do not 

appear to hedge resulting exposures by 

executing offsetting transactions (either 

with other dealers or other customers) 

in the same single-name CDS. In 

instances where dealers appear to hedge 

resulting exposures following a large 

trade in single-name CDS written on the 

same reference entity, they generally do 

so within a maximum of 24 hours after 

executing the original trade. 

One commenter responded to this 

analysis, asserting that dealers, rather 

than hedging security-based swap 

exposures using offsetting transactions 

in the same instruments, might choose 

instead to hedge their security-based 

swap exposures in related assets, and 

that these types of hedging behaviors 

were not measured in the Commission 

staff analysis. The commenter further 

suggested that the use of cross-market 

hedges could be particularly important 

for transactions in single-name CDS that 

are especially illiquid.511 The 

Commission acknowledges that the 

staff’s analysis was limited to sameinstrument hedging.512 However, the 

Commission notes that, to the extent 

that security-based swap positions can 

be hedged using other assets—as the 

commenter suggests—these additional 

opportunities would suggest that dealers 

would likely need less time to hedge 

than if hedging opportunities existed 

only within the security-based swap 

market. 

In view of these comments and the 

staff analysis, the Commission is 

modifying Regulation SBSR’s 

timeframes for reporting security-based 

swap transaction information as follows. 

First, Rules 901(c) and 901(d), as 

adopted, require reporting sides to 

report the information enumerated in 

those rules ‘‘within the timeframe 

specified in paragraph (j) of this 

section’’—i.e., by Rule 901(j). Rule 

901(j), as adopted, provides that the 

reporting timeframe for Rules 901(c) and 

901(d) shall be ‘‘within 24 hours after 

the time of execution (or acceptance for 

clearing in the case of a security-based 

swap that is subject to regulatory 

reporting and public dissemination 

solely by operation of 

§ 242.908(a)(1)(ii)), or, if 24 hours after 

the time of execution or acceptance for 

clearing, as applicable, would fall on a 

day that is not a business day, by the 

same time on the next day that is a 

business day.’’ Under Rule 902(a), as 

adopted, the registered SDR that 

receives the transaction report from the 

reporting side is required, as proposed 

and re-proposed, to publicly 

disseminate a report of that transaction 

immediately upon receipt. The 

Commission believes that this approach 

will improve post-trade transparency 

and respond to commenters’ concerns. 

In particular, the Commission believes 

that this approach addresses concerns 

relating to potential market impact, the 

ability to report in real time, and the 

length of delay for dissemination of 

block trade information.513 Thus, the 

T+24 hour approach is designed to 

improve post-trade transparency in the 

security-based swap market in the near 

term, while generating additional data 

that the Commission can evaluate in 

considering appropriate treatment of 

block trades. 

At this time, the Commission is not 

adopting the provisions of proposed and 

re-proposed Rule 902 that would have 

provided for real-time public 

dissemination of non-block trades. 

However, the Commission is adopting, 

substantially as proposed and reproposed, what was originally designed 

to be the second wave of block 

dissemination—i.e., disseminating the 

full trade details, including the true 

notional amount, at one of two points in 

the day (either 07:00 or 13:00 UTC) after 

an initial report of the transaction 

(without the notional amount) had been 

disseminated in real time.514 The 

Commission is now simplifying that 

approach by eliminating the idea of 

‘‘batch dissemination’’ at two points 

during the day, and instead allowing for 

T+24 hour reporting for all transactions, 

regardless of the time of execution. 

Furthermore, in the absence of a 

standard to differentiate block from nonblock transactions, the Commission 

believes that it is appropriate to require 

the same T+24 hour reporting for all 

transactions.515

This interim phase is designed to 

allow the accumulation of empirical 

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516See ABC Letter at 7–8; CCMR I at 4 (‘‘The 

Commission should set the thresholds low at first 

in order to collect data that will enable them to 

make informed decisions about the final delay and 

threshold determinations’’); Institutional Investors 

Letter at 4–5 (stating, in reference to the CFTC’s 

proposed rules, that the marketplace currently lacks 

sufficient collection and analysis of swap trading 

data to establish block trade thresholds); ICI II at 8 

(‘‘We agree with the SEC that it should defer its 

proposed rulemaking regarding block thresholds 

until after SDRs register with the SEC and the SEC 

begins to receive and analyze data required to be 

reported under the final rules or until after SB swap 

transaction information begins to be publicly 

reported’’); MFA I at 4 (recommending that the 

Commission study and obtain empirical evidence to 

determine block trade definitions for each asset 

class to assure that the final rules do not disrupt 

the markets or reduce liquidity); ISDA/SIFMA I at 

4–5 (recommending significant detailed research, 

including independent academic research, before 

determining block size thresholds and reporting 

delays for particular security-based swap 

transactions); ISDA/SIFMA II at 8 (stating that 

market-based research and analysis should be 

employed to provide the basis for the determination 

of well-calibrated block trading exemption rules); 

SIFMA II at 8 (‘‘Until a liquid SBS trading market 

develops on SB–SEFs and exchanges, the 

Commission will not be able to make informed 

decisions on the definition of a block or an 

appropriate public reporting time frame. For the 

same reason, real-time reporting should be 

implemented gradually. Block trade thresholds 

should be set at a low level at first, such that many 

trades are treated as blocks, and raised slowly by 

the Commission when doing so is supported by 

market data’’). But see SDMA Letter at 3 (stating 

that swap transaction data are available today and 

block trade thresholds could be established without 

delay). 

517See Institutional Investors Letter at 4 

(recommending that the CFTC collect market data 

for one year before adopting rules relating to block 

trades); MFA II, Recommended Timeline at 4; 

WMBAA III at 6; FIA/FSF/ISDA/SIFMA Letter at 6. 

518See FIA/FSF/ISDA/SIFMA Letter at 6, note 6. 

519See ISDA/SIFMA I at 4; Goldman Sachs Letter 

at 5. 

520See ISDA/SIFMA I at 4. 

521See Goldman Sachs Letter at 5 (stating that the 

Commission could obtain the necessary data by 

asking large dealers to provide information on a 

confidential basis and supplementing that 

information with data obtained from a survey of 

other market participants). 

522See, e.g., Chen et al., supra note 510. 

523See ICI II at 8 (‘‘Any data on which the SEC 

could rely currently to develop a methodology for 

determining minimum block trade sizes will not 

adequately represent or reflect the swaps market 

once the Dodd-Frank requirements (including 

public reporting of swap data) are fully 

implemented’’). Two commenters pointed to 

evidence suggesting negative effects of post-trade 

transparency in other securities markets. See ISDA/ 

SIFMA Block Trade Study at 4–5 (stating that some 

studies had concluded that transparency had 

negatively impacted markets, including the 

Canadian stock markets and the London Stock 

Exchange); J.P. Morgan Letter at 2–4 (stating that 

anecdotal evidence reported in one study supported 

the view that institutional customers experienced 

less deep markets as a result of TRACE reporting, 

and that adverse impacts could be more substantial 

for CDS). 

524See http://www.dtcc.com/repository-otcdata.aspx (last visited September 22, 2014) for a 

description of aggregated data disseminated by 

DTCC. See also infra Section XXII(B)(1) for a 

description of transaction data obtained by the 

Commission. 

525See supra Section VI(F) (discussing Embargo 

Rule). 

526See GFI Letter at 3. 

527See supra Section VI(F). 

data and is consistent with various 

comments that emphasized the need for 

further study and analysis of empirical 

data prior to establishing block trading 

rules.516 Several commenters noted that 

implementing the rules requiring 

reporting to registered SDRs prior to the 

block trading rules would provide 

security-based swap transaction data (in 

addition to historical data) that could be 

used in the formation of block trade 

thresholds.517 One of these commenters 

stated, for example, that it would be 

premature to adopt block trade 

thresholds prior to the commencement 

of reporting to registered SDRs because 

SDR reporting would increase the 

amount of information available across 

various markets and asset classes.518

Commenters also recommended several 

methods for obtaining and analyzing 

empirical data,519 including 

independent academic research520 and a 

review of a statistically significant data 

set for each security-based swap 

category.521

Although more data and analyses 

about executed transactions are now 

available than when the Commission 

originally issued the Regulation SBSR 

Proposing Release,522 these data provide 

limited insights into how post-trade 

transparency might affect market 

behavior if executed transactions were 

to become publicly known on a realtime or near-real-time basis.523 The 

Commission has information from 

DTCC–TIW about most CDS trades over 

the past few years 524 and can analyze 

the frequency of execution and the 

notional trade sizes. However, the 

Commission believes that these data 

permit only speculative inferences 

about the potential market impact of 

those trades being made public. 

Currently, there is little post-trade 

transparency in the security-based swap 

market, so the current trading generally 

is informed only imperfectly, if at all, 

about earlier trading. 

Several aspects of the Commission’s 

adopted rules are designed to help 

facilitate the collection of data relating 

to how post-trade transparency affects 

market behavior. The Commission is 

adopting, as re-proposed, the 

requirement that the trade report 

include the time of execution and the 

requirement that the registered SDR 

mark the time that it receives the trade 

report. These requirements are designed 

to help inform the Commission as to the 

length of time between the execution of 

a transaction and when the transaction 

is reported to a registered SDR, which 

should provide useful data to the 

Commission in analyzing trends in 

reporting timeframes. These timeframes 

would provide some insight into the 

beliefs of market participants regarding 

the length of the reporting delay that 

they deem necessary to minimize the 

market impact of a transaction. 

Observing trades being reported to a 

registered SDR with varying delays after 

execution could provide the 

Commission with greater insight as to 

what market participants consider to be 

market-impacting trades. Further, the 

Commission believes that this approach 

would address, during the interim 

phase, the concerns of the commenters 

who believed that a public 

dissemination regime with 

inappropriately low block trade 

thresholds could harm market liquidity, 

and those who argued that market 

participants would need an extended 

period of time to comply with the 

requirements to report within shorter 

timeframes. 

Although any participant could take 

the full 24 hours to report a given trade, 

there may be incentives to submit trade 

reports in substantially less than 24 

hours. The Commission understands 

that, in some cases, entities that are 

likely to become SB SEFs (‘‘pre-SEFs’’) 

may want to broadcast trades executed 

electronically across their platforms to 

all subscribers in order to catalyze 

trading by other counterparties at the 

same price.525 This ‘‘work-up’’ process, 

according to a commenter, is designed 

to foster liquidity in the security-based 

swap market and to facilitate the 

execution of larger-sized transactions.526

If pre-SEFs and their participants want 

to continue their current practices and 

broadcast a subset of their executed 

trades across the platform in real time 

to facilitate work-ups, they will be 

subject to Rule 902(d), which embargos 

transaction information until the 

information is transmitted to a 

registered SDR.527 Therefore, any preSEF or user of a pre-SEF that wants to 

continue to have real-time information 

about a completed trade broadcast as 

part of a work-up must ensure that the 

initial transaction is reported to a 

registered SDR no later than the time at 

which it is broadcast to users of the preSEF. 

In response to commenters who 

advocated shorter reporting time frames 

or block trade delays, the Commission 

notes that it anticipates further refining 

the reporting timeframes when it 

proposes and implements final block 

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14622 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

528See Institutional Investors Letter at 4 

(recommending that the CFTC collect market data 

for one year before adopting rules relating to block 

trades); MFA II, Recommended Timeline at 4; 

WMBAA III at 6; FIA/FSF/ISDA/SIFMA Letter at 6 

(appropriate block trade thresholds, and therefore 

real-time reporting requirements, can be established 

only after the commencement of SDR reporting to 

regulators and careful analysis of security-based 

swap market transaction data). This approach is 

also broadly consistent with the implementation of 

the TRACE system, which shortened reporting 

requirements over time. Several commenters 

recommended a phased reporting approach 

analogous to TRACE. See CCMR I at 2; Cleary II at 

20; DTCC II at 9–10; FINRA Letter at 4–5; ISDA/

SIFMA I at 10; ISDA/SIFMA Block Trade Study at 

2; UBS Letter at 2–3; WMBAA II at 5. 

529 15 U.S.C. 78m(m)(1)(C)(iv). 

530Proposed Rule 900 would have defined 

‘‘security-based swap instrument’’ to mean ‘‘each 

security-based swap in the same asset class, with 

the same underlying reference asset, reference 

issuer, or reference index.’’ This definition was 

included, without change, in re-proposed Rule 

900(dd). 

531See 75 FR 75231. 

532See CCMR I at 3. 

trade rules, at which point reporting 

sides will have had more time to test 

and implement their reporting systems 

and processes. This approach was 

recommended by several 

commenters.528

2. Reporting Timeframe for Trades 

Executed Prior to Weekends or U.S. 

Federal Holidays 

While most transactions will have 24 

hours within which to be reported, Rule 

901(j) also provides that, ‘‘if 24 hours 

after the time of execution would fall on 

a day that is not a business day, [the 

transaction must be reported] by the 

same time on the next day that is a 

business day.’’ The Commission’s intent 

is to afford security-based swap 

counterparties—during the interim 

phase—the equivalent of at least an 

entire business day to hedge their 

positions, if they so desire, before the 

transaction must be reported and 

publicly disseminated. Without 

clarifying that, during the interim phase, 

reporting requirements fall only on 

business days, for a transaction 

executed on the day before a weekend 

or holiday, the counterparties would 

have less than the number of business 

hours of a regular business day to hedge 

a transaction if reporting were required 

within 24 hours of execution. 

The Commission is also adopting a 

definition of ‘‘business day’’ to clarify 

the ‘‘not a business day’’ provision. 

‘‘Business day’’ is defined in Rule 900(f) 

as ‘‘a day, based on U.S. Eastern Time, 

other than a Saturday, Sunday, or a U.S. 

federal holiday.’’ Counterparties to the 

trade may be in different time zones 

and/or jurisdictions; in the absence of 

Rule 900(f) there could be confusion 

about whether the ‘‘not a business day’’ 

provision referred to the jurisdiction 

and time zone of one side or the 

jurisdiction and time zone of the other. 

Because Regulation SBSR is designed to 

implement Title VII’s regulatory 

reporting and public dissemination 

requirements for the U.S. security-based 

swap market, the Commission is 

designating U.S. Eastern Time (which 

may be either Eastern Standard Time or 

Eastern Daylight Time) as the time zone 

on which the reporting side should base 

its reporting for purposes of Rules 900(f) 

and 901(j). The Commission also is 

excluding U.S. federal holidays from the 

definition of ‘‘business day.’’ The 

following examples are designed to help 

explain the application of this 

provision: 

• Example 1. A trader executes a 

trade at 04:59 UTC on Friday (11:59 

p.m. EST on Thursday). This particular 

Friday is not a U.S. federal holiday. The 

reporting side must report by 04:59 UTC 

on Saturday (11:59 p.m. EST on Friday). 

• Example 2. A trader executes a 

trade at 05:01 UTC on Friday (12:01 a.m. 

EST on Friday). The reporting side must 

report by 05:01 UTC on Monday (12:01 

a.m. EST on Monday), provided that 

this particular Monday is not a U.S. 

federal holiday. 

• Example 3. A trader executes a 

trade at 14:42 UTC on Friday (9:42 a.m. 

EST on Friday). The reporting side must 

report by 14:42 UTC on Monday (9:42 

a.m. EST on Monday), provided that 

this particular Monday is not a U.S. 

federal holiday. 

• Example 4. A trader executes a 

trade at 13:42 UTC on Friday (9:42 a.m. 

EDT on Friday). The following Monday 

is Labor Day, a U.S. federal holiday. The 

reporting party must report by 13:42 

UTC on Tuesday (9:42 a.m. EDT on 

Tuesday). 

• Example 5. A trader executes a 

trade at 16:45 UTC on Wednesday, 

November 26, 2014 (11:45 a.m. EST on 

Wednesday, November 26, 2014). 

Thursday, November 27, 2014 is 

Thanksgiving, a U.S. federal holiday. 

The reporting party must report by 

16:45 UTC on Friday, November 28, 

2014 (11:45 a.m. EST on Friday, 

November 28, 2014). 

• Example 6. A trader executes a 

trade at 16:45 UTC on a Wednesday 

(11:45 a.m. EST on Wednesday). 

Thursday is not a U.S. federal holiday, 

but a large blizzard causes emergency 

closures in New York City and several 

other U.S. cities. The reporting party 

must report by 16:45 UTC on Thursday 

(11:45 a.m. EST on Thursday). 

3. Other Revisions To Accommodate the 

Interim Phase 

In addition to the changes noted 

above, the Commission is adopting the 

following technical changes to 

Regulation SBSR to implement the 

interim phase of reporting and public 

dissemination. First, the Commission is 

not adopting certain sections of rule text 

that referred to block trades and 

marking those sections as ‘‘Reserved.’’ 

Rule 900(c), as re-proposed, would have 

defined a ‘‘block trade’’ as a large 

notional security-based swap 

transaction that meets the criteria set 

forth in proposed Rule 907(b). Rule 

907(b), as proposed and re-proposed, 

would have required a registered SDR to 

establish and maintain policies and 

procedures ‘‘for calculating and 

publicizing block trade thresholds for 

all security-based swap instruments 

reported to the registered security-based 

swap data repository in accordance with 

the criteria and formula for determining 

block size as specified by the 

Commission.’’ Rule 907(b), as proposed 

and re-proposed, also would have 

excluded equity TRS instruments and 

any security-based swap contemplated 

by Section 13(m)(1)(C)(iv) of the 

Exchange Act 529 from the definition of 

‘‘block trade.’’ Because the Commission 

anticipates soliciting public comment 

on block thresholds and other rules 

related to block trades—including what 

role (if any) registered SDRs should play 

in calculating those thresholds—the 

Commission is not at this time defining 

the term ‘‘block trade’’ in Rule 900(c) or 

adopting Rule 907(b). Similarly, because 

the Commission is not at this time 

adopting the requirement to report in 

real time, the Commission is not 

adopting a definition of ‘‘real time’’ in 

Rule 900. 

Second, the Commission has 

determined not to utilize the term 

‘‘security-based swap instrument’’ 530 in 

Regulation SBSR. The Commission 

devised the original definition of 

‘‘security-based swap instrument’’ in 

connection with its overall analysis of 

the block trade issue. In the Regulation 

SBSR Proposing Release, the 

Commission stated its preliminary belief 

that it would not be appropriate to 

establish different block trade 

thresholds for similar instruments with 

different maturities. Thus, the proposed 

definition of ‘‘security-based swap 

instrument’’ did not include any 

distinction based on tenor or date until 

expiration.531

One commenter discussed the 

concept of security-based swap 

instruments in the context of its overall 

discussion of block trade issues.532 The 

commenter argued that a different block 

size threshold would have to be 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14623 

533See id. 

534 ISDA/SIFMA I at 10. 

535See Regulation SBSR Proposing Release, 75 FR 

75219. The Commission believed that the 

information required under Rule 901(d)(1) would be 

available relatively quickly for a security-based 

swap that was executed and confirmed 

electronically because most of the required 

information would already be in an electronic 

format. On the other hand, the Commission 

recognized that, for security-based swaps that are 

not executed or confirmed electronically, additional 

time might be needed to systematize the 

information required under Rule 901(d)(1) and put 

it into the appropriate format. See id. 

536See Better Markets I at 9 (noting that 

technology that would permit reporting within 

much shorter timeframes is widely available, and 

that market participants routinely adhere to much 

shorter timeframes for their own business and 

internal reporting); Tradeweb Letter at 5 (different 

reporting timeframes based on the method of 

execution potentially could create incentives for 

market participants not to take advantage of 

available technology); SDMA I at 3 (stating, with 

reference to the CFTC’s proposed rules, that 

different reporting timeframes based on method of 

execution could create a ‘race to the slowest’ among 

swap execution facilities, with market participants 

favoring slower-reporting swap execution facilities 

over more efficient and transparent facilities). 

537See MFA Letter at 5; DTCC II at 12. 

538See MFA Letter at 5. 

539See ISDA/SIFMA I at 9. 

540See DTCC II at 12. 

541See id. 

542See supra Section II(C)(2). 

543However, the registered SDR’s policies and 

procedures adopted under Rule 907(a)(1) generally 

should explain to reporting sides how to report if 

all the security-based swap transaction data 

required by Rules 901(c) and 901(d) is being 

reported simultaneously, and how to report if 

responsive data are being provided at separate 

times. In the latter case, the registered SDR should 

provide the reporting side with the transaction ID 

after the reporting side reports the information 

required by Rule 901(c). The reporting side would 

then include the transaction ID with its submission 

of data required by Rule 901(d), thereby allowing 

the registered SDR to match the Rule 901(c) report 

with the subsequent Rule 901(d) report. 

calculated for each category of securitybased swap instrument, so the 

boundaries of those categories would 

greatly impact market participants’ 

ability to engage in block trading. The 

commenter recommended, therefore, 

that instruments be classified in as few 

categories as possible.533 Another 

commenter argued that the definition of 

‘‘security-based swap instrument’’ 

‘‘should provide for more granular 

distinctions between different types of 

transaction within a single asset class to 

avoid grouping together transactions 

with quite different characteristics.’’ 534

The Commission anticipates soliciting 

public comment on block trade 

thresholds at a later date. Because the 

initial intent of the term ‘‘security-based 

swap instrument’’ was to delineate 

separate categories of security-based 

swaps that could have separate block 

trade thresholds, the Commission is not 

adopting the term ‘‘security-based swap 

instrument’’ at this time. The 

Commission anticipates soliciting 

public comment on whether and how to 

establish different categories of securitybased swaps—and what, if any, block 

thresholds and dissemination delays 

will apply to those different categories— 

when it solicits comment on block 

thresholds. 

Further, proposed Rule 902(b) would 

have specified the delay for 

dissemination of certain information 

about block trades to the public as well 

as what information a registered SDR 

should disseminate immediately. 

Because the Commission anticipates 

that it will re-propose all aspects of 

Regulation SBSR as they pertain to 

block trades, the Commission is not 

adopting Rule 902(b) at this time. 

Rules 901(j), as adopted, require the 

reporting of both primary and secondary 

trade information, respectively, for a 

security-based swap no later than 24 

hours after the time of execution (or 

acceptance for clearing in the case of a 

security-based swap that is subject to 

regulatory reporting and public 

dissemination solely by operation of 

Rule 908(a)(1)(ii)), or, if 24 hours after 

the time of execution or acceptance for 

clearing, as applicable, would fall on a 

day that is not a business day, by the 

same time on the next day that is a 

business day. Re-proposed Rule 

901(d)(2) would have required the 

reporting side to report what final Rule 

901(d) now terms the ‘‘secondary trade 

information’’ promptly, but in any 

event, no later than: (1) 15 minutes after 

the time of execution for a securitybased swap that is executed and 

confirmed electronically; (2) 30 minutes 

after the time of execution for a securitybased swap that is confirmed 

electronically but not executed 

electronically; or (3) 24 hours after the 

time of execution for a security-based 

swap that is not executed or confirmed 

electronically. In proposing these 

reporting timeframes, the Commission 

recognized that the amount of time 

required for counterparties to report the 

information required under proposed 

Rule 901(d)(1) depended upon, among 

other things, the extent to which the 

security-based swap was customized 

and whether the security-based swap 

was executed or confirmed 

electronically or manually.535

Generally, commenters’ views 

regarding the regulatory reporting 

timeframes in proposed Rule 901(d)(2) 

were mixed. While some commenters 

expressed concerns that the proposed 

timeframes were too lenient or 

incentivized slower technologies,536

other commenters expressed the view 

that the reporting timeframes in 

proposed Rule 901(d)(2) were not 

practicable.537 One of these commenters 

noted the likelihood of errors if 

reporting timeframes were too short.538

Another commenter urged the 

Commission to strike an appropriate 

balance between speed and accuracy in 

establishing timeframes for regulatory 

reporting.539 One commenter suggested 

that, initially, the Rule 901(d) regulatory 

reporting timeframes should be set 

closer to current market capability, with 

electronically confirmable trades 

reported within 24 hours.540 This 

commenter recommended a phase-in 

period to allow reporting parties to 

develop the necessary reporting 

capabilities, after which time shorter 

timeframes could be implemented.541

The Commission is not adopting the 

reporting timeframes proposed in Rule 

901(d)(2), and is therefore renumbering 

Rule 901(d)(1) as Rule 901(d).542

Because Rule 901(j), as adopted, allows 

reporting sides up to 24 hours to report 

the primary trade information pursuant 

to Rule 901(c) (or until the same time on 

the next business day if the trade occurs 

less than 24 hours before a weekend or 

federal holiday), the Commission 

believes that it is appropriate also to 

modify the timeframe for reporting the 

secondary trade information set forth in 

Rule 901(d) to harmonize with the Rule 

901(c) requirement. Although both the 

primary and secondary trade 

information must be reported within 24 

hours of the time of execution or 

acceptance for clearing, as applicable (or 

until the same time on the next business 

day if the trade occurs less than 24 

hours before a weekend or federal 

holiday), Rule 901 does not require that 

all of the information enumerated in 

Rules 901(c) and 901(d) be provided in 

a single trade report. Thus, a reporting 

side could, if permitted by the policies 

and procedures of the relevant 

registered SDR, make an initial report of 

the primary trade information followed 

by a subsequent report containing 

secondary trade information, so long as 

both reports were provided within the 

timeframe prescribed by Rule 901(j).543

The Commission acknowledges the 

issues raised by the commenters 

regarding the proposed reporting 

timeframes, and, in particular, the 

concerns that unreasonably short 

reporting timeframes would result in the 

submission of inaccurate transaction 

information. The Commission believes 

that the 24-hour reporting timeframe 

being adopted in Rule 901(j) strikes an 

appropriate balance, for the interim 

phase, between the need for prompt 

reporting of security-based swap 

transaction information and allowing 

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14624 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

544See DTCC II at 12; MFA at 5. 

545See Cleary II at 15–16. 

546Rule 900(e), as re-proposed, defined ‘‘confirm’’ 

as ‘‘the production of a confirmation that is agreed 

to by the parties to be definitive and complete and 

that has been manually, electronically, or, by some 

other legally equivalent means, signed.’’ 

547One commenter suggested that the 

Commission use the term ‘‘issued,’’ rather than 

‘‘confirm’’ to better reflect existing market practice 

with respect to confirming the terms of a securitybased swap. See ISDA IV at 10. The deletion of the 

term ‘‘confirm’’ from Regulation SBSR, as adopted, 

addresses this concern. 

548See Cleary II at 13 (‘‘we would recommend 

that the SEC gather further data on the costs and 

benefits of disclosing notional size before requiring 

such disclosure for all transactions’’); ISDA/SIFMA 

I at 5 (size of a block trade transaction should not 

be disclosed at any time); ISDA/SIFMA II at 8 

(same); ISDA/SIFMA Block Trade Study at 26–27 

(noting that reporting of notional amounts of block 

trades will hamper the execution of large-sized 

trades and recommending dissemination of capped 

volume information); Phoenix Letter at 3; SIFMA I 

at 5; UBS Letter at 2 (arguing actual notional 

amount of an illiquid security-based swap would 

provide information to the market about potential 

hedging activity); WMBAA II at 7 (arguing that 

dissemination of the full notional amount could 

jeopardize the anonymity of counterparties to the 

trade). 

549See WMBAA II at 7 (also noting that the result 

may be that counterparties are less willing to engage 

in large transactions); Phoenix Letter at 3 (stating 

that reporting block trades at the same time as nonblock trades could jeopardize the anonymity of the 

block trade). 

550See Cleary II at 13. 551See WMBAA II at 7; ISDA/SIFMA I at 5; ISDA/ 

SIFMA Block Trade Study at 2, 26–27; Vanguard 

Letter at 5; Goldman Sachs Letter at 6; SIFMA I at 

5; J.P. Morgan Letter at 12–13; MFA I at 4; MFA III 

at 8; UBS Letter at 2; FIA/FSF/ISDA/SIFMA Letter 

at 6; Phoenix Letter at 3; ISDA IV at 16. 552See Rule 902(c) (requiring that certain types of 

security-based swaps not be publicly disseminated). 

553One commenter appears to agree generally 

with this approach. See J.P. Morgan Letter at 14 

(‘‘ ‘un-masked’ trade-by-trade notional amounts 

should eventually be disseminated . . . in order to 

facilitate analysis of market trends by market 

participants and the academic community’’). 

554See Phoenix Letter at 3. 

555The Commission further notes that equity total 

return swaps are synthetic substitutes for positions 

in the underlying equity security or securities; 

therefore, the Commission believes that it would 

not be appropriate to allow masking for a synthetic 

substitute when there is no masking exceptions to 

public dissemination in the cash equities markets. 

556See ICI II at 7 (‘‘We also support the SEC reopening for comment certain issues related to block 

trades—such as the required time delays—in 

connection with the future SEC proposal regarding 

how to define block trades’’). 

557See Hedging Analysis at 5. 

558See infra Section XXII(C)(3)(a) (describing the 

importance of conducting additional data analysis 

during the interim phase). 

reporting entities sufficient time to 

develop fast and robust reporting 

capability. The Commission notes that 

some commenters supported a 24-hour 

reporting timeframe as consistent with 

existing industry reporting capability,544

and believes that this timeframe 

addresses commenters’ concerns that 

some elements of the required 

information might not be available 

within the initially proposed reporting 

timeframes.545

Finally, Rule 901(d)(2), as proposed 

and re-proposed, would have 

established reporting timeframes based 

on whether a security-based swap is 

executed and/or confirmed 

electronically. The term ‘‘confirm’’ 

appeared only in Rule 901(d)(2), as 

proposed and re-proposed.546 Because 

this term does not appear in Rule 

901(d)(2), as adopted, the Commission 

has determined not to adopt a definition 

for the term ‘‘confirm’’ in final Rule 

900.547

4. Dissemination of Notional Amount 

The Commission is mindful of 

comments expressing concern about 

dissemination of the full notional 

amount for block trades.548 For 

example, two commenters expressed the 

view that disseminating the notional 

amount of a block trade could 

jeopardize the anonymity of the 

counterparties.549 One commenter, who 

noted that TRACE never requires the 

dissemination of the exact notional 

amount of block transactions, suggested 

that the Commission had not fully 

explained its rationale for not adopting 

this approach for security-based 

swaps.550 Numerous commenters 

supported dissemination of the notional 

amount of block trades through a 

‘‘masking’’ or ‘‘size plus’’ convention 

comparable to that used by TRACE, in 

which transactions larger than a 

specified size would be reported as 

‘‘size plus.’’ 551

Under Rule 902(a), as adopted, a 

registered SDR is required to publicly 

disseminate (for all disseminationeligible transactions 552), immediately 

upon receipt of the transaction report, 

all of the elements required by Rule 

901(c), including the true notional 

amount of the transaction (as opposed to 

a ‘‘capped’’ or ‘‘bucketed’’ notional 

amount). The Commission believes the 

T+24 hour approach during the interim 

phase should address commenters’ 

concerns about disseminating the true 

notional amount of a transaction, 

including concerns about preserving the 

anonymity of counterparties.553 One 

commenter expressed concern about 

reporting blocks and non-blocks in the 

same timeframe, which, the commenter 

stated, would prevent market 

participants from being able to hedge 

the trade.554 The Commission believes 

that a 24-hour timeframe for reporting of 

transaction information should address 

any concerns about disseminating the 

true notional amount of any transaction 

and allow market participants who 

choose to hedge adequate time to 

accomplish a majority of their hedging 

activity before transaction data is 

publicly disseminated.555 During the 

interim phase when no transaction must 

be reported in less than 24 hours after 

execution, the Commission will be able 

to collect and analyze transaction 

information to develop an 

understanding of how market 

participants are reacting to the 

introduction of mandated post-trade 

transparency. The Commission expects 

to study, among other things, the 

frequency with which security-based 

swap market participants transact in 

non-standard notional amounts, and 

will attempt to observe whether the 

market reacts differently to last-sale 

prints of any non-standard sizes versus 

more conventional sizes. Based on such 

data and analysis, the Commission 

anticipates considering whether it may 

be appropriate to establish notional caps 

or rounding conventions in 

disseminated reports. 

5. Analysis Period 

As discussed in Section XXII(C)(3)(a), 

infra, during the interim phase, the 

Commission will have access to more 

useful data about how different securitybased swap trades of different sizes and 

with different reporting delays might be 

affecting subsequent behavior in the 

market, as well as any additional data 

and analysis that might be submitted by 

third parties.556 Furthermore, once 

implemented, reporting sides will be 

required under Regulation SBSR to 

submit their security-based swap 

execution times to a registered SDR. As 

noted above, security-based swap 

transaction data currently stored in 

DTCC–TIW includes the time of 

reporting but not the time of the 

execution.557 Having the execution time 

instead of only the reporting time will 

allow a more robust and granular 

analysis of any hedging that may or may 

not occur within the first 24-hour period 

after execution. 

The Commission is directing its staff 

to use data collected during the interim 

phase to publish a report for each asset 

class of security-based swaps assessing 

the impact of post-trade transparency on 

that asset class. The Appendix to Rule 

901 of Regulation SBSR sets forth the 

guidelines for these reports, which must 

be completed no later than two years 

following the initiation of public 

dissemination of SBS transaction data 

by the first registered SDR in each asset 

class.558

The completion of the staff’s report 

for an asset class will mark the 

beginning of an analysis period, during 

which the Commission anticipates 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14625 

559See Regulation SBSR Proposing Release, 75 FR 

75284. 

560See 15 U.S.C. 78m(m)(1)(E)(ii)–(iii). The 

Commission anticipates that these proposed rules 

also would address certain issues raised by 

commenters during the comment period for 

Regulation SBSR. For example, several commenters 

proposed calculation methodologies for block trade 

thresholds. See, e.g., Goldman Sachs Letter at 4–6; 

ISDA/SIFMA I at 4; Better Markets I at 6; WMBAA 

II at 3; ISDA/SIFMA Block Trade Study at 26; 

Cleary II at 14 (supporting various tests or 

methodologies for establishing block trade 

thresholds). Commenters suggested various 

approaches for how often block thresholds should 

be updated. See ISDA/SIFMA I at 5 (stating that 

block trade thresholds should be updated at least 

every three months because liquidity in the OTC 

markets may change quickly); ISDA/SIFMA II at 8 

(stating that the block trading exemption rules 

should be updated quarterly); ISDA/SIFMA Block 

Trade Study at 2 (stating that the reporting rules 

should be re-evaluated regularly to ensure that they 

reflect the changing characteristics of the market); 

ICI I at 3 (stating that block trade thresholds would 

need to be reviewed more than once a year to 

remain meaningful); WMBAA II at 5 

(recommending that block trade thresholds be 

updated at appropriate intervals); MFA III at 8 

(stating that an SB SEF’s swap review committee 

should periodically determine what constitutes a 

‘‘block’’ for each security-based swap or securitybased swap class that the SF SEF trades). See also 

Barclays Letter at 5 (generally supporting a 30- 

calendar-day look-back for determining block size 

thresholds). 

561See Institutional Investors Letter at 4 

(recommending that the CFTC collect market data 

for one year before adopting rules relating to block 

trades); MFA II, Recommended Timeline at 4; 

WMBAA III at 6; FIA/FSF/ISDA/SIFMA Letter at 6 

(appropriate block trade thresholds, and therefore 

real-time reporting requirements, can be established 

only after the commencement of SDR reporting to 

regulators and careful analysis of security-based 

swap market transaction data). This approach is 

also broadly consistent with the implementation of 

the TRACE system, which shortened reporting 

requirements over time. Several commenters 

recommended a phased reporting approach 

analogous to TRACE. See CCMR I at 2; Cleary II at 

20; DTCC II at 9–10; FINRA Letter at 4–5; ISDA/

SIFMA I at 10; ISDA/SIFMA Block Trade Study at 

2; UBS Letter at 2–3; WMBAA II at 5. 

562The Commission recognizes that market 

participants may use a variety of other terms to refer 

to such transactions, including ‘‘blocks,’’ ‘‘parent/ 

child’’ transactions, and ‘‘splits.’’ The Commission 

has determined to use a single term, ‘‘bunched 

orders,’’ for purposes of this release, as this appears 

to be a widely accepted term. See, e.g., ‘‘Bunched 

orders challenge SEFs,’’ MarketsMedia (March 25, 

2014), available at http://marketsmedia.com/

bunched-orders-challenge-sefs/ (last visited 

September 22, 2014); ‘‘Cleared bunched trades 

could become mandatory rule,’’ Futures and 

Options World (October 31, 2013) (available at 

http://www.fow.com/3273356/Cleared-bunchedtrades-could-become-mandatory-rule.html (last 

visited September 22, 2014). 

563 In aggregate, the notional amount of the 

security-based swaps that result from the allocation 

is the same as the notional amount of the executed 

bunched order. 

564See ISDA/SIFMA I at 7–8. See also ISDA IV 

at 10, 13 (asserting that the bunched order 

execution could be disseminated publicly, but that 

post-allocation activities should be excluded from 

public dissemination). 

565See id. at 8. 

566See supra Section V. A bunched order 

execution will be subject to this reporting hierarchy 

unless it is executed on a platform and submitted 

to clearing. 

567Rule 901(d)(1) requires the reporting side for 

a security-based swap to report ‘‘the counterparty 

ID or the execution agent ID of each counterparty, 

as applicable.’’ The Commission notes that an asset 

manager acts as an execution agent for the clients 

that receive allocations of an executed bunched 

order. 

568See supra Section VI. 

considering the report, any public 

comments received on the report, and 

any other relevant data and information, 

including the Commission’s original 

proposal to define ‘‘real time’’ in the 

context of Section 13(m) of the 

Exchange Act to mean ‘‘as soon as 

technologically practicable, but in no 

event later than 15 minutes after the 

time of execution of a security-based 

swap transaction.’’ 559 Based on this 

analysis, the Commission anticipates 

that it will prepare a proposal that 

would address, among other things: (1) 

The criteria for determining what 

constitutes a large notional securitybased swap transaction (block trade) for 

particular markets and contracts; and (2) 

the appropriate time delay for 

disseminating large notional securitybased swap transactions (block trades) 

to the public.560 The Commission 

believes that the approach of studying 

security-based swap market activity 

once post-trade transparency is 

implemented, but before adopting block 

trade rules, accords with the 

recommendations of several 

commenters.561

VIII. Reporting and Public 

Dissemination of Security-Based Swaps 

Involving Allocation 

This section explains the application 

of Regulation SBSR to certain securitybased swaps executed by an asset 

manager on behalf of multiple clients— 

transactions involving what are 

sometimes referred to as ‘‘bunched 

orders.’’ 562 To execute a bunched order, 

an asset manager negotiates and 

executes a security-based swap with a 

counterparty, typically a security-based 

swap dealer, on behalf of multiple 

clients. The bunched order could be 

executed on- or off-platform. The asset 

manager would allocate a fractional 

amount of the aggregate notional 

amount of the transaction to each client, 

either at the time of execution or some 

time after execution. Allocation results 

in the termination of the executed 

bunched order and the creation of new 

security-based swaps between the 

security-based swap dealer and the 

accounts managed by the asset 

manager.563 By executing a bunched 

order, the asset manager avoids having 

to negotiate the account-level 

transactions individually, and obtains 

exposure for each account on the same 

terms (except, perhaps, for size). 

A. Discussion of Comments Received 

and Application of Regulation SBSR 

In response to the Regulation SBSR 

Proposing Release, one commenter 

stated that asset managers commonly 

use bunched orders and allocations in 

the OTC derivatives market, and 

recommended that publicly 

disseminating the execution of a 

bunched order—without the allocation 

information—would satisfy the 

transparency objective of Title VII and 

be consistent with TRACE reporting.564

The commenter also expressed the view 

that the reporting party for a bunched 

order execution should be obligated to 

report allocation information, which 

would be necessary to indicate the final 

placement of risk derived from the 

initial trade.565 The discussion below 

explains how Regulation SBSR’s 

regulatory reporting and public 

dissemination requirements apply to 

executed bunched orders that are 

subject to the reporting hierarchy in 

Rule 901(a)(2)(ii) and the security-based 

swaps that result from the allocation of 

these transactions, to the extent that the 

resulting security-based swaps are not 

cleared. The Regulation SBSR Proposed 

Amendments Release is proposing 

guidance for reporting platformexecuted bunched orders that will be 

submitted to clearing and security-based 

swaps that result from the allocation of 

a bunched order if the resulting 

security-based swaps are cleared. 

Regulation SBSR requires bunched 

order executions to be reported like 

other security-based swaps. The 

reporting side for a bunched order 

execution subject to the reporting 

hierarchy in Rule 901(a)(2)(ii) 566 must 

report the information required by Rules 

901(c) and 901(d) for the bunched order 

execution, including the notional 

amount of the bunched order execution, 

to a registered SDR.567 The information 

described in final Rule 901(c) will be 

publicly disseminated under final Rule 

902(a), like any other security-based 

swap transaction that does not fall 

within the enumerated exceptions to 

public dissemination in Rule 902(c).568

The Commission believes that it is 

appropriate to enhance price discovery, 

and thus consistent with the statutory 

provisions governing public 

dissemination of security-based swaps, 

to require public dissemination of a 

single transaction report showing the 

aggregate notional amount of the 

bunched order execution (i.e., the size 

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14626 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

569See 15 U.S.C. 13(m)(1)(B) (authorizing the 

Commission to make security-based swap 

transaction and pricing data available to the public 

‘‘in such form and at such times as the Commission 

determines appropriate to enhance price 

discovery’’). 

570See supra Section V(C)(5). 

571As stated above, allocation also results in the 

termination of the bunched order execution, which 

is a life cycle event of the original transaction. This 

life cycle event must be reported, in accordance 

with Rule 901(e), to the registered SDR that receives 

the report of the original bunched order execution. 

572 If 24 hours after the time of allocation would 

fall on a day that is not a business day, the report 

of the security-based swaps resulting from the 

allocation would be due by the same time on the 

next day that is a business day. See Rule 901(j). One 

commenter requested that Regulation SBSR reflect 

that the timeframe for reporting security-based 

swaps resulting from a bunched order execution 

commence upon receipt of the identity of the 

counterparties to the bunched order execution by 

the reporting party during its own business hours. 

See ISDA IV at 10. The Commission believes that 

the requirement that the reporting side make the 

required report within 24 hours of the time that the 

new security-based swap is created is responsive to 

this comment. 

573Rule 901(d)(10), as adopted, provides that, if 

a ‘‘security-based swap arises from the allocation, 

termination, novation, or assignment of one or more 

existing security-based swaps,’’ the reporting side 

must report ‘‘the transaction ID of the allocated, 

terminated, assigned, or novated security-based 

swap(s),’’ subject to one exception that would not 

apply to an allocation that is not submitted for 

clearing. 

574See ISDA/SIFMA I at 7–8; ISDA IV at 10, 13. 

575See supra Section VI(D). 

576See MFA I at 2–3 (‘‘Counterparties are often 

aware of an investment manager’s standard fund 

allocation methodology and therefore, reporting 

transactions at the allocated level . . . will make 

evident an allocation scheme that other participants 

can easily associate with a particular investment 

manager’’). 

577See Rule 901(c)(4) (requiring reporting of the 

notional amount of a security-based swap and the 

currency in which the notional amount is 

denominated). 578See Rule 901(a) (requiring that a securitybased swap, ‘‘including a security-based swap that 

results from the allocation, termination, novation, 

or assignment of another security-based swap shall 

be reported’’ as provided in the rest of the rule). 

prior to allocation).569 The public 

thereby will know the full size of the 

bunched order execution and that this 

size was negotiated at a single price. 

The reporting side for a bunched order 

execution also must report life cycle 

events for the bunched order 

execution—including the termination of 

the executed bunched order that result 

from its allocation—to the registered 

SDR that receives the initial report of 

the transaction. 

When a bunched order execution is 

allocated, new security-based swaps are 

created that must be reported to a 

registered SDR pursuant to Rule 901(a). 

To clarify that point, the introductory 

language to final Rule 901(a) states that 

a ‘‘security-based swap, including a 

security-based swap that results from 

the allocation, termination, novation, or 

assignment of another security-based 

swap, shall be reported’’ as provided in 

the rest of the rule.570 Reporting of the 

security-based swaps resulting from the 

allocation of a bunched order execution 

should assure that the Commission and 

other relevant authorities know the final 

placement of risk that results from the 

bunched order execution.571 As with 

any other security-based swap, the 

reporting side for a security-based swap 

resulting from an allocation is 

determined by Rule 901(a). Also, as 

with any other security-based swap, the 

reporting side must make the required 

report within 24 hours of the time that 

the new security-based swap is 

created—not within 24 hours of the time 

of execution of the original bunched 

order.572 Under Rule 901(d)(10), the 

reporting side for a security-based swap 

resulting from an allocation must report 

the transaction ID of the executed 

bunched order as part of the report of 

the new security-based swap.573 This 

requirement will allow the Commission 

and other relevant authorities to link a 

report of a bunched order execution to 

the smaller security-based swaps that 

result from the allocation of the 

bunched order execution. Because these 

related transactions can be linked across 

registered SDRs using the transaction ID 

of the bunched order execution, the 

Commission believes that it is not 

necessary or appropriate to require that 

the security-based swaps resulting from 

the allocation be reported to the same 

registered SDR that received the 

transaction report of the original 

transaction. 

The Commission agrees with the 

commenters who recommended that 

publicly disseminating the execution of 

a bunched order—without the allocation 

information—would satisfy the 

transparency objective of Title VII.574

Therefore, Regulation SBSR does not 

require a registered SDR to publicly 

disseminate reports of the new securitybased swaps that result from an 

allocation. In fact, as described above, 

Rule 902(c)(7), as adopted, prohibits a 

registered SDR from disseminating 

‘‘[a]ny information regarding the 

allocation of a security-based swap.’’ 575

This approach also accords with the 

recommendation of the commenter who 

urged that the aggregate notional 

amount prior to allocation be 

disseminated, rather than the individual 

transaction sizes, in order to preserve 

anonymity of the asset manager and its 

clients.576

The Commission notes that Rule 

907(a)(1), as adopted, requires a 

registered SDR to establish and maintain 

policies and procedures that, among 

other things, enumerate the specific data 

elements of a security-based swap that 

must be reported. Registered SDRs 

should consider describing, as part of 

these policies and procedures, the 

means by which persons with a duty to 

report bunched order executions—and 

the new security-based swaps that result 

from the allocation—must report the 

information required by Rules 901(c) 

and 901(d). 

B. Example: Reporting and Public 

Dissemination for an Uncleared 

Bunched Order Execution 

The following example demonstrates 

how Regulation SBSR applies to a 

bunched order execution that will not 

be cleared and the security-based swaps 

that result from the allocation of that 

bunched order execution. Assume that 

an asset manager, acting on behalf of 

several investment fund clients, 

executes a bunched order with a 

registered security-based swap dealer. 

Assume that the transaction is not 

submitted to clearing and there are no 

indirect counterparties on either side. 

The execution of the bunched order 

could occur either on a platform or not. 

1. Reporting the Executed Bunched 

Order 

Under Rule 901(a)(2)(ii), as adopted, 

the registered security-based swap 

dealer is the reporting side for the 

bunched order execution because only 

one side of the transaction includes a 

registered security-based swap dealer. 

Under final Rules 901(c) and 901(d), the 

registered security-based swap dealer 

has up to 24 hours after the time of 

execution of the bunched order to report 

all applicable primary and secondary 

trade information to a registered SDR. 

The registered security-based swap 

dealer must report the entire notional 

amount of the executed bunched order 

as part of the Rule 901(c) primary trade 

information.577 Rule 902(a) requires the 

registered SDR to publicly disseminate 

a single last-sale print showing the 

aggregate notional amount of the 

bunched order execution immediately 

upon receiving the report from the 

registered security-based swap dealer. 

2. Reporting the Allocations 

Regulation SBSR also requires 

reporting to a registered SDR of the 

security-based swaps that result from 

allocation of the bunched order 

execution.578 As the reporting side for 

the executed bunched order, the 

registered security-based swap dealer 

must make a life cycle event report, in 

accordance with Rule 901(e), to notify 

the registered SDR that received the 

report of the executed bunched order 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14627 

579The Commission assumes that the investment 

funds would not be registered security-based swap 

dealers for purposes of these examples. 

580Even though the reports could be made at the 

same time, Rule 901(a) requires a report of a 

bunched order execution and an associated 

allocation to be maintained as separate records by 

a registered SDR because the execution of the 

bunched order and the allocations are separate 

reportable security-based swap transactions. 

581See 75 FR 75214–15. 

582 Id. at 75215. 

583See id. at 75237. 

584See 78 FR 31069–72. 

585See id. at 31071–72. 

586Cravath Letter at 9. 

587 Japanese Banks Letter at 5. 

588See also Multiple Associations IV at 6 (stating 

that ‘‘many of the transaction-based requirements in 

Title VII, such as . . . trade reporting rules, 

generally do not further legislative or regulatory 

purposes when applied to inter-affiliate swaps,’’ but 

without specifying whether the comment was with 

respect to regulatory reporting, public 

dissemination, or both). 

589See 78 FR 31072. 

that the trade has been allocated, which 

terminates the security-based swap. 

Pursuant to Rule 901(a)(2)(ii), the 

registered security-based swap dealer 

also is the reporting side for each 

security-based swap resulting from 

allocation of the bunched order 

execution because only one side of the 

transaction includes a registered 

security-based swap dealer.579 If the 

asset manager provides the allocation 

information to the registered securitybased swap dealer prior to or 

contemporaneous with the bunched 

order execution, the registered securitybased swap dealer could report the 

bunched order execution and the 

security-based swaps that result from its 

allocation to a registered SDR at the 

same time.580 If the asset manager does 

not provide the allocation information 

to the registered security-based swap 

dealer until some time after execution of 

the bunched order, the registered 

security-based swap dealer must report 

each security-based swap resulting from 

the allocation within 24 hours of the 

allocation. In either case, the reports of 

the security-based swaps resulting from 

the allocation of the bunched order 

execution must include the 

counterparty IDs of each investment 

fund and the notional amount of each 

security-based swap resulting from the 

allocation. In either case, Rule 

901(d)(10) requires each report of a 

security-based swap resulting from the 

allocation to include the transaction ID 

of the bunched order execution so that 

the Commission and other relevant 

authorities will have the ability to link 

each resulting transaction with the 

initial bunched order execution. 

IX. Inter-Affiliate Security-Based 

Swaps 

A. Background and Summary of Final 

Rule 

Regulation SBSR, as initially 

proposed, did not contemplate any 

exception from reporting for interaffiliate security-based swaps. In the 

Regulation SBSR Proposing Release, the 

Commission expressed the preliminary 

view that a report of an inter-affiliate 

security-based swap should be publicly 

disseminated with an indicator 

identifying the transaction as an interaffiliate security-based swap.581 The 

Commission noted that, for such 

transactions, ‘‘there might not be an 

arm’s length negotiation over the terms 

of the [security-based swap] transaction, 

and disseminating a report of the 

transaction without noting that fact 

would be inimical to price 

discovery.’’ 582 Rule 907(a)(4), as 

proposed, would have required a 

registered SDR to establish and maintain 

written policies and procedures 

describing, among other things, how 

reporting parties would report—and 

consistent with the enhancement of 

price discovery, how the registered SDR 

would publicly disseminate—securitybased swap transactions that do not 

involve an opportunity to negotiate any 

material terms, other than the 

counterparty.583

The Commission received several 

comments regarding inter-affiliate 

security-based swaps in response to the 

Regulation SBSR Proposing Release and 

discussed those comments in the CrossBorder Proposing Release.584 Although 

the Cross-Border Proposing Release did 

not propose to revise any portion of 

Regulation SBSR with regard to the 

treatment of inter-affiliate securitybased swaps, the Commission provided 

some preliminary thoughts on how 

Regulation SBSR could be applied to 

them, particularly as regards to public 

dissemination, in a manner that could 

address commenters’ concerns without 

taking the step of suppressing all interaffiliate transactions from public 

dissemination.585 In response to the 

Cross-Border Proposing Release, the 

Commission received additional 

comments, described below, regarding 

the application of Regulation SBSR to 

inter-affiliate security-based swaps. 

Regulation SBSR, as adopted, applies 

to all security-based swaps, including 

inter-affiliate security-based swaps. The 

Commission has considered, but is not 

adopting, any exemption from 

Regulation SBSR’s regulatory reporting 

or public dissemination requirements 

for inter-affiliate security-based swaps. 

Therefore, Rules 901(c) and 901(d) 

require reporting of inter-affiliate 

security-based swaps; Rule 901(i) 

requires reporting of historical interaffiliate security-based swaps; and Rule 

902 requires public dissemination of 

inter-affiliate security-based swaps. 

Furthermore, Rule 907(a)(4) requires a 

registered SDR to establish and maintain 

policies and procedures that, among 

other things, identify characteristics of 

or circumstances associated with the 

execution or reporting of a securitybased swap that could, in the fair and 

reasonable estimation of the registered 

SDR, cause a person without knowledge 

of such characteristics or circumstances 

to receive a distorted view of the 

market. As discussed in Section VI(G), 

supra, the Commission generally 

believes that a registered SDR should 

establish a flag for inter-affiliate 

security-based swaps to help market 

observers better understand the 

information that is publicly 

disseminated. 

B. Discussion of Comments 

1. Regulatory Reporting of Inter-Affiliate 

Security-Based Swaps 

Most of the comments relating to 

inter-affiliate security-based swaps, in 

response to both the initial proposal and 

the Cross-Border Proposing Release 

(which re-proposed Regulation SBSR in 

its entirety), pertained to public 

dissemination. However, one 

commenter stated that, because interaffiliate transactions should not be 

publicly disseminated, it also should be 

unnecessary to ‘‘collect’’ information 

about them.586 Another commenter on 

the Regulation SBSR Proposing Release 

argued that, for a foreign entity 

registered as a bank holding company 

and subject to the consolidated 

supervision of the Federal Reserve 

System, the reporting of inter-affiliate 

transactions would be superfluous 

because the Federal Reserve has ‘‘ample 

authority to monitor transactions among 

affiliates,’’ 587 suggesting that even 

regulatory reporting of inter-affiliate 

security-based swaps should not be 

necessary.588 In the Cross-Border 

Proposing Release, the Commission 

specifically asked whether commenters 

believed that cross-border inter-affiliate 

security-based swaps should be 

excluded from the regulatory reporting 

requirements of Regulation SBSR and, if 

so, under what circumstances such 

security-based swaps should be 

excluded.589 No commenters on the 

Cross-Border Proposing Release 

responded to this particular question 

pertaining to regulatory reporting. 

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14628 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

590Section 13A(a)(1) of the Exchange Act, 15 

U.S.C. 78m–1(a)(1), provides that each securitybased swap that is not accepted for clearing shall 

be subject to regulatory reporting. Section 

13(m)(1)(G) of the Exchange Act, 15 U.S.C. 

78m(m)(1)(G), provides that each security-based 

swap (whether cleared or uncleared) shall be 

reported to a registered SDR. 

591 In addition, one group of commenters 

acknowledged that ‘‘a number of rules that apply to 

the core operations of a registered entity will 

perforce apply to such entity’s inter-affiliate swap 

transactions and could further Dodd-Frank policy 

purposes.’’ Multiple Associations Letter at 9. These 

commenters stated that inter-affiliate transactions 

would need to be taken into account in calculating 

an entity’s capital requirements, and that internal 

recordkeeping requirements are essential to the 

oversight of the security-based swap business. See 

id. The Commission notes that regulatory reporting 

of all security-based swaps, including inter-affiliate 

security-based swaps, will assist the Commission 

and other relevant authorities in overseeing 

compliance with these capital and recordkeeping 

requirements, as the regulatory report of an entity’s 

security-based swap activity could provide an 

external check of the internal records of such 

entities’ positions and activities. 

592Cleary II at 17. See also SIFMA/FIA/

Roundtable Letter at A–44 (stating that ‘‘real-time 

reporting of inter-affiliate [security-based swaps] 

. . . would distort market information and thus 

have a detrimental market and commercial 

impact’’). 

593 ISDA/SIFMA I at 13. See also ISDA IV at 13 

(recommending that inter-affiliate trades should not 

be subject to public dissemination). 

594Multiple Associations Letter at 11–12. See also 

ISDA I at 5 (stating, in the context of pre-enactment 

security-based swaps, that inter-affiliate securitybased swaps should not be subject to reporting). 

595Multiple Associations Letter at 16. 

596See id. at 11–12. 

597These policies and procedures could address 

not only reporting of whether a security-based swap 

is an inter-affiliate transaction, but also whether the 

initial security-based swap was executed in a 

jurisdiction with public dissemination 

requirements. This could be either the United States 

or another jurisdiction that imposes last-sale 

transparency requirements similar to those in 

Regulation SBSR. Further, these policies and 

procedures also could address whether to indicate 

the approximate time when the initial securitybased swap was executed. For example, there could 

be condition flags for the initial security-based 

swap having been executed within the past 24 

hours, between one and seven days before, or longer 

than seven days before. An indication that the 

initial trade was executed less than 24 hours before 

could provide significant price discovery value, 

while an indication that the initial trade was 

executed over a week before could, all things being 

equal, have less. However, even information about 

a trade executed over a week ago (or more) could 

have price discovery value for security-based swaps 

that trade infrequently. 

The Commission continues to believe 

that the Commission and other relevant 

authorities should have ready access to 

information about the specific 

counterparties that hold positions in all 

security-based swaps subject to 

Regulation SBSR. While it is true that 

the Federal Reserve or perhaps another 

relevant authority might exercise 

consolidated supervision over a group, 

such supervision might not provide the 

Commission and other relevant 

authorities with current and specific 

information about security-based swap 

positions held by the group’s 

subsidiaries. As a result, it would likely 

be more difficult for relevant authorities 

to conduct general market analysis or 

surveillance of market behavior, and 

could present difficulties during a crisis, 

when ready access to accurate and 

timely information about specific risk 

exposures might be crucial. 

Furthermore, the statutory provisions 

that require regulatory reporting of 

security-based swap transactions state 

that ‘‘each’’ security-based swap shall be 

reported; these statutory provisions do 

not by their terms limit the reporting 

requirement to transactions having 

particular characteristics (such as being 

negotiated at arm’s length).590 Even 

absent these constraints, for the reasons 

described above, the Commission does 

not believe that an exemption from 

regulatory reporting for these 

transactions would be appropriate. 

Therefore, Regulation SBSR subjects 

inter-affiliate security-based swaps to 

regulatory reporting.591

2. Public Dissemination of Inter-Affiliate 

Security-Based Swaps 

As discussed below, some 

commenters raised concerns regarding 

the public dissemination of interaffiliate security-based swaps. After 

carefully considering the issues raised 

by these commenters, the Commission 

has determined to adopt Regulation 

SBSR with no exemption from the 

public dissemination requirements for 

inter-affiliate security-based swaps. 

As a preliminary matter, the 

Commission notes that, once a securitybased swap transaction has been 

reported to a registered SDR, the 

counterparties assume no additional 

burdens associated with public 

dissemination of the transaction. That 

function will be carried out solely by 

the registered SDR. Thus, requiring 

registered SDRs to publicly disseminate 

security-based swaps, including interaffiliate security-based swaps, will not 

increase the compliance burden on 

security-based swap counterparties. 

One commenter argued that interaffiliate security-based swaps should 

not be subject to public dissemination 

because ‘‘public reporting could confuse 

market participants with irrelevant 

information’’ and suggested that ‘‘the 

Commissions collect data on these 

transactions but not require 

dissemination to the public at large.’’ 592

Another commenter stated that an interaffiliate transaction ‘‘does not contain 

any additional price information beyond 

that contained in the transaction with 

the customer.’’ 593 One group of 

commenters argued that publicly 

disseminating inter-affiliate transactions 

‘‘will distort the establishment of 

position limits, analysis of open 

interest, determinations of block trade 

thresholds and performance of other 

important regulatory analysis, functions 

and enforcement activities that require 

an accurate assessment of the [securitybased] swaps market.’’ 594 These 

commenters stated, further, that interaffiliate security-based swaps ‘‘could be 

required to be publicly reported in 

multiple jurisdictions, even though they 

are not suitable for reporting in any 

jurisdiction.’’ 595

An accurate assessment of the 

security-based swap market will be 

necessary for a wide range of functions, 

potentially including—as noted by this 

group of commenters—analysis of open 

interest and the establishment of block 

trade thresholds.596 The Commission 

believes that users of security-based 

swap market data—whether regulators, 

SDRs, market participants, or the public 

at large—should have an accurate and 

undistorted view of the market. 

However, it does not follow that public 

dissemination of inter-affiliate securitybased swaps will necessarily prevent an 

accurate assessment of the securitybased swap market. 

The need to distinguish reports of 

initial transactions from subsequent 

inter-affiliate transactions exists 

whether or not the latter are publicly 

disseminated. As noted above, the 

Commission is requiring each registered 

SDR to adopt, among others, policies 

and procedures for flagging transaction 

reports that have special 

circumstances.597 This flagging 

mechanism is designed to provide 

regulators with a more accurate view of 

the security-based swap market, and the 

same mechanism can be applied to 

publicly disseminated last-sale reports 

to give market observers the same view. 

The Commission continues to believe 

that the commenters’ concerns about the 

potentially limited price discovery 

value of inter-affiliate security-based 

swaps can be addressed through the 

public dissemination of relevant data 

that flags such limitations, rather than 

suppressing these transactions from 

public dissemination entirely. 

Additionally, even if the report of an 

initial security-based swap transaction 

has been publicly disseminated in 

another jurisdiction, the Commission 

believes that it would be preferable to 

disseminate a report of the subsequent 

inter-affiliate transaction with an 

appropriate condition flag rather than 

suppressing a report of the inter-affiliate 

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598SIFMA/FIA/Roundtable Letter at A–44. 

599Cleary II at 17. 

600See Multiple Associations Letter at 12. 

601See Rule 901(c)(2). 

602SIFMA/FIA/Roundtable Letter at A–44; 

Multiple Associations Letter at 11 (emphasis 

added). 

603SIFMA/FIA/Roundtable Letter at A–44. 

604See Multiple Associations Letter at 12 (‘‘The 

market-facing swaps already will have been 

reported and therefore, to require that inter-affiliate 

swaps also be reported will duplicate 

information’’). 

605 In addition, even if the initial transaction is 

publicly disseminated, the Commission does not 

believe that publicly disseminating the second, 

inter-affiliate transaction would cause observers to 

obtain a distorted view of the market, as long as the 

second transaction is flagged as an inter-affiliate 

transaction. See supra Section VI(G). 

transaction from public dissemination 

through a registered SDR. Public 

dissemination of such a transaction by 

a registered SDR would help to assure 

that information concerning the 

transaction was readily available to 

participants in the U.S. market and 

other market observers. 

One group of commenters argued that 

‘‘use of inter-affiliate [security-based 

swaps] not only allows risks to reside 

where they are more efficiently 

managed, but it also has a net positive 

effect on an institution’s assets and 

liquidity, as well as on its efficiency in 

deploying capital. For these reasons, we 

believe that there should be an interaffiliate exemption from the public 

dissemination requirements.’’ 598

Another commenter raised similar 

concerns, arguing that ‘‘public reporting 

of inter-affiliate transactions could 

seriously interfere with the internal risk 

management practices of a corporate 

group’’ and that ‘‘[p]ublic disclosure of 

a transaction between affiliates could 

prompt other market participants to act 

in a way that would prevent the 

corporate group from following through 

with its risk management strategy by, for 

instance, causing adverse price 

movements in the market that the riskcarrying affiliate would use to 

hedge.’’ 599 The Commission agrees 

generally that corporate groups should 

engage in appropriate risk management 

practices. However, the Commission 

does not agree that Regulation SBSR, as 

adopted, is inimical to effective risk 

management. The Commission notes 

that, during the first phase of Regulation 

SBSR, all security-based swaps— 

regardless of size—must be reported 

within 24 hours from the time of 

execution and—except with regard to 

transactions falling within Rule 902(c)— 

immediately publicly disseminated. As 

discussed in Section VII, supra, this 

reporting timeframe is designed, in part, 

to minimize any potential for market 

disruption resulting from public 

dissemination of any security-based 

swap transaction during the interim 

phase of Regulation SBSR. The 

Commission anticipates that, during the 

interim period, it will collect and 

analyze data concerning the sizes of 

transactions that potentially affect 

liquidity in the market. If the 

Commission ultimately determines that 

some form of block trade exception to 

real-time public dissemination is 

appropriate, an inter-affiliate securitybased swap of block size would be able 

to avail itself of that exception. The 

Commission sees no basis for 

concluding, at this time, that interaffiliate security-based swaps are more 

difficult to hedge than other types of 

security-based swaps, or that the 

hedging of these transactions presents 

unique concerns that would not also 

arise in connection with the hedging of 

a security-based swap that was not an 

inter-affiliate transaction. Therefore, the 

Commission does not agree with the 

commenters’ concern that public 

dissemination of inter-affiliate securitybased swaps will impede the ability of 

corporate groups to hedge. 

Another group of commenters argued 

that ‘‘affiliates often enter into these 

swaps on terms linked to an external 

trade being hedged. If markets have 

moved before the inter-affiliate trade is 

entered into on the SEF or reported as 

an off-exchange trade, market 

participants could also misconstrue the 

market’s true direction and depth.’’ 600

This comment suggests that last-sale 

reports of transactions that appear out of 

the order in which the transactions in 

fact occurred could mislead market 

observers. The Commission shares this 

concern but does not conclude that the 

appropriate response is to suppress all 

inter-affiliate transactions from public 

dissemination. The Commission 

believes instead that this issue can be 

addressed by requiring the 

dissemination of the date and time of 

execution on the last-sale report.601 This 

requirement is designed to allow market 

observers to construct a time-sequenced 

record of all transactions in the securitybased swap market and thereby 

counteract the possibility that certain 

transactions could be reported and 

publicly disseminated out of the order 

in which they were in fact executed. 

Some commenters stated that interaffiliate security-based swaps ‘‘are 

typically risk transfers with no market 

impact.’’ 602 This statement does not 

exclude the possibility that some interaffiliate security-based swaps might 

have a market impact. The Commission 

sees no basis to conclude at this time 

that inter-affiliate security-based swaps 

do not provide price discovery value or 

other useful information to market 

observers. Market observers might be 

able to discern useful information from 

the last-sale reports of some interaffiliate security-based swaps, and the 

Commission believes that market 

observers should be given the 

opportunity to do so—particularly given 

the Title VII mandate that all securitybased swaps shall be publicly 

disseminated. The value of this 

information to market observers is 

unknown at this time, because market 

observers have never before had the 

opportunity to view comprehensive lastsale information from the security-based 

swap market. Suppressing all interaffiliate security-based swaps from 

public dissemination would eliminate 

any potential that market observers 

could develop ways to utilize this 

information. Thus, under the final rules, 

market observers who wish to evaluate 

the entire record of transactions, 

including inter-affiliate transactions, 

will have the opportunity to do so. As 

discussed above, the Commission 

disagrees with the commenters who 

argued that ‘‘[r]equiring real-time 

reporting of inter-affiliate [securitybased swaps] . . . would distort market 

information and thus have a detrimental 

market and commercial impact.’’ 603

Because such transactions will be 

flagged, market observers can simply— 

if they wish—remove from their 

analysis any transactions having an 

inter-affiliate flag. 

The Commission sees one 

circumstance where public 

dissemination of an inter-affiliate 

transaction could have significant price 

discovery value: When the initial 

transaction is effected in a foreign 

jurisdiction without a public 

dissemination requirement and is not 

otherwise subject to public 

dissemination under Regulation SBSR, 

and the subsequent inter-affiliate 

transaction—between one of the original 

counterparties and one of its affiliate— 

would be publicly disseminated if it fell 

within Rule 908(a)(1). Commenters’ 

views that public dissemination of an 

inter-affiliate transaction would be 

duplicative and distorting are premised 

on the view that the initial transaction 

is, in fact, publicly disseminated, which 

may not always be the case.604

Therefore, public dissemination of the 

subsequent inter-affiliate transaction 

might be the only way for the market to 

obtain any pricing information about the 

related pair of transactions.605 In the 

Cross-Border Proposing Release, the 

Commission specifically noted this 

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606See 78 FR 31072. 

607SIFMA/FIA/Roundtable Letter at A–28. 

608 Id. at A–30. 

609See 75 FR 75215, 75234, 75237. 

610See 78 FR 31069–72. 

611See supra Section II (describing UICs that 

must be reported to registered SDRs pursuant to 

Regulation SBSR). 

612See 78 FR 31211–12. 

613See id. at 31213. 

614Accordingly, the Commission is now adopting 

a simplified definition of ‘‘UIC.’’ See Rule 900(qq) 

(defining ‘‘UIC’’ as ‘‘a unique identification code 

assigned to a person, unit of a person, product, or 

transaction’’). See also infra Section X(B)(2) 

(discussing final Rule 903(a)). 

circumstance and requested comment 

on it.606 No commenters responded. 

Finally, one commenter on the CrossBorder Proposing Release argued that 

the Commission should propose a 

comprehensive rule regarding interaffiliate security-based swaps ‘‘before 

finalizing the substantive underlying 

rules governing the SBS markets.’’ 607

The commenter reasoned that ‘‘a 

separate proposed rule, like the CrossBorder Proposal, is necessary to ensure 

that market participants are accorded 

sufficient opportunity to comment on 

the interplay between the Commission’s 

proposed rules and inter-affiliate 

trades.’’ 608

The Commission notes that 

Regulation SBSR, as initially proposed, 

did not contemplate any exception for 

inter-affiliate security-based swaps, and 

the Regulation SBSR Proposing Release 

discussed at various points how 

proposed Regulation SBSR would apply 

to inter-affiliate transactions.609 The 

Commission received comments 

regarding the reporting of inter-affiliate 

transactions in response to both the 

Regulation SBSR Proposing Release and 

the Cross-Border Proposing Release. 

Commenters on the Cross-Border 

Proposing Release’s discussion of the 

application of Regulation SBSR to interaffiliate security-based swaps did not 

raise any new issues that had not 

already been raised in response to the 

Regulation SBSR Proposing Release. In 

addition, as noted above, the 

Commission discussed in the CrossBorder Proposing Release the comments 

regarding inter-affiliate transactions 

submitted in response to the Regulation 

SBSR Proposing Release.610 After 

carefully considering all of these 

comments, the Commission believes 

that commenters had sufficient 

opportunity to present their views on 

inter-affiliate transactions in Regulation 

SBSR and therefore it is appropriate at 

this time to adopt final rules relating to 

regulatory reporting and public 

dissemination of security-based swaps, 

including inter-affiliate security-based 

swaps. 

X. Rule 903—Use of Codes 

Regulation SBSR, as adopted, permits 

or, in some instances, requires securitybased swap counterparties to report 

coded information to registered SDRs. 

These codes, known as unique 

identification codes (‘‘UICs’’), will be 

used to identify products, transactions, 

and legal entities, as well as certain 

business units and employees of legal 

entities.611 Rule 903 of Regulation SBSR 

establishes standards for assigning and 

using coded information in securitybased swap reporting and dissemination 

to help ensure that codes are assigned 

in an orderly manner and that 

regulators, market participants, and the 

public are able to interpret coded 

information stored and disseminated by 

registered SDRs. 

A. Proposed Treatment of Coded 

Information 

As initially proposed, Regulation 

SBSR would have established a process 

for assigning UICs in Rule 900 and 

addressed the standards for using coded 

information in Rule 903. Proposed Rule 

900 would have provided that a ‘‘unique 

identification code’’ or ‘‘UIC’’ would be 

the unique code assigned to a person, 

unit of a person, or product by or on 

behalf of an internationally recognized 

standards-setting body (‘‘IRSB’’) that 

imposes fees and usage restrictions that 

are fair and reasonable and not 

unreasonably discriminatory. The 

proposed definition of ‘‘UIC’’ further 

would have provided that, if there 

existed no IRSB meeting these criteria, 

a registered SDR would have been 

required to assign all necessary UICs 

using its own methodology. Similarly, if 

an IRSB meeting the criteria existed but 

had not assigned a relevant UIC, the 

registered SDR would have been 

required to assign that UIC using its 

own methodology. When the 

Commission re-proposed Regulation 

SBSR as part of the Cross-Border 

Proposing Release, it designated the 

definition of ‘‘UIC’’ as re-proposed Rule 

900(nn) but made no changes to the 

substance of the definition.612

Rule 903, as originally proposed, 

would have permitted the use of codes 

in place of certain data elements for 

purposes of reporting and publicly 

disseminating the information required 

under proposed Rules 901 and 902 of 

Regulation SBSR, provided that the 

information to interpret such codes is 

‘‘widely available on a non-fee basis.’’ 

When the Commission re-proposed Rule 

903, it replaced the term ‘‘reporting 

party’’ with ‘‘reporting side’’ but 

otherwise made no substantive revisions 

to the rule.613

B. Comments Received and Final Rule 

903 

1. Relocation of UIC Provisions Into 

Rule 903 

Final Rule 903 is divided into 

paragraphs (a) and (b). Rule 903(a) sets 

out the requirements that registered 

SDRs must follow when assigning UICs. 

Similar requirements were initially 

proposed as part of the definition of 

‘‘UIC’’ in Rule 900, and re-proposed 

without revision in Rule 900(nn). The 

Commission now believes that it would 

be more consistent with the overall 

structure of Regulation SBSR to move 

any substantive requirements from the 

definitions rule (Rule 900) and into an 

operative rule. Therefore, the 

Commission’s substantive requirements 

for a registered SDR’s use of UICs are 

now located in final Rule 903.614 As 

described below, the Commission is 

adopting these requirements 

substantially as proposed, but with 

certain changes as described below. In 

particular, Rule 903(a), as adopted, 

includes new language regarding 

Commission recognition of international 

systems for assigning UICs. In addition, 

final Rule 903(a) provides that, if the 

Commission has recognized such a 

system that assigns UICs to persons, 

each participant of a registered SDR 

shall obtain a UIC from or through that 

system for identifying itself, and each 

participant that acts as a guarantor of a 

direct counterparty’s performance of 

any obligation under a security-based 

swap that is subject to Rule 908(a) shall, 

if the direct counterparty has not 

already done so, obtain a UIC for 

identifying the direct counterparty from 

or through that system, if that system 

permits third-party registration without 

a requirement to obtain prior permission 

of the direct counterparty. 

Final Rule 903(b) imposes certain 

restrictions on how coded information 

may be reported and publicly 

disseminated. Rule 903(b) substantially 

incorporates the earlier versions of Rule 

903, with certain conforming and 

technical changes described below. 

2. Comments Regarding UICs and Final 

Rule 903(a) 

The Commission received several 

comments on the proposed rules 

relating to UICs and the development of 

internationally recognized LEIs 

generally. One commenter expressed 

concern that, absent a methodology 

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615See ICI I at 6. 

616See DTCC V at 14 (also noting that, while 

global standards for identification codes are likely 

to exist for some data fields, certain global 

identifiers will not exist). 

617See id. See also Bloomberg Letter at 1 (‘‘an 

identifier system should be comprehensive and 

global’’). 

618See Benchmark Letter at 1. 

619See letter from Kenneth E. Bentsen, Jr., 

President and CEO, SIFMA, to the Honorable Jacob 

J. Lew, Chairman, Financial Stability Oversight 

Council, dated April 11, 2014, available at http:// 

www.sifma.org/newsroom/2014/sifma_pushes_for_

broad_use_of_leis_to_promote_financial_stability/ 

(last visited January 13, 2015). In a prior comment 

letter, this commenter recommended that ‘‘industry 

utilities’’ be considered for assigning unique IDs for 

legal entities/market participants, as well as for 

transactions and products. See ISDA/SIFMA I at 8. 

See also SWIFT Letter at 2 (expressing support for 

a global standard for identifying security-based 

swap market participants); DTCC X (stating that 

there has been significant adoption globally on 

transaction ID, product ID, and LEI standards). 

620See Levin Letter at 4. 

621See ISDA IV at 12. Regulation SBSR, as 

adopted, does not compel a counterparty on a 

reporting side to a security-based swap to obtain an 

LEI for a counterparty on the other side of the 

transaction. 

622See infra Section X(B)(3) (explaining the 

Commission’s rationale for adopting final Rule 

903(a)). 

623See infra Section X(B)(3) (discussing final 

Rule 903(b)). 

624Regulation SBSR, as proposed and reproposed, would have employed the term 

‘‘internationally recognized standards-setting body’’ 

rather than ‘‘internationally recognized standardssetting system,’’ which is used in Regulation SBSR, 

as adopted. The Commission made this revision to 

better reflect the process of LEI issuance. LEIs are 

being assigned by a number of different bodies in 

different jurisdictions being coordinated through a 

global system, rather than by a single body. 

625The Commission is a member of the Executive 

Committee of the LEI ROC. The LEI ROC is a standalone committee established pursuant to 

recommendations by the Financial Stability Board 

(‘‘FSB’’) that was subsequently endorsed by the 

Group of 20 nations. See Financial Stability Board 

(‘‘FSB’’), A Global Legal Entity Identifier for 

Financial Markets (June 8, 2012), available at 

http://www.leiroc.org/publications/gls/roc_

20120608.pdf (last visited September 22, 2014); 

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

international/g7-g20/Documents/G20%20

Ministerial%20Communique%20November%204-5- 

2012-Mexico%20City.pdf (last visited September 

22, 2014). 

626See https://www.gmeiutility.org/index.jsp. 

outlined by a standard-setting body, 

multiple UICs could be assigned by 

different regulators to the same financial 

entity, thereby creating compliance 

burdens, operational difficulties, and 

opportunities for confusion.615 Another 

commenter believed that, absent 

internationally recognized LEIs, 

requiring SDR-specific UICs would 

create inconsistencies among different 

SDRs.616 This commenter recommended 

that the Commission postpone this 

requirement until an international 

taxonomy exists that can be applied 

consistently.617 A third commenter 

stated that it is imperative that a single 

source of reference data and 

unambiguous identifiers be 

established.618 A fourth commenter 

argued that ‘‘[s]ignificant progress in 

establishing the GLEIS has been made to 

date, and the time for further expanding 

the use of the LEI through rulemaking 

is favorable.’’ 619 A fifth commenter 

noted that the CFTC’s swap reporting 

rules require the use of LEIs and urged 

the Commission, for the sake of clarity 

and consistency, to replace its reference 

to ‘‘unique counterparty identifiers’’ 

with ‘‘Legal Entity Identifiers,’’ unless 

the Commission’s rule was intended to 

include identifiers beyond LEIs.620 A 

sixth commenter suggested that the 

rules reflect primary use of the LEI as a 

party identifier and the need to use an 

LEI ‘‘when available,’’ recognizing that 

a reporting party may request but cannot 

compel its counterparties to obtain an 

LEI.621

The Commission is adopting in Rule 

903(a) the provisions relating to the 

process for assigning UICs largely as 

proposed and re-proposed, but— 

reflecting the comments described 

above—is including two new 

requirements: (1) That the Commission 

recognize an IRSS before the use of UICs 

from that IRSS becomes mandatory 

under Regulation SBSR; and (2) that, if 

the Commission has recognized an IRSS 

that assigns UICs to persons, each 

participant of a registered SDR shall 

obtain a UIC from or through that IRSS. 

As noted below, the Commission is 

recognizing the GLEIS as an IRSS for 

assigning LEIs. Final Rule 903(a) states: 

‘‘If an internationally recognized 

standards-setting system that imposes 

fees and usage restrictions on persons 

that obtain UICs for their own usage that 

are fair and reasonable and not 

unreasonably discriminatory and that 

meets the requirements of paragraph (b) 

of this section is recognized by the 

Commission and has assigned a UIC to 

a person, unit of a person, or product (or 

has endorsed a methodology for 

assigning transaction IDs), the registered 

security-based swap data repository 

shall employ that UIC (or methodology 

for assigning transaction IDs). If no such 

system has been recognized by the 

Commission, or a recognized system has 

not assigned a UIC to a particular 

person, unit of a person, or product (or 

has not endorsed a methodology for 

assigning transaction IDs), the registered 

security-based swap data repository 

shall assign a UIC to that person, unit 

of person, or product using its own 

methodology (or endorse a methodology 

for assigning transaction IDs). If the 

Commission has recognized such a 

system that assigns UICs to persons, 

each participant of a registered securitybased swap data repository shall obtain 

a UIC from or through that system for 

identifying itself, and each participant 

that acts as a guarantor of a direct 

counterparty’s performance of any 

obligation under a security-based swap 

that is subject to § 242.908(a) shall, if 

the direct counterparty has not already 

done so, obtain a UIC for identifying the 

direct counterparty from or through that 

system, if that system permits thirdparty registration without a requirement 

to obtain prior permission of the direct 

counterparty.’’ 622

The Commission shares commenters’ 

desire to have identifiers that are widely 

recognized, which would increase 

efficiency at both the SDR and market 

participant level. To avoid confusion 

about when an IRSS meets the standards 

of Rule 903, the Commission has 

modified the rule to provide that UICs 

issued by a particular IRSS would not 

become mandatory under Regulation 

SBSR unless the Commission has 

recognized the IRSS. As detailed below, 

the Commission is recognizing the 

GLEIS, applying the standards provided 

in Rule 903. The Commission will apply 

the standards provided in Rule 903 to 

any future assessment of whether an 

IRSS should be recognized as a provider 

of UICs for purposes of Regulation 

SBSR. Specifically, the Commission will 

consider whether the IRSS imposes fees 

and usage restrictions on persons that 

obtain UICs for their own usage that are 

fair and reasonable and not 

unreasonably discriminatory, and 

whether the information necessary to 

interpret the codes assigned by or 

through the IRSS is widely available to 

users of the information on a non-fee 

basis and without usage restrictions.623

Since Regulation SBSR was initially 

proposed in 2010, significant strides 

have been made in the development of 

a globally recognized LEI. The 

Commission hereby recognizes the 

GLEIS, which operates under a 

regulatory oversight committee 

(‘‘ROC’’), as an internationally 

recognized standards-setting system 

(‘‘IRSS’’) 624 that meets the requirements 

of Rule 903 of Regulation SBSR. The 

Commission notes that the LEI 

Regulatory Oversight Committee (‘‘LEI 

ROC’’) currently includes members that 

are official bodies from over 40 

jurisdictions.625 LEIs are being issued by 

over 30 pre-local operating units (‘‘preLOUs’’) around the globe, including the 

Global Markets Entity Identifier 

(‘‘GMEI’’) Utility in the United States.626

Furthermore, the Commission believes 

that the GLEIS imposes fees and usage 

restrictions on persons that obtain UICs 

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627See FSB, A Global Legal Entity Identifier for 

Financial Markets, at 20 (‘‘Fees, where and when 

imposed, should be modest and set on a non-profit 

cost-recovery basis’’) and at 20, note 20 (‘‘It is 

possible that some jurisdictions could be willing to 

fund the LEI issuance from public sources and 

provide LEIs to its local entities free of charge’’). As 

of December 26, 2014, the cost of obtaining an LEI 

from the GMEI Utility was $200, plus a $20 

surcharge for the LEI Central Operating Unit. The 

annual cost of maintaining an LEI from the GMEI 

Utility was $100, plus a $20 surcharge for the LEI 

Central Operating Unit. See https://

www.gmeiutility.org/frequentlyAskedQuestions.jsp. 

628See, e.g., http://www.financialstability

board.org/wp-content/uploads/r_120608.pdf?page_

moved=1, at 9 (‘‘Access to the LEI and associated 

reference data will be free and open to all users, and 

there should be no ‘bundling’ of other services 

alongside the LEI by providers which forces users 

to pay directly or indirectly for the LEI’’). In 

addition, LEI information can be downloaded at no 

cost from pre-LOU Web sites. See, e.g., https://

www.gmeiutility.org/ (providing a link for 

downloading an FTP file containing LEI 

information). 

629The Commission understands that the GLEIS 

permits one firm to register a second firm when the 

first firm has a controlling interest over the second. 

See https://www.gmeiutility.org/frequentlyAsked

Questions.jsp (‘‘Who can register an entity for the 

LEI?’’). 

630See Levin Letter at 4. 

631Rule 900(qq), as adopted, defines UIC to mean 

‘‘a unique identification code assigned to a person, 

unit of a person, product, or transaction.’’ 

632To avoid this possibility with respect to the 

identification of legal persons that are participants 

of at least one registered SDR, the Commission has 

recognized the GLEIS—by or through which LEIs 

are issued—as an IRSS that meets the criteria of 

Rule 903. The Commission is requiring that, if the 

Commission has recognized such a system that 

assigns UICs to persons, each participant of a 

registered SDR shall obtain a UIC from or through 

that system. The Commission notes that a single 

person may act in various capacities in the securitybased swap market. For example, a person could be 

a direct counterparty with respect to some 

transactions while acting as a broker with respect 

to other transactions. If that person is a participant 

of a registered SDR, that person must obtain an LEI 

from or through the GLEIS to identify itself in all 

applicable security-based swap transaction reports, 

regardless of the capacity in which the person acted 

with respect to a particular transaction. 

633The Commission notes, however, that 

Regulation SBSR does not prohibit one registered 

SDR from utilizing the UICs that were originally 

assigned by another SDR. 

634See infra Section XIX (discussing regulatory 

implications of having multiple registered SDRs). 

635See ISDA/SIFMA I at 8. See also ISDA IV at 

12 (requesting that the Commission acknowledge 

the ISDA OTC Taxonomy as an acceptable product 

ID for reporting under Regulation SBSR and 

recognize that reporting parties, as opposed to 

SDRs, are generally best positioned to assign these 

values). In the context of the development of 

product IDs, the Commission is not at this time 

making any determination as to whether the ISDA 

OTC Taxonomy system constitutes an IRSS under 

Regulation SBSR, or whether the product IDs issued 

under the ISDA OTC Taxonomy system meet the 

criteria of Rule 903. 

636See id. 

for their own usage that are fair and 

reasonable and not unreasonably 

discriminatory under Rule 903(a).627

The Commission also understands that 

the GLEIS does not impose any fees for 

usage of or access to its LEIs, and that 

all of the associated reference data 

needed to understand, process, and 

utilize the LEIs are widely and freely 

available and not subject to any usage 

restrictions.628 Therefore, the 

Commission believes that the LEIs 

issued by or through the GLEIS meet the 

standards of Rule 903(b), which are 

discussed in the section immediately 

below. The Commission also notes that 

it would expect to revisit its recognition 

of the GLEIS if the GLEIS were to 

modify its operations in a manner that 

causes it no longer to meet the standards 

of Rule 903. The Commission believes 

that the provisions of Rule 903— 

coupled with the Commission’s 

recognition of the GLEIS—will facilitate 

the reporting and analysis of securitybased swap transaction data, because (1) 

each participant of a registered SDR 

must be identified using the same LEI 

for all transactions reported pursuant to 

Regulation SBSR, and regardless of 

which registered SDR holds records of 

its transactions, and (2) a participant, 

when it acts as guarantor of a direct 

counterparty to a security-based swap 

that is subject to Rule 908(b), is required 

to obtain an LEI from or through the 

GLEIS if the direct counterparty does 

not already have an LEI and if the 

system permits third-party registration 

without a requirement to obtain prior 

permission of the direct counterparty.629

As noted above, one commenter 

recommended that, for clarity and 

consistency with the CFTC’s swap 

reporting rules, the Commission refer to 

LEIs, rather than UICs, unless the 

Commission intended to include 

identifiers beyond LEIs.630 Although the 

Commission agrees that the use of the 

term ‘‘LEI’’ would provide greater 

consistency with the CFTC’s rules, 

Regulation SBSR continues to refer to 

UICs, rather than LEIs, for two reasons. 

First, as the commenter suggested, the 

term ‘‘UIC’’ in Regulation SBSR 

includes identifiers in addition to LEIs, 

such as identifiers for products, 

transactions, business units of legal 

entities (i.e., branches and trading 

desks), and individual traders.631

Second, the GLEIS does not extend to 

natural persons or sub-legal entity 

business units, such as a branches and 

trading desks. Because at present the 

Commission has not recognized an IRSS 

for these types of UICs, a registered SDR 

is required to assign UICs to these 

entities using its own methodology. 

Thus, because Regulation SBSR refers to 

identifiers in addition to LEIs, 

Regulation SBSR continues to refer to 

UICs rather than LEIs. 

The Commission acknowledges that, 

under final Rule 903(a), different 

registered SDRs could, in theory, assign 

different UICs to the same person, unit 

of a person, or product. Inconsistent 

UICs could require the Commission and 

other relevant authorities to map the 

UICs assigned by one registered SDR to 

the corresponding UICs assigned by 

other registered SDRs to obtain a 

complete picture of the market activity 

pertaining to a particular person or 

business unit.632 Although mapping 

may present certain challenges, the 

Commission believes that this approach 

is better than the likely alternative of 

having market participants assign UICs 

to identify persons, units of persons, or 

products according to their own 

methodologies.633 In other words, the 

Commission believes that UICs, even if 

they are SDR-specific, will provide a 

streamlined way of reporting, 

disseminating, and interpreting 

security-based swap information.634 The 

Commission believes that requiring 

registered SDRs to develop their own 

UICs—but only for UICs that are not 

assigned by or through an IRSS that has 

been recognized by the Commission— 

will result in less confusion than the 

currently available alternatives, such as 

allowing each reporting side to utilize 

its own nomenclature conventions, 

which would subsequently have to be 

normalized by registered SDRs 

themselves or by the Commission. 

The Commission further understands 

that, at this time, neither the GLEIS nor 

any other IRSS has assigned product IDs 

or established a methodology for 

assigning transaction IDs. Therefore, a 

registered SDR also is required under 

Rule 903(a) to assign, or endorse a 

methodology for assigning, product IDs 

and transaction IDs. One commenter 

recommended that ‘‘industry utilities’’ 

be considered for assigning unique IDs, 

including transaction IDs and product 

IDs.635 With respect to product IDs, Rule 

903(a) provides a registered SDR with 

flexibility to assign a product ID created 

by an industry utility, in the absence of 

an IRSS recognized by the Commission 

that issues product IDs. Thus, if an 

industry utility developed product 

IDs,636 a registered SDR could endorse 

that industry utility as the means for 

assigning such product IDs, and require 

use of those product IDs for reporting 

and publicly dissemination transaction 

information in its policies and 

procedures required by Rule 907(a). 

With respect to transaction IDs, a 

registered SDR—in the absence of an 

IRSS recognized by the Commission that 

has endorsed a methodology for 

assigning transaction IDs—is required to 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14633 

637See Rule 903(a). See also supra Section 

III(B)(2) (discussing transaction IDs). 

638See DTCC V at 14 (recommending that the 

Commission allow flexibility for a registered SDR 

to accept transaction IDs already generated by the 

reporting side or to assign transaction IDs where 

such request is made); ISDA III at 2; ISDA IV at 11; 

Tradeweb Letter at 5 (arguing that SB SEFs and 

exchanges should be permitted to assign transaction 

IDs). 

639See Rule 903(a). Thus, for example, a 

counterparty or platform must not generate 40- 

character transaction IDs if the registered SDR 

requires and can accept only 32-character 

transaction IDs. 

640See GS1 Proposal at 53. 

641See ISDA/SIFMA I at 8. 

642See Barnard I at 3 (noting that making this 

information available for free could eliminate 

confusion). 

643See Markit I at 6 (stating that identifier 

systems provided on an automated basis and/or for 

free ‘‘generally are not adequate for the intended 

goals’’). 

644See id. 

645See DTCC II at 16. The commenter supported 

the continued use of existing license codes, 

including the Markit Reference Entity Database 

(‘‘RED’’)TM codes currently used in trade 

confirmations for credit derivatives and the Reuters 

Instrument Codes (‘‘RIC’’) used in electronic 

messages for equity derivatives. The commenter 

further noted that without RED codes, the 

description of a reference entity in submitted data 

could vary, even in minor ways (e.g., the 

punctuation used in an abbreviation), creating 

difficulties for the SDR that would be required to 

correctly identify the reference entity. This 

commenter also suggested that the Commission 

adopt a rule that would provide existing licensing 

codes at a reduced cost for small volume market 

participants. As described below, final Rule 903(b) 

permits the use of codes in security-based swap 

reports under Regulation SBSR only if the 

information necessary to interpret the codes is 

widely available on a non-fee basis. 

assign transaction IDs or endorse a 

methodology for assigning transaction 

IDs.637 A number of commenters 

recommended that Regulation SBSR 

permit transaction IDs generated by 

persons other than a registered SDR.638

The Commission generally agrees with 

these comments, and has revised the 

UIC provisions relating to transaction 

IDs as follows. Although Rule 900, as 

proposed and re-proposed, would have 

defined ‘‘transaction ID’’ as ‘‘the unique 

identification code assigned by 

registered security-based swap data 

repository to a specific security-based 

swap,’’ the definition of ‘‘UIC’’ in 

proposed Rule 900(nn) did not mention 

transaction IDs. The final definition of 

‘‘UIC’’ includes transaction IDs in 

addition to identification codes for 

persons, units of persons, and products. 

The final definition of ‘‘transaction ID’’ 

is ‘‘the UIC assigned to a specific 

security-based swap transaction,’’ 

without the limitation that it be 

assigned by a registered SDR. The 

Commission agrees with these 

commenters that requiring a registered 

SDR to use transaction IDs assigned 

only by a registered SDR would not be 

practical. The Commission believes that 

it would be more efficient and 

consistent with current practice in the 

security-based swap market to allow 

transaction IDs to be assigned at or 

shortly after execution, by a 

counterparty, platform, or post-trade 

processor. Final Rule 903(a) includes 

language that contemplates that an IRSS 

or registered SDR may ‘‘endorse a 

methodology for assigning transaction 

IDs.’’ This formulation makes clear that 

transaction IDs need not be assigned by 

an IRSS or registered SDR itself, but can 

be assigned by security-based swap 

counterparties, platforms, or post-trade 

processors using the IRSS’s or registered 

SDR’s methodology. Any entity that 

assigns the transaction ID must do so in 

accordance with the methodology 

endorsed by a recognized IRSS or, in the 

absence of a recognized IRSS that has 

endorsed a methodology for assigning 

transaction IDs, by the registered SDR 

that will receive the report of the 

transaction.639

Two commenters addressed the types 

of entities that can act as IRSSs. One of 

these commenters recommended that 

for-profit entities be permitted to act as 

reference data registration 

authorities,640 while the other 

commenter argued that LEIs should be 

issued by a not-for-profit entity that 

operates on the principle of cost 

recovery, and that the industry should 

determine the appropriate model for 

cost recovery.641 The Commission does 

not believe that it is necessary or 

appropriate to specify the type of 

entity—for-profit or non-profit—that can 

establish or operate an IRSS. Whichever 

the case, final Rule 903(a) specifies that 

the UICs issued by an IRSS may be used 

under Regulation SBSR only if the IRSS 

that imposes fees and usage restrictions 

that are fair and reasonable and not 

unreasonably discriminatory and that 

meets the criteria of Rule 903(b) has 

been recognized by the Commission. In 

other words, the overall character of the 

IRSS’s operation does not matter for 

purposes of compliance with Regulation 

SBSR (i.e., whether it is a for-profit or 

non-profit entity) so long as any fees 

and usage restrictions imposed with 

respect to UICs meets the requirements 

of Rule 903(a). In addition, any codes 

used as, or as part of, UICs under 

Regulation SBSR must meet the 

standards of Rule 903(b), which are 

described below. 

3. Comments on Proposed Rule 903 and 

Final Rule 903(b) 

Commenters expressed differing 

views regarding whether the providers 

of UICs—and product IDs in 

particular—should be able to charge fees 

for the codes or for the information 

necessary to interpret the codes. One 

commenter supported the proposed 

requirement that information necessary 

to interpret reported or publicly 

disseminated codes be available free of 

charge.642 However, a second 

commenter—a provider of product 

identification codes for security-based 

swaps—stated that Regulation SBSR 

should not require product identifiers to 

be freely available.643 This commenter 

noted that maintaining a reliable 

identification system for security-based 

swaps requires a substantial level of 

investment, and recommended that the 

providers of product identification 

codes be permitted to charge 

commercially reasonable fees for 

developing and maintaining the 

codes.644 A third commenter 

recommended that existing licensing 

codes be used for product IDs to the 

extent possible, because using existing 

codes would be easier for registered 

SDRs; the use of new codes would 

require ongoing maintenance and the 

development of specific processes for 

reporting, which could result in poorer 

quality data submissions.645

After careful consideration of these 

comments, the Commission continues to 

believe that the information necessary to 

interpret any codes used by registered 

SDRs must be ‘‘widely available on a 

non-fee basis.’’ Thus, the Commission is 

adopting this key feature of Rule 903(b) 

as proposed and re-proposed. A primary 

goal of Title VII is to use reporting and 

public dissemination of security-based 

swap data as a means of monitoring 

risks and increasing transparency, both 

to regulators and the public, of the 

security-based swap markets. If the 

transaction data that are reported and 

publicly disseminated contain codes 

and the information necessary to 

interpret such codes is not widely 

available on a non-fee basis, these Title 

VII goals could be frustrated. In the 

absence of Rule 903(b), a registered SDR 

could require—or acquiesce in the use 

of—proprietary, fee-based identification 

codes, thereby requiring all users of the 

security-based swap market data to pay 

the code creator, directly or indirectly, 

for the information necessary to 

interpret the codes. Users of the data 

also might be subject to usage 

restrictions imposed by the code creator. 

Currently, the security-based swap 

market data typically include fee-based 

codes, and all market participants and 

market observers must pay license fees 

and agree to various usage restrictions to 

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14634 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

646See Bloomberg Letter at 2. This commenter 

stated that it would be possible to develop a public 

domain symbology for security-based swap 

reference entities that relied on products in the 

public domain to ‘‘provide an unchanging, unique, 

global and inexpensive identifier.’’ According to 

this commenter, its proprietary symbology product 

for securities could provide a starting point for a 

security-based swap symbology product. 

647For example, in the absence of an LEI, 

different persons might refer to a particular legal 

entity as ‘‘XYZ,’’ ‘‘XYZ Corp.’’, or ‘‘XYZ 

Corporation.’’ Confusion about whether all of these 

terms refer to same entity would be minimized, if 

not wholly eliminated, if all parties referred to the 

entity using the same code (e.g., ‘‘ABCD12345’’). 

648See Markit Letter at 6. 

649See Charter of the Regulator Oversight 

Committee for the Global Legal Entity Identifier 

(LEI) System (November 5, 2012), http://

www.leiroc.org/publications/gls/roc_20121105.pdf 

(last visited September 22, 2014) (‘‘ROC Charter’’). 

The ROC Charter provides that the mission of the 

ROC is ‘‘to uphold the governance principles of and 

to oversee the Global LEI System, in the broad 

public interest.’’ Id. at 1. The ROC Charter further 

provides that, in protecting the broad public 

interest, the objectives of the ROC include ‘‘open 

and free access to publicly available data from the 

Global LEI System,’’ and specifically includes the 

following principle: ‘‘all public data should be 

readily available on a continuous basis, easily and 

widely accessible using modern technology, and 

free of charge.’’ Id. at 2 (emphasis added). At the 

same time, the ROC Charter states that ‘‘any entities 

required, or eligible, to obtain an LEI [must be] able 

to acquire one under open and non-discriminatory 

terms.’’ Id. One such term is that ‘‘fees, where and 

when imposed by the [Central Operating Unit], are 

set on a non-profit cost-recovery basis.’’ Id. 

650Final Rule 903(a) thus provides: ‘‘If an 

internationally recognized standards-setting system 

that imposes fees and usage restrictions on persons 

that obtain UICs for their own usage that are fair 

and reasonable and not unreasonably 

discriminatory is recognized by the Commission 

and has assigned a UIC to a person, unit of a person, 

or product (or has endorsed a methodology for 

assigning transaction IDs), the registered securitybased swap data repository shall employ that UIC 

(or methodology for assigning transaction IDs). If no 

such system has been recognized by the 

Commission, or a recognized system has not 

assigned a UIC to a particular person, unit of a 

person, or product (or has not endorsed a 

methodology for assigning transaction IDs), the 

registered security-based swap data repository shall 

assign a UIC to that person, unit of person, or 

product using its own methodology (or endorse a 

methodology for assigning transaction IDs)’’ 

(emphasis added). 

obtain the information necessary to 

interpret the codes. The Commission 

believes that allowing continuation of 

the status quo would not satisfy the 

Title VII mandate to increase securitybased swap market transparency 

through public dissemination. If 

information to understand embedded 

codes is not widely available on a nonfee basis, information asymmetries 

would likely continue to exist between 

large market participants who pay for 

the codes and others market 

participants. One commenter suggested 

that alternatives could be developed to 

the status quo of using fee-based codes 

in security-based swap market data.646

The Commission welcomes the 

development of such alternatives, and 

believes that Rule 903(b), as adopted, 

will likely encourage such development. 

Furthermore, the Commission 

believes that the public dissemination 

requirements in Title VII should allow 

observers of the market to incorporate 

the information contained in public 

reports of security-based swaps into any 

decisions they might take regarding 

whether and how to participate in the 

market (or even to avoid participation), 

and for intermediaries in the market to 

incorporate this information to provide 

better advice to their clients about the 

market. The Commission does not 

believe that these objectives would be 

advanced if the ability of market 

participants to understand public 

reports of security-based swap 

transactions were conditioned on 

agreeing to pay fees to a code creator. 

The Commission similarly believes that 

subjecting the public’s use of this 

information to restrictions imposed by a 

code creator also could frustrate the 

objectives of public dissemination. In 

addition, allowing continuation of the 

status quo would retard the ability of 

the Commission and other relevant 

authorities to obtain and analyze 

comprehensive security-based swap 

information. 

The Commission recognizes the 

usefulness of codes. They make 

reporting more efficient because 

providing just one code—a product ID, 

for example—can eliminate the need to 

report multiple data elements 

individually. Codes also facilitate the 

standardized representation of securitybased swap data and thereby make 

reporting (and understanding reported 

data) more reliable and efficient.647

With respect to product IDs specifically, 

the Commission believes that unless an 

IRSS has been recognized by the 

Commission and can assign product IDs, 

registered SDRs should be free to choose 

between using an existing mechanism 

for assigning product IDs—assuming it 

is consistent with Rule 903(b)—and 

developing a new product classification 

system. If all existing product 

identification codes require users of the 

transaction information to pay a fee, 

then a registered SDR may not require 

or permit use of those codes for 

reporting and public dissemination. The 

registered SDR would be required to 

issue UICs using its own methodology 

and make the information necessary to 

interpret those codes available on a nonfee basis. 

In light of the requirement in Rule 

903(b) that the information necessary to 

interpret coded information be widely 

available on a non-fee basis, it would be 

inconsistent with the rule for a 

registered SDR to permit information to 

be reported pursuant to Rule 901, or to 

publicly disseminate information 

pursuant to Rule 902, using codes in 

place of certain data elements if the 

registered SDR imposes, or permits the 

imposition of, any usage restrictions on 

the disseminated information. The 

purpose of Rule 903(b) is to help ensure 

that the public is able to utilize the lastsale information provided by Regulation 

SBSR without limitation or expense. 

The commenter that provides product 

identification codes for security-based 

swaps also noted that proposed 

Regulation SBSR would allow an IRSB 

that develops counterparty identifiers to 

charge fees, and believed that providers 

of product IDs should receive 

comparable treatment.648 In response to 

this comment, the Commission believes 

that it is appropriate to make minor 

revisions to the rule language to clarify 

its original intent and thereby eliminate 

any apparent contradiction between the 

two paragraphs of Rule 903. When the 

Commission originally proposed that an 

IRSB could impose fees and usage 

restrictions as long as they were fair and 

reasonable and not unreasonably 

discriminatory, the Commission 

intended that language to apply to 

persons that obtain UICs for their own 

usage (such as a legal entity that seeks 

to identify itself as a counterparty when 

engaging in security-based swap 

transactions), not ultimate users of the 

information (such as third parties who 

might wish to enter into a securitybased swap with that entity as the 

reference entity). The Commission 

believes that this distinction is 

consistent with international efforts to 

develop a global LEI.649

In Rule 903(a), as adopted, the 

Commission is inserting after the words 

‘‘fees and usage standards’’ the new 

words ‘‘on persons that obtain UICs for 

their own usage.’’ 650 This language 

clarifies that it is consistent with Rule 

903(a) for a registered SDR to accept 

codes for which the code creator 

assesses fair and reasonable fees on 

market participants that need to identify 

themselves, their agents, or parts of their 

organizations when engaging in 

financial activities. For example, Rule 

903(a) would permit a registered SDR to 

charge participants that need to acquire 

UICs that are assigned by registered 

SDRs, such as counterparty IDs, 

ultimate parent IDs, branch IDs, trading 

desk IDs, and trader IDs. 

In Rule 903(b), as adopted, the 

Commission is inserting the words ‘‘to 

users of the information’’ immediately 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14635 

651Final Rule 903(b) thus provides: ‘‘A registered 

security-based swap data repository may permit 

information to be reported pursuant to § 242.901, 

and may publicly disseminate that information 

pursuant to § 242.902, using codes in place of 

certain data elements, provided that the information 

necessary to interpret such codes is widely 

available to users of the information on a non-fee 

basis’’ (emphasis added). 

652See Rule 13n–4(c)(1)(i) under the Exchange 

Act, which is part of the SDR Adopting Release. But 

see Regulation SBSR Proposed Amendments 

Release, Section VI (proposing to prohibit SDRs 

from charging fees for publicly disseminating 

regulatorily mandated transaction data). 

653Specifically, re-proposed Rule 903 provided 

that ‘‘The reporting side may provide information 

to a registered security-based swap data repository 

pursuant to § 242.901 and a registered securitybased swap data repository may publicly 

disseminate information pursuant to § 242.902 

using codes in place of certain data elements, 

provided that the information necessary to interpret 

such codes is widely available on a non-fee basis.’’ 

654See supra Section IV (discussing Rule 901(h)). 

See also Rule 907(a)(5) (requiring a registered SDR 

to establish and maintain policies and procedures 

for assigning UICs in a manner consistent with Rule 

903); Rule 907(a)(2) (requiring a registered SDR to 

establish and maintain policies and procedures that 

specify, among other things, protocols for 

submitting information, including but not limited to 

UICs). 

655See Bloomberg Letter at 2. 656 Id. 

657 Id. 

658See supra notes 615 to 618 and accompanying 

text. 

659See ISDA/SIFMA I at 8. 

660See supra Section X(B)(1). 

after the phrase ‘‘widely available.’’ 651

The users of information referred to in 

final Rule 903(b) could include the 

Commission, other relevant authorities, 

or any person who wishes to view or 

utilize the publicly disseminated 

security-based swap transaction data for 

any purpose. As noted above, the 

Commission does not believe that access 

to this information should be impeded 

by having to pay fees or agree to usage 

restrictions in order to understand any 

coded information that might be 

contained in the transaction data. 

The Commission notes that Rule 

903(b) prevents registered SDRs and 

code creators from impeding a person’s 

ability to obtain the information 

necessary to interpret coded information 

used in reporting or public 

dissemination under Regulation SBSR. 

Rule 903(b) is not intended to prevent 

a registered SDR from charging for its 

SDR services. To the contrary, registered 

SDRs are expressly permitted to charge 

fees for their SDR services that are fair 

and reasonable and not unreasonably 

discriminatory.652

The Commission notes that it is 

making an additional revision to the 

language in re-proposed in Rule 903 to 

conform final Rule 903(b) to the 

Commission’s original intent and to 

avoid any potential conflict with final 

Rule 901(h). Rule 901(h), as adopted, 

provides that the reporting side shall 

electronically transmit the information 

required under Rule 901 to a registered 

SDR ‘‘in a format required by the 

registered [SDR].’’ Under re-proposed 

Rule 903, the reporting side could 

‘‘provide information to a registered 

[SDR] . . . using codes in place of 

certain data elements.’’ 653 This 

language in re-proposed 903 could have 

been read to give the reporting side 

discretion to select what codes it could 

use for reporting transaction 

information to a registered SDR., The 

Commission has revised final Rule 

903(b) to more clearly reflect its original 

intent: That reporting sides shall report 

information in a format required by the 

registered SDR.654 Thus, Rule 903(b), as 

adopted, provides that a registered SDR 

‘‘may permit information to be reported 

. . . using codes in place of certain data 

elements.’’ The Commission believes 

that final Rule 903(b), read together with 

final Rule 901(h), makes clear that a 

reporting side may provide coded 

information to a registered SDR only to 

the extent permitted by the registered 

SDR and only in a format required by 

the SDR. Therefore, the reporting side 

may not exercise its own discretion 

when selecting codes to use in its 

reports to the registered SDR, regardless 

of whether the codes otherwise comport 

with Rule 903. 

Finally, one commenter expressed 

concern that, although Regulation SBSR, 

as initially proposed, would have 

required that the information necessary 

to interpret codes be made available for 

free, the proposal would not have 

prevented a code creator from charging 

for other uses.655 In this commenter’s 

view, ‘‘[a] widely used identifier can 

become a de facto standard for anyone 

doing business in the relevant 

marketplace. This creates the potential 

for abuse, defeating the entire purpose 

of promoting the broad availability of 

identifiers.’’ 656 This commenter 

believed instead that, ‘‘[a]s long as all 

market participants have the unfettered 

freedom to introduce alternative 

identifiers and to map those identifiers 

to the standard, however, multiple, 

competing identifiers can provide an 

inexpensive solution.’’ 657 The 

Commission shares the commenter’s 

concern that identification codes not 

become a tool for monopolistic abuse. 

This is why the Commission is requiring 

in Rule 903(b) that, if such codes will 

be used for reporting or publicly 

disseminating security-based swap 

transaction data, ‘‘the information 

necessary to interpret such codes [must 

be] widely available to users of the 

information on a non-fee basis.’’ Thus, 

the Commission does not believe it will 

be necessary for market participants to 

introduce alternative identifiers, 

although Regulation SBSR would not 

prohibit them from doing so. 

C. Policies and Procedures of Registered 

SDRs Relating to UICs 

As proposed and re-proposed, Rule 

907(a)(5) would have required a 

registered SDR to establish and maintain 

written policies and procedures for 

assigning: (1) A transaction ID to each 

security-based swap that is reported to 

it; and (2) UICs established by or on 

behalf of an IRSB that imposes fees and 

usage restrictions that are fair and 

reasonable and not unreasonably 

discriminatory (or, if no standardssetting body meets these criteria or a 

standards-setting body meets these 

criteria but has not assigned a UIC to a 

particular person, unit of a person, or 

product, assigning a UIC using its own 

methodology). 

The Commission received several 

comments, noted above, that discussed 

utilization of UICs generally and 

considered them in connection with 

Rule 907(a)(5).658 The Commission also 

received a comment that generally 

encouraged the Commission to adopt a 

convention for assigning unique IDs and 

incorporating a pilot or early adopter 

program for certain products and 

participants that would allow for endto-end testing and proof of concept.659

As discussed above, the Commission 

believes that UICs—even if utilized on 

an SDR-specific basis in the absence of 

UICs issued by a recognized IRSS—will 

create a more consistent and transparent 

system for reporting and analyzing 

security-based swap transactions. 

Therefore, the Commission continues to 

believe that it is important for registered 

SDRs to have policies and procedures 

providing for the issuance of such UICs 

and is adopting a modified version of 

Rule 907(a)(5) that requires registered 

SDRs to establish written policies and 

procedures ‘‘[f]or assigning UICs in a 

manner consistent with [Rule 903].’’ 

This is a conforming change to be 

consistent with the Commission’s 

decision to locate the substantive 

requirements for the assignment of UICs 

in Rule 903.660 With respect to the 

comment received, the Commission 

believes that market participants can 

work with entities that are likely to 

register with the Commission as SDRs 

on pilot programs for certain products 

and conventions for assigning UICs. 

However, the Commission does not 

believe it would be appropriate for the 

Commission itself to adopt such 

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14636 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

661 In addition, the Commission is making a 

technical conforming change to revise the title of 

the rule to refer to ‘‘registered’’ SDRs. 

662See Barnard I at 3; Markit I at 1; DTCC II 

at 1. 

663See Markit I at 4. 

664See Markit I at 4–5; DTCC II at 19–20; DTCC 

IV at 4 (recommending that SDRs operate on a 

24/6.5 basis to reflect the global nature of the 

financial markets and process transactions in real 

time, while also maintaining multiple levels of 

operational redundancy and data security). 

665See Markit I at 4. 

666Markit I at 4–5. 

conventions; the Commission believes 

instead that greater expertise in coding 

data will reside in the industry and, in 

particular, at registered SDRs. The 

Commission further believes that Rule 

900(qq), which defines ‘‘UIC,’’ and Rule 

903, which establishes standards for the 

use of UICs provide adequate 

parameters for the development of a UIC 

system. The Commission believes that 

allowing the industry to develop 

conventions for assigning UICs will 

likely result in a more efficient and 

flexible UIC regime than if the 

Commission were to adopt such 

conventions itself. 

XI. Operating Hours of Registered 

SDRs—Rule 904 

Title VII of the Dodd-Frank Act does 

not explicitly address or prescribe the 

hours of operation of the reporting and 

public dissemination regime that it 

requires. The security-based swap 

market is global in nature, and securitybased swaps are executed throughout 

the world and at any time of the day. In 

light of the global nature of the securitybased swap market, the Commission 

believes that the public interest is 

served by requiring near-continuous 

reporting and public dissemination of 

security-based swap transactions, no 

matter where or when they are executed 

(subject to the cross-border rules 

discussed in Section XV, infra). 

Furthermore, having a near-continuous 

reporting and public dissemination 

regime would reduce the incentive for 

market participants to defer execution of 

security-based swap transactions until 

after regular business hours to avoid 

post-trade transparency. Accordingly, 

the Commission proposed Rule 904, 

which would have required a registered 

SDR to design its systems to allow for 

near-continuous receipt and 

dissemination of security-based swap 

data. A registered SDR would have been 

permitted to establish ‘‘normal closing 

hours’’ and to declare, on an ad hoc 

basis, ‘‘special closing hours,’’ subject to 

certain requirements. Rule 904 was not 

revised as part of the Cross-Border 

Proposing Release, and was re-proposed 

in exactly the same form as initially 

proposed. 

As discussed below, three 

commenters addressed proposed Rule 

904. The Commission has carefully 

reviewed the comments received and 

has determined to adopt Rule 904, as 

proposed and re-proposed, subject to 

one conforming change, as discussed 

below.661

Rule 904, as adopted, requires a 

registered SDR to have systems in place 

to receive and disseminate information 

regarding security-based swap data on a 

near-continuous basis, with certain 

exceptions. First, under final Rule 

904(a), a ‘‘registered SDR may establish 

normal closing hours when, in its 

estimation, the U.S. market and major 

foreign markets are inactive.’’ Second, 

under final Rule 904(b), a registered 

SDR ‘‘may declare, on an ad hoc basis, 

special closing hours to perform system 

maintenance that cannot wait until 

normal closing hours.’’ Rule 904(b) 

further provides that a registered SDR 

shall, ‘‘to the extent reasonably possible 

under the circumstances, avoid 

scheduling special closing hours during 

[periods] when, in its estimation, the 

U.S. market and major foreign markets 

are most active.’’ Rules 904(a) and 

904(b) each require the registered SDR 

to provide participants and the public 

with reasonable advance notice of its 

normal closing hours and special 

closing hours, respectively. 

Rule 904(c) specifies requirements for 

handling and disseminating reported 

data during a registered SDR’s normal 

and special closing hours. During 

normal closing hours and, to the extent 

reasonably practicable during special 

closing hours, a registered SDR is 

required to ‘‘have the capability to 

receive and hold in queue’’ the 

transaction data that it receives. 

Pursuant to Rule 904(d), immediately 

upon system re-opening following 

normal closing hours or special closing 

hours (assuming it was able to hold 

incoming data in queue), the registered 

SDR is required to publicly disseminate 

any transaction data required to be 

reported under Rule 901(c) that it 

received and held in queue. Finally, 

pursuant to Rule 904(e), if the registered 

SDR could not, while it was closed, 

receive and hold in queue reported 

information, it would be required, 

immediately upon resuming normal 

operations, to send a notice to all 

participants that it had resumed normal 

operations but could not, while closed, 

receive and hold in queue such 

transaction information. Therefore, any 

participant that had an obligation to 

report information—but was unable to 

do so because of the registered SDR’s 

inability to receive and hold data in 

queue—would be required upon 

notification by the registered SDR to 

promptly report the information to the 

registered SDR. 

As proposed and re-proposed, Rule 

904(e) would have provided that if a 

participant could not fulfil a reporting 

obligation due to a registered SDR’s 

inability to receive and hold data in 

queue, the participant would be 

required to report the information 

‘‘immediately’’ upon receiving a 

notification that the registered SDR has 

resumed normal operations. The 

Commission has decided to replace the 

word ‘‘immediately’’ with the word 

‘‘promptly’’ in the final rule because 

‘‘promptly’’ emphasizes the need for 

information to be submitted without 

unreasonable delay while affording 

participants a practical degree of 

flexibility. In general, the Commission 

believes that submitting a required 

report ‘‘promptly’’ implies ‘‘as soon as 

practicable.’’ 

The three commenters that addressed 

Rule 904 were generally supportive of 

the goal of promoting transparency and 

price discovery though a regime of 

continuous reporting and public 

dissemination,662 although one of these 

commenters pointed out the need for 

registered SDRs to close periodically to 

perform necessary system 

maintenance.663 Two of these 

commenters also suggested alternative 

operating hours and procedures for 

registered SDRs.664 One commenter 

stated that the requirements that a 

registered SDR have normal closing 

hours only when neither U.S. nor 

international markets are active, and 

should continue to receive the relevant 

transaction data and hold them in queue 

even when the registered SDR is closed 

for normal or ad hoc special closing 

hours, exceeded the capabilities of 

currently existing reporting 

infrastructures. The commenter argued 

that such requirements would increase 

the risk of infrastructure failure because 

SDRs would not have adequate time to 

maintain and update their systems.665

This commenter suggested that, if 

systems are required to be available on 

a 24-hour basis, the Commission should 

define operating hours to be 24 hours 

from Monday to Friday, and consider 

allowing additional closing hours either 

‘‘when markets are less active’’ or 

‘‘when only less active markets are 

open.’’ 666

The Commission believes there are 

compelling reasons to implement a 

system of reporting and public 

dissemination that, in general, operates 

near-continuously. As discussed above, 

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667Markit I at 4. 

668See, e.g., DDR Rulebook, Section 7.1 (DDR 

System Accessibility) (‘‘Data submitted during DDR 

System down time is stored and processed once the 

service has resumed’’), available at http://

www.dtcc.com/∼/media/Files/Downloads/legal/

rules/DDR_Rulebook.pdf (last visited October 7, 

2014). 

669See Regulation SBSR Proposing Release, 75 FR 

75220. 

670See id. In a separate rulemaking, the 

Commission is adopting a rule that will require a 

registered SDR to establish, maintain, and enforce 

written policies and procedures reasonably 

designed to calculate positions for all persons with 

open security-based swaps for which the SDR 

maintains records. See SDR Adopting Release 

(adopting Rule 13n–5(b)(2) under the Exchange 

Act). 

671See Cross-Border Proposing Release, 78 FR 

31068. 

672Rule 901(e), as initially proposed, would have 

provided that the new counterparty would be the 

reporting party if it is a U.S. person; the other 

original counterparty would become the reporting 

party if the new counterparty is not a U.S. person. 

the Commission believes that requiring 

near-continuous reporting and public 

dissemination of security-based swaps— 

except for when, in the estimation of a 

registered SDR, the U.S. market and 

major foreign markets are inactive—will 

serve the public interest and reduce 

incentives for market participants to 

trade outside of regular business hours. 

The Commission, however, recognizes 

the need for a registered SDR to have 

closing hours to maintain and update its 

systems, and Rules 904(a) and 904(b), as 

adopted, specifically allow registered 

SDRs to have normal and special closing 

hours. Further, while Rule 904(b) states 

that a registered SDR should avoid 

scheduling special closing hours during 

a time when, in its estimation, the U.S. 

and major foreign markets are most 

active, the Commission notes that a 

registered SDR is required to do so only 

‘‘to the extent reasonably possible under 

the circumstances.’’ As such, the 

Commission believes that Rules 904(a) 

and 904(b) provide sufficient flexibility 

to registered SDRs in determining their 

closing times to perform the necessary 

maintenance procedures. The 

Commission does not believe it would 

be appropriate to require registered 

SDRs to operate 24 hours only from 

Monday to Friday, as the commenter 

suggests, as certain major foreign 

markets may be active during hours that 

fall within the weekend in the United 

States. 

The Commission recognizes the 

commenter who asserted that the 

proposed requirement for a registered 

SDR to receive and hold in the queue 

the data required to be reported during 

its closing hours ‘‘exceeds the 

capabilities of currently-existing 

reporting infrastructures.’’ 667 The 

Commission notes that this comment 

was submitted in January 2011. Since 

that time, however, provisionally 

registered CFTC SDRs that are likely 

also to register as SDRs with the 

Commission appear to have developed 

the capability of receiving and holding 

data in queue during their closing 

hours.668 Accordingly, the Commission 

believes that it is appropriate to require 

registered SDRs to hold data in queue 

during their closing hours should help 

to prevent market disruptions by 

enabling reporting sides for securitybased swaps to report transactions at all 

times. 

XII. Subsequent Revisions to Reported 

Security-Based Swap Information 

A. Reporting Life Cycle Events—Rule 

901(e) 

1. Description of Proposal and ReProposal 

Rule 901(e), as proposed and reproposed, would have required the 

reporting of certain life cycle event 

information. ‘‘Life cycle event’’ was 

defined in the proposal and re-proposal 

to mean ‘‘with respect to a securitybased swap, any event that would result 

in a change in the information reported 

to a registered security-based swap data 

repository under § 242.901, including a 

counterparty change resulting from an 

assignment or novation; a partial or full 

termination of the security-based swap; 

a change in the cash flows originally 

reported; for a security-based swap that 

is not cleared, any change to the 

collateral agreement; or a corporate 

action affecting a security or securities 

on which the security-based swap is 

based (e.g., merger, dividend, stock 

split, or bankruptcy). Notwithstanding 

the above, a life cycle event shall not 

include the scheduled expiration of the 

security-based swap, a previously 

described and anticipated interest rate 

adjustment (such as a quarterly rate 

adjustment), or other event that does not 

result in any change to the contractual 

terms of the security-based swap.’’ 

Re-proposed Rule 901(e) would have 

provided that ‘‘For any life cycle event, 

and any adjustment due to a life cycle 

event, that results in a change to 

information previously reported 

pursuant to Rule 901(c), 901(d), or 

901(i), the reporting side shall promptly 

provide updated information reflecting 

such change to the entity to which it 

reported the original transaction, using 

the transaction ID,’’ subject to two 

exceptions. Under Rule 901(e)(1), as reproposed, if the reporting side ceased to 

be a counterparty to the security-based 

swap due to any assignment or novation 

and if the new side included a U.S. 

person, a security-based swap dealer, or 

a major security-based swap participant, 

the new side would be the reporting 

side following the assignment or 

novation. Under re-proposed Rule 

901(e)(2), if the new side did not 

include a U.S. person, a security-based 

swap dealer, or a major security-based 

swap participant, the other side would 

be the reporting side following the 

assignment or novation. 

In proposing Rule 901(e), the 

Commission preliminarily believed that 

the reporting of life cycle event 

information would provide regulators 

with access to information about 

significant changes that occur over the 

duration of a security-based swap.669

The Commission also stated that the 

reporting of life cycle event information 

would help to assure that regulators 

have accurate and up-to-date 

information concerning outstanding 

security-based swaps and the current 

obligations and exposures of securitybased swap counterparties.670

In determining the entity that would 

be required to report life cycle event 

information, the Commission’s 

approach in proposing and re-proposing 

Rule 901(e) was that, generally, the 

person who originally reported the 

initial transaction would have the 

responsibility to report any subsequent 

life cycle event.671 However, if the life 

cycle event were an assignment or 

novation that removed the original 

reporting party, either the new 

counterparty or the remaining original 

counterparty would have to be the 

reporting party.672

In re-proposing Regulation SBSR, the 

Commission included the new concept 

of a ‘‘reporting side,’’ which would have 

included the direct counterparty and 

any indirect counterparty. The CrossBorder Proposing Release also proposed 

to impose greater duties to report 

transactions on non-U.S. person 

security-based swap dealers or major 

security-based swap participants. 

Accordingly, the Commission reproposed Rule 901(e) to provide that the 

duty to report would switch to the other 

side only if the new side did not include 

a U.S. person (as in the originally 

proposed rule) or a security-based swap 

dealer or major security-based swap 

participant. The Commission 

preliminarily believed that, if the new 

side included a security-based swap 

dealer or major security-based swap 

participant, the new side should retain 

the duty to report. This approach was 

designed to align reporting duties with 

the market participants that the 

Commission believed would be better 

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673See Cross-Border Proposing Release, 78 FR 

31068. 

674See DTCC II at 13. 

675See id. 

676See DTCC V at 11; DTCC VI at 9. 

677 DTCC VI at 9. 

678Barnard I at 3. 

679Rule 900(q), as adopted, defines ‘‘life cycle 

event’’ to mean ‘‘with respect to a security-based 

swap, any event that would result in a change in 

the information reported to a registered securitybased swap data repository under § 242.901(c), (d) 

or (i), including: An assignment or novation of the 

security-based swap; a partial or full termination of 

the security-based swap; a change in the cash flows 

originally reported; for a security-based swap that 

is not a clearing transaction, any change to the title 

or date of any master agreement, collateral 

agreement, margin agreement, or any other 

agreement incorporated by reference into the 

security-based swap contract; or a corporate action 

affecting a security or securities on which the 

security-based swap is based (e.g., a merger, 

dividend, stock split, or bankruptcy). 

Notwithstanding the above, a life cycle event shall 

not include the scheduled expiration of the 

security-based swap, a previously described and 

anticipated interest rate adjustment (such as a 

quarterly interest rate adjustment), or other event 

that does not result in any change to the contractual 

terms of the security-based swap.’’ 

680See DTCC VI at 9. See also DTCC II at 13 

(stating that ‘‘[m]any life cycle events are priceforming or significantly change the exposures under 

a trade. . . . The current definition supports 

reporting of these events’’). 

681 ISDA IV at 11. 

682 DTCC VI at 9. Another commenter stated that 

the parties to a collateral agreement rarely modify 

their agreement over its life, and that any change 

to a collateral agreement would require extensive 

negotiation between the counterparties. 

Accordingly, the commenter believed that the cost 

of establishing reporting processes to detect and 

report changes to a collateral agreement would 

outweigh the usefulness of reporting them. See 

ISDA/SIFMA I at 16. 

suited to carrying them out, because 

non-U.S. person security-based swap 

dealers and major security-based swap 

participants likely would have taken 

significant steps to establish and 

maintain the systems, processes and 

procedures, and staff resources 

necessary to report security-based 

swaps.673

2. Final Rules Relating to Life Cycle 

Events and Response to Comments 

a. General Comment and Definition of 

‘‘Life Cycle Event’’ 

One commenter expressed support for 

the requirement to report life cycle 

event information, stating that the 

reporting of life cycle event information 

was necessary for detailed market 

regulation and for prudential and 

central bank regulation.674 The 

commenter noted that ‘‘[m]any life cycle 

events are price-forming or significantly 

change the exposures under a 

trade. . . .’’ 675 In subsequent comment 

letters, this commenter stated that the 

definition of ‘‘life cycle event’’ was 

overly broad, and that life cycle events 

should be limited to those that impact 

the counterparties to or the pricing of 

the security-based swap.676 Specifically, 

the commenter suggested that the 

Commission define ‘‘life cycle event’’ to 

mean ‘‘an event that would result in a 

change in the counterparty or price of a 

security-based swap reported to the 

registered [SDR].’’ 677 However, another 

commenter believed that the proposed 

definition was ‘‘clear, sufficient, and 

complete.’’ 678

After careful consideration, the 

Commission is adopting the definition 

of ‘‘life cycle event’’ in Rule 900(q) 

substantially as re-proposed, but with 

certain minor modifications to respond 

to comments and to clarify the original 

intent of the rule.679 First, the 

Commission is making a technical 

change to the definition to indicate that 

a life cycle event refers to any event that 

would result in a change in the 

information reported ‘‘under 

§ 242.901(c), (d), or (i),’’ rather than any 

event that would result in a change in 

the information reported ‘‘under 

§ 242.901’’ (as re-proposed). This 

technical change will conform the 

definition of ‘‘life cycle event’’ to the 

requirements of Rule 901(e), as reproposed and as adopted, which 

requires the reporting of a change to 

information previously reported 

pursuant to paragraph (c), (d), or (i) of 

Rule 901. By defining ‘‘life cycle event’’ 

in this manner, the Commission aims to 

ensure that information reported 

pursuant to Rules 901(c), (d), and (i) is 

updated as needed, so that the data 

maintained by registered SDRs remains 

current for the duration of a securitybased swap. This requirement should 

help to ensure that the data accessible 

to the Commission through registered 

SDRs accurately reflects the current 

state of the market. Therefore, the 

Commission does not believe that it is 

appropriate to limit the definition of 

‘‘life cycle event’’ to post-execution 

events that impact the counterparties to 

or the pricing of a security-based swap, 

as suggested by the commenter.680

Although the final definition of ‘‘life 

cycle event’’ encompasses these types of 

events, it also encompasses other 

information reported pursuant to Rules 

901(c), 901(d), or 901(i). 

One commenter asked that the 

Commission remove the reference to 

‘‘dividends’’ in the definition of ‘‘life 

cycle event’’ because dividends ‘‘are 

contract intrinsic events that do not 

result in a change to the contractual 

terms of the SBS and therefore, should 

not be defined as reportable life cycle 

events.’’ 681 The Commission does not 

believe that it is necessary to revise the 

definition of ‘‘life cycle event’’ as the 

commenter suggests. As indicated 

above, the definition of ‘‘life cycle 

event’’ provides, in relevant part, that a 

life cycle event includes ‘‘any event that 

would result in a change in the 

information reported to a registered 

[SDR] . . . including . . . a corporate 

action affecting a security or securities 

on which the security-based swap is 

based (e.g., a merger, dividend, stock 

split, or bankruptcy)’’ (emphasis added). 

Thus, a regular payment of a dividend 

that does not require a restatement of 

the terms of the security-based swap 

would not constitute a life cycle event. 

However, other actions involving 

dividends could be life cycle events. For 

example, the distribution of a stock 

dividend that required an adjustment to 

the notional terms of an equity securitybased swap—or any other corporate 

action related to dividends that resulted 

in a modification of one or more terms 

of the security-based swap—would be a 

life cycle event and therefore would 

have to be reported pursuant to Rule 

901(e). 

Second, the Commission is clarifying 

that a life cycle event includes ‘‘an 

assignment or novation of the securitybased swap,’’ instead of ‘‘a counterparty 

change resulting from an assignment or 

novation.’’ The Commission notes that, 

while assignments and novations 

necessarily include a counterparty 

change, assignments and novations also 

may involve modifications to other 

terms of the security-based swap 

reported pursuant to paragraphs (c), (d), 

or (i) of Rule 901. These modifications 

are the type of changes that the 

Commission believes should be reported 

to a registered SDR; therefore, the 

Commission is modifying the definition 

of ‘‘life cycle event’’ to clarify this view. 

Third, the Commission is making a 

technical change to the definition to 

indicate that a life cycle event includes, 

for a security-based swap that is not a 

clearing transaction, ‘‘any change to the 

title or date of any master agreement, 

collateral agreement, margin agreement, 

or any other agreement incorporated by 

reference into the security-based swap 

contract.’’ As re-proposed, the definition 

of ‘‘life cycle event’’ would have 

included, ‘‘for a security-based swap 

that is not cleared, any change to the 

collateral agreement.’’ One commenter 

questioned the need to include a 

reference to a change in the collateral 

agreement in the definition of ‘‘life cycle 

event’’ because ‘‘collateral agreement 

terms are not among the data required 

to be reported upon execution.’’ 682 The 

Commission agrees with the commenter 

that collateral agreement terms are not 

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683Final Rule 901(d)(4) requires, for a securitybased swap that is not a clearing transaction, 

reporting of the title and date of any master 

agreement, collateral agreement, margin agreement, 

or other agreement incorporated by reference in the 

security-based swap contract. 

684CME/ICE Letter at 3. As discussed in Section 

V, supra, in the agency model of clearing, and 

sometimes in the principal model as well, 

acceptance of an alpha for clearing terminates the 

alpha. 

685See Securities Exchange Act Release No. 

66703 (March 30, 2012), 77 FR 20536–37 (April 5, 

2012) (noting that ‘‘when a security-based swap 

between two counterparties . . . is executed and 

submitted for clearing, the original contract is 

extinguished and replaced by two new contracts 

where the [clearing agency] is the buyer to the seller 

and the seller to the buyer’’). This treatment also 

would be consistent with CFTC regulations. See 17 

CFR 39.12(b)(6) (CFTC rule providing that 

derivatives clearing organizations that clear swaps 

must have rules providing that, among other things, 

‘‘upon acceptance of a swap by the derivatives 

clearing organization for clearing: (i) The original 

swap is extinguished; [and] (ii) The original swap 

is replaced by an equal and opposite swap between 

the derivatives clearing organization and each 

clearing member acting as principal for a house 

trade or acting as agent for a customer trade’’). 

686Final Rule 901(e)(2) provides that ‘‘All reports 

of life cycle events and adjustments due to life cycle 

events shall be reported within 24 hours of the time 

of occurrence of the life cycle event to the entity 

to which the original security-based swap 

transaction was reported and shall include the 

transaction ID of the original transaction.’’ 

687See MarkitSERV I at 8. 

688See id. See also DTCC IX at 2. 

689See Barnard I at 3; DTCC II at 13. 

690See DTCC II at 13. The commenter stated that 

life cycle events that are price-forming events 

subject to confirmation could be reported within 

the same timeframes as initial reports of these 

events. However, the commenter indicated that life 

cycle events resulting from other processes, such as 

corporate actions or credit events, ‘‘where many 

trades will be impacted simultaneously and 

processing may be manual or automated,’’ would 

require different amounts of time to report. See id. 

required to be reported, and the 

definition of ‘‘life cycle event’’ in final 

Rule 900(q) no longer refers to changes 

in the collateral agreement. To assure 

that Rule 901(e) operates as intended, 

the Commission has modified the 

definition of ‘‘life cycle event’’ in final 

Rule 900(q) to reference, with respect to 

a security-based swap that is not a 

clearing transaction, the same terms that 

must be reported pursuant to Rule 

901(d)(4).683 Thus, if there were a 

change in the title or date of a master 

agreement, collateral agreement, margin 

agreement, or other agreement 

incorporated by reference into a 

security-based swap contract, such a 

change would be a ‘‘life cycle event’’ as 

defined in final Rule 900(q), and final 

Rule 901(e) would require reporting of 

that change. 

Finally, two commenters argued that 

the ‘‘Commission’s classification of a 

swap being accepted for clearing as a 

life cycle event is inconsistent with the 

operations of a Clearing Agency’’ 

because clearing may require the 

‘‘termination of the pre-existing alpha 

swap in order to create two new, unique 

swaps.’’ 684 The Commission agrees that 

any security-based swap that results 

from clearing an alpha should not be 

considered a life cycle event of the 

alpha, although the termination of the 

alpha would be such a life cycle 

event.685 The Commission believes that 

the new term ‘‘clearing transaction’’ 

makes clear that security-based swaps 

that result from clearing (e.g., betas and 

gammas in the agency model) are 

independent security-based swaps, not 

life cycle events of the security-based 

swap that is submitted to clearing (e.g., 

alpha security-based swaps). 

b. Final Rule 901(e)(1) 

As described above, re-proposed Rule 

901(e) would have required the 

reporting side to promptly report any 

life cycle event, or any adjustment due 

to a life cycle event, that resulted in a 

change to information previously 

reported pursuant to Rule 901(c), (d), or 

(i) to the entity to which it reported the 

original transaction, using the 

transaction ID. Rule 901(e), as proposed 

and re-proposed, also included 

provisions for determining which 

counterparty would report the life cycle 

event. The Commission is adopting a 

modified version of Rule 901(e) to 

address comments received and to 

implement certain technical changes. 

The Commission also has changed the 

title of the rule from ‘‘Duty to report any 

life cycle event of a security-based 

swap’’ in the re-proposal to ‘‘Reporting 

of life cycle events’’ in the final rule. In 

addition, final Rule 901(e) provides that 

a life cycle event or adjustment due to 

a life cycle event must be reported 

within the timeframe specified in Rule 

901(j). 

Although the definition of ‘‘life cycle 

event’’ would encompass the 

disposition of a security-based swap 

that has been submitted to clearing (e.g., 

whether, under the agency model of 

clearing, the alpha security-based swap 

has been accepted for clearing or 

rejected by the clearing agency), the 

Commission believes that it is 

appropriate to address the reporting of 

this specific type of life cycle event in 

the context of the Regulation SBSR 

Proposed Amendments Release, which 

address a number of topics regarding the 

reporting of security-based swaps that 

will be submitted to clearing or that 

have been cleared. Accordingly, final 

Rule 901(e)(1)(i) indicates that the 

reporting side shall not have a duty to 

report whether or not a security-based 

swap has been accepted for clearing or 

terminated by a clearing agency, and 

instead provides that ‘‘A life cycle 

event, and any adjustment due to a life 

cycle event, that results in a change to 

information previously reported 

pursuant to paragraph (c), (d), or (i) of 

this section shall be reported by the 

reporting side, except that the reporting 

side shall not report whether or not a 

security-based swap has been accepted 

for clearing.’’ 

c. Final Rule 901(e)(2) 

Re-proposed Rule 901(e) would have 

required the reporting side to include 

the transaction ID in a life cycle event 

report, and to report life cycle event 

information to the entity to which it 

reported the original transaction. Final 

Rule 901(e)(2) retains both of these 

requirements.686 The Commission 

believes that including the transaction 

ID in a life cycle event report will help 

to ensure that it is possible to link the 

report of a life cycle event to the report 

of the initial security-based swap of 

which it is a life cycle event. One 

commenter supported the requirement 

to report life cycle events to the same 

entity that received the original 

transaction report.687 The commenter 

stated that requiring a single registered 

SDR to receive, store, and report, where 

appropriate, all relevant information 

related to a given security-based swap 

throughout its life cycle would help to 

prevent fragmentation and ensure that 

corrections to previously reported data 

could be easily identified by the 

public.688 The Commission generally 

agrees with these views, and final Rule 

901(e)(2) retains the requirement to 

report life cycle events to the same 

entity to which the original transaction 

was reported. 

d. Reporting Timeframe for Life Cycle 

Events 

Rule 901(e), as proposed and reproposed, would have required life 

cycle events to be reported by the 

reporting side ‘‘promptly.’’ Two 

commenters believed that it was 

appropriate to require that life cycle 

events be reported ‘‘promptly.’’ 689 One 

of these commenters also stated that life 

cycle events could require different 

processing times based on the nature of 

the event, and asked the Commission to 

clarify the meaning of ‘‘promptly’’ with 

respect to life cycle event reporting.690

In particular, the commenter stated that 

‘‘the term ‘promptly,’ . . . without 

further explanation, may be interpreted 

by reporting parties differently for 

similar events and processes, 

particularly in a market where certain 

processes have historically taken a 

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14640 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

691 DTCC II at 13. 692See DTCC V at 11. See also ISDA III 

(requesting that ‘‘reporting parties be allowed to 

report lifecycle events either intra-day or as an endof day [sic] update to the terms of the [securitybased swap]’’). Further, one commenter noted that 

the CFTC rules allow a life cycle event to be 

reported either as event data on the same day as the 

event occurs or daily as ‘‘state data,’’ and that nonswap dealers or non-major swap participants may 

report these events either as life cycle event data or 

as state data no later than the end of the first 

business day following the event. See ISDA IV at 

11. This commenter requested that the Commission 

confirm in its rules that the same approach and 

timelines may be applied to meet the requirements 

of Regulation SBSR. The Commission notes that 

Rules 901(e) and 901(j), as adopted, provide for 

reporting of a life cycle event or an adjustment due 

to a life cycle event within 24 hours after the 

occurrence of the life cycle event or the adjustment 

due to the life cycle event. The Commission notes, 

further, that Rule 901(e)(1) requires the reporting of 

a life cycle event, and any adjustment due to a life 

cycle event, that results in a change to information 

previously reported pursuant to Rule 901(c), 901(d), 

or 901(i). Thus, Rule 901(e)(1) contemplates the 

reporting of the specific changes to previously 

reported information. Reports of life cycle events, 

therefore, must clearly identify the nature of the life 

cycle event for each security-based swap. It is not 

sufficient merely to re-report all of the terms of the 

security-based swap each day without identifying 

which data elements have changed. However, 

Regulation SBSR would not prevent a registered 

SDR from developing for its members a mechanism 

or other service that automates or facilitates the 

production of life cycle events from state data. 

693See Better Markets I at 9. 

694See DTCC II at 13. The Commission also 

believes that the 24-hour timeframe for reporting 

life cycle events will allow reporting sides to 

determine whether to report life cycle events on an 

intra-day or end-of-day basis. See DTCC V at 11; 

ISDA III. Reports of life cycle events, however, must 

clearly identify the nature of the life cycle event for 

each security-based swap. It is not sufficient merely 

to re-report all of the terms of the security-based 

swap each day without identifying which data 

elements have changed. See also note 692 supra. 

695Re-proposed Rule 901(e)(2) would have 

provided that the duty to report life cycle event 

information following an assignment or novation 

would switch to the other side only if the new side 

did not include a U.S. person (as in the originally 

proposed rule) or a security-based swap dealer or 

major security-based swap participant. As the 

Commission explained in the Cross-Border 

Proposing Release, if the new side included a 

security-based swap dealer or major security-based 

swap participant, the new side should retain the 

duty to report. See 78 FR 31068. 

696See ISDA III. 

697See supra Section V(C)(5). 

698See DTCC II at 13. 699See infra Section XII(C). 700 ISDA/SIFMA I at 6. 701See CFTC Rule 45.1, 17 CFR 45.1. The 

Commissions’ ongoing reporting requirements 

differ, however, with respect to the reporting of 

valuation information. The CFTC’s rules require 

reporting of valuation data as well as life cycle 

event data. As discussed in above in Section 

II(B)(3)(k), the Commission is not requiring 

reporting of valuation data for security-based 

swaps. 

number of days to effect.’’ 691 This 

commenter also suggested that the 

Commission revise Rule 901(e) to allow 

for the flexibility of reporting life cycle 

events either event-by-event or through 

one daily submission that would 

include multiple events.692 Another 

commenter stated that the required time 

for reporting both life cycle events and 

corrections should be stronger and more 

specific than the proposed requirement 

that they be reported ‘‘promptly.’’ 693

After careful consideration, the 

Commission does not believe that it 

would be appropriate to require life 

cycle events or adjustments due to life 

cycle events to be reported more quickly 

than the time within which information 

relating to the original transaction must 

be reported. As noted in Section 

VII(B)(3), supra, final Rule 901(j) 

provides that the transaction 

information required by Rules 901(c) 

and 901(d) generally must be reported 

within 24 hours of the time of 

execution. Similarly, Rule 901(j) 

provides that the reporting timeframe 

for Rule 901(e) shall be 24 hours after 

the occurrence of the life cycle event or 

the adjustment due to the life cycle 

event. The Commission believes that 24 

hours should provide sufficient time to 

report life cycle events even if the 

processing of some of these events is not 

yet fully automated.694 The Commission 

believes, further, that specifying a time 

within which life cycle event 

information must be reported will 

address the commenter’s concern that 

reporting sides could adopt different 

interpretations of the reporting 

timeframe. The Commission notes that 

it anticipates soliciting comment on the 

timeframe for reporting life cycle events, 

adjustments, and clearing transactions 

in the future, when it considers block 

thresholds and time delays. 

e. Re-Proposed Rule 901(e)(2) 

The Commission has determined not 

to adopt re-proposed Rule 901(e)(2), 

which would have specified the 

reporting side following an assignment 

or novation of the security-based 

swap.695 One commenter noted that, 

under the current market practice for 

reporting novations, the reporting party 

is re-determined based on the current 

status of the parties.696 This commenter 

noted that the current practice allows 

the reporting party logic to be consistent 

for new as well as novated trades, and 

recommended that the Commission use 

a consistent methodology for reporting 

of new trades and novations. The 

Commission agrees that using a single 

methodology for assigning reporting 

obligations would be administratively 

easier than using one methodology 

when a security-based swap is first 

executed and a different methodology 

when the counterparties change as a 

result of an assignment or novation. As 

the Commission explained above,697 it 

has determined that the reporting side 

following an assignment or novation 

will be determined using the procedures 

in Rule 901(a). 

f. Additional Comments Regarding Life 

Cycle Event Reporting 

One commenter believed that life 

cycle events should be reported using 

standard market forms, such as the trade 

confirmation for novations and early 

terminations, and the exercise notice for 

an exercise.698 Contrary to the 

commenter’s suggestion, the 

Commission believes that registered 

SDRs should be responsible for 

specifying the precise manner and 

format for reporting data. Moreover, the 

Commission understands that standard 

market forms may exist for some, but 

not all, of the life cycle events that must 

be reported under Regulation SBSR. 

Therefore, the Commission has 

determined not to prescribe a format for 

reporting sides to report life cycle event 

information. Instead, Rule 907(a)(3), as 

adopted, requires a registered SDR to 

establish and maintain written policies 

and procedures that specify how 

reporting sides are to report life cycle 

events and corrections to previously 

submitted information, for making 

corresponding updates or corrections to 

transaction records, and for applying an 

appropriate flag to these transaction 

reports.699

One commenter stated that it was 

critical for the SEC and the CFTC to 

adopt consistent regulatory approaches 

‘‘[i]n the life cycle event model across 

asset classes.’’ 700 The Commission 

agrees that would be useful for the 

Commissions to adopt consistent 

approaches to the reporting of life cycle 

event information to the extent possible. 

The Commission believes that 

Regulation SBSR’s approach to life cycle 

event reporting is broadly consistent 

with the approach taken by the CFTC. 

For example, because the agencies have 

adopted similar definitions, the life 

cycle event information required to be 

reported under the rules of both 

agencies is substantially similar.701 In 

addition, both agencies’ rules require 

that life cycle events be reported to the 

same entity that received the report of 

the original transaction, and both 

agencies’ rules require the entity that 

reports the initial transaction to also 

report life cycle events for the 

transaction. The Commission notes that 

a registered SDR that accepts transaction 

reports for both swaps and securitybased swaps could establish policies 

and procedures for reporting life cycle 

events of security-based swaps that are 

comparable to its policies and 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14641 

702 ISDA IV at 13 (emphasis in original). 

703 Id. 

704 Id. at 13–14. 

705See 75 FR 75236. 

706As discussed above in Section VI, Rule 902 

requires a registered SDR to immediately publicly 

disseminate a transaction report of a security-based 

swap, or a life cycle event or adjustment due to a 

life cycle event. If a security-based swap falls into 

the category of regulatory reporting but not public 

dissemination, there would be no need to publicly 

disseminate the correction because the initial 

security-based swap was not publicly disseminated. 

707The Commission modified the language from 

‘‘counterparty’’ or ‘‘party’’ to ‘‘side’’ in the reproposal of Rule 905. Additional minor changes 

were made for clarification such as inserting 

‘‘transaction’’ in Rule 905(a)(1) and changing an ‘‘a’’ 

to ‘‘the’’ in Rule 905(b)(1). Re-proposed Rule 905 

also substitutes the word ‘‘counterparties’’—which 

is a defined term in Regulation SBSR—for the word 

‘‘parties,’’ which was used in the initial proposal 

but was not a defined term. 

708For example, the title of final Rule 905(a) is 

‘‘Duty to correct,’’ rather than ‘‘Duty of 

counterparties to correct.’’ In addition, the 

Commission is deleting a reference to ‘‘securitybased swap transaction’’ from Rule 905(a)(2), as 

well as a reference to ‘‘reporting side’’ in Rule 

905(b)(1).’’ 

709See infra Section XII(C). 

710See Rule 902(c) (listing certain transactions 

that a registered SDR may not publicly 

disseminate). 

711See Rule 905(b)(2). When verifying 

information pursuant to Rule 905(b), a registered 

SDR must comply with the standards of Rule 

13n–5. In particular, Rule 13n–5(b)(1)(iii) provides 

that an SDR ‘‘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.’’ 

712Barnard I at 3. 

713 ISDA/SIFMA I at 9. 

714See MFA I at 5. 

procedures for reporting life cycle 

events of swaps, provided that its 

policies and procedures for reporting 

life cycle events of security-based swaps 

comply with the requirements of 

Regulation SBSR. 

Another commenter expressed the 

view that Regulation SBSR ‘‘should 

clarify what shall be reported as the 

time of execution for a life cycle event 

for purposes of public 

dissemination.’’ 702 The commenter 

stated that the CFTC requires market 

participants to report the execution time 

of the original trade as the execution 

time for a life cycle event for the trade. 

The commenter suggested that, under 

this approach, ‘‘the data that is publicly 

disseminated for lifecycle events may 

not be that meaningful to the public as 

it does not include any indication of the 

point in time the reported price has 

been traded.’’ 703 The commenter stated, 

further, that the time of execution for a 

life cycle event for purposes of public 

dissemination ‘‘should be the date and 

time such price-forming event is 

agreed.’’ 704

As discussed in Section VII(B)(3), 

supra, final Rule 901(j) provides that the 

reporting timeframe for a life cycle 

event shall be 24 hours after the 

occurrence of the life cycle event or the 

adjustment due to the life cycle event. 

Final Rule 902(a) requires a registered 

SDR to publicly disseminate a 

transaction report of a life cycle event, 

or adjustment due to a life cycle event, 

immediately upon receipt of the 

information. Thus, under Regulation 

SBSR, a life cycle event, or an 

adjustment due to a life cycle event, 

must be reported and publicly 

disseminated within 24 hours after the 

occurrence of the life cycle event or 

adjustment due to the life cycle event. 

The Commission believes that together 

these requirements will provide market 

observers with certain information 

concerning the time when the life cycle 

event occurred. However, the 

Commission notes that Regulation 

SBSR, as proposed and re-proposed, did 

not require the reporting or public 

dissemination of the time of execution 

of a life cycle event, and Regulation 

SBSR, as adopted, likewise includes no 

such requirements. 

B. Error Corrections—Rule 905 

As the Commission noted in the 

Regulation SBSR Proposing Release, any 

system for transaction reporting must 

accommodate the possibility that certain 

data elements may be incorrectly 

reported.705 Therefore, the Commission 

proposed Rule 905 to establish 

procedures for correcting errors in 

reported and disseminated securitybased swap information. 

In the Cross-Border Proposing 

Release, the Commission modified 

proposed Rule 905 slightly to 

correspond with certain new provisions 

in re-proposed Rule 908, which 

contemplated that certain types of crossborder security-based swaps would be 

required to be reported but not publicly 

disseminated. Rule 905 was re-proposed 

to clarify that, if a registered SDR 

receives corrected information relating 

to a previously submitted transaction 

report, it would be required to publicly 

disseminate a corrected transaction 

report only if the initial security-based 

swap were subject to the public 

dissemination requirement.706 The 

Commission also made certain other 

technical and conforming changes,707

but otherwise re-proposed Rule 905 was 

substantially similar to proposed Rule 

905. 

As discussed below, the Commission 

received several comments on proposed 

Rule 905. After consideration of the 

comments, the Commission has 

determined to adopt Rule 905 with 

certain minor editorial revisions.708

Rule 905(a) applies to any 

counterparty to a security-based swap 

that discovers an error in the 

information reported with respect to 

that security-based swap. If a nonreporting side discovers the error, the 

non-reporting side shall promptly notify 

the reporting side of the error. Once the 

reporting side receives notification of 

the error from the non-reporting side, or 

if the reporting side discovers the error 

on its own, the reporting side must 

promptly submit an amended report— 

containing corrected data—to the 

registered SDR that received the 

erroneous transaction report. The 

reporting side must submit the report 

required by Rule 905(a) in a manner 

consistent with the policies and 

procedures of the registered SDR that 

are contemplated by Rule 907(a)(3).709

Rule 905(b) details the responsibilities 

of a registered SDR to correct 

information and re-disseminate 

corrected information, where 

appropriate. If a registered SDR either 

discovers an error in the security-based 

swap information or receives 

notification of an error from a reporting 

side, the registered SDR is required to 

verify the accuracy of the terms of the 

security-based swap and, following such 

verification, promptly correct the 

information in its system. If the 

erroneous information contains any 

primary trade information enumerated 

in Rule 901(c) (and the transaction is 

dissemination-eligible 710), the 

registered SDR must publicly 

disseminate a corrected transaction 

report of the security-based swap 

promptly following verification of the 

trade by the counterparties to the 

security-based swap, with an indication 

that the report relates to a previously 

disseminated transaction.711

Three commenters were generally 

supportive of the proposed error 

reporting procedures. One commenter 

believed that publicly disseminating 

error reports would ‘‘increase 

confidence in the integrity of the 

markets.’’ 712 Another commenter stated 

that it supported ‘‘the objective of 

prompt correction of errors by the 

reporting party.’’ 713 A third commenter 

expressed support for requiring a 

reporting party to correct previously 

reported erroneous data, and agreed that 

it was appropriate for a non-reporting 

counterparty to have the obligation to 

notify the reporting party of an error of 

which it is aware.714

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14642 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

715See id. 

716See id. 

717See SDR Adopting Release. 

718 In the context of trade reporting, one 

commenter stated: ‘‘Confirmation processes are 

designed to identify when economic terms to trades 

have changed, distinguishing between expected 

events under an existing confirmation and 

amendments of economic terms due to the 

modification in terms . . . The trade confirmation 

is a bilateral process in which both parties agree to 

the confirmation, thereby ensuring any errors in the 

original data are corrected.’’ DTCC II at 5. The 

Commission believes that this comment supports 

the approach taken above, that counterparties to a 

transaction do not incur duties under Rule 905 

unless an error is detected that both sides would 

regard as such. 

719 Id. at 5–6. 

720See ISDA/SIFMA I at 9. 

721Rule 905(a). 

722The registered SDR, however, must comply 

with Rule 13n–5(b)(1)(iii) under the Exchange Act, 

which provides, in relevant part: ‘‘Every securitybased 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.’’ 723See Better Markets I at 9. 

The third commenter also sought 

guidance regarding the application of 

Rule 905 if a dispute arose between a 

reporting side and non-reporting side 

concerning whether a report was, in 

fact, erroneous.715 The commenter 

urged the Commission to provide in its 

final rule that, if corrected information 

is not promptly reported to the 

registered SDR because of a dispute over 

whether an error exists, the nonreporting party side may itself report the 

disputed data to the registered SDR; the 

commenter believed that, in such cases, 

the Commission should oblige the 

registered SDR to review promptly the 

disputed data with the 

counterparties.716

The Commission notes that, in a 

separate release, it is adopting Rule 

13n–5(b)(6) under the Exchange Act, 

which requires an SDR to establish 

procedures and provide facilities 

reasonably designed to effectively 

resolve disputes over the accuracy of the 

transaction data and positions that are 

recorded in the SDR.717 As the 

Commission notes in adopting that rule, 

only the parties to a dispute can resolve 

it. Thus, the SDR itself is not required 

to resolve the dispute, although the 

Commission believes that SDRs must 

provide processes to facilitate 

resolution, which would improve the 

quality and accuracy of the securitybased swap data that the SDR holds. 

The Commission is interpreting the term 

‘‘error’’ in final Rule 905 as one which 

both sides to the transaction would 

reasonably regard as such. If the 

counterparties dispute whether an error 

exists, then the counterparties can use 

an SDR’s procedures and facilities 

established under Rule 13n–5(b)(6) to 

attempt to resolve the dispute. If the 

dispute-resolution process under Rule 

13n–5(b)(6) yielded agreement that an 

error exists, then Rule 905 would 

require the counterparties to correct the 

error.718

The third commenter also asked the 

Commission, in the context of Rule 905, 

to clarify that the reporting is for 

informational purposes and does not 

affect the terms of the trade; otherwise, 

‘‘[a]bsent some mechanism to make the 

report nonbinding pending a dispute, 

the correction mechanics in the 

Proposed Rule will result in the 

reporting party (typically the SBS 

dealer) prevailing in any dispute.’’ 719

The Commission does not believe that 

reporting of an error in previously 

submitted security-based swap 

transaction information can change the 

terms of the trade. Reporting is designed 

to capture the terms of the trade, not to 

establish such terms. The Commission’s 

expectation, however, is that the report 

of a security-based swap provided to 

and held by a registered SDR will 

reflect, fully and accurately, the terms of 

the trade agreed to by the 

counterparties. If a counterparty 

becomes aware that the record held by 

the registered SDR does not accurately 

reflect the terms of the trade, that 

counterparty incurs a duty under Rule 

905 to take action to have that record 

corrected. 

A fourth commenter argued that the 

specific root cause of such amendments 

(for example a booking error or a trade 

amendment between parties) could be 

omitted.720 The Commission notes that 

Rule 905 does not require the reporting 

side to include the root cause of the 

error. This commenter also urged the 

Commission to clarify that reporting 

parties are not responsible for data that 

are inaccurately transcribed or 

corrupted after submission to the 

registered SDR. The Commission notes 

that the obligations under Rule 905 

attach to a counterparty to a securitybased swap only after that counterparty 

‘‘discovers’’ the error or, if the 

counterparty is the reporting side, after 

it ‘‘receives notification’’ of the error 

from the non-reporting side.721 Thus, a 

security-based swap counterparty incurs 

no duty under Rule 905 if its transaction 

data are inaccurately transcribed or 

corrupted after submission to the 

registered SDR unless the counterparty 

discovers the inaccurate transcription or 

corruption. Thus, under Rule 905, a 

counterparty would incur no duty to 

correct data errors of which it is 

unaware.722

Finally, a fifth commenter believed 

that Rule 905 should provide an error 

reporting timeframe that is stronger and 

more specific than the proposed 

requirement that such reports be 

submitted ‘‘promptly.’’ 723 The 

Commission continues to believe that 

‘‘promptly’’ is an appropriate standard 

because it emphasizes the need for 

corrections to be submitted without 

unreasonable delay while affording 

reporting sides a practical degree of 

flexibility 

C. Policies and Procedures for Reporting 

Life Cycle Events and Corrections 

Rule 907(a)(3), as originally proposed, 

would have required a registered SDR to 

establish and maintain written policies 

and procedures for ‘‘specifying how 

reporting parties are to report 

corrections to previously submitted 

information in its records that is 

subsequently discovered to be 

erroneous, and applying an appropriate 

indicator to any transaction report 

required to be disseminated by [Rule 

905(b)(2)] that the report relates to a 

previously disseminated transaction.’’ 

Rule 907(a)(3), as re-proposed, would 

have required a registered SDR to 

establish and maintain written policies 

and procedures for ‘‘specifying how 

reporting sides are to report corrections 

to previously submitted information, 

making corrections to information in its 

records that is subsequently discovered 

to be erroneous, and applying an 

appropriate indicator to any report 

required to be disseminated by [Rule 

905(b)(2)] that the report relates to a 

previously disseminated transaction.’’ 

The Commission received no adverse 

comment on Rule 907(a)(3) and is 

adopting it as re-proposed with a slight 

modification. Rule 907(a)(3), as adopted, 

requires a registered SDR to establish 

and maintain policies and procedures 

for ‘‘specifying procedures for reporting 

life cycle events and corrections to 

previously submitted information, 

making corresponding updates or 

corrections to transaction records, and 

applying an appropriate flag to the 

transaction report to indicate that the 

report is an error correction required to 

be disseminated by [Rule 905(b)(2)] or is 

a life cycle event, or any adjustment due 

to a life cycle event, required to be 

disseminated by [Rule 902(a)]’’ 

(emphasis added). The Commission is 

adding to final Rule 907(a)(3) the 

explicit requirement that a registered 

SDR establish and maintain policies and 

procedures regarding the reporting and 

flagging of life cycle events. The 

Commission believes that these 

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724See supra note 721 and accompanying text. 

725One such condition flag could be for voided 

trades. There may be scenarios in which a securitybased swap is executed (or thought to be executed), 

subsequently reported to a registered SDR, and 

publicly disseminated by that SDR—but later 

voided or canceled for some reason. For example, 

a transaction might be submitted to clearing but 

rejected by the clearing agency, and the 

counterparties could deem their agreement to be 

void ab initio. In this situation, the Commission 

believes the registered SDR could satisfy its 

obligation to publicly disseminate under Regulation 

SBSR by including a condition flag that the 

previously disseminated transaction report had 

been voided or canceled. 

726See Rule 902(a). 

727For example, DTCC Data Repository, LLC 

(‘‘DDR’’) utilizes an Event Identifier (‘‘EID’’) to 

maintain the integrity of a transaction throughout 

its lifecycle and enable public identification of 

events, including corrections, which occur with 

respect to the transaction. See DDR Rulebook, 

Section 4.1 at http://dtcc.com/∼/media/Files/

Downloads/legal/rules/DDR_Rulebook.ashx, last 

visited September 22, 2014. The EID is separate 

from the Unique Swap Identifiers (‘‘USI’’), which is 

the CFTC-equivalent of the transaction ID. See also 

ISDA/SIFMA I at 10 (recommending that initial 

trades should carry a ‘‘primary reference number’’ 

when disseminated, ‘‘and all amendments of that 

trade would then produce iterations of the original 

reference number’’). 

728Section 13A(a)(3) of the Exchange Act, 15 

U.S.C. 78m–1(a)(1), stipulates which counterparty 

must report a security-based swap that is not 

accepted by any clearing agency or derivatives 

clearing organization. That provision does not 

contemplate reporting by the other direct 

counterparty. Title VII does not stipulate who 

should report cleared security-based swaps. 

However, Section 13(m)(1)(F) of the Exchange Act, 

15 U.S.C. 78m(m)(1)(F), provides that ‘‘[p]arties to 

a security-based swap (including agents of the 

parties to a security-based swap) shall be 

responsible for reporting security-based swap 

transaction information to the appropriate 

registered entity in a timely manner as may be 

prescribed by the Commission.’’ 

additions will improve the ability of the 

Commission and other relevant 

authorities to identify and analyze life 

cycle events of security-based swaps. 

In the case of a life cycle event or 

error correction, the initial transaction 

has already been reported to the 

registered SDR, and the subsequent 

report involves some type of revision to 

the previously submitted report. The 

Commission seeks to have the ability to 

observe a security-based swap 

transaction throughout its life, which 

requires the ability to connect 

subsequently reported events to the 

original transaction. The Commission 

also seeks to avoid mistaking life cycle 

events or corrections of previously 

submitted reports for new transactions, 

which could result in overcounting the 

gross notional amount of the securitybased swap market or subsets thereof. 

Therefore, the Commission believes that 

registered SDRs must have appropriate 

policies and procedures that stipulate 

how reporting sides must report such 

follow-on events, and how the 

registered SDR itself can distinguish 

them and record them properly. 

Just as the Commission believes that 

a registered SDR should be given 

reasonable flexibility to enumerate 

specific data elements to be reported 

and the method for reporting them, the 

Commission also believes that a 

registered SDR should be given 

reasonable flexibility regarding the 

handling of corrections to previously 

submitted information. As discussed 

above, final Rule 905 does not require 

the reporting side to report the cause of 

an error.724 Nor does Rule 905 set forth 

a specific procedure for how a registered 

SDR must accept a report of a life cycle 

event or error correction. Accordingly, a 

registered SDR’s policies and 

procedures under Rule 907(a)(3) could 

require resubmission of the entire 

record with or without an indication of 

which elements in that record had been 

revised. Alternatively, a registered 

SDR’s policies and procedures could 

require a submission of only the data 

element or elements that had been 

revised. The Commission notes, 

however, that Rule 905(b)(2) requires a 

registered SDR to publicly disseminate 

a corrected transaction report of a 

security-based swap, if erroneously 

reported information relates to a 

security-based swap that had been 

publicly disseminated and falls into any 

of the categories of information 

enumerated in Rule 901(c). Therefore, a 

registered SDR will need to have a 

means of identifying changes in 

reported data so that it can identify the 

changed element or elements in the 

publicly disseminated correction report. 

The Commission notes that Rule 

907(a)(3) requires a registered SDR’s 

policies and procedures also to address 

how the registered SDR will apply an 

appropriate condition flag to any 

corrected transaction report that must be 

re-disseminated. Market observers 

should be able to understand that a 

transaction report triggered by Rule 

905(b)(2) or Rule 902(a) does not 

represent a new transaction, but merely 

a revision to a previous transaction. 

Without an indication to that effect, 

market observers could misunderstand 

the true state of the market.725 To 

provide observers with a clear view of 

the market, public reports of life cycle 

events should allow observers to 

identify the security-based swap subject 

to the life cycle event. The Commission 

notes, however, that registered SDRs 

may not use the transaction ID for this 

function because the transaction ID is 

not a piece of ‘‘information reported 

pursuant to [Rule 901(c)]’’ or a 

condition flag.726 Moreover, the 

Commission believes that knowledge of 

the transaction ID should remain 

limited to counterparties, infrastructure 

providers, and their agents, and should 

not be widely known. Knowledge of the 

transaction ID by additional parties 

could raise data integrity issues, as such 

additional parties could accidentally or 

even intentionally submit ‘‘false 

corrections’’ to the registered SDR 

regarding transactions to which they 

were never a counterparty. This could 

damage the otherwise accurate record of 

the original transaction. Screening out 

improperly submitted ‘‘corrections’’—or 

repairing damage to the registered SDR’s 

records that a false correction might 

cause—could become a significant and 

unwanted burden on registered SDRs. 

Therefore, registered SDRs, in their 

policies and procedures under Rule 

907(a)(3), will need to use some means 

other than the transaction ID to indicate 

that a publicly disseminated report 

triggered by Rule 905(b)(2) or Rule 

902(a) pertains to a previously 

disseminated transaction.727

XIII. Other Duties of Participants 

A. Duties of Non-Reporting Sides To 

Report Certain Information—Rule 

906(a) 

The Commission believes that a 

registered SDR generally should 

maintain complete information for each 

security-based swap reported to the 

registered SDR, including UICs for both 

sides of a transaction. Although 

Regulation SBSR generally takes the 

approach of requiring only one side to 

report the majority of the transaction 

information,728 the Commission 

recognizes that it might not be feasible 

or desirable for the reporting side to 

report to a registered SDR all of the UICs 

of the non-reporting side. To address 

this issue, the Commission proposed 

Rule 906(a), which would provide a 

means for a registered SDR to obtain 

UICs from the non-reporting side. 

Rule 906(a), as initially proposed, 

would have established procedures 

designed to ensure that a registered SDR 

obtains UICs for both direct 

counterparties to a security-based swap. 

As initially proposed, Rule 906(a) 

would have required a registered SDR to 

identify any security-based swap 

reported to it for which the registered 

SDR does not have the participant ID 

and (if applicable) the broker ID, desk 

ID, and trader ID of each counterparty. 

The registered SDR would have been 

required to send a report once a day to 

each of its participants identifying, for 

each security-based swap to which that 

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729See 78 FR 31214. 

730As discussed above, see supra Section II(C), 

the Commission has added ‘‘branch ID’’ and 

‘‘execution agent ID’’ to the UICs required to be 

reported under Regulation SBSR. The Commission 

believes that reporting the branch ID and the 

execution agent ID for both counterparties to a 

security-based swap, if applicable, to a registered 

SDR will assist the Commission and other relevant 

authorities in overseeing the security-based swap 

market. Accordingly, the Commission has included 

branch ID and execution agent ID as UICs that 

registered SDRs must obtain pursuant to Rule 

906(a). 

731The Commission has determined to use the 

term ‘‘counterparty ID’’ rather than ‘‘participant ID’’ 

and to use the term ‘‘trading desk ID’’ rather than 

‘‘desk ID’’ throughout Regulation SBSR. See supra 

Sections II(B)(3)(b) and II(C)(3)(c). In addition, the 

Commission has inserted the word ‘‘direct’’ 

immediately before each instance of the word 

‘‘counterparty.’’ When the Commission re-proposed 

Rule 906(a), it made conforming changes to reflect 

the introduction of the ‘‘reporting side’’ concept 

and to clarify that relevant UICs for the nonreporting side must be reported only for direct 

counterparties. The word ‘‘counterparty’’ occurs in 

two places in final Rule 906(a), but the re-proposed 

rule inserted ‘‘direct’’ before ‘‘counterparty’’ only 

after the first occurrence. Final Rule 906(a) inserts 

‘‘direct’’ before ‘‘counterparty’’ both times that the 

word ‘‘counterparty’’ is used. Final Rule 906(a) also 

includes modifications that clarify that the term 

‘‘participant,’’ as used in Rule 906(a), means a 

participant in a registered SDR. The Commission 

has made similar modifications throughout final 

Rule 906. The Commission also is revising the final 

sentence of Rule 906(a) to clarify that the 

participant referred to in that sentence is a 

participant of a registered SDR, and to clarify that 

a participant that receives a Rule 906(a) report from 

a registered SDR is responsible for providing 

missing UIC information for its side of each 

security-based swap referenced in the report. The 

participant is not responsible for providing any 

missing UIC information pertaining to the other 

side of the transaction. Accordingly, the last 

sentence of Rule 906(a) states: ‘‘A participant of a 

registered security-based swap data repository that 

receives such a report shall provide the missing 

information with respect to its side of each securitybased swap referenced in the report to the 

registered security-based swap data repository 

within 24 hours.’’ In addition, the Commission is 

revising the rule to refer to execution agents to 

conform to Rule 901(d)(1)(i). Finally, to more 

accurately reflect the requirements of the rule, the 

Commission is changing the title of the rule to 

‘‘Identifying missing UIC information.’’ 

732See DTCC II at 16. This commenter also 

suggested that desk IDs and trader IDs should not 

be required to be reported due to the fact that desk 

structures are changed relatively frequently and 

traders often rotate to different desks or transfer to 

different firms. See DTCC II at 11. This suggestion 

is addressed above in Section II(C)(3)(c). 

733See DTCC II at 16. 

734However, if the non-reporting side for the 

security-based swap does not meet the definition of 

‘‘participant’’ in Rule 900(u), Rule 906(a) would not 

require the registered SDR to request UIC 

information from the non-reporting side. This result 

is consistent with the Regulation SBSR Proposing 

Release. See 75 FR 75240 (‘‘Thus, the Commission 

anticipates that there would be some SBSs reported 

to and captured by a registered SDR where only one 

counterparty of the SBS is a participant’’). 

735Rule 906(a) provides: ‘‘A registered securitybased swap data repository shall identify any 

security-based swap reported to it for which the 

registered security-based swap data repository does 

not have the counterparty ID and (if applicable) the 

broker ID, branch ID, execution agent ID, trading 

desk ID, and trader ID of each direct counterparty. 

Once a day, the registered security-based swap data 

repository shall send a report to each participant of 

the registered security-based swap data repository 

or, if applicable, an execution agent, identifying, for 

each security-based swap to which that participant 

is a counterparty, the security-based swap(s) for 

which the registered security-based swap data 

repository lacks counterparty ID and (if applicable) 

broker ID, branch ID, execution agent ID, desk ID, 

and trader ID. A participant of a registered securitybased swap data repository that receives such a 

report shall provide the missing information with 

respect to its side of each security-based swap 

referenced in the report to the registered securitybased swap data repository within 24 hours.’’ Rule 

900(u) defines ‘‘participant,’’ with respect to a 

registered SDR, as ‘‘a counterparty, that meets the 

criteria of § 242.908(b), of a security-based swap 

that is reported to that registered security-based 

swap data repository to satisfy an obligation under 

§ 242.901(a).’’ 

736Nothing in Regulation SBSR prevents a nonreporting side from voluntarily providing all of its 

applicable UICs to the reporting side, so that the 

reporting side could, as agent, report all of the nonreporting side’s UICs together with the rest of the 

data elements required by Rules 901(c) and 901(d). 

If this were to occur, the registered SDR would not 

need to send a Rule 906(a) report to the nonreporting side inquiring about the non-reporting 

side’s missing UICs. 

737See DTCC V at 13. As noted above, however, 

Rule 906(a), as adopted, requires the registered SDR 

to obtain UIC information only from non-reporting 

sides that are participants of that registered SDR. 

738See DTCC V at 13. 

739See 15 U.S.C. 78m(n)(5). 

participant is a counterparty, the 

security-based swap(s) for which the 

registered SDR lacks participant IDs and 

(if applicable) a broker ID, desk ID, or 

trader ID. The participant would have 

been required to provide the missing 

information within 24 hours of 

receiving this report from the registered 

SDR. 

When the Commission re-proposed 

Regulation SBSR as part of the CrossBorder Proposing Release, it made 

conforming changes to Rule 906(a) to 

reflect the introduction of the ‘‘reporting 

side’’ concept and to clarify that the 

participant ID, broker ID, desk ID, and 

trader ID must be reported only for 

direct counterparties.729

The Commission has decided to adopt 

Rule 906(a) substantially as re-proposed, 

with conforming changes related to 

including branch ID and execution 

agent ID among the UICs that must be 

provided to the registered SDR730 and 

other minor technical changes.731

The Commission received two 

comment letters from the same 

commenter addressing proposed Rule 

906(a). The first letter, which responded 

to the initial proposal, stated that 

regulators must have the UICs of both 

counterparties to a security-based swap 

to accurately track exposures.732 The 

commenter believed that, ideally, this 

process would be supported 

electronically and that the use of thirdparty services should meet this 

requirement.733

The Commission generally shares the 

commenter’s view that registered SDRs 

should maintain UICs for both sides of 

a security-based swap.734 The 

Commission notes that Rule 901(d) 

requires the reporting side to report the 

branch ID, broker ID, execution agent 

ID, trader ID, and trading desk ID—as 

applicable—only for the direct 

counterparty on its side. Rule 901(d)(1) 

requires the reporting side to report only 

the counterparty ID or execution agent 

ID, as applicable, of a counterparty on 

the other side. The Commission could 

have required the reporting side to 

provide UIC information for both sides 

of the transaction, but this would 

obligate a non-reporting side to furnish 

its UIC information to the reporting side 

so that the additional UICs could be 

reported by the reporting side. There are 

circumstances where a non-reporting 

side might be unable or unwilling to 

provide its UIC information to the 

reporting side. Therefore, the 

Commission is instead requiring the 

registered SDR to obtain these UICs 

from the non-reporting side through the 

Rule 906(a) process.735 Obtaining UICs 

for both sides will enhance the 

Commission’s ability to carry out its 

responsibility to oversee the securitybased swap market, because the 

Commission will be able to identify 

individual traders and business units 

that are involved in security-based swap 

transactions.736

In a subsequent comment letter, in 

response to the re-proposal of 

Regulation SBSR, the same commenter 

expressed concern that Rule 906(a) 

could require a registered SDR to send 

reports to and obtain information from 

persons who might not be participants 

of that registered SDR.737 More 

generally, this commenter suggested 

that registered SDRs should not police 

security-based swap reports for 

deficiencies or unpopulated data fields 

in any manner that requires the 

registered SDR to take affirmative action 

to obtain information.738

The Commission disagrees with the 

commenter’s suggestion that registered 

SDRs should have no duty to review the 

completeness of security-based swap 

reports or obtain missing information 

from participants. To the contrary, the 

Commission believes that registered 

SDRs are best situated to review 

reported data for completeness because 

they have a statutory and regulatory 

duty to accept and maintain securitybased swap data, as prescribed by the 

Commission.739 Imposing an affirmative 

duty on registered SDRs to verify the 

completeness of reported data and to 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14645 

740See supra Section IV (discussing Rule 

907(a)(2)). 

741The Commission notes that Rule 13n–5(b)(2) 

under the Exchange Act provides: ‘‘Every securitybased 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.’’ 

742The policies and procedures of a registered 

SDR will establish on-boarding procedures for 

participants. 

743Proposed Rule 900 further would have 

provided that a person would be presumed to 

control another person if the person: ‘‘(1) [i]s a 

director, general partner or officer exercising 

executive responsibility (or having similar status or 

functions); (2) [d]irectly 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 (3) [i]n the case of a partnership, has the right 

to receive, upon dissolution, or has contributed, 25 

percent or more of the capital.’’ 

744See 78 FR 31210–11. The definition of 

‘‘affiliate’’ was re-proposed as Rule 900(a). The 

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

parent’’ were re-proposed as Rules 900(f), 900(r), 

and 900(ll), respectively. Re-proposed Rule 

900(mm) contained the definition of ‘‘ultimate 

parent ID.’’ 

745Specifically, the Commission is modifying 

Rule 906(b) to clarify that the term ‘‘participant,’’ 

means a participant in a registered SDR. The 

Commission also is replacing the term ‘‘participant 

ID’’ with ‘‘counterparty ID.’’ 

746See Financial Crisis Inquiry Commission, 

‘‘The Financial Crisis Inquiry Report: Final Report 

of the National Commission on the Causes of the 

Financial and Economic Crisis in the United 

States,’’ January 2011, at xxi, available at: http:// 

www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPOFCIC.pdf, last visited September 22, 2014 

(explaining that relevant authorities ‘‘lacked a full 

understanding of the risks and interconnections in 

the financial markets’’ prior to and during the 

financial crisis, including, among other things, the 

exposures created by Lehman Brothers’ derivatives 

contracts). 

747Among other things, Rule 906(b) should 

enable the Commission and other relevant 

authorities to identify quickly security-based swaps 

of a corporate group that have been reported to the 

registered SDR, including security-based swaps 

Continued 

obtain missing data should increase the 

reliability of data maintained by 

registered SDRs while decreasing the 

possibility of registered SDRs providing 

incomplete reports to relevant 

authorities. This, in turn, will facilitate 

oversight of the security-based swap 

market, which is a primary objective 

Title VII. 

Rule 906(a) requires registered SDRs 

to communicate with participants that 

are not reporting sides under Regulation 

SBSR. As discussed above, these 

communications are required to ensure 

that a registered SDR maintains 

complete UIC information for both sides 

of each security-based swap transaction 

that is reported to the registered SDR. 

The Commission recognizes that some 

non-reporting sides may not wish to 

connect directly to a registered SDR 

because they may not want to incur the 

costs of establishing a direct connection. 

Rule 906(a) does not prescribe the 

means registered SDRs must use to 

obtain information from non-reporting 

sides. As a result, registered SDRs have 

broad discretion to establish a 

methodology for notifying non-reporting 

sides of missing UIC information and 

obtaining UIC reports from the nonreporting side. For example, a registered 

SDR could send notifications and 

receive reports via email, in accordance 

with its policies and procedures.740

Registered SDRs should consider 

allowing non-reporting sides to provide 

the information required by Rule 906(a) 

in a minimally-burdensome manner. 

Historical security-based swaps must 

be reported to a registered SDR pursuant 

to Rule 901(i). The Commission 

acknowledges that broker IDs, branch 

IDs, execution agent IDs, trading desk 

IDs, and trader IDs do not yet exist and 

will not exist until assigned by 

registered SDRs. Therefore, these UICs 

are not data elements applicable to 

historical security-based swaps. 

Accordingly, registered SDRs are not 

required under Rule 906(a) to identify 

these UICs as missing or to 

communicate to non-reporting side 

participants that they are missing, and 

non-reporting side participants are not 

required by Rule 906(a) to provide these 

UICs to a registered SDR with respect to 

any historical security-based swaps. 

B. Duty To Provide Ultimate Parent and 

Affiliate Information to Registered 

SDRs—Rule 906(b) 

To assist the Commission and other 

relevant authorities in monitoring 

systemic risk, a registered SDR should 

be able to identify and calculate the 

security-based swap exposures of its 

participants on an enterprise-wide 

basis.741 Therefore, the Commission 

proposed Rule 906(b), which would 

have required each participant of a 

registered SDR to provide to the 

registered SDR information sufficient to 

identify its ultimate parent(s) and any 

affiliate(s) of the participant that also are 

participants of the registered SDR. 

Proposed Rule 906(b) would have 

required a person to provide parent and 

affiliate information to a registered SDR 

immediately upon becoming a 

participant.742 Proposed Rule 906(b) 

also would have required a participant 

to promptly notify the registered SDR of 

any changes to reported parent or 

affiliate information. 

The Commission also proposed rules 

to define the relationships that could 

give rise to reporting obligations under 

Rule 906(b). Proposed Rule 900 would 

have defined an ‘‘affiliate’’ as ‘‘any 

person that, directly or indirectly, 

controls, is controlled by, or is under 

common control with, a person’’ and 

‘‘control’’ 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.’’ 743 The 

Commission also proposed definitions 

of ‘‘parent’’ and ‘‘ultimate parent’’ to 

identify particular categories of 

affiliated entities based on a person’s 

ability to control an affiliate. 

Specifically, proposed Rule 900 would 

have defined ‘‘parent’’ to mean ‘‘a legal 

person that controls a participant’’ and 

‘‘ultimate parent’’ as ‘‘a legal person that 

controls a participant and that itself has 

no parent.’’ The Commission also 

proposed to define ‘‘ultimate parent ID’’ 

as ‘‘the UIC assigned to an ultimate 

parent of a participant.’’ 

The Commission re-proposed the 

definitions of ‘‘affiliate,’’ ‘‘control,’’ 

‘‘parent,’’ ‘‘ultimate parent,’’ and 

‘‘ultimate parent ID,’’ and Rule 906(b) 

without change in the Cross-Border 

Proposing Release.744

After considering the comments 

received, which are discussed below, 

the Commission is adopting Rule 906(b), 

as proposed and re-proposed, subject to 

two clarifying changes.745 Obtaining 

ultimate parent and affiliate information 

will assist the Commission in 

monitoring enterprise-wide risks related 

to security-based swaps. If participants 

are not required to identify which of 

their affiliates also are participants of a 

particular registered SDR, the 

Commission or other relevant 

authorities might be unable to calculate 

the security-based swap exposures of 

that ownership group using data held in 

the registered SDR. As a result, systemic 

risk might build undetected within an 

ownership group, even if all securitybased swaps for that enterprise were 

reported to the same registered SDR. 

The lack of transparency regarding OTC 

derivatives exposures within the same 

ownership group was one of the factors 

that hampered regulators’ ability to 

respond to the financial crisis of 2007– 

08.746

The Commission believes that a 

reasonable means of monitoring 

security-based swap positions on a 

group-wide basis is by requiring each 

participant of a registered SDR to 

provide information sufficient to 

identify the participant’s ultimate 

parent(s) and any affiliate(s) of the 

participant that also are participants of 

the registered SDR, using ultimate 

parent IDs and counterparty IDs.747 Rule 

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held by securitization vehicles that are controlled 

by financial institutions. 

748See DTCC II at 13–14; ICI I at 6; GS1 Proposal 

at 43–44. 

749See DTCC II at 13–14. 

750See id. at 17. This commenter believed that a 

registered SDR likely would obtain parent and 

affiliate information from a data vendor and allow 

participants to review and approve the data. 

751See id. 

752See ICI I at 6; GS1 Proposal at 43–44. 

753See ICI I at 6, note 9. 

754See id. 

755 Id. 

756See GS1 Proposal at 43. 

757As originally proposed, Rule 907(a)(6) would 

have required a registered SDR to establish and 

maintain written policies and procedures ‘‘[f]or 

periodically obtaining from each participant 

information that identifies the participant’s ultimate 

parent(s) and any other participant(s) with which 

the counterparty is affiliated, using ultimate parent 

IDs and participant IDs’’ (emphasis added). The 

Commission re-proposed Rule 907(a)(6) with the 

word ‘‘participant’’ in place of the word 

‘‘counterparty.’’ 

758See DTCC II at 17; Multiple Associations 

Letter at 7–8; SIFMA I at 6. 

759Final Rule 900(a) defines ‘‘affiliate,’’ while the 

definitions of ‘‘control,’’ ‘‘parent,’’ ‘‘ultimate 

parent’’ and ‘‘ultimate parent ID’’ are in Rules 

900(h), 900(t), 900(oo), and 900(pp), respectively. 

760See SIFMA I at 6. 

761See id. 

762See id. 

906(b), as adopted, imposes an 

affirmative obligation on participants of 

a registered SDR to provide this 

ownership and affiliation information to 

a registered SDR immediately upon 

becoming a participant of that SDR. The 

participant also must notify the 

registered SDR promptly of any changes 

to that information. To minimize 

burdens on participants and to align the 

burdens as closely as possible with the 

purpose behind the requirement, Rule 

906(b) does not require a participant of 

a registered SDR to provide information 

to the registered SDR about all of its 

affiliates, but only those that are also 

participants of the same registered SDR. 

The Commission received three 

comments addressing proposed Rule 

906(b).748 One commenter supported 

the proposed rule, stating that parent 

and affiliate information, along with 

other information required to be 

reported by Regulation SBSR, is critical 

to providing regulators with a 

comprehensive view of the swaps 

market and assuring that publicly 

reported data is accurate and 

meaningful.749 This commenter further 

stated that registered SDRs should have 

the power to obtain parent and affiliate 

information from firms, because this 

information would help to illustrate the 

full group level exposures of firms and 

the impact of the failure of any 

participant.750 The Commission 

generally agrees with the commenter’s 

points and continues to believe that 

identifying security-based swap 

exposures within an ownership group is 

critical to monitoring market activity 

and detecting potential systemic risks. 

The existence of data vendors that 

provide parent and affiliate information 

may reduce any burdens on participants 

associated with reporting such 

information to a registered SDR,751 but 

the Commission does not view this as 

an adequate substitute for having the 

information reported to and readily 

available from registered SDRs. Title 

VII’s regulatory reporting requirement is 

designed to allow the Commission and 

other relevant authorities to have access 

to comprehensive information about 

security-based swap activity in 

registered SDRs. The Commission 

believes that it would be inimical to that 

end for relevant authorities to have all 

the transaction information in registered 

SDRs but be forced to rely on 

information from outside of registered 

SDRs to link positions held by affiliates 

within the same corporate group. 

Two commenters suggested 

clarifications or modifications to the 

proposed rule.752 One commenter 

expressed concerns about how Rule 

906(b) would apply to agents, noting 

that investment advisers frequently 

execute a single security-based swap 

transaction on behalf of multiple 

accounts and allocate the notional 

amount of the transaction among these 

accounts at the end of the day.753 The 

commenter stated that advisers often do 

not know all of the affiliates of their 

clients and, as a result, might be unable 

to comply with Rule 906(b).754 The 

commenter recommended that ‘‘the 

Commission clarify that an adviser that 

has implemented reasonable policies 

and procedures to obtain the required 

information about affiliates and 

documented its efforts to obtain the 

information from its clients be deemed 

to have satisfied [Rule 906(b) of] 

Regulation SBSR.’’ 755

The Commission believes that it is 

unnecessary to modify Rule 906(b) in 

response to this comment. The 

Commission notes that Rule 906(b) 

imposes no obligations on an execution 

agent, such as an investment adviser 

that executes a single security-based 

swap on behalf of multiple accounts and 

allocates the notional amount of the 

transaction among those accounts at the 

end of the day. Rather, it would be the 

counterparty itself that would have the 

responsibility under Rule 906(b). 

Another commenter expressed the 

view that the information required to be 

reported by Rule 906(b) should be 

placed in prescribed XBRL templates or 

other such input mechanisms that 

would capture this information at its 

source for all downstream processes in 

the financial supply chain to use.756 The 

Commission has determined not to 

specify the manner or format in which 

security-based swap counterparties 

must provide ultimate parent and 

affiliate information to a registered SDR. 

The Commission believes that it would 

be preferable to allow each registered 

SDR to determine a suitable way to 

receive and maintain ultimate parent 

and affiliate information about its 

participants. The Commission notes that 

Rule 907(a)(6), as adopted, requires a 

registered SDR to establish and maintain 

written policies and procedures for 

periodically obtaining from each 

participant information that identifies 

the participant’s ultimate parent(s) and 

any other participant(s) with which the 

counterparty is affiliated, using ultimate 

parent IDs and counterparty IDs.757

The Commission received three 

comments on the definitions of 

‘‘control’’ and ‘‘affiliate.’’ 758 No 

commenters specifically addressed the 

definitions of ‘‘parent,’’ ‘‘ultimate 

parent,’’ or ‘‘ultimate parent ID.’’ After 

carefully evaluating these comments, 

the Commission is adopting the 

definitions of ‘‘affiliate,’’ ‘‘control,’’ 

‘‘parent,’’ ‘‘ultimate parent,’’ and 

‘‘ultimate parent ID’’ as proposed and 

re-proposed.759

One commenter stated its view that 

the proposed definition of ‘‘control’’ 

was improper.760 This commenter 

believed that the proposed 25% 

threshold for presuming control was too 

low, and that obtaining the information 

required by Rule 906(b) from entities 

with which a security-based swap 

market participant has less than a 

majority ownership relationship would 

be overly burdensome, and, in some 

cases, not practicable.761 The 

commenter recommended that the 

Commission amend the definition to 

presume control based on no less than 

majority ownership.762

The Commission disagrees that, for 

purposes of Regulation SBSR, control 

should be presumed to exist only if 

there is majority ownership. Rule 906(b) 

is designed to assist the Commission 

and other relevant authorities in 

monitoring group-wide security-based 

swap exposures by enabling a registered 

SDR to provide them with the 

information necessary to calculate 

positions in security-based swaps held 

within the same ownership group that 

are reported to that registered SDR. If 

the Commission were to adopt 

definitions of ‘‘control’’ and ‘‘affiliate’’ 

that were based on majority ownership, 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14647 

763See, e.g., Rule 300(f) of Regulation ATS under 

the Exchange Act, 17 CFR 242.300(f); Rule 19g2– 

1(b)(2) under the Exchange Act, 17 CFR 240.19g2– 

1(b)(2); Form 1 (Application for, and Amendments 

to Application for, Registration as a National 

Securities Exchange or Exemption from Registration 

Pursuant to Section 5 of the Exchange Act); Form 

BD (Uniform Application for Broker-Dealer 

Registration). See also Rule 3a55–4(b)(2) under the 

Exchange Act, 17 CFR 240.3a55–4(b)(2) (defining 

control to mean ownership of 20% or more of an 

issuer’s equity, or the ability to direct the voting of 

20% or more of the issuer’s voting equity). 

764See 17 CFR 45.6(a) (defining ‘‘control’’ in the 

context of the CFTC’s LEI system); 17 CFR 

45.6(e)(2). 

765See Multiple Associations Letter at 7–8. 

766Securities Exchange Act Release No. 63452 

(December 7, 2010), 75 FR 80174 (December 21, 

2010). In the Entity Definitions Proposing Release, 

‘‘affiliated group’’ would have been used to describe 

the range of counterparties that a security-based 

swap market participant would need to count for 

purposes of determining whether it qualified for a 

de minimis exception from the definition of 

‘‘security-based swap dealer.’’ For purposes of the 

Entity Definitions Proposing Release, the 

Commissions stated that an affiliated group would 

be defined as ‘‘any group of entities that is under 

common control and that reports information or 

prepares its financial statements on a consolidated 

basis.’’ See 75 FR 80180, note 43. 767Securities Exchange Act Release No. 66868 

(April 27, 2012), 77 FR 30596 (May 23, 2012). 

768See id. at 30625. 

769See 78 FR 31214. 

770Barnard I at 3. 

771The Commission also revised Rule 906(c), to 

clarify that the term ‘‘participant’’ means a 

participant of a registered SDR. 

772See supra Section V(B)(1) (explaining that, 

during the period before the Commission has 

adopted rules for the registration of security-based 

swap dealers and major security-based swap 

participants, the Commission seeks to avoid 

imposing costs on market participants who 

otherwise would have to assess whether they are 

security-based swap dealers or major security-based 

swap participants). 

participants would be required to 

identify fewer entities as affiliates, even 

if certain indicia of affiliation were 

present. The Commission believes that, 

to carry out its oversight function for the 

security-based swap market, it should 

err on the side of inclusion rather than 

exclusion when considering which 

positions are part of the same ownership 

group for general oversight purposes. 

The Commission also notes that the 

definition of ‘‘control’’ as adopted in 

Rule 900(h) is consistent with the 

definition used in other Commission 

rules and forms,763 so market 

participants should be accustomed to 

applying this definition in the conduct 

of their business activities. Furthermore, 

the CFTC’s swap data reporting rules 

employ a materially similar definition of 

‘‘control’’ for purposes of determining 

whether two market participants are 

affiliated with each other.764 If the 

Commission were to adopt a different 

definition of ‘‘control,’’ market 

participants would need to determine 

their affiliates under both sets of rules, 

thereby imposing what the Commission 

believes would be unnecessary costs on 

market participants. 

One commenter suggested that the 

Commission and the CFTC use a 

consistent definition of ‘‘affiliate’’ 

throughout the Title VII rulemakings 765

and recommended that the Commission 

and CFTC use the definition of 

‘‘affiliated group’’ in the Commissions’ 

proposed joint rulemaking to further 

define the terms swap dealer, securitybased swap dealer, major swap 

participant, major security-based swap 

participant, and eligible contract 

participant (‘‘Entity Definitions 

Proposing Release’’).766 The 

Commission does not believe it is 

appropriate to adopt, for purposes of 

Regulation SBSR, the definition of 

‘‘affiliated group’’ that was proposed in 

the Entity Definitions Proposing 

Release. The final rules defining ‘‘swap 

dealer,’’ ‘‘security-based swap dealer,’’ 

‘‘major swap participant,’’ ‘‘major 

security-based swap participant,’’ and 

‘‘eligible contract participant’’ (‘‘Final 

Entity Definition Rules’’) did not adopt 

a definition of ‘‘affiliated group.’’ 767

When the Commission and CFTC 

adopted the Final Entity Definition 

Rules they specifically rejected the 

notion that an ‘‘affiliated group’’ should 

include only those entities that report 

information or prepare financial 

statements on a consolidated basis as a 

prerequisite for being affiliated because 

they did not believe that whether or not 

two entities are affiliated should change 

according to changes in accounting 

standards.768 The Commission 

continues to believe that changes in 

accounting standards should not 

determine whether two entities are 

affiliated and therefore declines to adopt 

the definition of ‘‘affiliated group’’ that 

it proposed in the Entity Definitions 

Proposing Release. 

C. Policies and Procedures of Registered 

Security-Based Swap Dealers and 

Registered Major Security-Based Swap 

Participants To Support Reporting— 

Rule 906(c) 

For the security-based swap reporting 

requirements established by the DoddFrank Act to achieve the objectives of 

enhancing price transparency and 

providing regulators with access to data 

to help carry out their oversight 

responsibilities, the information that 

participants provide to registered SDRs 

must be reliable. Ultimately, the 

majority of security-based swaps likely 

will be reported by registered securitybased swap dealers and registered major 

security-based swap participants. The 

Commission believes that requiring 

these participants to adopt policies and 

procedures to address their securitybased swap reporting obligations will 

increase the accuracy and reliability of 

the transaction reports that they submit 

to registered SDRs. 

Proposed Rule 906(c) would have 

required a participant that is a securitybased swap dealer or major securitybased swap participant to establish, 

maintain, and enforce written policies 

and procedures that are reasonably 

designed to ensure that the participant 

complies with any obligations to report 

information to a registered SDR in a 

manner consistent with Regulation 

SBSR and the policies and procedures 

of any registered SDR of which it is a 

participant. The policies and procedures 

contemplated by proposed Rule 906(c) 

were intended to promote complete and 

accurate reporting of security-based 

swap information by participants that 

are security-based swap dealers and 

major security-based swap participants, 

consistent with their obligations under 

the Dodd-Frank Act and Regulation 

SBSR. Proposed Rule 906(c) also would 

have required a security-based swap 

dealer or major security-based swap 

participant to review and update its 

policies and procedures at least 

annually. The Commission re-proposed 

Rule 906(c) without change as part of 

the Cross-Border Proposing Release.769

The one commenter who addressed this 

aspect of Regulation SBSR stated that 

proposed Rule 906(c) is ‘‘a necessary 

part of risk governance and 

compliance.’’ 770

The Commission agrees and is 

adopting Rule 906(c), largely as 

proposed and re-proposed, subject to 

two modifications.771 As proposed and 

re-proposed, Rule 906(c) would have 

required security-based swap dealers 

and major security-based swap 

participants to establish, maintain, and 

enforce written policies and procedures 

to support security-based swap 

transaction reporting. As discussed 

above, Rule 906(c), as adopted, imposes 

this duty only on registered securitybased swap dealers and registered major 

security-based swap participants.772

Second, Rule 906(c), as adopted, does 

not include the phrase ‘‘and the policies 

and procedures of any registered 

security-based swap data repository of 

which it is a participant.’’ The 

Commission believes that it is sufficient 

to require that the policies and 

procedures of registered security-based 

swap dealers and registered major 

security-based swap participants be 

reasonably designed to ensure 

compliance with the reporting 

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14648 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

773The Commission notes that a reporting side is 

also required to electronically transmit information 

required under Regulation SBSR to a registered SDR 

in a format required by that SDR. See Rule 901(h); 

note 268, supra, and accompanying text. 

774See 15 U.S.C. 78m(b)(2)(B). 

775See, e.g., FINRA Conduct Rule 3010(b) 

(requiring FINRA member broker-dealers to 

establish and maintain written procedures ‘‘that are 

reasonably designed to achieve compliance with 

applicable securities laws and regulations, and with 

the applicable Rules of [the NASD]’’); FINRA 

Conduct Rule 3012 (requiring FINRA member 

broker-dealers to establish and maintain written 

supervisory procedures to ensure that internal 

policies and procedures are followed and achieve 

their intended objectives). 

776See 75 FR 75234. 

777 17 CFR 240.13n–7(b)(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’’). 

778See SDR Adopting Release. 

obligations under Regulation SBSR.773

Additionally, the Commission 

anticipates that SDRs will enter into 

contractual arrangements with reporting 

sides for the reporting of transactions 

required to be reported under 

Regulation SBSR, and that such 

arrangements likely will stipulate the 

various rights and obligations of the 

parties when reporting security-based 

swap transactions. 

Rule 906(c) is designed to promote 

greater accuracy and completeness of 

reported security-based swap 

transaction data by requiring the 

participants that will bear substantial 

reporting obligations under Regulation 

SBSR to adopt policies and procedures 

that are reasonably designed to ensure 

that their reports are accurate and 

reliable. If these participants do not 

have written policies and procedures for 

carrying out their reporting duties, 

compliance with Regulation SBSR 

might depend too heavily on key 

individuals or ad hoc and unreliable 

processes. The Commission, therefore, 

believes that registered security-based 

swap dealers and registered major 

security-based swap participants should 

be required to establish written policies 

and procedures which, because they are 

written and can be shared throughout 

the organization, should be independent 

of any specific individuals. Requiring 

such participants to adopt and maintain 

written policies and procedures relevant 

to their reporting responsibilities, as 

required under Rule 906(c), should help 

to improve the degree and quality of 

overall compliance with the reporting 

requirements of Regulation SBSR. 

Periodic review of the policies and 

procedures, as required by Rule 906(c), 

should help ensure that these policies 

and procedures remain well functioning 

over time. 

The value of requiring policies and 

procedures in promoting regulatory 

compliance is well-established. Internal 

control systems have long been used to 

strengthen the integrity of financial 

reporting. For example, Congress 

recognized the importance of internal 

control systems in the Foreign Corrupt 

Practices Act, which requires public 

companies to maintain a system of 

internal accounting controls.774 Brokerdealers also must maintain policies and 

procedures for various purposes.775 The 

Commission believes that requiring each 

registered security-based swap dealer 

and registered major security-based 

swap participant to adopt and maintain 

written policies and procedures 

designed to promote compliance with 

Regulation SBSR is consistent with 

Congress’s goals in adopting the DoddFrank Act. 

The policies and procedures required 

by Rule 906(c) could address, among 

other things: (1) The reporting process 

and designation of responsibility for 

reporting security-based swap 

transactions; (2) the process for 

systematizing orally negotiated securitybased swap transactions; (3) order 

management system outages or 

malfunctions, and when and how backup systems are to be used in connection 

with required reporting; (4) verification 

and validation of all information 

relating to security-based swap 

transactions reported to a registered 

SDR; (5) a training program for 

employees responsible for securitybased swap transaction reporting; (6) 

control procedures relating to securitybased swap transaction reporting and 

designation of personnel responsible for 

testing and verifying such policies and 

procedures; and (7) reviewing and 

assessing the performance and 

operational capability of any third party 

that carries out any duty required by 

Regulation SBSR on behalf of the 

registered security-based swap dealer or 

registered major security-based swap 

participant.776

XIV. Other Aspects of Policies and 

Procedures of Registered SDRs 

A. Public Availability of Policies and 

Procedures 

Rule 907(c), as proposed and reproposed, would have required a 

registered SDR to make its policies and 

procedures publicly available on its 

Web site. The Commission did not 

receive any comments on Rule 907(c) 

and is adopting it as proposed and reproposed. This public availability 

requirement will allow all interested 

parties to understand how the registered 

SDR is utilizing the flexibility it has in 

operating the transaction reporting and 

dissemination system. Being able to 

review the current policies and 

procedures will provide an opportunity 

for participants to make suggestions to 

the registered SDR for altering and 

improving those policies and 

procedures, in light of new products or 

circumstances, consistent with the 

principles set out in Regulation SBSR. 

B. Updating of Policies and Procedures 

Proposed Rule 907(d) would have 

required a registered SDR to ‘‘review, 

and update as necessary, the policies 

and procedures required by [Regulation 

SBSR] at least annually.’’ Proposed Rule 

907(d) also would have required the 

registered SDR to indicate the date on 

which its policies and procedures were 

last reviewed. The Cross-Border 

Proposing Release re-proposed Rule 

907(d) without revision. 

The Commission did not receive any 

comments on Rule 907(d) and is 

adopting it as proposed and reproposed. The Commission continues to 

believe that a registered SDR should 

periodically review its policies and 

procedures to ensure that they remain 

well-functioning over time. The 

Commission also continues to believe 

that requiring registered SDRs to 

indicate the date on which their policies 

and procedures were last reviewed will 

allow regulators and SDR participants to 

understand which version of the 

policies and procedures are current. A 

registered SDR could satisfy this 

obligation by, for example, noting when 

individual sections were last updated or 

by reissuing the entirety of the policies 

and procedures with an ‘‘as of’’ date. 

The Commission notes that, regardless 

of the method chosen and although only 

the most current version of a registered 

SDR’s policies and procedures must be 

publicly available pursuant to Rule 907, 

the registered SDR must retain prior 

versions of those policies and 

procedures for regulatory purposes 

pursuant to Rule 13n–7(b) under the 

Exchange Act,777 as adopted by the 

Commission.778 These records would 

help the Commission, if conducting a 

review of a registered SDR’s past 

actions, to understand what policies and 

procedures were in force at the time. 

C. Provision of Certain Reports to the 

Commission 

Under Title VII, the Commission is 

responsible for regulating and 

overseeing the security-based swap 

market, including the trade reporting 

obligations imposed by Regulation 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14649 

779Under Title VII, registered SDRs are not selfregulatory organizations and thus lack the 

enforcement authority that self-regulatory 

organizations have over their members under the 

Exchange Act. Any information or reports requested 

by the Commission under Rule 907(e) would assist 

the Commission in examining for and enforcing 

compliance with Regulation SBSR by reporting 

parties. 

780For example, a registered SDR would be able 

to determine that a reporting side had reported late 

if the date and time of submission were more than 

24 hours after the date and time of execution 

reported by the reporting side (or, if 24 hours after 

the time of execution would have fallen on a day 

that was not a business day, then after that same 

time on the next business day). See Rule 901(j). 

781Some examples of clearly inaccurate data 

would include using lettered text in a field that 

clearly requires a number (or vice versa), or using 

a UIC that corresponds to no valid LEI or to a UIC 

issued or endorsed by the registered SDR. 

782An example of an incomplete report would be 

leaving one or more required reporting fields blank. 

783 DTCC V at 14. 

784 Id. 

785See note 783, supra. 

786 Id. 

787See also Section 13(n)(5)(B) of the Exchange 

Act, 15 U.S.C. 78m(n)(5)(B) (requiring an SDR to 

‘‘confirm with both counterparties to the securitybased swap the accuracy of the data that was 

submitted’’); Rule 13n–4(b)(3) under the Exchange 

Act (implementing that requirement). 

788Security-based swap market data indicates 

that many security-based swap transactions involve 

activity in more than one jurisdiction. See infra 

Section XXII(B)(1)(b) (noting that data in the Trade 

Information Warehouse reveals that approximately 

13% of price-forming transactions in North 

American single-name CDS transaction from 

January 2008 to December 2013 were between two 

U.S.-domiciled counterparties; 48% of such 

transactions were cross-border transactions between 

a U.S.-domiciled counterparty and a foreigndomiciled counterparty; and an additional 39% 

were between two foreign-domiciled 

counterparties). 

789See 79 FR 47287. 

790See Morrison v. Nat’l Australia Bank, Ltd., 130 

S. Ct. 2869, 2884 (2010) (identifying focus of 

statutory language to determine what conduct was 

relevant in determining whether the statute was 

being applied to domestic conduct). 

791When the statutory text does not describe the 

relevant activity with specificity or provides for 

Continued 

SBSR.779 The Commission believes that, 

to carry out this responsibility, it will be 

necessary to obtain from each registered 

SDR information related to the 

timeliness, accuracy, and completeness 

of data reported to the registered SDR by 

the SDR’s participants. Required data 

submissions that are untimely,780

inaccurate,781 or incomplete 782 could 

compromise the regulatory data that the 

Commission would utilize to carry out 

its oversight responsibilities. 

Furthermore, required data submissions 

that are untimely, inaccurate, or 

incomplete could diminish the value of 

publicly disseminated reports that are 

meant to promote transparency and 

price discovery. 

Accordingly, the Commission 

proposed and re-proposed Rule 907(e), 

which would have required a registered 

SDR to ‘‘have the capacity to provide to 

the Commission, upon request, 

information or reports related to the 

timeliness, accuracy, and completeness 

of data reported to it’’ pursuant to 

Regulation SBSR and the registered 

SDR’s policies and procedures. The sole 

commenter on this provision agreed that 

an SDR should be able to ‘‘readily 

provide the Commission with any 

relevant information,’’ but noted that an 

SDR might not be in the best position to 

confirm the accuracy of the trade 

information it receives.783 The 

commenter believed that ultimate 

responsibility for the submission of 

accurate and complete information 

belongs with the reporting side, and that 

Rule 907(e) should be revised to reflect 

that an SDR’s information will ‘‘only be 

as timely, accurate, and complete as 

provided to it by parties to the 

trade.’’ 784

The Commission is adopting Rule 

907(e) with a minor revision. The final 

rule provides that a registered SDR 

‘‘shall provide, upon request, 

information or reports . . .’’ rather than, 

as proposed and re-proposed, that a 

registered SDR ‘‘shall have the capacity 

to provide . . .’’ This language better 

conveys the Commission’s expectation 

that, not only must a registered SDR 

have the capacity to provide the 

relevant information or reports, it must 

in fact provide such information or 

reports when the Commission requests. 

The Commission believes that this 

revision accords with the commenter 

who stated that an SDR should be able 

to ‘‘readily provide the Commission 

with any relevant information.’’ 785

However, the Commission is not 

revising Rule 907(e) to reflect that an 

SDR’s information will ‘‘only be as 

timely, accurate, and complete as 

provided to it by parties to the trade,’’ 

as requested by the commenter.786 The 

Commission appreciates that there 

could be certain data elements 

submitted by reporting sides that a 

registered SDR could not reasonably be 

expected to know are inaccurate. For 

example, if the reporting side submits a 

valid trader ID for trader X when in fact 

the transaction was carried out by trader 

Y, the Commission would not expect a 

Rule 907(e) report provided by a 

registered SDR to reflect this fact. The 

Commission notes, however, that Rule 

13n–5(b)(1)(iii) under the Exchange Act 

requires an 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 securitybased swap data repository is complete 

and accurate.’’ Thus, the Commission 

could require a registered SDR to 

include in a Rule 907(e) report any 

instances where a reporting side 

reported a trader ID that fails the SDR’s 

validation rules, because the SDR is in 

a position to know which trader IDs 

(and other UICs) are consistent with 

UICs assigned to traders of its 

participants.787

XV. Rule 908—Cross-Border Reach of 

Regulation SBSR 

Security-based swap business 

currently takes place across national 

borders, with agreements negotiated and 

executed between counterparties in 

different jurisdictions (which might 

then be booked and risk-managed in 

still other jurisdictions).788 Given the 

global nature of the market and to help 

ensure an effective regime for regulatory 

reporting and public dissemination of 

security-based swap transactions under 

Title VII, it is important that Regulation 

SBSR identify which transactions in this 

global market will be subject to these 

Title VII requirements. Regulation 

SBSR, as initially proposed in 

November 2010, included Rule 908, 

which sought to address the crossborder application of the regulatory 

reporting and public dissemination 

requirements. In the Cross-Border 

Proposing Release, issued in May 2013, 

the Commission re-proposed Rule 908 

with substantial revisions. Commenters’ 

views on re-proposed Rule 908 and the 

final rule, as adopted by the 

Commission, are discussed in detail 

below, following a discussion of the 

Commission’s approach to cross-border 

application of its authority under Title 

VII and the Exchange Act generally. 

A. General Considerations 

As stated in the Cross-Border 

Adopting Release, the Commission 

continues to believe that a territorial 

approach to the application of Title 

VII—including the requirements relating 

to regulatory reporting and public 

dissemination of security-based swap 

transactions—is appropriate.789 This 

approach, properly understood, 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.790 Once the 

Commission has identified the activity 

regulated by the statutory provision, it 

then determines whether a person is 

engaged in conduct that the statutory 

provision regulates and whether this 

conduct occurs within the United 

States.791

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14650 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

further Commission interpretation of statutory 

terms or requirements, this analysis may require the 

Commission to identify through interpretation of 

the statutory text the specific activity that is 

relevant under the statute or to incorporate prior 

interpretations of the relevant statutory text. See 

Cross-Border Adopting Release, 79 FR 47287 

(explaining the Commission’s approach to 

interpreting Title VII requirements). 

792See 79 FR 47288–89. As discussed below, the 

Commission is adopting a definition of ‘‘U.S. 

person’’ in Regulation SBSR that cross-references 

the definition adopted as part of the Cross-Border 

Adopting Release. 

793See id. at 47344. 

794See id. at 47289. 

795See id. at 47289–90. 

796 15 U.S.C. 78o–10(f)(1)(A). 

797 In addition, Section 30(c) of the Exchange Act, 

15 U.S.C. 78dd(c), authorizes the Commission to 

apply Title VII to persons transacting a business 

‘‘without the jurisdiction of the United States’’ if 

they contravene rules that the Commission has 

prescribed as ‘‘necessary or appropriate to prevent 

the evasion of any provision’’ of Title VII. As the 

Commission stated in the Cross-Border Adopting 

Release, Section 30(c) does not require a finding 

that actual evasion has occurred or is occurring to 

invoke the Commission’s authority to reach activity 

‘‘without the jurisdiction of the United States’’ or 

to limit application of Title VII to security-based 

swap activity ‘‘without the jurisdiction of the 

United States’’ only to business that is transacted 

in a way that is purposefully intended to evade 

Title VII. See 79 FR 47291. The focus of this 

provision is not whether such rules impose Title VII 

requirements only on entities engaged in activity 

that is consciously evasive, but whether the rules 

are generally ‘‘necessary or appropriate’’ to prevent 

potential evasion of Title VII. The Commission 

therefore disagrees with the commenter who stated 

that the Commission ‘‘should not adopt an 

extraterritorial regulatory framework premised on 

the assumption that activities conducted outside 

the U.S. will be undertaken abroad for the purpose 

of evasion.’’ Cleary III at 5. 

798See Rule 908(c). See also infra Section XV(E). 

799Rule 900 as initially proposed. See also 

Regulation SBSR Proposing Release, 75 FR 75284. 

800See Cross-Border Proposing Release, 78 FR 

31207. 

801See 79 FR 47303–13. These comments focused 

on the proposed definition generally and did not 

address the application of the definition to 

Regulation SBSR. 

802See Cross-Border Adopting Release, 79 FR 

47308, note 255. 

803Rule 3a71–3(a)(5) under the Exchange Act, 17 

CFR 240.3a71–3(a)(4), defines ‘‘United States’’ as 

the United States of America, its territories and 

possessions, any State of the United States, and the 

District of Columbia. 

804Rule 3a71–3(a)(4)(ii) under the Exchange Act, 

17 CFR 240.3a71–3(a)(4)(ii), defines ‘‘principal 

place of business’’ as the location from which the 

officers, partners, or managers of the legal person 

primarily direct, control, and coordinate the 

activities of the legal person. With respect to an 

externally managed investment vehicle, this 

location is the office from which the manager of the 

vehicle primarily directs, controls, and coordinates 

the investment activities of the vehicle. See also 

Cross-Border Adopting Release, 79 FR 47308 

Under the foregoing analysis, when a 

U.S. person enters into a security-based 

swap, the security-based swap 

necessarily exists at least in part within 

the United States. The definition of 

‘‘U.S. person’’—adopted in the CrossBorder Adopting Release and 

incorporated by reference into 

Regulation SBSR—is intended, in part, 

to identify those persons for whom it is 

reasonable to infer that a significant 

portion of their financial and legal 

relationships is likely to exist within the 

United States, and that it is therefore 

reasonable to conclude that risk arising 

from their security-based swap activities 

could manifest itself within the United 

States, regardless of the location of their 

counterparties, given the ongoing nature 

of the obligations that result from 

security-based swap transactions.792

Under its territorial approach, the 

Commission seeks to apply Title VII’s 

regulatory reporting and public 

dissemination requirements in a 

consistent manner to differing 

organizational structures that serve 

similar economic purposes, and thereby 

avoid creating different regulatory 

outcomes for differing legal 

arrangements that raise similar policy 

considerations and pose similar 

economic risks to the United States.793

Therefore, as discussed in the CrossBorder Adopting Release, this territorial 

application of Title VII requirements 

extends to the activities of U.S. person 

conducted through a foreign branch or 

office 794 and to the activities of a nonU.S. person for which the U.S. person 

provides a recourse guarantee.795

The Commission further notes that 

Section 15F(f)(1)(A) of the Exchange 

Act 796 provides that each registered 

security-based swap dealer and major 

security-based swap participant ‘‘shall 

make such reports as are required by the 

Commission, by rule or regulation, 

regarding the transactions and positions 

and financial condition of the registered 

security-based swap dealer or major 

security-based swap participant.’’ 797

Finally, the Commission seeks to 

minimize the potential for duplicative 

or conflicting regulations. The 

Commission recognizes the potential for 

market participants who engage in 

cross-border security-based swap 

activity to be subject to regulation under 

Regulation SBSR and parallel rules in 

foreign jurisdictions in which they 

operate. To address this possibility, the 

Commission—as described in detail 

below—is adopting a ‘‘substituted 

compliance’’ framework. The 

Commission may issue a substituted 

compliance determination if it finds that 

the corresponding requirements of the 

foreign regulatory system are 

comparable to the relevant provisions of 

Regulation SBSR, and are accompanied 

by an effective supervisory and 

enforcement program administered by 

the relevant foreign authorities.798 The 

availability of substituted compliance is 

designed to reduce the likelihood of 

cross-border market participants being 

subject to potentially conflicting or 

duplicative reporting requirements. 

B. Definition of ‘‘U.S. Person’’ 

In the Regulation SBSR Proposing 

Release, the Commission proposed to 

define ‘‘U.S. person’’ as ‘‘a natural 

person that is a U.S. citizen or U.S. 

resident or a legal person that is 

organized under the corporate laws of 

any part of the United States or has its 

principal place of business in the 

United States.’’ 799 In the Cross-Border 

Proposing Release, the Commission 

introduced a new definition of ‘‘U.S. 

person’’ that it proposed to use in all 

Title VII rulemakings to promote 

consistency and transparency, which 

differed from the initially proposed 

definition in certain respects. Reproposed Rule 900(pp) would have 

defined ‘‘U.S. person’’ by crossreferencing proposed Rule 3a71–3(a)(7), 

which would have defined ‘‘U.S. 

person’’ as: 

(i) Any natural person resident in the 

United States; 

(ii) any partnership, corporation, 

trust, or other legal person organized or 

incorporated under the laws of the 

United States or having its principal 

place of business in the United States; 

and 

(iii) any account (whether 

discretionary or non-discretionary) of a 

U.S. person.800

The Commission received extensive 

comment on this proposed definition of 

‘‘U.S. person’’ and responded to those 

comments in the Cross-Border Adopting 

Release.801

The Commission adopted a definition 

of ‘‘U.S. person’’ in the Cross-Border 

Adopting Release as Rule 3a71–3(a)(4) 

under the Exchange Act, which reflects 

a territorial approach to the application 

of Title VII.802 The Commission believes 

that using the same definition of ‘‘U.S. 

person’’ in multiple Title VII rules could 

benefit market participants by 

eliminating complexity that might result 

from the use of different definitions for 

different Title VII rules. Accordingly, 

final Rule 900(ss) of Regulation SBSR 

defines ‘‘U.S. person’’ to have the same 

meaning as in Rule 3a71–3(a)(4). Rule 

3a71–3(a)(4)(i) defines ‘‘U.S. person’’ as: 

(1) A natural person resident in the 

United States; 803 (2) 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 804 in the 

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(discussing the Commission’s rationale for adopting 

the ‘‘principal place of business’’ test). 

805See id., 79 FR 47309, note 262 (‘‘The final 

definition of ‘principal place of business’ will help 

ensure that entities do not restructure their business 

by incorporating under foreign law while 

continuing to direct, control, and coordinate the 

operations of the entity from within the United 

States, which would enable them to maintain a 

significant portion of their financial and legal 

relationships within the United States while 

avoiding application of Title VII requirements to 

such transactions’’). 

806See id. at 47313. 

807To the extent that a person has knowledge of 

facts that could lead a reasonable person to believe 

that a counterparty may not be a U.S. person under 

the definition, it might need to conduct additional 

diligence before relying on the representation. See 

id. at 47313, note 302. 

808As discussed below, under Rule 908(a), the 

U.S.-person status of the counterparties to a 

security-based swap is one factor in determining 

whether the security-based swap is subject to 

Regulation SBSR. If a security-based swap is subject 

to Regulation SBSR, the U.S.-person status of the 

counterparties may influence the determination of 

the reporting side under Rule 901(a)(2)(ii). See 

supra Section V(B). 

809The final rule permitting reliance on 

representations with respect to a counterparty’s 

U.S.-person status applies only to the definition of 

‘‘U.S. person’’ as used in Regulation SBSR and does 

not apply to any determination of a person’s U.S.- 

person status under any other provision of the 

federal securities laws, including Commission 

rules, regulations, interpretations, or guidance. 

810See infra Section XV(C) (discussing when a 

security-based swap is subject to regulatory 

reporting and public dissemination). 

811See 79 FR 47313, note 300. 

812Some commenters supported a cross-border 

jurisdictional regime that would apply securitybased swap regulation on the basis of whether a 

direct counterparty to a security-based swap is a 

U.S. person. See, e.g., JFMC Letter at 5; JSDA Letter 

at 3–4; AFR Letter at 4, 13–14. These commenters 

did not, however, raise this suggestion specifically 

in the context of Regulation SBSR. See also IIB 

Letter at 11 (observing that a status-based test for 

jurisdictional application would be more 

appropriate than a territorial approach based on the 

location of conduct). The Cross-Border Adopting 

Release addressed these comments. See 79 FR 

47302–06. 

United States; (3) an account (whether 

discretionary or non-discretionary) of a 

U.S. person; or (4) any estate of a 

decedent who was a resident of the 

United States at the time of death. As 

discussed in the Cross-Border Adopting 

Release, the Commission believes that a 

definition of ‘‘U.S. person’’ that focused 

solely on whether a legal person is 

organized, incorporated, or established 

in the United States could encourage 

some entities to move their place of 

incorporation to a non-U.S. jurisdiction 

to avoid complying with Title VII, while 

maintaining their principal place of 

business in the United States.805

By incorporating Rule 3a71–3(a)(4) by 

reference, Regulation SBSR also 

incorporates subparagraph (iv) of Rule 

3a71–3(a)(4), which allows a person to 

rely on a counterparty’s representation 

that the counterparty is not a U.S. 

person, unless such person knows or 

has reason to know that the 

representation is inaccurate. As 

explained in the Cross-Border Adopting 

Release,806 Rule 3a71–3(a)(4)(iv) reflects 

a constructive knowledge standard for 

reliance. Under this standard, a 

counterparty is permitted to rely on a 

representation, unless such person 

knows or has reason to know that it is 

inaccurate. A person would have reason 

to know the representation is not 

accurate if a reasonable person should 

know, under all of the facts of which the 

person is aware, that it is not 

accurate.807 Expressly permitting market 

participants to rely on such 

representations in the ‘‘U.S. person’’ 

definition should help facilitate the 

determination of which side to a 

security-based swap is the reporting 

side and mitigate challenges that could 

arise in determining a counterparty’s 

U.S.-person status under the final 

rule.808 It permits the party best 

positioned to make this determination 

to perform an analysis of its own U.S.- 

person status and convey, in the form of 

a representation, the results of that 

analysis to its counterparty. Such 

representations should help reduce the 

potential for inconsistent classification 

and treatment of a person by its 

counterparties and promote uniform 

application of Title VII.809

Rule 3a71–3(a)(4)(iii)—and thus 

Regulation SBSR—provides that the 

term ‘‘U.S. person’’ does not include the 

International Monetary Fund, the 

International Bank for Reconstruction 

and Development, the Inter-American 

Development Bank, the Asian 

Development Bank, the African 

Development Bank, the United Nations; 

their agencies and pension plans; and 

any other similar international 

organizations and their agencies and 

pension plans. Therefore, a securitybased swap involving any such 

institution, for that fact alone, will not 

be subject to regulatory reporting or 

public dissemination under Regulation 

SBSR.810 However, as discussed in 

Section XVI(A), infra, a security-based 

swap transaction involving such an 

institution could be subject to regulatory 

reporting and/or public dissemination, 

depending on the domicile and 

registration status of the other side of 

the transaction. 

Finally, similar to the approach taken 

by the Commission in the Cross-Border 

Adopting Release for purposes of the de 

minimis calculation,811 a change in a 

counterparty’s U.S.-person status after a 

security-based swap is executed would 

not affect the original transaction’s 

treatment under Regulation SBSR. 

However, if that person were to enter 

into another security-based swap 

following its change in status, any 

duties required by Regulation SBSR 

would be determined according to the 

new status of that person at the time of 

the second security-based swap. 

C. Scope of Security-Based Swap 

Transactions Covered by Requirements 

of Regulation SBSR—Rule 908(a) 

1. Transactions Involving a Direct 

Counterparty That Is a U.S. Person 

Under both the proposal and reproposal, any security-based swap that 

had a direct counterparty that is a U.S. 

person would have been subject to both 

regulatory reporting and public 

dissemination, regardless of the 

registration status or domicile of any 

counterparty on the other side of the 

transaction. Commenters generally did 

not object to this aspect of the proposal 

and the re-proposal.812

Final Rule 908(a)(1)(i) provides, in 

relevant part, that a security-based swap 

shall be subject to regulatory reporting 

and public dissemination if ‘‘[t]here is a 

direct . . . counterparty that is a U.S. 

person on either or both sides of the 

transaction.’’ Thus, any security-based 

swap that has a direct counterparty that 

is a U.S. person is subject to both 

regulatory reporting and public 

dissemination, regardless of the 

registration status or domicile of any 

counterparty on the other side of the 

transaction. This determination is 

consistent with the territorial 

application of Title VII described above, 

because any security-based swap that 

has a U.S.-person direct counterparty 

exists at least in part within the United 

States. One purpose of the rule is to 

allow the Commission and other 

relevant authorities to access, for 

regulatory and supervisory purposes, a 

record of each such transaction. A 

second purpose of the rule is to carry 

out the Title VII mandate for public 

dissemination of security-based swap 

transactions. The transparency benefits 

of requiring public dissemination of 

security-based swaps involving at least 

one U.S.-person direct counterparty 

would inure to other U.S. persons and 

the U.S. market generally, as other 

participants in the U.S. market are likely 

to transact in the same or related 

instruments. 

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813See Regulation SBSR Proposing Release, 75 FR 

75240 (‘‘Because a branch or office has no separate 

legal existence under corporate law, the branch or 

office would be an integral part of the U.S. person 

itself’’). 

814 In the Cross-Border Proposing Release, the 

term ‘‘transaction conducted through a foreign 

branch’’ was defined in re-proposed Rule 900(hh) 

to cross-reference the definition of that term in 

proposed Rule 3a71–3(a)(4) under the Exchange 

Act, and the term ‘‘foreign branch’’ was defined in 

re-proposed Rule 900(n) to cross-reference the 

definition of foreign branch in proposed Rule 3a71– 

3(a)(1). In the Cross-Border Adopting Release, the 

Commission adopted the term ‘‘foreign branch’’ as 

proposed and adopted the term ‘‘transaction 

conducted through a foreign branch’’ with certain 

modifications. See 79 FR 47322. 

815Cross-Border Proposing Release, 78 FR 31063. 

816See re-proposed Rule 908(a)(2)(ii). 

817See re-proposed Rule 908(a)(2)(iv). 

818See SIFMA/FIA/Roundtable Letter at A–43. 819 IIB Letter at 9. The commenter also noted that 

‘‘EMIR [the European Markets Infrastructure 

Regulation] would apply to transactions between 

the U.S. branches of two entities established in the 

EU,’’ id., and thus appeared to suggest that U.S. 

regulation should apply to transactions between 

two foreign branches of U.S. persons. 

820See Better Markets IV at 23. 

821See Cross-Border Adopting Release, 79 FR 

47289 (describing the application of the securitybased swap dealer de minimis threshold with 

respect to foreign branches or offices of U.S. 

persons). The Commission notes that a transaction 

conducted by a U.S. person through any other office 

that does not have a separate legal identity from the 

U.S. person, even if such office does not meet the 

definition of ‘‘foreign branch’’ in Rule 3a71–3(a)(2) 

of the Exchange Act, also is a transaction conducted 

by the U.S. person directly, and thus is subject to 

regulatory reporting and public dissemination 

under Rule 908(a)(1)(i), as adopted. 

822Under Rule 908(a)(2)(iii), as re-proposed, 

public dissemination would have applied to a 

security-based swap between a U.S. person direct 

counterparty and a non-U.S. person (other than a 

security-based swap dealer) unless the U.S. person 

conducted the transaction through a foreign branch. 

Thus, the U.S. person could have directed a nonU.S.-person counterparty to interact only with its 

foreign branch staff, which would have made the 

transaction eligible for the exception provided by 

re-proposed Rule 908(a)(2)(iii). 

823As discussed in Section XV(C)(6), infra, if a 

transaction involving a registered security-based 

swap dealer or registered major security-based swap 

participant does not fall within Rule 908(a)(1), Rule 

908(a)(2), as adopted, subjects that transaction to 

regulatory reporting but not public dissemination. 

824See SIFMA/FIA/Roundtable Letter at A–43. 

825Also in the Cross-Border Proposing Release, 

the Commission proposed new terms ‘‘direct 

counterparty’’ and ‘‘indirect counterparty’’ to 

distinguish the primary obligor on the securitybased swap from the person who guarantees the 

primary obligor’s performance, respectively. The 

Commission also proposed the term ‘‘side’’ to refer 

to the direct counterparty and any guarantor of the 

direct counterparty. See 78 FR 31211. 

2. Transactions Conducted Through a 

Foreign Branch or Office 

Rule 908(a), as initially proposed, 

treated foreign branches and offices of 

U.S. persons as integral parts of the U.S. 

person itself.813 Therefore, Rule 908(a), 

as initially proposed, would not have 

treated a security-based swap 

transaction executed by or through a 

foreign branch or office of a U.S. person 

any differently than any other 

transaction executed by the U.S. person. 

In the Cross-Border Proposing 

Release, the Commission revised its 

approach to transactions conducted 

through a foreign branch. Although all 

transactions conducted through a 

foreign branch or office would have 

been subject to regulatory reporting, reproposed Rule 908(a)(2)(iii) would have 

provided an exception to public 

dissemination for transactions 

conducted through a foreign branch 

when the other side is a non-U.S. person 

who is not a security-based swap 

dealer.814 In proposing this exception to 

public dissemination for such 

transactions conducted through a 

foreign branch, the Commission stated 

that it was ‘‘concerned that, if it did not 

take this approach, non-U.S. market 

participants might avoid entering into 

security-based swaps with the foreign 

branches of U.S. banks so as to avoid 

their security-based swaps being 

publicly disseminated.’’ 815 However, 

Rule 908(a)(2) would have subjected a 

transaction conducted through a foreign 

branch to public dissemination if there 

was, on the other side, a U.S. person 

(including a foreign branch) 816 or a 

security-based swap dealer.817

One commenter expressed the view 

that foreign branches should be treated 

the same as non-U.S.-person securitybased swap dealers for purposes of 

public dissemination, and that securitybased swaps between two non-U.S. 

persons, between a non-U.S. person and 

a foreign branch, and between two 

foreign branches should not be subject 

to public dissemination.818 Another 

commenter, however, stated that ‘‘it 

should be expected that most 

jurisdictions would seek to apply their 

rules to transactions between two of 

their own domiciled persons, despite 

some of the activity being conducted 

abroad.’’ 819 A third commenter 

recommended that the exception to 

public dissemination for foreign 

branches be eliminated, so that securitybased swaps between a foreign branch 

and any non-U.S. person would be 

subject to public dissemination.820

As noted above, the Commission is 

adopting the requirement that any 

security-based swap transaction having 

a direct counterparty that is a U.S. 

person, including a security-based swap 

conducted through a foreign branch, 

shall be subject to regulatory reporting. 

The Commission has determined not to 

adopt the proposed exception from 

public dissemination for certain 

transactions conducted through a 

foreign branch. Thus, under Rule 

908(a)(1)(i), as adopted, any securitybased swap transaction conducted 

through a foreign branch is subject to 

both regulatory reporting and public 

dissemination. Under the territorial 

approach to the application of Title VII 

requirements discussed above, a foreign 

branch has no separate existence from 

the U.S. person itself. Therefore, any 

security-based swap transaction 

conducted through a foreign branch is a 

security-based swap executed by the 

U.S. person itself, and any securitybased swap executed by a U.S. person 

exists at least in part within the United 

States.821 The Title VII requirements for 

regulatory reporting and public 

dissemination apply to all securitybased swap transactions that exist in 

whole or in part within the United 

States, unless an exception applies. 

Upon further consideration, the 

Commission believes that the exception 

from public dissemination for foreign 

branches in Rule 908(a), as re-proposed, 

is not warranted. Granting an exception 

to public dissemination for certain 

transactions conducted through a 

foreign branch could have created 

incentives for some U.S. persons to 

utilize foreign branches to evade Title 

VII’s public dissemination 

requirements.822 This could be the case 

particularly in a foreign jurisdiction that 

does not apply rules for public 

dissemination to all or some 

transactions conducted through foreign 

branches operating within that 

jurisdiction. Thus, the Commission 

disagrees with the commenter who 

expressed the view that foreign 

branches should be treated the same as 

non-U.S. person security-based swap 

dealers for purposes of public 

dissemination,823 and that securitybased swaps between two non-U.S. 

persons, between a non-U.S. person and 

a foreign branch, and between two 

foreign branches should not be subject 

to public dissemination.824

3. Transactions Guaranteed by a U.S. 

Person 

Regulation SBSR, as initially 

proposed, did not impose reporting 

requirements based on whether a U.S. 

person acts as a guarantor of a securitybased swap. As re-proposed, however, 

Rule 908(a)(1)(ii) would have required 

regulatory reporting of any securitybased swap that had a U.S.-person 

guarantor, even when no direct 

counterparty was a U.S. person.825 In 

addition, Rule 908(a)(2), as re-proposed, 

would have required public 

dissemination of some, but not all, 

transactions having a U.S.-person 

indirect counterparty. Re-proposed Rule 

908(a)(2)(ii) would have provided, in 

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826The Commission noted in the Cross-Border 

Proposing Release that, where U.S. persons have an 

interest on both sides of a transaction, even if 

indirectly, the transaction generally should be 

subject to Title VII’s public dissemination 

requirement. See 78 FR 31062. 

827As used in this release, a ‘‘covered crossborder transaction’’ refers to a transaction that 

meets the description above and will not be 

submitted to clearing at a registered clearing agency 

having its principal place of business in the United 

States. 

828See SIFMA/FIA/Roundtable Letter at A–41; 

ESMA Letter at 3; AFR Letter at 4, 13–14. 

829See SIFMA/FIA/Roundtable Letter at A–41. 

830ESMA Letter at 3. 

831See AFR Letter at 4, 13–14 (noting that the 

geographic location of the entities ultimately 

responsible for security-based swap liabilities 

should determine the application of the 

Commission’s rules implementing the Dodd-Frank 

Act). Another commenter stated that the proposed 

definition of ‘‘indirect counterparty’’ in Regulation 

SBSR implies that an indirect counterparty can 

cause a trade to be subject to reporting even in cases 

where the direct counterparties to the trade would 

not lead to the conclusion that the trade is 

reportable. The commenter recommended that the 

Commission amend the definition of ‘‘indirect 

counterparty’’ to make it clear that its scope is 

limited to U.S.-person guarantors and not all 

guarantors, to be consistent with the intent 

demonstrated by the Commission in the preamble 

where reference is made to U.S.-person guarantors. 

See ISDA IV at 4. Although the Commission has not 

amended the definition of ‘‘indirect counterparty’’ 

in this manner, such an amendment is not 

necessary because Rule 908(a)(i), as adopted, 

effectively reaches the same result. Rule 908(a)(i) 

provides that a security-based swap will be subject 

to regulatory reporting and public dissemination if 

there is a direct or indirect counterparty that is a 

U.S. person on either or both sides of the 

transaction. 

832As discussed below, compliance with Rule 

908(a)(1)(i) is not required until the Commission 

establishes a compliance date for this provision. 

833See 79 FR 47289 (discussing dealing 

transactions of non-U.S. persons that are subject to 

recourse guarantees by their U.S. affiliates). 

834See SIFMA/FIA/Roundtable Letter at A–41. 

835See ESMA Letter at 3. 

relevant part, that a security-based swap 

is subject to public dissemination if 

there is an indirect counterparty that is 

a U.S. person on each side of the 

transaction.826 Re-proposed Rule 

908(a)(2)(iv) would have provided, in 

relevant part, that a transaction where 

one side includes a U.S.-person 

(including an indirect counterparty that 

is a U.S. person) and the other side 

includes a non-U.S. person that is a 

security-based swap dealer would be 

subject to public dissemination. 

However, a transaction would have been 

excepted from public dissemination if 

one side consisted of a non-U.S.-person 

direct counterparty and a U.S.-person 

guarantor, where neither is a securitybased swap dealer or major securitybased swap participant, and the other 

side includes no counterparty that is a 

U.S. person, security-based swap dealer, 

or major security-based swap 

participant (a ‘‘covered cross-border 

transaction’’).827

Commenters generally did not object 

to the Commission’s proposal to subject 

transactions between direct 

counterparties who are U.S. persons to 

regulatory reporting or public 

dissemination. However, commenters 

expressed mixed views about extending 

regulatory reporting and public 

dissemination requirements to 

transactions involving U.S.-person 

guarantors.828 One of these commenters 

stated that a guarantee of a securitybased swap transaction by a U.S. person 

should not affect whether the 

transaction is subject to regulatory 

reporting or public dissemination, 

because there is too tenuous a nexus to 

justify applying Regulation SBSR on the 

basis of the guarantee alone.829 Another 

commenter recommended that a 

security-based swap between two nonU.S. persons be subject to Commission 

regulation only where the transaction is 

‘‘guaranteed by a U.S. person for a 

significant value.’’ 830 A third 

commenter, however, recommended 

that the Commission apply Title VII 

rules to transactions in which the risk 

flows back to a U.S. entity, including 

transactions involving guaranteed 

foreign subsidiaries and branches of 

U.S. entities.831

The Commission is adopting, as reproposed, in Rule 908(a)(1)(ii) the 

requirement that any transaction 

involving a U.S.-person guarantor is 

subject to regulatory reporting. The 

Commission has determined to continue 

to consider whether to carve out 

covered cross-border transactions from 

public dissemination. Thus, Rule 

908(a)(1)(i), as adopted, requires public 

dissemination of all security-based swap 

transactions having a U.S.-person 

guarantor.832 This approach is 

consistent with the territorial approach 

to applying Title VII requirements, 

described above. A security-based swap 

with a U.S.-person indirect counterparty 

is economically equivalent to a securitybased swap with a U.S.-person direct 

counterparty, and both kinds of 

security-based swaps exist, at least in 

part, within the United States. As the 

Commission observed in the CrossBorder Adopting Release, the presence 

of a U.S. guarantor facilitates the 

activity of the non-U.S. person who is 

guaranteed and, as a result, the securitybased swap activity of the non-U.S. 

person cannot reasonably be isolated 

from the U.S. person’s activity in 

providing the guarantee.833 The 

financial resources of the U.S.-person 

guarantor could be called upon to 

satisfy the contract if the non-U.S. 

person fails to meet its obligations. 

Thus, the extension of a guarantee is 

economically equivalent to a transaction 

entered into directly by the U.S.-person 

guarantor. Accordingly, Rule 

908(a)(1)(i), as adopted, provides that a 

security-based swap shall be subject to 

regulatory reporting and public 

dissemination if ‘‘[t]here is a direct or 

indirect counterparty that is a U.S. 

person on either or both sides of the 

transaction’’ (emphasis added). The 

Commission disagrees with the 

commenter who stated that a guarantee 

of a security-based swap transaction by 

a U.S. person should not affect whether 

the transaction is subject to regulatory 

reporting or public dissemination, 

because there is too tenuous a nexus to 

justify applying Regulation SBSR on the 

basis of the guarantee alone.834 Under 

the territorial approach described above, 

any security-based swap guaranteed by 

a U.S. person exists at least in part 

within the United States, which triggers 

the application of Title VII 

requirements. The Commission believes 

that this is true regardless of whether a 

particular guarantee is ‘‘for a significant 

value.’’ 835 Furthermore, if the 

Commission does not require regulatory 

reporting of security-based swaps that 

are guaranteed by U.S. persons—in 

addition to security-based swaps having 

a U.S.-person direct counterparty—the 

Commission and other relevant 

authorities could be less likely to detect 

potential market abuse or the build-up 

of potentially significant risks within 

individual firms or groups or more 

widespread systemic risks to the U.S. 

financial system. 

The Commission anticipates seeking 

additional comment on whether or not 

to except covered cross-border 

transactions from public dissemination 

in the future. Furthermore, as discussed 

in the proposed compliance schedule 

for Rules 901, 902, 903, 904, 905, 906, 

and 908 of Regulation SBSR set forth in 

the Regulation SBSR Proposed 

Amendments Release, the Commission 

is proposing to defer the compliance 

date for Rule 908(a)(1)(i) with respect to 

the public dissemination of covered 

cross-border transactions until such 

time as the Commission has received 

and considered comment on such an 

exception. Thus, although covered 

cross-border transactions are subject to 

public dissemination under Rule 

908(a)(1)(i), as adopted, there would be 

no public dissemination of any such 

transaction until the Commission 

considers whether these transactions 

should be excepted from public 

dissemination. 

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836 Id. at 4. 

837See CME II at 5; SIFMA/FIA/Roundtable Letter 

at A–42. 

838See CME II at 5. 

839See SIFMA/FIA/Roundtable Letter at A–42. 

840 ISDA/SIFMA I at 19. The Regulation SBSR 

Proposed Amendments Release addresses the issue 

of whether registered clearing agencies should be 

required to report security-based swap transaction 

information to a registered SDR. 

841See Cross-Border Adopting Release, 79 FR 

47302–03, note 186 (explaining that security-based 

swap activity that ‘‘results in a transaction 

involving a U.S. counterparty creates ongoing 

obligations that are borne by a U.S. person, and thus 

is properly viewed as occurring within the United 

States’’). 

842See CME II at 5. 

843A transaction also could be subject to 

regulatory reporting and public dissemination 

because it meets the first prong of Rule 908(a)(1): 

It could have a U.S. person on either or both sides 

of the transaction. Such a transaction must be 

reported within 24 hours after the time of 

execution, regardless of whether the transaction is 

accepted for clearing. See Rule 901(j). 

844See supra Sections II(A)(2)(a) and II(B)(2) 

(explaining that Rule 901(j) provides that the 

reporting timeframes applicable to Rules 901(c) and 

901(d) are triggered by acceptance for clearing, not 

the time of execution, if a security-based swap is 

subject to regulatory reporting and public 

dissemination solely by operation of Rule 

908(a)(1)(ii)). 

845 ISDA/SIFMA I at 19. 

846Another commenter argued that, if the 

Commission applied Regulation SBSR to securitybased swaps involving non-U.S. counterparties that 

nevertheless are cleared through a clearing agency 

having its principal place of business in the United 

States, the Commission could require reporting of 

such transactions to a registered SDR ‘‘without 

exercising further jurisdiction over’’ the transaction. 

Socie ́te ́ Ge ́ne ́rale Letter at 12. The commenter 

believed that ‘‘[t]his solution would provide the 

Commission and U.S. market participants with 

information about swaps cleared in the United 

States without conflicting with foreign regulatory 

schemes.’’ Id. The Commission’s decision to require 

such transactions to be reported and publicly 

disseminated pursuant to Regulation SBSR does not 

necessarily indicate that they will be subjected to 

other requirements of Title VII. The Commission 

intends to address the scope of each of those 

requirements, including their applicability to the 

types of transactions identified by this commenter, 

in subsequent rulemakings. 

847See SIFMA/FIA/Roundtable Letter at A–42. 

4. Transactions Accepted for Clearing by 

a U.S. Clearing Agency 

Re-proposed Rules 908(a)(1)(iv) and 

908(a)(2)(v) would have required 

regulatory reporting and public 

dissemination, respectively, of securitybased swaps that are ‘‘cleared through a 

clearing agency having its principal 

place of business in the United States.’’ 

One commenter agreed that ‘‘DoddFrank’s reporting requirements should 

apply to any transaction that . . . was 

cleared through a registered clearing 

organization having its principal place 

of business in the U.S.’’ 836 Two other 

commenters objected.837 One of these 

commenters observed that Regulation 

SBSR could require regulatory reporting 

and public dissemination of transaction 

information before the transaction is 

submitted for clearing; as a result, 

circumstances could arise where the 

sides would not know whether a 

particular security-based swap is subject 

to regulatory reporting and public 

dissemination until after reporting 

deadlines have passed.838 The other 

commenter argued that the proposed 

requirement might discourage market 

participants from clearing transactions 

in the United States, which would be 

contrary to the objective of reducing 

systemic risk.839 Another commenter 

argued that a transaction between two 

non-U.S. persons that is cleared through 

a clearing agency having its principal 

place of business in the United States 

should not be subject to public 

dissemination, ‘‘although the clearing 

agency can provide information for 

regulatory purposes.’’ 840

The Commission is adopting Rule 

908(a)(1)(ii) with two modifications. 

The rule, as adopted, provides that a 

security-based swap shall be subject to 

regulatory reporting and public 

dissemination if ‘‘[t]he security-based 

swap is accepted for clearing by a 

clearing agency having its principal 

place of business in the United States.’’ 

Rule 908(a)(1)(ii), as adopted, is 

consistent with the territorial approach 

discussed above. Just as a security-based 

swap to which a U.S. person is a direct 

or indirect counterparty exists, at least 

in part, within the United States, a 

security-based swap that is accepted for 

clearing by a clearing agency having its 

principal place of business in the 

United States also exists, at least in part, 

within the United States. Such 

acceptance creates ongoing obligations 

that are borne by a U.S. person and thus 

are properly viewed as existing within 

the United States.841

The Commission acknowledges the 

concerns of the commenter who 

observed that Regulation SBSR, as reproposed, could have required 

regulatory reporting and public 

dissemination of transaction 

information before the transaction is 

submitted for clearing.842 Currently, 

clearing in the security-based swap 

market is voluntary. Therefore, 

counterparties—if they decide to clear a 

transaction at all—might not submit the 

transaction to a clearing agency until 

some time after it is executed. The final 

rule reflects the Commission’s view 

that, if a security-based swap is subject 

to regulatory reporting and public 

dissemination solely because of Rule 

908(a)(1)(ii),843 the duty to report the 

trade is not triggered by the execution 

of the security-based swap but rather by 

the registered clearing agency’s 

acceptance of the transaction for 

clearing.844 The Commission believes 

that it would not be appropriate to link 

the reporting requirement to the time of 

execution, because the registered 

clearing agency’s acceptance of the 

transaction for clearing might not take 

place until several days after the time of 

execution. 

The Commission disagrees with the 

commenter who argued that a 

transaction between two non-U.S. 

persons that is cleared through a 

clearing agency having its principal 

place of business in the United States 

should not be subject to public 

dissemination, ‘‘although the clearing 

agency can provide information for 

regulatory purposes.’’ 845 The 

Commission believes that such 

transactions—subject to the 

modifications to the rule text noted 

above—should be subject to both 

regulatory reporting and public 

dissemination and therefore is not 

adopting the this commenter’s 

recommendation. For the reasons 

described above, the Commission 

believes that such transactions exist at 

least in part within the United States; 

therefore, Title VII’s requirements for 

both regulatory reporting and public 

dissemination properly apply to such 

transactions. This approach will permit 

the Commission and other relevant 

authorities the ability to observe in a 

registered SDR all of the alpha 

transactions that have been accepted by 

a registered clearing agency having its 

principal place of business in the 

United States and to carry out oversight 

of security-based swaps that exist at 

least in part within the United States. 

Furthermore, the Commission believes 

that public dissemination of such 

transactions will have value to 

participants in the U.S. security-based 

swap market, who are likely to trade the 

same or similar products, as these 

products have been made eligible for 

clearing by a registered clearing agency 

having its principal place of business in 

the United States.846

Furthermore, the Commission 

disagrees with the commenter who 

argued that requiring regulatory 

reporting and public dissemination of 

transactions cleared through a U.S. 

clearing agency is likely to discourage 

market participants from clearing 

transactions in the United States.847 The 

Commission questions whether the 

commenters’ assertion would in fact 

come to pass. Market participants are 

likely to consider multiple factors when 

deciding whether and where to clear a 

security-based swap. These factors 

could include the cost of clearing, the 

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848See proposed Rule 908(a); Regulation SBSR 

Proposing Release, 75 FR 75239–40. 

849See Better Markets IV at 23. 

850See id. at 24. 

851A security-based swap involving a U.S.-person 

that is registered as a security-based swap dealer or 

major security-based swap participant is included 

in Rule 908(a)(1) and is thus subject to both 

regulatory reporting and public dissemination. A 

security-based swap between a non-U.S. person that 

is registered as a security-based swap dealer or 

major security-based swap participant and a U.S. 

person (including a foreign branch or office) also is 

included in Rule 908(a)(1). 

852Rule 908(a)(1)(iii), as re-proposed, would have 

required regulatory reporting of a security-based 

swap having a direct or indirect counterparty that 

is a registered security-based swap dealer or 

registered major security-based swap participant on 

either side of the transaction. However, Rule 

908(a)(2), as re-proposed, did not list the existence 

of a registered security-based swap dealer or 

registered major security-based swap participant on 

either side of the transaction, for that reason alone, 

as triggering public dissemination. 

853See Section 15F(f)(1)(A) of the Exchange Act, 

15 U.S.C. 78o–10(f)(1)(A) (providing that each 

registered security-based swap dealer and major 

security-based swap participant ‘‘shall make such 

reports as are required by the Commission, by rule 

or regulation, regarding the transactions and 

positions and financial condition of the registered 

security-based swap dealer or major security-based 

swap participant’’). 

854 In the Cross-Border Proposing Release, the 

Commission noted its longstanding view that an 

entity that has registered with the Commission 

subjects itself to the entire regulatory system 

governing such regulated entities. See 78 FR 30986. 

types of products that can be cleared, 

the safeguards that clearing agencies put 

in place for customer funds, and 

clearing agency policies on netting and 

margin. Commenters offered no support 

for the assertion that the application of 

regulatory reporting and public 

dissemination requirements to 

transactions that are accepted for 

clearing by a U.S. clearing agency would 

be a deciding or even a significant factor 

in whether to clear or the choice of 

clearing agency. Even if this assertion 

were true, however, the Commission 

believes that it is appropriate, for the 

reasons discussed above, to subject 

these transactions to regulatory 

reporting and public dissemination. 

Finally, the Commission recognizes 

that the reporting hierarchy in Rule 

901(a)(2)(ii), as adopted, does not assign 

reporting obligations for two kinds of 

cross-border transaction: (1) A 

transaction where there is no U.S. 

person, registered security-based swap 

dealer, or registered major securitybased swap participant on either side; 

and (2) a transaction where there is no 

registered security-based swap dealer or 

registered major security-based swap 

participant on either side and there is a 

U.S. person on only one side. If such a 

transaction is accepted for clearing by a 

registered clearing agency having its 

principal place of business in the 

United States, neither side—under 

Regulation SBSR as adopted by the 

Commission—is required to report the 

transaction to a registered SDR. 

However, as described in Section V(B), 

supra, the Commission anticipates 

soliciting further comment on how 

Regulation SBSR should be applied to 

transactions involving unregistered nonU.S. persons, including how reporting 

duties should be assigned for the two 

kinds of transaction noted above. 

5. Transactions Involving a Registered 

Security-Based Swap Dealer or 

Registered Major Security-Based Swap 

Participant That Is Not a U.S. Person 

Under re-proposed Rule 908(a)(1)(iii), 

a security-based swap would have been 

subject to regulatory reporting if there is 

a direct or indirect counterparty that is 

a security-based swap dealer or major 

security-based swap participant on 

either side of the transaction, regardless 

of the counterparties’ place of domicile 

and regardless of the place of execution 

of the transaction. Under Rule 908(a), as 

initially proposed, a counterparty’s 

status as a security-based swap dealer or 

major security-based swap participant 

would not by itself have triggered 

reporting obligations for a particular 

security-based swap.848

One commenter recommended 

expanding the public dissemination 

requirement to include security-based 

swaps that occur outside the United 

States between a non-U.S. person 

security-based swap dealer and a nonU.S. person that is not guaranteed by a 

U.S. person,849 and between two nonU.S. person security-based swap 

dealers.850

Rule 908(a)(2), as adopted, provides: 

‘‘A security-based swap that is not 

included within paragraph (a)(1) of this 

section shall be subject to regulatory 

reporting but not public dissemination 

if there is a direct or indirect 

counterparty on either or both sides of 

the transaction that is a registered 

security-based swap dealer or a 

registered major security-based swap 

participant.’’ 851 Thus, a security-based 

swap between a non-U.S. person 

registered security-based swap dealer or 

registered major security-based swap 

participant and another non-U.S. person 

(which could include another non-U.S. 

person registered security-based swap 

dealer or registered major security-based 

swap participant), and where neither 

direct counterparty is guaranteed by a 

U.S. person, would be subject to 

regulatory reporting but not public 

dissemination. This treatment of 

security-based swaps involving nonU.S. person registered security-based 

swap dealers and non-U.S. person 

registered major security-based swap 

participants is generally consistent with 

re-proposed Rule 908(a); the language of 

final Rule 908(a)(2) is designed to clarify 

that outcome.852

The Commission is not at this time 

taking the view that a security-based 

swap involving a registered securitybased swap dealer or registered major 

security-based swap participant, for that 

reason alone, exists within the United 

States. Therefore, the Commission is not 

subjecting any transactions involving a 

non-U.S.-person registered securitybased swap dealer or registered major 

security-based swap participant, for its 

registration status alone, to any 

requirement under Regulation SBSR 

based on a territorial application of Title 

VII. However, the Commission is 

requiring non-U.S.-person registered 

security-based swap dealers and 

registered major security-based swap 

participants to report their securitybased swap transactions pursuant to 

Rule 908(a)(2).853 Requiring reporting to 

a registered SDR of all transactions 

entered into by registered security-based 

swap dealers and registered major 

security-based swap participants will 

provide the Commission and other 

relevant authorities with important 

information to help with the assessment 

of their positions and financial 

condition.854 Such information could in 

turn assist the Commission and other 

relevant authorities in assessing and 

addressing potential systemic risks 

caused by these security-based swap 

positions, or in detecting insider trading 

or other market abuse. 

The Commission notes that a non-U.S. 

person that is registered as a securitybased swap dealer or major securitybased swap participant, when reporting 

a transaction that falls within Rule 

908(a)(2), must comply with the policies 

and procedures of the registered SDR 

regarding how to flag the transaction as 

not subject to public dissemination. The 

Commission would not view a 

registered SDR as acting inconsistent 

with Rule 902 for publicly 

disseminating a security-based swap 

that falls within Rule 908(a)(2) if the 

reporting side had failed to 

appropriately flag the transaction. 

6. No Final Rule Regarding Transactions 

Conducted Within the United States. 

Under re-proposed Rule 908(a)(1)(i), a 

security-based swap would have been 

subject to regulatory reporting if it was 

a transaction conducted within the 

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855A security-based swap would be a 

‘‘transaction conducted within the United States’’ if 

it is solicited, negotiated, executed, or booked 

within the United States, by or on behalf of either 

counterparty to the transaction, regardless of the 

location, domicile, or residence status of either 

counterparty to the transaction. See proposed Rule 

240.3a71–3(a)(5) under the Exchange Act; CrossBorder Proposing Release, 78 FR 31297; reproposed Rule 900(ii). The word ‘‘counterparty’’ as 

used within this term would have the same 

meaning as ‘‘direct counterparty’’ in re-proposed 

Rule 900(j) of Regulation SBSR. See Cross-Border 

Proposing Release, 78 FR 31061. 

856Rule 908(a), as initially proposed, would have 

required regulatory reporting of any security-based 

swap that is ‘‘executed in the United States or 

through any means of interstate commerce.’’ See 

Regulation SBSR Proposing Release, 75 FR 75287. 

857See 78 FR 31061. 

858See ABA Letter at 3; Citadel Letter at 1–2; 

Cleary III at 28; IAA Letter at 6; IIB Letter at 9; 

SIFMA/FIA/Roundtable Letter at A–42; Pearson 

Letter at 2; FOA Letter at 7–8; JFMC Letter at 4– 

5; ISDA IV at 18. 

859 In addition, the Commission has authority to 

promulgate rules, including additional regulatory 

requirements, applicable to persons transacting a 

business in security-based swaps ‘‘without the 

jurisdiction of the United States’’ when ‘‘necessary 

or appropriate’’ to prevent evasion of the provisions 

of Title VII of the Dodd-Frank Act. The Commission 

is not necessarily exercising the full extent of its 

authorities today but will be monitoring for gaps in 

reporting of swaps outside the United States that 

could be an evasion of the Commission’s rules and 

regulations. See Section 30(c) of the Exchange Act, 

15 U.S.C. 78dd(c). 

860However, several commenters argued that 

specific requirements under Regulation SBSR 

should not apply to certain kinds of counterparties 

in certain circumstances. All of these comments are 

discussed in relation to Rule 908(a) in the section 

immediately above. 

861See supra Section XV(C)(5), note 853 and 

accompanying text. 

862See 78 FR 31092. 

863See, e.g., Cleary III at 15–16; Davis Polk I at 

7, 11; Davis Polk II at 21–22; Socie ́te ́ Ge ́ne ́rale Letter 

at 11; CCMR II at 2. See also Cross-Border Adopting 

Release, 79 FR 47357–58 (discussing several 

comments relating to substituted compliance issues 

generally). 

United States.855 Re-proposed Rule 

908(a)(1)(i) preserved the principle—but 

not the specific language—from the 

initial proposal that a security-based 

swap would be subject to regulatory 

reporting if it is executed in the United 

States.856 When the Commission reproposed Rule 908(a)(1)(i) in the CrossBorder Proposing Release, the 

Commission expressed concern that the 

language in the Regulation SBSR 

Proposing Release could have required 

a security-based swap to be reported if 

it had only the slightest connection with 

the United States.857

Re-proposed Rules 908(a)(1)(i) and 

908(a)(2)(i) would have subjected a 

security-based swap transaction to 

Regulation SBSR’s regulatory reporting 

and public dissemination requirements, 

respectively, if the security-based swap 

was a ‘‘transaction conducted within the 

United States.’’ Commenters expressed 

divergent views regarding this 

provision 858 and, after careful 

consideration, the Commission has 

decided not to adopt re-proposed Rule 

908(a)(1)(i) or 908(a)(2)(i) at this time. 

As discussed above, the Commission 

anticipates seeking additional public 

comment on whether and, if so, how 

regulatory reporting and public 

dissemination requirements should be 

applied to transactions involving nonU.S. persons when they engage in 

conduct within the United States.859

D. Limitations on Counterparty 

Reporting Obligations—Rule 908(b) 

As-proposed, Rule 908(b) would have 

provided that, notwithstanding any 

other provision of Regulation SBSR, a 

direct or indirect counterparty to a 

security-based swap would not incur 

any obligation under Regulation SBSR 

unless the counterparty is: 

(1) A U.S. person; 

(2) a security-based swap dealer or 

major security-based swap participant; 

or 

(3) a counterparty to a transaction 

conducted within the United States. 

The Commission received no 

comments that specifically addressed 

re-proposed Rule 908(b).860

At this time, the Commission is 

adopting only the first two prongs of 

Rule 908(b). Thus, Rule 908(b), as 

adopted, provides that, notwithstanding 

any other provision of Regulation SBSR, 

a person shall not incur any obligation 

under Regulation SBSR unless it is a 

U.S. person, a registered security-based 

swap dealer, or a registered major 

security-based swap participant. As 

discussed above, U.S. persons can be 

subjected to requirements under Title 

VII because their transactions, whether 

undertaken directly or indirectly, exist 

at least in part within the United States. 

Furthermore, registered security-based 

swap dealers and registered major 

security-based swap participants are 

required to report their security-based 

swap transactions.861

Rule 908(b) is designed to specify the 

types of persons that will incur duties 

under Regulation SBSR. If a person does 

not come within any of the categories 

enumerated by Rule 908(b), it would not 

incur any duties under Regulation 

SBSR. Under Rule 908(b), as adopted, a 

non-U.S. person incurs no duties under 

Regulation SBSR unless it is a registered 

security-based swap dealer or registered 

major security-based swap participant. 

The Commission believes that this 

modification will reduce assessment 

costs and provide greater legal certainty 

to counterparties engaging in crossborder security-based swaps. The 

Commission anticipates soliciting 

additional public comment on whether 

regulatory reporting and/or public 

dissemination requirements should be 

extended to transactions occurring 

within the United States between nonU.S. persons and, if so, which non-U.S. 

persons should incur reporting duties 

under Regulation SBSR. 

E. Substituted Compliance—Rule 908(c) 

1. General Considerations 

The security-based swap market is 

global in scope, and relevant authorities 

around the globe are in the process of 

adopting security-based swap reporting 

and public dissemination requirements 

within their jurisdictions. Once these 

new requirements are finalized and take 

effect, market participants that engage in 

security-based swap transactions 

involving more than one jurisdiction 

could be subject to conflicting or 

duplicative reporting or public 

dissemination obligations. As initially 

proposed, Regulation SBSR did not 

contemplate that the reporting and 

public dissemination requirements 

associated with cross-border securitybased swaps could be satisfied by 

complying with the rules of a foreign 

jurisdiction instead of U.S. rules. Thus, 

in many cases, counterparties to a 

security-based swap would have been 

required to comply with proposed 

Regulation SBSR even if reporting of a 

security-based swap also was required 

under the rules of a foreign jurisdiction. 

As discussed in the Cross-Border 

Proposing Release,862 a number of 

commenters urged the Commission to 

allow compliance with comparable 

home country requirements to substitute 

for compliance with the parallel U.S. 

requirements.863 In response to those 

comments and recognizing that other 

jurisdictions may implement regulatory 

reporting and public dissemination 

regimes for security-based swaps that 

are comparable to the requirements set 

forth in Title VII and Regulation SBSR, 

the Commission re-proposed Rule 908 

in the Cross-Border Proposing Release to 

include a new paragraph (c). Rule 

908(c), as re-proposed, would have 

permitted, under certain conditions, 

substituted compliance for regulatory 

reporting and public dissemination 

requirements relating to security-based 

swaps. The Commission preliminarily 

believed that the availability of 

substituted compliance would reduce 

the likelihood that market participants 

would be subject to potentially 

conflicting or duplicative sets of rules 

while still meeting the statutory and 

policy objectives of Title VII. Reproposed Rule 908(c) would have 

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864 78 FR 31085–86. 

865See ESMA Letter at 2–3; FOA Letter at 2–3; 

IIF Letter at 1–2; JSDA Letter at 2; MFA/AIMA 

Letter at 5–7. 866See IIF Letter at 3. 867See AFR Letter at 8. 868See id. 869See Better Markets IV at 3, 24–25 (noting that 

the Commission’s duty is to protect investors and 

the public consistent with congressional policy, not 

to minimize the costs, burdens, or inconvenience 

that regulation imposes on industry). 

870See id. at 26. 

871 If the rules of a foreign jurisdiction did not 

apply to the security-based swap, there would be 

no need to consider the possibility of substituted 

compliance, because there would be no foreign 

rules that could substitute for the applicable U.S. 

rules. 

872As noted in the Cross-Border Proposing 

Release, this assumed that neither U.S. person is 

acting through a foreign branch. If either or both 

U.S. persons is acting through a foreign branch, the 

security-based swap between those U.S. persons 

would have been eligible for substituted compliance 

under Rule 908(c)(1), as re-proposed. See 78 FR 

31093–94, note 1149. 

specified the security-based swaps that 

would be eligible for substituted 

compliance and would have established 

procedures for market participants to 

request, and for the Commission to 

issue, substituted compliance orders. 

As discussed in detail below, the 

Commission is adopting Rule 908(c) 

substantially as re-proposed, with minor 

modifications also described below. The 

Commission believes in general that, if 

a foreign jurisdiction applies a 

comparable system for the regulatory 

reporting and public dissemination of 

security-based swaps, it would be 

appropriate to consider permitting 

affected market participants to comply 

with the foreign requirements to satisfy 

the comparable requirements of 

Regulation SBSR. Where the 

Commission finds that a foreign 

jurisdiction’s reporting and public 

dissemination requirements are 

comparable to those implemented by 

the Commission, Rule 908(c) provides 

that the Commission may make a 

substituted compliance determination 

with respect to such jurisdiction for 

these requirements. The Commission 

believes that permitting substituted 

compliance could reduce the likelihood 

that market participants would be 

subject to conflicting or duplicative 

regulation with respect to a securitybased swap transaction. 

In adopting Rule 908(c), the 

Commission is not making any 

assessment at this time regarding 

whether any foreign jurisdiction’s 

requirements for regulatory reporting 

and public dissemination of securitybased swaps are comparable to 

Regulation SBSR. Furthermore, because 

the analysis of any particular foreign 

jurisdiction would be very fact specific, 

it is impractical for the Commission to 

opine at this time on whether specific 

aspects of a foreign system would or 

would not allow the Commission to 

make a comparability determination. In 

view of the many technical differences 

that could exist between the 

Commission’s Title VII rules and 

parallel requirements in other 

jurisdictions, the Commission stated in 

the Cross-Border Proposing Release that 

‘‘the Commission would endeavor to 

take a holistic approach in making 

substituted compliance 

determinations—that is, we would 

ultimately focus on regulatory outcomes 

as a whole with respect to the 

requirements within the same category 

rather than a rule-by-rule 

comparison.’’ 864 The Commission 

continues to believe that this approach 

to comparability is appropriate, and 

intends to focus on regulatory outcomes 

as a whole when considering whether to 

make a comparability determination. 

2. Substituted Compliance Procedure— 

Rule 908(c)(2)(i) 

Rule 908(c)(2)(i), as re-proposed, 

would have allowed the Commission, 

conditionally or unconditionally, by 

order, to make a substituted compliance 

determination regarding regulatory 

reporting and public dissemination with 

respect to a foreign jurisdiction ‘‘if that 

foreign jurisdiction’s requirements for 

regulatory reporting and public 

dissemination of security-based swaps 

are comparable to otherwise applicable 

requirements’’ under Regulation SBSR. 

A number of commenters endorsed 

the Commission’s proposal to permit 

substituted compliance with Regulation 

SBSR.865 One of these commenters 

noted, for example, that substituted 

compliance would reduce burdens on 

businesses in the United States and 

elsewhere without weakening oversight, 

thus allowing firms to use funds more 

efficiently.866 However, two 

commenters recommended that the 

Commission narrow the proposed 

availability of substituted compliance. 

One of these commenters stated that the 

Commission’s proposed controls on 

substituted compliance would be 

inadequate.867 The commenter further 

stated that, although substituted 

compliance potentially has a legitimate 

role to play in a cross-border regulatory 

regime, the greater the scope for 

substituted compliance, the stricter the 

controls should be on the ability to 

substitute foreign rules for U.S. rules.868

The other commenter stated that the 

Cross-Border Proposing Release failed to 

provide an adequate legal or policy 

justification for allowing substituted 

compliance.869 This commenter 

believed that, rather than using 

substituted compliance, the 

Commission should exercise its 

exemptive authority sparingly and only 

upon finding an actual conflict exists 

with a particular foreign regulation.870

The Commission has carefully 

considered these comments and 

determined to adopt Rule 908(c)(2)(i) as 

re-proposed, with one modification, as 

described in Section XV(E)(3), infra. 

Permitting substituted compliance 

should reduce the likelihood that 

market participants face duplicative or 

contradictory reporting or public 

dissemination requirements, and 

thereby decrease costs and 

administrative burdens on market 

participants without compromising the 

regulatory goals of Title VII. The 

requirements for substituted compliance 

are designed to ensure that the Title VII 

requirements for regulatory reporting 

and public dissemination of securitybased swaps are being satisfied, albeit 

through compliance with the rules of a 

foreign jurisdiction rather than the 

specific provisions of Regulation SBSR. 

3. Security-Based Swaps Eligible for 

Substituted Compliance—Rule 908(c)(1) 

Rule 908(c)(1), as re-proposed, would 

have provided that compliance with the 

regulatory reporting and public 

dissemination requirements in Sections 

13(m) and 13A of the Exchange Act, and 

the rules and regulations thereunder, 

may be satisfied by compliance with the 

rules of a foreign jurisdiction that is the 

subject of a substituted compliance 

order issued by the Commission, 

provided that at least one of the direct 

counterparties to the security-based 

swap is either a non-U.S. person or a 

foreign branch, and the transaction is 

not solicited, negotiated, or executed 

within the United States. Thus, under 

re-proposed Rule 908(c)(1), certain 

kinds of security-based swaps would 

not have been eligible for substituted 

compliance even if they were subject to 

reporting and public dissemination 

requirements in a foreign 

jurisdiction.871 Specifically, a securitybased swap between two U.S. persons 

would not have been eligible for 

substituted compliance with respect to 

regulatory reporting and public 

dissemination, even if the securitybased swap was solicited, negotiated, 

and executed outside the United 

States.872 Furthermore, re-proposed 

Rule 908(c)(1) would not have allowed 

for the possibility of substituted 

compliance with respect to regulatory 

reporting and public dissemination if 

the relevant direct counterparty that was 

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873See ISDA II at 5; SIFMA/FIA/Roundtable 

Letter at 3–4. A third commenter expressed the 

view that any swap involving a U.S. person and a 

non-U.S. person should be eligible for substituted 

compliance. See CCMR II at 2–3. 

874See ISDA II at 5. 

875See SIFMA/FIA/Roundtable Letter at 3–4. This 

commenter did not raise this comment expressly in 

the context of Rule 908(c)(1), however. 

876Rule 908(c)(1), as adopted, provides: 

‘‘Compliance with the regulatory reporting and 

public dissemination requirements in sections 

13(m) and 13A of the Act (15 U.S.C. 78m(m) and 

78m–1), and the rules and regulations thereunder, 

may be satisfied by compliance with the rules of a 

foreign jurisdiction that is the subject of a 

Commission order described in paragraph (c)(2) of 

this section, provided that at least one of the direct 

counterparties to the security-based swap is either 

a non-U.S. person or a foreign branch.’’ 

877See ABA Letter at 5; ICI II at 11; IIB Letter at 

27; IIF Letter at 4; ISDA II at 4; JFMC Letter at 7– 

8; FOA Letter at 4 (noting that the Commission 

should begin discussions with the European 

Commission to establish an agreed approach for the 

coordinated oversight of the transatlantic securitybased swap markets); SIFMA/FIA/Roundtable 

Letter at A–36. 

878See ICI II at 11; ISDA II at 4. Re-proposed Rule 

908(c)(2)(iv), described below, would have required 

the Commission to enter into a supervisory and 

enforcement memorandum of understanding or 

other agreement with the relevant foreign 

regulator(s) prior to issuing a substituted 

compliance order covering a foreign jurisdiction. 

879 Interpretive Guidance and Policy Statement 

Regarding Compliance with Certain Swap 

Regulations, 78 FR 45292 (July 26, 2013). 

880See ISDA II at 4. 

881See ESMA Letter at 3 (recommending that 

comparability determinations should be requested 

at the European Union-level, rather than by 

individual firms); JSDA Letter at 2. See also Pearson 

Letter at 3 (recommending that the review of a 

foreign regime be conducted in cooperation solely 

with the relevant foreign regulators or legislators, 

not firms). 

882See 79 FR 47358 (‘‘We are persuaded that 

allowing foreign regulators to submit such requests 

would promote the completeness of requests and 

promote efficiency in the process for considering 

such requests, in light of foreign regulators’ 

expertise regarding their domestic regulatory 

system, including the effectiveness of their 

either a non-U.S. person or foreign 

branch (or its agent)—regardless of place 

of domicile—solicited, negotiated, or 

executed a security-based swap from 

within the United States. 

The Commission received two 

comment letters in response to reproposed Rule 908(c)(1), both of which 

addressed the proposal to limit 

substituted compliance availability to 

security-based swaps that are not 

solicited, negotiated, or executed in the 

United States.873 One of these 

commenters recommended that the 

Commission remove this requirement 

altogether.874 The other commenter 

noted that, as a general matter, it is 

virtually impossible to determine on a 

trade-by-trade basis whether each 

specific contact with a counterparty or 

potential counterparty has some nexus 

to the United States, and urged the 

Commission to subject security-based 

swaps to Title VII regulation solely 

according to whether counterparties are 

U.S. persons.875

In response to these comments, the 

Commission has decided to adopt a 

modified version of Rule 908(c)(1) that 

does not condition substituted 

compliance eligibility on the location of 

execution, negotiation, or solicitation of 

a particular transaction.876 Under Rule 

908(c)(1), as adopted, a security-based 

swap is eligible for substituted 

compliance with respect to regulatory 

reporting and public dissemination if at 

least one of the direct counterparties to 

the security-based swap is either a nonU.S. person or a foreign branch. Thus, 

Rule 908(c)(1) permits a security-based 

swap between a U.S. person and the 

New York branch of a foreign bank (i.e., 

a non-U.S. person with operations 

inside the United States) to be eligible 

for substituted compliance, provided 

that a substituted compliance order is in 

effect with respect to the home country 

of the foreign bank that operates the 

U.S. branch. The standard in Rule 

908(c)(1), as adopted, is consistent with 

the Commission’s decision not to 

impose, at this time, reporting or public 

dissemination requirements based 

solely on whether a transaction is 

conducted within the United States. 

Regarding which security-based 

swaps are eligible for the possibility of 

substituted compliance, the 

Commission believes that, if at least one 

direct counterparty to a security-based 

swap is a foreign branch or a non-U.S. 

person (even if the non-U.S. person is a 

registered security-based swap dealer or 

registered major security-based swap 

participant, or is guaranteed by a U.S. 

person), the security-based swap should 

be eligible for consideration for a 

substituted compliance determination 

under Regulation SBSR. This approach 

recognizes that a transaction involving a 

foreign branch or a non-U.S. person 

faces the possibility of being subject to 

reporting requirements in multiple 

jurisdictions (the United States and 

another jurisdiction whose rules may 

govern the transaction). The approach 

adopted by the Commission of allowing 

any transaction involving a foreign 

branch or non-U.S. person to be eligible 

to be considered for substituted 

compliance is designed to limit 

disincentives for non-U.S. persons to 

transact security-based swaps with U.S. 

persons by allowing for the possibility 

that compliance with the rules of a 

foreign jurisdiction could be substituted 

for compliance with the specific 

provisions of Regulation SBSR when the 

non-U.S. person transacts with a U.S. 

person. This approach also would allow 

for a reasonable minimization of 

reporting burdens on foreign branches 

and non-U.S. persons in situations 

where the local jurisdiction in which 

they operate does not offer the 

possibility of substituted compliance. 

4. Requests for Substituted 

Compliance—Rule 908(c)(2)(ii) 

Rule 908(c)(2)(ii), as re-proposed, 

would have established the process for 

market participants to follow when 

applying for a substituted compliance 

determination: ‘‘Any person that 

executes security-based swaps that 

would, in the absence of a substituted 

compliance order, be required to be 

reported pursuant to [Regulation SBSR] 

may file an application, pursuant to the 

procedures set forth in § 240.0–13 of 

this chapter, requesting that the 

Commission make a substituted 

compliance determination regarding 

regulatory reporting and public 

dissemination with respect to a foreign 

jurisdiction the rules of which also 

would require reporting and public 

dissemination of those security-based 

swaps. Such application shall include 

the reasons therefor and such other 

information as the Commission may 

request.’’ 

A number of commenters 

recommended that the Commission 

permit foreign regulators, as well as 

market participants, to file an 

application for a substituted compliance 

determination.877 Some of these 

commenters noted that foreign 

regulatory authorities would be wellpositioned to describe their regulatory 

frameworks and manner of supervision, 

and, in any event, their involvement 

would be needed to negotiate the 

memorandum of understanding that the 

Commission proposed to require as a 

precondition of granting a substituted 

compliance order.878 One commenter 

also stated that the CFTC’s Cross-Border 

Guidance 879 contemplates accepting 

applications for substituted compliance 

from non-U.S. regulators.880 Two 

commenters suggested that substituted 

compliance applications should be 

submitted by foreign regulatory 

authorities, rather than individual 

firms.881

The Commission is adopting Rule 

908(c)(2)(ii) largely as re-proposed, with 

a few minor revisions. First, consistent 

with the adoption of Rule 0–13 in the 

Cross-Border Adopting Release, the 

Commission has revised Rule 

908(c)(2)(ii) to permit foreign financial 

regulatory authorities to submit 

applications for substituted compliance 

determinations on behalf of market 

participants subject to their 

jurisdictions.882

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compliance and enforcement mechanisms, and to 

allow for a single point of contact to facilitate the 

consideration of substituted compliance requests 

associated with the jurisdiction’’). 

883This could be either a U.S. person or a nonU.S. person that engages in activity in that 

jurisdiction. 

884This formulation of final Rule 908(c)(2)(ii) 

closely follows the language of Rule 0–13(a) under 

the Exchange Act, 17 CFR 240.0–13(a), which 

provides in relevant part that an application for 

substituted compliance must be submitted to the 

Commission ‘‘by a party that potentially would 

comply with requirements under the Exchange Act 

pursuant to a substituted compliance order, or by 

the relevant foreign financial regulatory authority or 

authorities.’’ 

885Thus, the Commission disagrees with the 

commenters who argued that substituted 

compliance applications should be submitted only 

by foreign regulatory authorities, rather than 

individual firms. See ESMA Letter at 3; JSDA Letter 

at 2. Although obtaining information from foreign 

regulatory authorities could be an important aspect 

of the substituted compliance review, the 

Commission sees no basis for denying individual 

firms that might comply with requirements of 

Regulation SBSR pursuant to a substituted 

compliance order the ability to request substituted 

compliance and thereby initiate that review. See 

Cross-Border Adopting Release, 79 FR 47358 (‘‘We 

are not . . . foreclosing the ability of a market 

participant itself to submit a request that it be able 

to comply with Exchange Act requirements 

pursuant to a substituted compliance order’’). 

886See id. In addition, Rule 0–13(h) requires the 

Commission to publish in the Federal Register a 

notice that a complete application has been 

submitted. 

887See Cross-Border Proposing Release, 78 FR 

31215. 

888See id. 889See id. 

Second, Rule 908(c)(2)(ii), as reproposed, would have permitted filing 

by any ‘‘person that executes securitybased swaps.’’ Read literally, this 

language in the re-proposed rule could 

have permitted persons who are not 

subject to Regulation SBSR to seek a 

substituted compliance determination. 

The Commission seeks to limit the 

scope of persons who can apply for 

substituted compliance determinations 

to foreign financial regulators and 

parties that would be subject to 

Regulation SBSR, because these persons 

have the greatest knowledge about the 

foreign jurisdiction in question. 

Moreover, in the case of market 

participants active in that jurisdiction, 

they will be directly impacted by 

potentially overlapping rules and thus 

have the greatest interest in making the 

strongest case for substituted 

compliance. Accordingly, Rule 

908(c)(2)(ii), as adopted, permits a 

‘‘party that potentially would comply 

with requirements under [Regulation 

SBSR] pursuant to a substituted 

compliance order,’’ 883 or the relevant 

foreign financial regulatory authority or 

authorities in that jurisdiction,884 to file 

an application requesting a substituted 

compliance determination.885

Third, the Commission has 

determined not to include the final 

sentence of re-proposed Rule 

908(c)(2)(ii)—‘‘[s]uch application shall 

include the reasons therefor and such 

other information as the Commission 

may request’’—in final Rule 

908(c)(2)(ii). Rule 0–13(e) under the 

Exchange Act, as adopted in the CrossBorder Adopting Release, provides 

detailed requirements regarding the 

information required to be submitted 

(e.g., supporting documentation, 

including information regarding 

applicable regulatory requirements, 

compliance monitoring by foreign 

regulators, and applicable precedent).886

In light of the cross-reference to Rule 0– 

13 in final Rule 908(c)(2)(ii), the last 

sentence of re-proposed Rule 

908(c)(2)(ii) is unnecessary and 

therefore is not included in final Rule 

908(c)(2)(ii). 

5. Findings Necessary for Substituted 

Compliance—Rule 908(c)(2)(iii) 

Rule 908(c)(2)(iii), as re-proposed, 

would have provided that, in making a 

substituted compliance determination 

with respect to a foreign jurisdiction, 

the Commission shall take into account 

such factors as it determines are 

appropriate, such as the scope and 

objectives of the relevant foreign 

regulatory requirements, as well as the 

effectiveness of the supervisory 

compliance program administered, and 

the enforcement authority exercised, by 

the foreign financial regulatory 

authority to support oversight of its 

regulatory reporting and public 

dissemination system for security-based 

swaps. Furthermore, Rule 908(c)(2)(iii), 

as re-proposed, would have provided 

that the Commission would not make a 

substituted compliance determination 

with respect to regulatory reporting and 

public dissemination unless the 

Commission found that the relevant 

foreign regulatory regime provided for 

the reporting and public dissemination 

of comparable data elements in a 

manner and timeframe comparable to 

those required by Regulation SBSR.887

As a prerequisite to any substituted 

compliance determination, re-proposed 

Rule 908(c)(2)(iii) also would have 

required that the Commission have 

direct electronic access to the securitybased swap data held by the trade 

repository or foreign regulatory 

authority.888 Lastly, re-proposed Rule 

908(c)(2)(iii) would have required the 

Commission to find that any trade 

repository or foreign regulatory 

authority in the foreign jurisdiction is 

subject to requirements regarding data 

collection and maintenance; systems 

capacity, resiliency, and security; and 

recordkeeping that are comparable to 

the requirements imposed on registered 

SDRs.889

The Commission has determined to 

adopt Rule 908(c)(2)(iii) as re-proposed, 

subject to two minor changes, one in 

each of Rules 908(c)(2)(iii)(B) and 

908(c)(2)(iii)(D), which are discussed 

below. Final Rule 908(c)(2)(iii) provides 

that, in making a substituted 

compliance determination, the 

Commission shall take into account 

such factors that it determines are 

appropriate, which include but are not 

limited to the scope and objectives of 

the relevant foreign regulatory 

requirements, as well as the 

effectiveness of the supervisory 

compliance program administered, and 

the enforcement authority exercised, by 

the foreign financial regulatory 

authority to support oversight of its 

regulatory reporting and public 

dissemination system for security-based 

swaps. The rule further provides that 

the Commission shall not make such a 

substituted compliance determination 

unless it finds that: 

(A) The data elements that are 

required to be reported pursuant to the 

rules of the foreign jurisdiction are 

comparable to those required to be 

reported pursuant to Rule 901; 

(B) The rules of the foreign 

jurisdiction require the security-based 

swap to be reported and publicly 

disseminated in a manner and a 

timeframe comparable to those required 

by Regulation SBSR (or, in the case of 

transactions that are subject to 

regulatory reporting but not public 

dissemination, the rules of the foreign 

jurisdiction require the security-based 

swaps to be reported in a manner and 

timeframe comparable to those required 

by Regulation SBSR); 

(C) The Commission has direct 

electronic access to the security-based 

swap data held by a trade repository or 

foreign regulatory authority to which 

security-based swaps are reported 

pursuant to the rules of that foreign 

jurisdiction; and 

(D) Any trade repository or foreign 

regulatory authority in the foreign 

jurisdiction that receives and maintains 

required transaction reports of securitybased swaps pursuant to the laws of that 

foreign jurisdiction is subject to 

requirements regarding data collection 

and maintenance; systems capacity, 

integrity, resiliency, availability, and 

security; and recordkeeping that are 

comparable to the requirements 

imposed on security-based swap data 

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14660 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

890See Rule 908(c)(2)(iii)(A)–(D), as adopted, and 

infra note 910. 

891See ABA Letter at 5; AFR Letter at 12; Better 

Markets IV at 3, 29–32; ISDA II at 6. 

892See FOA Letter at 6; ISDA II at 6. 

893 ISDA II at 6. 

894 Id. 

895See JFMC Letter at 7; ISDA II at 8. Other 

commenters expressed a general preference for a 

holistic review of a relevant jurisdiction’s securitybased swap regulatory regime but did not expressly 

reference Regulation SBSR in this context. See, e.g., 

SIFMA/FIA/Roundtable Letter at A–37–A–38; 

Pearson Letter at 3; IIF Letter at 5; ICI II at 11; JFMC 

Letter at 1; MFA/AIMA Letter at 5 (observing that 

a line-by-line or rule-by-rule analysis would place 

a significant burden on the Commission, and 

potentially result in disjointed regulation); ABA 

Letter at 5. 

896See ICI II at 12; ISDA II at 8 (noting also that 

jurisdictions may choose to establish goals and 

requirements that are ancillary to the G–20 

regulatory goals, but these ancillary requirements 

should not become a barrier to an effective crossborder compliance regime that furthers the G–20 

goals). With respect to security-based swap 

reporting, the ‘‘G–20 goals’’ referenced by these 

commenters were articulated in the Leaders’ 

Statement at the Pittsburgh Summit (September 24– 

25, 2009), available at: https://www.g20.org/sites/

default/files/g20_resources/library/Pittsburgh_

Declaration.pdf, last visited September 22, 2014. 

897One commenter urged the Commission to 

‘‘replace the apparently subjective ‘outcomes-based’ 

standard for comparison with a more rigorous and 

objective standard based on the underlying rules.’’ 

AFR Letter at 9. For the reasons noted above, the 

Commission is adopting a ‘‘comparable’’ standard, 

rather than the type of review suggested by the 

commenter. This commenter further stated: 

‘‘Another reason that ‘outcomes-based’ assessment 

may not be adequate is that the inter-operability of 

different rule sets may be critical to the 

effectiveness of the overall international regime 

. . . this is the case for standardization of data 

formats in reporting, and may also be true for 

various risk management elements that must be 

standardized across a global financial institution.’’ 

Id. at 10. The Commission intends to work with 

foreign regulatory authorities to develop more 

uniform data standards to allow maximum 

aggregability while minimizing market participant 

costs and burdens that would result from having to 

report in different jurisdictions using different data 

standards and formats. 

898As re-proposed, this rule would have provided 

that the Commission shall not make a substituted 

compliance determination unless it finds that the 

‘‘rules of the foreign jurisdiction require the 

security-based swap to be reported and publicly 

disseminated in a manner and a timeframe 

comparable to those required by §§ 242.900 through 

242.911.’’ As discussed previously, Regulation 

SBSR, as adopted, consists of Rules 900 through 

909 under the Exchange Act. Therefore, the 

reference in re-proposed Rule 908(c)(2)(iii)(B) to 

‘‘§§ 242.900 through 242.911’’ is being revised to 

read: ‘‘§§ 242.900 through 242.909.’’ 

repositories by the Commission’s rules 

and regulations.890

Although no commenters discussed 

the appropriateness of considering the 

examination and enforcement practices 

of foreign regulators in making a 

substituted compliance determination 

for Regulation SBSR specifically, a 

number of commenters addressed the 

general concept of considering actual 

practices in the foreign jurisdiction as 

part of the substituted compliance 

determination. Certain commenters 

generally supported the retention by the 

Commission of the authority to decline 

to make a comparability finding based 

on the substantive enforcement of 

foreign regulatory regimes.891 Two of 

these commenters noted, however, that 

supervisory practices differ significantly 

among jurisdictions.892 One of these 

commenters stated: ‘‘This lack of 

commonality should not be assumed to 

be a defect in supervisory standards; 

common objectives may be reached 

through differing means.’’ 893 This 

commenter expressed the general view, 

however, that ‘‘a general, high-level 

inquiry into the existence of an 

examination and enforcement process 

and institutions to support it arguably 

should inform views about the 

comparability of outcomes.’’ 894

The Commission agrees that the 

examination and enforcement practices 

of each foreign jurisdiction will need to 

be evaluated on a case-by-case basis, 

and anticipates that it will consider 

whether the regulatory protections 

provided in that jurisdiction’s securitybased swap markets are substantially 

realized through sufficiently vigorous 

supervision and enforcement. While the 

Commission believes that common 

objectives may be reached through 

differing means, the Commission also 

believes that compliance with a foreign 

jurisdiction’s rules for reporting and 

public dissemination of security-based 

swaps should be a substitute for 

compliance with the U.S. rules only 

when the foreign jurisdiction has a 

reporting and public dissemination 

regime comparable to that of the United 

States. This determination must 

consider actual practices and 

implementation as well as written laws 

and regulations of the foreign 

jurisdiction. 

a. Data Element Comparability—Rule 

908(c)(2)(iii)(A) 

The Commission received several 

comments regarding the data element 

comparability determination required 

by what is now final Rule 

908(c)(2)(iii)(A). Two commenters 

recommended that the Commission 

determine whether a foreign jurisdiction 

has comparable security-based swap 

reporting requirements based on a 

holistic review of that jurisdiction’s 

regulations and the local market 

environment.895 Some commenters 

suggested that the Commission should 

determine whether the security-based 

swap reporting framework of a foreign 

jurisdiction is designed to achieve the 

G–20 goals of transparency in the 

derivatives markets.896

The Commission is adopting reproposed Rule 908(c)(2)(iii)(A) without 

revision. Under the final rule, the 

foreign jurisdiction must require 

reporting of data elements comparable 

to those required under Rule 901 of 

Regulation SBSR for the Commission to 

make a comparability determination. If 

the data elements required by the 

foreign jurisdiction are not comparable, 

important information about a securitybased swap might not be captured by 

the foreign trade repository or foreign 

regulatory authority. This could create 

gaps or inconsistencies in the 

information available to the 

Commission and impair the 

Commission’s ability to monitor the 

security-based swap market. As noted in 

Section XV(E)(1), supra, the 

Commission generally agrees with the 

commenters who expressed the view 

that the Commission should take a 

‘‘holistic’’ or ‘‘outcomes-based’’ view of 

another jurisdiction’s rules when 

making a substituted compliance 

determination, rather than conduct a 

‘‘line-by-line’’ or ‘‘rule-by-rule’’ 

analysis. At this time, the Commission 

does not believe that it is sufficient to 

consider only whether the data elements 

required by the foreign regulatory 

regime are designed to achieve the 

objectives of the G–20 with respect to 

reporting. The G–20 objectives are a 

high-level set of principles designed to 

guide jurisdictions in adopting reforms 

for the OTC derivatives markets. 

Therefore, the Commission believes that 

it is necessary and appropriate to 

consider whether the data elements 

reported under that jurisdiction’s rules 

are comparable to those required under 

Rule 901 of Regulation SBSR—not 

whether they are comparable to the G– 

20 standards—in deciding whether to 

grant a substituted compliance 

determination. If the Commission took 

the opposite view, it would be difficult 

to conclude that the oversight and 

transparency goals of Title VII were 

being satisfied through compliance with 

the rules of the foreign jurisdiction in 

lieu of Regulation SBSR.897

b. Timeframe of Reporting and Public 

Dissemination—Rule 908(c)(2)(iii)(B) 

The Commission also is adopting Rule 

908(c)(2)(iii)(B) as re-proposed, subject 

to certain conforming changes.898 Rule 

908(c)(2)(iii)(B), as adopted, provides 

that the Commission shall not issue a 

substituted compliance determination 

unless the relevant foreign jurisdiction 

requires security-based swaps to be 

reported and publicly disseminated ‘‘in 

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899Although the Commission is requiring 

reporting and public dissemination of securitybased swaps within 24 hours of the time of 

execution during the first initial phase of 

Regulation SBSR, see Rule 901(j), the Commission 

anticipates considering provisions to implement the 

Title VII requirement for real-time public 

dissemination. Therefore, the Commission would 

view a foreign jurisdiction’s regime for public 

dissemination of security-based swaps as 

comparable only if it (1) had rules providing for 

real-time public dissemination of all security-based 

swaps currently, or (2) was following a comparable 

process of moving to real-time public dissemination 

for all security-based swaps in phases. 

900See JSDA Letter at 2. Another commenter 

requested that the Commission determine that 

Japan has comparable security-based swap 

reporting standards. See JFMC Letter at 8. This 

comment is beyond the scope of this rulemaking. 

However, after Regulation SBSR becomes effective, 

market participants in this jurisdiction that would 

rely on a substituted compliance determination, or 

their regulators, may submit a request for 

substituted compliance with respect to regulatory 

reporting and public dissemination if they believe 

that the rules in that jurisdiction satisfy the criteria 

for substituted compliance described in Rule 908(c). 

901 ISDA II at 9. 

902See ICI II at 12. 

903Under Rule 900(l), as adopted, ‘‘direct 

electronic access’’ has the same meaning as in Rule 

13n–4(a)(5) under the Exchange Act, discussed in 

the SDR Adopting Release. Rule 13n–4(a)(5) defines 

‘‘direct electronic access’’ 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. 

904See AFR Letter at 9 (noting that the 

Commission should seek to analyze data from 

foreign repositories in conjunction with U.S.- 

sourced data to determine the swap exposure of an 

entity on a global basis). 

905See IIF Letter at 7; ISDA II at 8. 

906 Id. at 8. The second commenter did not offer 

a rationale for its opposition to the proposed direct 

electronic access requirement. See IIF Letter at 7. 

907SIFMA/FIA/Roundtable Letter at A–46 (stating 

that over a dozen jurisdictions have been identified 

where local law prohibits the disclosure of client 

names to non-local regulators that do not have an 

information-sharing treaty or agreement in place 

with the local regulator, some of which cannot be 

satisfied by counterparty consent). 

908See supra note 788 (providing statistics 

regarding the amount of cross-border trading in the 

security-based swap market). 

a manner and a timeframe comparable 

to those required by [Regulation 

SBSR].’’ Given the Title VII 

requirements that all security-based 

swaps be reported to a registered SDR 

and that security-based swaps be 

publicly disseminated in real time, the 

Commission believes that allowing 

substituted compliance with the rules of 

a foreign jurisdiction that has reporting 

timeframes and dissemination outcomes 

not comparable to those in the United 

States would run counter to the 

objectives and requirements of Title VII. 

If the Commission allowed substituted 

compliance for such a jurisdiction, the 

Commission might have access to less 

regulatory data about the security-based 

swap market, or price discovery could 

be less efficient, than would have been 

the case if Regulation SBSR applied in 

its entirety. Thus, for example, the 

Commission generally does not 

anticipate permitting substituted 

compliance with respect to regulatory 

reporting and public dissemination 

under Rule 908(c) if a foreign 

jurisdiction does not (among other 

things) impose public dissemination 

requirements for all security-based 

swaps on a trade-by-trade basis.899

Thus, the Commission disagrees with 

the commenter who suggested that a 

non-U.S. public dissemination regime 

that disseminates data on an aggregate 

basis should be deemed comparable to 

Regulation SBSR.900

One commenter stated that 

‘‘[c]omparability should be addressed 

flexibly with respect to public 

dissemination, recognizing that in 

certain jurisdictions’ [sic] transparency 

obligations are linked to use of a trading 

venue and fall on the venue.’’ 901

Another commenter recommended that 

the Commission should not determine 

that a foreign jurisdiction lacks 

comparable security-based swap 

reporting rules based on technical 

differences in the timeframes for, or 

manner of, reporting.902 Whether the 

Commission grants a substituted 

compliance determination will depend 

on the facts and circumstances 

pertaining to a particular request. Thus, 

it is difficult to address concerns such 

as those raised by these two commenters 

in the abstract. As the Commission 

noted in Section XV(E)(1), supra, it will 

assess comparability in a holistic 

manner rather than on a rule-by-rule 

basis. 

c. Direct Electronic Access—Rule 

908(c)(2)(iii)(C) 

The Commission also is adopting Rule 

908(c)(2)(iii)(C) as re-proposed. Rule 

908(c)(2)(iii)(C) provides that the 

Commission may not issue a substituted 

compliance order with respect to 

regulatory reporting and public 

dissemination in a foreign jurisdiction 

unless ‘‘[t]he Commission has direct 

electronic access to the security-based 

swap data held by a trade repository or 

foreign regulatory authority to which 

security-based swaps are reported 

pursuant to the rules of that foreign 

jurisdiction.’’ 903 Commenters expressed 

differing views regarding the direct 

electronic access requirement in reproposed Rule 908(c)(2)(iii)(C). One 

commenter expressed support for the 

proposed requirement, believing that 

direct electronic access is a critical 

element for adequate monitoring of risks 

to U.S. financial stability.904 However, 

two commenters objected to the 

proposed direct electronic access 

requirement.905 One of these 

commenters suggested that the 

Commission should not require direct 

electronic access at this time, but should 

instead wait for the ‘‘FSB’’ to develop 

plans ‘‘to produce and share globally 

aggregated trade repository data that 

authorities need for monitoring systemic 

risks.’’ 906 Another commenter ‘‘urge[d] 

the Commission to take into account the 

issue of foreign jurisdictions’ privacy 

laws before imposing a blanket 

requirement that [the Commission] have 

direct electronic access.’’ 907

After carefully considering the 

comments received, the Commission 

continues to believe that requiring 

direct electronic access to securitybased swap data held by a trade 

repository or foreign regulatory 

authority is a necessary part of any 

substituted compliance determination. 

Thus, the Commission does not believe 

that it should rely instead on the FSB or 

other international bodies developing 

arrangements for trade repositories and 

relevant authorities to share information 

across jurisdictions. While these crossborder information-sharing 

arrangements are important, and the 

Commission will continue to participate 

in such efforts, granting substituted 

compliance without direct electronic 

access would not be consistent with the 

underlying premise of substituted 

compliance: That a comparable 

regulatory result is reached through 

compliance with foreign rules rather 

than with the corresponding U.S. rules. 

If the Commission were to grant 

substituted compliance for a foreign 

jurisdiction where the Commission did 

not have direct electronic access to the 

facility to which security-based swap 

transactions of that jurisdiction are 

reported, the Commission might not 

have access to transaction information 

for portions of the security-based swap 

market that it otherwise would have the 

ability to surveil.908 If the Commission 

were to rely solely on international 

information-sharing agreements, it 

could face substantial delays before a 

foreign trade repository or foreign 

regulatory authority, even acting 

expeditiously, could compile and make 

available to the Commission data 

relating to a substantial volume of 

transactions. Delays in obtaining such 

data could compromise the ability of the 

Commission to supervise security-based 

swap market participants, or to share 

information with other relevant U.S. 

authorities in a timely fashion. Thus, 

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909See also infra Section XVI(A) (addressing the 

impact of foreign privacy laws on Regulation 

SBSR). 

910See SDR Adopting Release, note 831. 

911Rule 908(c)(2)(iv). 

the Commission believes that direct 

electronic access to security-based swap 

data held by the foreign trade repository 

or foreign regulatory authority to which 

security-based swap transactions are 

reported in the foreign jurisdiction must 

be a prerequisite to issuing a substituted 

compliance order with respect to 

Regulation SBSR applying to that 

jurisdiction. 

The Commission has taken into 

consideration the comment that certain 

jurisdictions have privacy laws or 

blocking statutes that could, in certain 

cases, render a foreign trade repository 

or foreign regulatory authority unable to 

provide the Commission with direct 

electronic access to transaction 

information that would include the 

identity of the counterparties. The 

Commission is not persuaded that this 

consideration should remove direct 

electronic access as a requirement for 

substituted compliance under 

Regulation SBSR. Indeed, if foreign 

privacy laws result in the Commission 

having less than comparable access to 

the security-based swap transaction data 

held at a foreign trade repository or 

foreign regulatory authority than the 

Commission otherwise would have if no 

substituted compliance order were in 

effect, then the premise of substituted 

compliance would not be met. Although 

foreign regulatory authorities would 

likely have access to information about 

security-based swap transactions that 

exist at least in part in their 

jurisdictions, these authorities might 

lack the ability to share this information 

with the Commission. As a result, it 

could be difficult if not impossible for 

the Commission or any other relevant 

authority, foreign or domestic, to 

observe the build-up of systemic risks 

created by the global security-based 

swap activity of U.S. persons. In sum, 

the Commission believes that, if it does 

not have direct electronic access to the 

transaction information reported to the 

foreign trade repository or foreign 

regulatory authority, substituted 

compliance would not yield a 

comparable outcome and the 

requirements of Rule 908(c)(2) would 

not be met.909 The Commission believes 

that, in this situation, the specific 

requirements of Regulation SBSR 

should continue to apply; if necessary 

supervisory information cannot be 

obtained via direct electronic access to 

the security-based swap data held by a 

foreign trade repository or foreign 

regulatory authority, then such 

transactions must continue to be 

reported to a registered SDR, from 

which the Commission can obtain such 

information. 

d. Trade Repository Capabilities—Rule 

908(c)(2)(iii)(D) 

The Commission received no 

comments on Rule 908(c)(2)(iii)(D) and 

is adopting that rule as re-proposed, 

with certain minor changes. Final Rule 

908(c)(2)(iii)(D) provides that the 

Commission shall not make a 

substituted compliance determination 

with respect to regulatory reporting and 

public dissemination unless it finds that 

‘‘[a]ny trade repository or foreign 

regulatory authority in the foreign 

jurisdiction that receives and maintains 

required transaction reports of securitybased swaps pursuant to the laws of that 

foreign jurisdiction is subject to 

requirements regarding data collection 

and maintenance; systems capacity, 

integrity, resiliency, availability, and 

security; and recordkeeping that are 

comparable to the requirements 

imposed on security-based swap data 

repositories by the Commission’s rules 

and regulations’’ (emphasis added). In 

the re-proposed rule, the highlighted 

language would have read ‘‘. . . by 

§§ 240.13n–5 through 240.13n–7 of this 

chapter.’’ Because requirements 

imposed on registered SDRs relating to 

data collection and maintenance; 

systems capacity, integrity, resiliency, 

availability, and security; and 

recordkeeping could be imposed by 

Commission rules and regulations other 

than or in addition to Rules 13n–5 

through 13n–7 under the Exchange Act, 

the Commission believes that it would 

be more appropriate to use the broader 

language in the text of final Rule 

908(c)(2)(iii)(D). The Commission 

continues to believe that, to allow 

substituted compliance for regulatory 

reporting and public dissemination with 

respect to a foreign jurisdiction, any 

entity in that foreign jurisdiction that is 

required to receive and maintain 

security-based swap transaction data 

must have protections and operability 

standards comparable to those imposed 

on SEC-registered SDRs. 

In addition, the re-proposed rule 

would have required, in relevant part, 

that—in connection with a substituted 

compliance determination—the foreign 

trade repository or foreign regulatory 

authority must be subject to 

requirements for ‘‘systems capacity, 

resiliency, and security’’ that are 

comparable to parallel U.S. 

requirements. That provision in final 

Rule 908(c)(2)(iii)(D) now states, 

‘‘systems capacity, integrity, resiliency, 

availability, and security.’’ The addition 

of ‘‘integrity’’ and ‘‘availability’’ to 

characterize the expected operational 

capability of the foreign trade repository 

or foreign regulatory authority is 

derived from a parallel change that the 

Commission made in adopting final 

Rule 13n–6 under the Exchange Act that 

applies to SEC-registered SDRs.910

Because these standards apply to SECregistered SDRs, the Commission 

believes that it is appropriate for Rule 

908(c)(2)(iii)(D) to include them as 

elements necessary for a finding that a 

foreign trade repository or foreign 

regulatory authority is subject to 

comparable regulatory duties. 

e. Memoranda of Understanding—Rule 

908(c)(2)(iv) 

Rule 908(c)(2)(iv), as re-proposed, 

would have required that, before issuing 

a substituted compliance order relating 

to regulatory reporting and public 

dissemination with respect to a foreign 

jurisdiction, the Commission shall have 

entered into a supervisory and 

enforcement memorandum of 

understanding (‘‘MOU’’) or other 

arrangement with the relevant foreign 

financial regulatory authority or 

authorities under such foreign financial 

regulatory system addressing oversight 

and supervision of the applicable 

security-based swap market. No 

commenters addressed this proposed 

requirement. 

The Commission is adopting Rule 

908(c)(2)(iv) with certain minor 

revisions. First, the Commission is 

modifying the rule to indicate that a 

substituted compliance determination 

may require the Commission to enter 

into more than one MOU or other 

arrangement with a foreign authority. 

Second, the Commission has modified 

the rule to provide that such MOUs or 

other arrangements would ‘‘address[ ] 

supervisory and enforcement 

cooperation and other matters arising 

under the substituted compliance 

determination.’’ 911 These clarifications 

are designed to facilitate discussions 

between the Commission and relevant 

foreign regulators. 

The Commission expects that any 

grant of substituted compliance would 

be predicated on the presence of 

enforcement MOUs or other 

arrangements that provide formal 

mechanisms by which the Commission 

can request assistance and obtain 

documents and information from 

foreign authorities regarding 

enforcement matters involving 

securities. Substituted compliance also 

may be expected to be predicated on the 

presence of supervisory MOUs or other 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14663 

912The Commission made a similar statement in 

the Cross-Border Proposing Release. See 78 FR 

31089. Three commenters agreed with the 

statement. See AFR Letter at 12; Better Markets IV 

at 30; IIF Letter at 4, 7. 

913See Better Markets IV at 29, 32. 

914See ABA Letter at 6; ISDA II at 9. 

915See FOA Letter at 5; IIF Letter at 7; SIFMA/ 

FIA/Roundtable Letter at A–37. 

916See 78 FR 31096. 

917See IIB Letter at 25; ISDA II at 9; SIFMA/FIA/ 

Roundtable Letter at A–45. 

918See IIB Letter at 25 (‘‘regulatory reporting 

provides the Commission with the tools for market 

surveillance and oversight of its regulated markets, 

while public dissemination is designed to provide 

the market, rather than regulators, real-time price 

transparency’’). 

919See id. 

920 ISDA II at 9. 

arrangements that provide formal 

mechanisms by which the Commission 

can request assistance and obtain nonpublic information from foreign 

authorities related to the oversight of 

dually regulated entities. As a result, 

such MOUs or other arrangements 

should help the Commission ensure 

compliance with Title VII requirements 

for regulatory reporting and public 

dissemination. 

In addition, any grant of substituted 

compliance may be conditioned upon 

the Commission entering into other 

MOUs or arrangements that address 

additional matters specific to the 

substituted compliance determination. 

Such MOUs or other arrangements, 

among other respects, may be expected 

to help promote the effectiveness of 

substituted compliance by providing 

mechanisms by which the Commission 

may request information and/or monitor 

for circumstances where the foreign 

regime may no longer be comparable to 

the counterpart Title VII requirements 

(due, for example, to changes in the 

substantive legal framework of the 

foreign regime that are inconsistent with 

the understandings that underpinned 

the Commission’s initial grant of 

substituted compliance). In addition, 

such MOUs or other arrangements may 

provide mechanisms by which the 

Commission could request information 

and monitor the effectiveness of the 

enforcement and supervision 

capabilities of the appropriate foreign 

regulator(s). More generally, such MOUs 

or other arrangements can provide 

mechanisms by which the Commission 

could obtain information relevant to the 

assessment of comparability. 

f. Modification or Withdrawal of 

Substituted Compliance Order 

Rule 908(c)(2)(v), as re-proposed, 

would have provided that the 

Commission may, on its own initiative, 

modify or withdraw a substituted 

compliance order with respect to 

regulatory reporting and public 

dissemination in a foreign jurisdiction, 

at any time, after appropriate notice and 

opportunity for comment. The 

Commission is adopting Rule 

908(c)(2)(v) as re-proposed, without 

revision. 

Situations can arise where it would be 

necessary or appropriate to modify or 

withdraw a substituted compliance 

order. A modification or withdrawal 

could be necessary if, after the 

Commission issues a substituted 

compliance order, the facts or 

understandings on which the 

Commission relied when issuing that 

order are no longer true. The 

Commission believes, therefore, that it 

is appropriate to establish a mechanism 

whereby it could, at any time and on its 

own initiative, modify or withdraw a 

previously issued substituted 

compliance order with respect to 

regulatory reporting and public 

dissemination, after appropriate notice 

and opportunity for comment. Having 

made a comparability determination, 

the Commission should have the ability 

to periodically review the determination 

and decide whether the substituted 

compliance determination should 

continue to apply.912 The Commission 

could determine to condition a 

substituted compliance order on an 

ongoing duty to disclose relevant 

information. Thus, the Commission 

generally agrees with the commenter 

who argued that persons making use of 

substituted compliance should be 

responsible for informing the 

Commission if factors on which the 

Commission relied in making the 

determination change in any material 

way.913

Two commenters generally supported 

the re-proposed Rule 908(c)(2)(v) 

requirement for the Commission to 

publish for comment proposed 

withdrawals or modifications.914

Several commenters also recommended 

that any final decision by the 

Commission to modify or withdraw a 

comparability determination should 

include a phase-in period to provide 

market participants adequate 

opportunity to make necessary 

adjustments to their compliance systems 

and processes.915 The Commission 

generally agrees with these comments, 

and believes that all affected persons 

should have appropriate notice of the 

introduction, withdrawal, or 

modification of a substituted 

compliance order so as to minimize 

undue disruptions in the market. The 

Commission will address phase-in 

issues and timeframes on a case-by-case 

basis—in the relevant order that 

introduces, modifies, or withdraws 

substituted compliance—depending on 

the facts and circumstances of the 

particular situation. 

6. Consideration of Regulatory 

Reporting and Public Dissemination in 

the Commission’s Analysis of 

Substituted Compliance 

When the Commission re-proposed 

Rule 908(c) in the Cross-Border 

Proposing Release, it expressed a 

preliminary view that regulatory 

reporting and public dissemination 

should be considered together in the 

Commission’s analysis of whether to 

permit substituted compliance.916 If the 

Commission were to adopt that 

approach, security-based swap 

transactions would not be eligible for 

substituted compliance if there were 

comparable foreign rules in one area but 

not the other. In other words, a foreign 

jurisdiction that has comparable rules 

for regulatory reporting of securitybased swap transactions but not 

comparable rules for public 

dissemination of such transactions 

would not have been eligible for 

substituted compliance under 

Regulation SBSR. 

Three commenters suggested that the 

Commission consider making separate 

substituted compliance determinations 

for regulatory reporting and public 

dissemination.917 One of these 

commenters expressed the view that 

making separate determinations is 

appropriate because regulatory reporting 

and public dissemination serve distinct 

goals.918 This commenter also argued 

that, due to the significant costs 

associated with documentation, 

procedures, and technological systems 

necessary to comply with reporting 

regimes, the possibility of separate 

substituted compliance determinations 

for regulatory reporting and public 

dissemination could substantially 

reduce costs for non-U.S. market 

participants while still achieving the 

Commission’s important market 

surveillance and transparency goals.919

One of the other commenters argued 

that ‘‘[d]ifferences among jurisdictions 

in the timing of reporting . . . should be 

evaluated in light of systemic risk and 

market supervisory objectives, rather 

than policies of facilitating price 

discovery.’’ 920 The commenter 

concluded, therefore, that ‘‘[s]uch 

flexibility should include the potential 

for separate determinations regarding 

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14664 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

921 Id. 

922 Id.; IIB Letter at 25. 

923 ISDA II at 9. 

924The Commission specifically raised this issue 

in the Cross-Border Proposing Release and asked 

how public dissemination could be carried out if 

substituted compliance were in effect for regulatory 

reporting but not for public dissemination. See 78 

FR 31096. 

925See IIB Letter at 25 (‘‘the separate possibility 

of substituted compliance for either regulatory 

reporting or public dissemination could 

substantially reduce costs for non-U.S. market 

participants while still achieving the Commission’s 

important market surveillance and transparency 

goals’’). 

926Rule 908(c)(2)(i). 

927See BIS Letter passim; CEB at 2, 4; ECB Letter 

passim; ECB Letter II passim; EIB Letter passim; 

Nordic Investment Bank Letter at 1; World Bank 

Letter I passim. 

928Section 1a(47)(B)(ix) of the CEA, 7 U.S.C. 

1a(47)(B)(ix), excludes from the definition of 

‘‘swap’’ any agreement, contract, or transaction a 

counterparty of which is a Federal Reserve Bank, 

the federal government, or a federal agency that is 

expressly backed by the full faith and credit of the 

United States. A security-based swap includes any 

swap, as defined in the CEA, that is based on, 

among other things, a narrow-based index or a 

single security or loan. See Section 3(a)(68) of the 

Exchange Act, 15 U.S.C. 78c3(a)(68). 

929See ECB Letter I at 2; ECB Letter II at 2. See 

also EIB Letter at 1; Nordic Development Bank at 

1. 

930See World Bank Letter I at 6–7. 

931See id. at 4. See also EIB Letter at 7 (‘‘As a 

matter of comity, actions by U.S. financial 

regulators should be consistent with the laws of 

other jurisdictions that provide exemption from 

national regulation for government-owned 

multinational developments such as the [EIB]’’). 

regulatory reporting and public 

dissemination requirements.’’ 921

Notwithstanding these comments, the 

Commission continues to believe that— 

subject to one exception described 

below—regulatory reporting and public 

dissemination should be considered 

together for purposes of substituted 

compliance under Rule 908(c). Even if 

regulatory reporting and public 

dissemination serve different policy 

goals, the Commission believes that 

treating regulatory reporting and public 

dissemination separately would not 

further those goals as effectively as 

considering these requirements together. 

The Commission agrees with the 

commenters who argued that regulatory 

reporting serves important market 

oversight goals.922 However, the 

Commission disagrees that these 

objectives should be pursued ‘‘rather 

than policies of facilitating price 

discovery.’’ 923 Title VII requires the 

Commission to pursue both sets of 

policy goals. If the Commission were to 

permit substituted compliance for 

regulatory reporting but not for public 

dissemination, certain transactions 

could be reported to a foreign trade 

repository or a foreign regulatory 

authority in lieu of a registered SDR but 

would (in theory) still be subject to the 

Regulation SBSR’s public dissemination 

requirements in Rule 902. Under 

Regulation SBSR, registered SDRs are 

charged with publicly disseminating 

information about security-based swap 

transactions. To carry out its public 

dissemination function, a registered 

SDR must obtain data about securitybased swap transactions that Regulation 

SBSR requires it to publicly 

disseminate. If this data were reported 

to a foreign trade repository or foreign 

regulatory authority under the terms of 

a substituted compliance order, it would 

be impractical, if not impossible, for a 

registered SDR to disseminate that 

transaction data, as required under Rule 

902. In other words, because the 

registered SDR needs a report of the 

transaction from the reporting side in 

order to carry out public dissemination, 

no purpose would be served—and 

indeed public dissemination could be 

compromised—by removing the duty to 

report the transaction to a registered 

SDR in lieu of the duty to report it to 

the foreign trade repository or foreign 

regulatory authority.924 The 

Commission continues to believe that it 

is impractical and unnecessary to devise 

an alternate method of public 

dissemination for security-based swaps 

that are reported in a foreign 

jurisdiction pursuant to a substituted 

compliance order. The Commission 

concludes, therefore, that a foreign 

jurisdiction’s regulatory reporting and 

public dissemination requirements— 

subject to one exception described 

immediately below—shall be 

considered together for purposes of 

evaluating comparability for purposes of 

a substituted compliance determination 

under Rule 908(c). 

One commenter argued that the 

Commission should be able to issue a 

substituted compliance order solely in 

respect of regulatory reporting that 

would apply to cross-border securitybased swaps that are subject to 

regulatory reporting but not public 

dissemination under Regulation 

SBSR.925 Under Rule 908(a), as adopted, 

there is one kind of security-based swap 

that is subject to regulatory reporting 

but not public dissemination: A 

transaction with a non-U.S. person that 

is registered as a security-based swap 

dealer or major security-based swap 

participant on one side and no U.S. 

person on the other side. Upon further 

consideration, the Commission agrees 

with the commenter and is adopting 

Rule 908(c) with certain revisions that 

will allow the Commission to issue a 

substituted compliance order with 

respect to regulatory reporting but not 

public dissemination with respect to 

this subset of cross-border transactions. 

The Commission has added a second 

sentence to the language in re-proposed 

Rule 908(c)(2)(i) to carry out this aim.926

The Commission also revised one prong 

of re-proposed Rule 908(c)(iii) to 

exclude consideration of the reporting 

timeframes for public dissemination in 

cases where the Commission is 

considering a substituted compliance 

request with respect to cross-border 

transactions that are, under Regulation 

SBSR, subject to regulatory reporting 

but not public dissemination. The 

Commission believes that offering the 

possibility of substituted compliance for 

these kinds of cross-border transactions 

could reduce compliance burdens for 

affected persons without reducing the 

capability of the Commission and other 

relevant authorities to oversee the 

security-based swap market. 

XVI. Other Cross-Border Issues 

A. Foreign Public Sector Financial 

Institutions 

In response to the Regulation SBSR 

Proposing Release, six commenters 

expressed concern about applying the 

requirements of Title VII to the activities 

of foreign public sector financial 

institutions (‘‘FPSFIs’’), such as foreign 

central banks and multilateral 

development banks.927 One commenter, 

the European Central Bank (‘‘ECB’’), 

noted that security-based swaps entered 

into by the Federal Reserve Banks are 

excluded from the definition of ‘‘swap’’ 

in the Commodity Exchange Act 

(‘‘CEA’’) 928 and that the functions of 

foreign central banks and the Federal 

Reserve are broadly comparable. The 

ECB argued, therefore, that securitybased swaps entered into by foreign 

central banks should likewise be 

excluded from the definition of 

‘‘swap.’’ 929 A second commenter, the 

World Bank (representing the 

International Bank for Reconstruction 

and Development, the International 

Finance Corporation, and other 

multilateral development institutions of 

which the United States is a member) 

also argued generally that the term 

‘‘swap’’ should be defined to exclude 

any transaction involving a multilateral 

development bank.930 The World Bank 

further noted that EMIR—the E.U. 

counterpart to Title VII of the DoddFrank Act—would expressly exclude 

multilateral development banks from its 

coverage.931

The ECB and BIS stated that foreign 

central banks enter into security-based 

swaps solely in connection with their 

public mandates, which require them to 

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932See BIS Letter at 4–5; ECB Letter I at 3. 933ECB Letter I at 3. See also ECB Letter II at 2. 934See CEB Letter at 4. However, the CEB did not 

state a view as to whether FPSFI trades should be 

subject to post-trade transparency. 

935See World Bank Letter I at 7. 

936See 78 FR 31074. 

937See id. 

938FMS Letter at 8. See also IDB Letter at 1 

(noting that IDB does not currently enter into 

security-based swaps but that it may do so in the 

future, and expressing concern about applying the 

requirements of Title VII to the activities of FPSFIs). 

939See id. at 8–11. 

940 KfW Letter at 1. 

941 KfW indicated, for example, that between 

2009 and 2012 it engaged in only four new trades 

to acquire credit protection, all in 2011; that the last 

time it had sold credit protection was in 2009; and 

that as of 2012 the outstanding notional amount of 

the credit protection it had purchased was zero. See 

id. at Annex A. 

942See id. at 1–6. 

943World Bank Letter at 6, note 11. 

944See Sullivan Letter at 18–19. 945See Rule 3a71–3(a)(4)(iii) under the Exchange 

Act (specifically excluding from the term ‘‘U.S. 

person’’ the International Monetary Fund, the 

International Bank for Reconstruction and 

Development, the Inter-American Development 

Bank, the Asian Development Bank, the African 

Development Bank, the United Nations, and their 

agencies, affiliates, and pension plans, and any 

other similar international organizations, their 

agencies, affiliates, and pension plans). 

946See Rule 908(a)(1) (requiring regulatory 

reporting of a security-based swap where there is a 

direct or indirect counterparty that is a U.S. person 

on either side of the transaction). 

947See Rule 901(a)(1)(i) and (ii). 

948See supra Section XV(C)(3)(iv). 

act confidentially in certain 

circumstances.932 The ECB argued in 

particular that public disclosure of its 

market activities could compromise its 

ability to take necessary actions and 

‘‘could cause signaling effects to other 

market players and finally hinder the 

policy objectives of such actions.’’ 933

Another commenter, the Council of 

Europe Development Banks (‘‘CEB’’), 

while opposing application of Title VII 

requirements to multilateral 

development banks generally, did not 

object to the CFTC and SEC preserving 

their authority over certain aspects of 

their transactions, such as by imposing 

reporting requirements.934 Similarly, the 

World Bank believed that the definition 

of ‘‘swap’’ could be qualified by a 

requirement that counterparties would 

treat such transactions as swaps solely 

for reporting purposes.935

In the Cross-Border Proposing 

Release, the Commission sought 

additional information to assist with 

analysis of this issue and asked a 

number of questions, including 

questions relating to how active FPSFIs 

are in the security-based swap market 

generally; the extent to which FPSFIs 

engage in security-based swap activity 

with U.S. persons; whether there are 

any characteristics of FPSFI activity in 

the security-based swap market that 

could make it easier for market 

observers to detect an FPSFI as a 

counterparty or that could make it easier 

to detect an FPSFI’s business 

transactions or market positions; and 

whether there are steps that the 

Commission could take to minimize 

such information leakage short of 

suppressing all FPSFI trades from 

public dissemination.936 The 

Commission specifically requested that 

commenters on this issue focus on the 

security-based swap market, not the 

market for other swaps. In addition, 

commenters were requested to answer 

only with respect to security-based 

swap activity that would be subject to 

Regulation SBSR, and not with respect 

to activity that, because of other factors, 

would not be subject to Regulation 

SBSR in any case.937

Only a few commenters on the CrossBorder Proposing Release responded to 

any of these questions or offered 

additional comments on FPSFI issues 

related to Regulation SBSR. One 

commenter, FMS-Wertmanagement 

(‘‘FMS’’), an instrumentality of the 

government of the Federal Republic of 

Germany that manages certain legacy 

financial portfolios, stated that securitybased swaps form only a small portion 

of its overall derivatives portfolio, and 

that it does not enter into any new 

security-based swaps ‘‘except with the 

purpose of restructuring existing 

security-based swaps within the limits 

of its winding-up strategy.’’ 938 This 

commenter, however, did not provide 

an opinion regarding how any 

provisions of Regulation SBSR would 

affect its operations; instead, the 

primary opinion expressed in the 

comment was that FPSFIs such as FMS 

should not be required to register as 

security-based swap dealers or major 

security-based swap participants and be 

subject to the attendant requirements.939

Another commenter, KfW 

Bankengruppe (‘‘KfW’’), is also an 

instrumentality of the Federal Republic 

of Germany and engages in 

‘‘promotional lending 

opportunities.’’ 940 KfW indicated that it 

has in the past engaged in a small 

number of security-based swap 

transactions but none recently.941 Like 

FMS, KfW argued that FPSFIs should 

not be subject to regulation as securitybased swap dealers or major securitybased swap participants and did not 

otherwise comment on any issues 

specific to Regulation SBSR.942 A third 

commenter, the World Bank, stated that, 

‘‘We do not object to reporting of our 

transactions by U.S. counterparties or 

non-U.S. counterparties that are 

independently required to be registered 

with the Commission. Our concern is 

limited to ensuring that non-U.S. 

counterparties that are otherwise not 

subject to regulation could become 

subject to certain requirements solely 

because a transaction with us could be 

deemed to be a ‘Transaction conducted 

within the United States.’ We are 

amenable to any solution that fixes this 

problem.’’ 943 A fourth commenter 

agreed with the World Bank, arguing 

that the term ‘‘transaction conducted 

within the United States,’’ which as 

proposed in the Cross-Border Proposing 

Release would trigger the regulatory 

reporting requirement, should be 

modified to exclude transactions with 

FPSPIs.944

The Commission believes that a 

security-based swap to which an FPSFI 

is a counterparty (‘‘FPSFI trade’’) should 

not, on that basis alone, be exempt from 

regulatory reporting. By the same token, 

however, the Commission also believes 

that a security-based swap to which an 

FPSFI is a counterparty—even if 

headquartered in the United States— 

should not, on that basis alone, be 

subject to regulatory reporting. All 

FPSFIs, even FPSFIs that are based in 

the United States, are deemed non-U.S. 

persons under the Commission’s Title 

VII rules.945 As with any other securitybased swap transaction having a direct 

counterparty that is a non-U.S. person, 

a transaction involving an FPSFI as a 

direct counterparty would be subject to 

Regulation SBSR’s regulatory reporting 

requirements only if it met one of the 

conditions in Rule 908(a)(1). Thus, a 

transaction between an FPSFI and a U.S. 

person would be subject to regulatory 

reporting.946 However, a transaction 

between an FPSFI and a non-U.S. 

person would be subject to regulatory 

reporting only if the non-U.S. person is 

a registered security-based swap dealer 

or a registered major security-based 

swap participant or is guaranteed by a 

U.S. person, a registered security-based 

swap dealer, or a registered major 

security-based swap participant.947 As 

noted above,948 the Commission has 

declined to adopt the term ‘‘transaction 

conducted within the United States,’’ 

which was proposed in the Cross-Border 

Proposing Release. In the Conduct ReProposal, the Commission anticipates 

soliciting additional comment on such 

transactions as they relate to regulatory 

reporting and public dissemination 

under Regulation SBSR. 

Regulatory reporting of FPSFI trades 

involving, on the other side, a U.S. 

person, a registered security-based swap 

dealer, or a registered major securitybased swap participant will facilitate 

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14666 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

949See CEB Letter at 4; World Bank Letter I at 7 

(stating that, although swaps involving FPSFIs as 

counterparties generally should be exempt from the 

definition of ‘‘swap,’’ they should be treated as 

swaps solely for reporting purposes). 

950See BIS Letter at 3 (stating that the BIS 

generally does not transact security-based swaps 

such as credit default swaps or equity derivatives); 

KfW Letter at Annex A; FMS Letter at 8. 

951See Rule 902(c)(1) (requiring a registered SDR 

not to disseminate the identity of any counterparty 

to a security-based swap). 

952See Rule 902(c)(2). 

953The Commission and other relevant 

authorities have a strong interest in being able to 

monitor the risk exposures of U.S. persons, 

particularly those involved in the security-based 

swap market, as the failure or financial distress of 

a U.S. person could impact other U.S. persons and 

the U.S. economy as a whole. The Commission and 

other relevant authorities also have an interest in 

obtaining information about non-U.S. 

counterparties that enter into security-based swaps 

with U.S. persons, because the ability of such nonU.S. counterparties to perform their obligations 

under those security-based swaps could impact the 

financial soundness of U.S. persons. See, e.g., S. 

Comm. on Banking, Hous., & Urban Affairs, The 

Restoring American Financial Stability Act of 2010, 

S. Rep. No. 111–176, at 32 (‘‘As a key element of 

reducing systemic risk and protecting taxpayers in 

the future, protections must include comprehensive 

regulation and rules for how the OTC derivatives 

market operates. Increasing the use of central 

clearinghouses, exchanges, appropriate margining, 

capital requirements, and reporting will provide 

safeguards for American taxpayers and the financial 

system as a whole’’) (emphasis added). 

954However, as described above in Section 

II(C)(3)(b), the reporting side might not know the 

counterparty ID of a counterparty by the time it 

must report the transaction (e.g., if the trade is to 

be allocated to a series of funds, and the fund 

manager has not yet determined the allocation). In 

such case, the reporting side would know the 

identity of the execution agent acting for the funds 

and thus would be required to report the execution 

agent ID instead of the counterparty ID with the 

initial transaction report. 

955See DTCC Letter II at 21; ISDA/SIFMA Letter 

I at 20. In addition, two comments on the 

Commission’s interim final temporary rule on the 

reporting of security-based swaps entered into 

before July 21, 2010, Securities Exchange Act 

Release No. 63094 (October 13, 2010), 75 FR 64643 

(October 20, 2010), made similar points. See 

Deutsche Bank Letter at 5 (‘‘In some cases, 

dissemination or disclosure of [counterparty] 

information could lead to severe civil or criminal 

penalties for those required to submit information 

to an SDR pursuant to the Interim Final Rules. 

These concerns are particularly pronounced 

because of the expectation that Reportable Swap 

data will be reported, on a counterparty identifying 

basis, to SDRs, which will be non-governmental 

entities, and not directly to the Commissions’’); 

ISDA I at 6 (‘‘In many cases, counterparties to crossborder security-based swap transactions will face 

significant legal and reputational obstacles to the 

reporting of such information. Indeed, disclosure of 

such information may lead to civil penalties in 

some jurisdictions and even criminal sanctions in 

other jurisdictions’’). 

956See DTCC Letter II at 21. 

957See id. 

958 ISDA/SIFMA Letter I at 20. 

959See Cleary II at 17–18. 

the Commission’s ability to carry out 

our regulatory oversight responsibilities 

with respect to registered entities, U.S. 

persons, and the U.S. security-based 

swap market more generally. The 

Commission notes that this approach 

was endorsed by the World Bank and 

another commenter in response to the 

original Regulation SBSR Proposing 

Release.949

Finally, the Commission does not 

believe that a sufficient basis exists to 

support an exemption from public 

dissemination for FPSFI trades. The 

Commission is aware of no 

characteristics of security-based swap 

transactions executed by FPSFIs that 

indicate that an exemption from the 

public dissemination requirements of 

Regulation SBSR would be appropriate. 

No commenters suggested that FPSFIs 

use security-based swaps differently 

from other market participants or that 

publicly disseminating FPSFI trades 

would provide an inaccurate view of the 

market. Moreover, based on the 

comments received, it appears that that 

FPSFI participation in the securitybased swap market—rather than the 

swap market generally—is extremely 

limited.950 Thus, if security-based swap 

activity consists of such a small portion 

of FPSFI activities, it is less apparent 

that an exemption is warranted; the 

harm that would result from 

disseminating security-based swap 

transactions—assuming such harm 

exists—would, all other things being 

equal, be less the fewer such 

transactions there are. The Commission 

notes, in any event, that Regulation 

SBSR contains provisions relating to 

public dissemination that are designed 

to protect the identity of security-based 

swap counterparties 951 and prohibit a 

registered SDR (with respect to 

uncleared security-based swaps) from 

disclosing the business transactions and 

market positions of any person.952 The 

Commission also notes that, during the 

interim phase of Regulation SBSR, no 

transaction must be reported before 24 

hours after execution. This approach is 

designed to minimize any adverse 

market impact of publicly disseminating 

any security-based swap transactions, 

when the Commission has not yet 

proposed and adopted block trades 

thresholds and the associated 

dissemination delays for the benefit of 

all counterparties, including FPSFIs. 

Given these potential protections for all 

security-based swap counterparties, not 

just FPSFIs, the Commission does not at 

this time see a basis to exempt FPSFI 

trades from public dissemination. 

B. Foreign Privacy Laws Versus Duty To 

Report Counterparty IDs 

Rule 901(d), as adopted, sets forth the 

data elements that must be reported to 

a registered SDR for regulatory 

purposes. One such element is the 

‘‘counterparty ID’’ of each counterparty, 

which will enable the Commission to 

determine every person who is a 

counterparty, direct or indirect, to a 

security-based swap. The Commission 

believes that it could be necessary to 

assess the positions and trading activity 

of any counterparty in order to carry out 

its regulatory duties for market 

oversight.953 Since only one side of the 

transaction is required to report, the 

reporting side is required to provide the 

counterparty ID of any counterparty on 

the other side.954 Without this 

requirement, the registered SDR would 

not have a record of the identity of the 

other side. 

Some commenters cautioned that U.S. 

persons might be restricted from 

complying with such a requirement in 

cases where a security-based swap is 

executed outside the United States.955

One of these commenters stated, for 

example, that the London branch of a 

U.S. person would need its 

counterparty’s consent to identify that 

party under U.K. law.956 The 

commenter noted that, in this case, the 

reporting party is located in a 

jurisdiction where applicable local law 

restricts the reporting party from 

reporting the identity of a counterparty. 

The same commenter added that, in a 

similar transaction executed by a Paris 

branch of a U.S. firm, French law 

requires the branch to obtain the 

consent of the counterparty every time 

that it wants to report that 

counterparty’s identity.957 Another of 

these commenters urged the 

Commission to ‘‘consider carefully and 

provide for consistency with, foreign 

privacy laws, some of which carry 

criminal penalties for wrongful 

disclosure of information,’’ 958 but did 

not provide further detail. A third 

commenter argued, without further 

explanation, that allowing substituted 

compliance when both parties are not 

domiciled in the United States could 

avoid problems with foreign privacy 

laws conflicting with U.S. reporting 

requirements.959

In the Cross-Border Proposing 

Release, the Commission stated that it 

sought to understand more precisely 

if—and, if so, how—requiring a party to 

report the transaction pursuant to 

Regulation SBSR (including disclosure 

of the other side’s identity to a 

registered SDR) might cause it to violate 

local law in a foreign jurisdiction where 

it operates. Before determining whether 

any exception to reporting the 

counterparty’s counterparty ID might be 

necessary or appropriate, the 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14667 

960See 78 FR 31073. 

961See IIB Letter at 19, note 45. 

962 ISDA IV at 19. 

963 Id. 

964See letter from Robert Pickel, Chief Executive 

Officer, ISDA, to David A. Stawick, Secretary, 

CFTC, dated August 27, 2012 (‘‘ISDA CFTC 

Letter’’), passim, available at www2.isda.org/

attachment/NjY2NQ==/Comment%20Letter%20- 

%20CFTC%20Reporting%20O

bligations%20Cross%20Border%20FINAL

%20082712.pdf (last visited January 13, 2015) 

(discussing a survey of privacy laws in a number 

of foreign jurisdictions); FSB OTC Derivatives 

Working Group (ODWG), OTC Derivatives Market 

Reforms: Fifth Progress Report on Implementation 

(April 15, 2013); Seventh Progress Report on 

Implementation (April 8, 2014); OTC Derivatives 

Regulators Group (ODRG), Report on Agreed 

Understandings to Resolving Cross-Border 

Conflicts, Inconsistencies, Gaps And Duplicative 

Requirements (August 2013); ODRG, Report on 

Cross-Border Implementation Issues (September 

2013). 

965The Commission understands that the privacy 

law limitations on disclosure of certain identifying 

information related to natural persons or entities 

can usually (but not always) be overcome by 

counterparty consent to such disclosure. Even 

where express consent resolves any outstanding 

privacy law issues, obtaining consent from the 

necessary counterparties may require market 

education and additional time to implement. See 

ISDA CFTC Letter at 8. 

966The Commission understands that blocking 

statue barriers to reporting normally cannot be 

waived by the person or entity that is the subject 

of the information, though the person or entity may, 

in some circumstances, apply for an exemption to 

report certain information. See id. 

967See ODWG Seventh Progress Report, supra 

note 965, at 10. 

968 15 U.S.C. 78mm. 

969 17 CFR 240.0–12. 

970For example, to support an exemption request, 

the requester should consider discussing whether 

obtaining waivers from its counterparties is an 

acceptable practice under the law of the foreign 

jurisdiction. 971The rules adopted in this release will be 

effective 60 days after publication in the Federal 

Register. For Rules 900, 907, and 909, the 

compliance date is the same as the effective date. 

The Commission is proposing a new compliance 

schedule for Rules 901, 902, 903, 904, 905, 906, and 

908 of Regulation SBSR. See Regulation SBSR 

Proposed Amendments Release, Section VII. Market 

participants will not have to comply with the 

requirements in those rules—such as the 

requirement in Rule 901(i) to report historical 

security-based swaps—until certain dates that will 

be specified when the Commission takes final 

action on the proposed compliance schedule. 

972For example, security-based swaps, as 

securities, are subject to the provisions of the 

Securities Act and the rules and regulations 

thereunder applicable to securities. The Securities 

Act requires that any offer and sale of a security 

must either be registered under the Securities Act, 

see Section 5 of the Securities Act, 15 U.S.C. 77e, 

or made pursuant to an exemption from 

registration, see, e.g., Sections 3 and 4 of the 

Securities Act, 15 U.S.C. 77c and 77d. In addition, 

the Securities Act requires that any offer to sell, 

offer to buy or purchase, or sale of a security-based 

swap to any person who is not an eligible contract 

participant must be registered under the Securities 

Act. See Section 5(e) of the Securities Act, 15 U.S.C. 

77e(e). Because of the statutory language of Section 

5(e), exemptions from this requirement in Sections 

3 and 4 of the Securities Act are not available. 

973The antifraud provisions of the securities laws 

include Section 17(a) of the Securities Act, 15 

U.S.C. 77q(a); Sections 9, 10(b), 14(e), and 15(c)(1)– 

(2) and (7) of the Exchange Act, 15 U.S.C. 78i, 78j, 

78n, 78o(c)(1)–(2); Section 206 of the Investment 

Advisers Act of 1940, 15 U.S.C. 80b–6; and any rule 

or regulation of the Commission promulgated under 

these statutory provisions. 

Commission sought additional 

information about any such foreign 

privacy laws and asked a number of 

questions about this issue.960

In response to the questions, one 

commenter listed specific provisions in 

foreign laws that would prevent the 

reporting side from identifying its 

foreign counterparty.961 Another 

commenter noted that reporting parties 

could face issues with identifying the 

counterparty if ‘‘either (i) consent is 

required for disclosing trade data to the 

Commission and such consent has not 

or cannot be obtained or (ii) a 

counterparty consent is not sufficient to 

overcome the data privacy 

restrictions.’’ 962 This commenter 

requested that the Commission 

‘‘recognize in [Regulation SBSR] the 

necessity for reporting parties to redact/ 

mask counterparty-identifying 

information’’ if they reasonably believe 

that disclosure of such information may 

violate the laws of another 

jurisdiction.963 Commenters did not 

suggest any rule text for a possible 

exemption from proposed Rule 

901(d)(1)(i) or discuss the effects of 

granting substituted compliance on 

avoiding foreign legal barriers to 

reporting. 

Based on the comment received as 

well as other sources consulted,964 the 

Commission understands that some 

laws and regulations exist in foreign 

jurisdictions that may limit or prevent 

reporting of counterparty ID to an SECregistered SDR pursuant to Regulation 

SBSR. These types of restrictions may 

include privacy laws, which generally 

restrict disclosure of certain identifying 

information about a natural person or 

entity,965 and so-called ‘‘blocking 

statutes’’ (including secrecy laws) which 

typically prevent the disclosure of 

information relating to third parties 

and/or foreign governments.966 Several 

jurisdictions with possible legal and 

regulatory barriers also have reported 

that they are in the process of modifying 

their legislation and regulations to 

remove such barriers.967 Therefore, it is 

difficult for the Commission to assess 

the extent to which legal and regulatory 

barriers will continue to exist that 

would hinder the ability of parties to 

meet the reporting requirement of 

Regulation SBSR. 

The Commission recognizes that 

security-based swap counterparties that 

will incur the duty to report preenactment and transactional securitybased swaps pursuant to Rule 901(i) 

may have entered into some of those 

transactions with counterparties in 

jurisdictions that have privacy laws or 

blocking statutes that may prohibit these 

reporting sides from disclosing the 

identities of these foreign 

counterparties. At the time that these 

transactions were executed, there was 

no regulatory requirement to report the 

identity of the counterparty under the 

United States securities laws. Therefore, 

the Commission believes that it would 

be inappropriate to compel a reporting 

side to disclose the identity of a 

counterparty to a historical securitybased swap now, if such disclosure 

would violate applicable foreign law 

and the reporting side could not 

reasonably have foreseen a future 

conflict with applicable U.S. law. The 

Commission will consider requests from 

reporting sides for exemptions, pursuant 

to Section 36 of the Exchange Act,968

from the requirement to report 

counterparty IDs of historical securitybased swaps executed up to the last day 

before the effective date of these final 

rules. Any such request should be filed 

pursuant to Rule 0–12 under the 

Exchange Act 969 and include: (1) The 

name of the jurisdiction or jurisdictions 

which the requester believes prohibit it 

from being able to carry out the duty 

under Rule 901(i) of reporting the 

identity of a counterparty; and (2) a 

discussion of the laws of the jurisdiction 

or jurisdictions that prohibit such 

reporting, and why compliance with the 

duty to report the counterparty ID under 

Rule 901(i) is limited or prohibited.970

Upon the effective date of these final 

rules, every security-based swap 

counterparty that is the reporting side 

for one or more security-based swaps 

will eventually have to report, among 

other things, the identity of each of its 

counterparties.971

C. Antifraud Authority 

The provisions of Regulation SBSR 

and the interpretive guidance discussed 

above relate solely to the applicability of 

the security-based swap regulatory 

reporting and public dissemination 

requirements under Title VII. Regulation 

SBSR does not limit the cross-border 

reach of the antifraud provisions or 

other provisions of the federal securities 

laws that are not addressed by this 

release.972

In Section 929P(b) of the Dodd-Frank 

Act,973 Congress added provisions to the 

federal securities laws confirming the 

Commission’s broad cross-border 

antifraud authority. 

In the Cross-Border Adopting Release, 

the Commission adopted Rule 250.1 

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14668 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

974 17 CFR 250.1. 

975See Cross-Border Adopting Release, 79 FR 

47360. 

976See, e.g., Cleary III at 36; Markit III at 2; 

SIFMA I at 5–6; WMBAA III at 3 (‘‘U.S. regulations 

also need to be in harmony with regulations of 

foreign jurisdictions’’); NGFP Letter at 1–2; AFGI 

Letter at 1 (urging the Commission to ensure the 

consistent regulation of financial guaranty insurers); 

CDEU Letter at 2; PensionsEurope Letter at 1–2 

(urging the Commission to avoid conflicts with 

European regulatory requirements); Barnard II at 1– 

2; Six Associations Letter at 1–2 (expressing general 

support for coordination among regulators with 

respect to the regulation of swaps and securitybased swaps); CCMR II, passim. 

977SIFMA I at 5–6. 

978Markit III at 2. 

979 Id. at 4–5. 

980See Benchmark at 1; Bloomberg Letter at 1; 

DTCC V at 14. 

981 15 U.S.C. 8325 (‘‘In order to promote effective 

and consistent global regulation of swaps and 

security-based swaps, the Commodity Futures 

Trading Commission, the Securities and Exchange 

Commission, and the prudential regulators . . . as 

appropriate, shall consult and coordinate with 

foreign regulatory authorities on the establishment 

of consistent international standards with respect to 

the regulation (including fees) of swaps’’). 

982The term ‘‘prudential regulator’’ is defined in 

Section 1a(39) of the CEA, 7 U.S.C. 1a(39), and that 

definition is incorporated by reference in Section 

3(a)(74) of the Exchange Act, 15 U.S.C. 78c(a)(74). 

983Section 712(a)(2) of the Dodd-Frank Act 

provides in part that the Commission shall ‘‘consult 

and coordinate to the extent possible with the 

Commodity Futures Trading Commission and the 

prudential regulators for the purposes of assuring 

regulatory consistency and comparability, to the 

extent possible.’’ 

984Senior representatives of OTC derivatives 

market regulators from G20 jurisdictions have met 

on a number of occasions to discuss international 

coordination of OTC derivatives regulations, 

including as part of the OTC Derivatives Regulators 

Group. See, e.g., Report of the OTC Derivatives 

Regulators Group on Cross-Border Implementation 

Issues (March 2014), available at https://

www.g20.org/sites/default/files/g20_resources/

library/Report%20of%20the%20OTC%20

Derivatives%20Regulators%20Group%20on%20

Cross-Border%20Implementation%20Issues.pdf; 

Joint Press Statement of Leaders on Operating 

Principles and Areas of Exploration in the 

Regulation of the Cross-Border OTC Derivatives 

Market (December 4, 2012), available at http://

www.sec.gov/news/press/2012/2012-251.htm; Joint 

Statement on Regulation of OTC Derivatives 

Markets (May 7, 2012), available at: http:// 

www.sec.gov/news/press/2012/2012-85.htm; Joint 

Statement on Regulation of OTC Derivatives 

Markets (December 9, 2011), available at: http://

www.sec.gov/news/press/2011/2011-260.htm, each 

last visited September 22, 2014. The Commission 

participates in the FSB’s Working Group on OTC 

Derivatives Regulation (‘‘ODWG’’), both on its own 

behalf and as the representative of the International 

Organization of Securities Commissions (‘‘IOSCO’’), 

which is co-chair of the ODWG. The Commission 

also serves as one of the co-chairs of the IOSCO 

Task Force on OTC Derivatives Regulation. 

985 15 U.S.C. 78c(a)(22)(A). 

986See 15 U.S.C. 78c(a)(10). 

987 15 U.S.C. 78k–1(c)(1). 

988 15 U.S.C. 78k–1(c)(1)(B). 

989 15 U.S.C. 78k–1(c)(1)(D). 

990 15 U.S.C. 78k–1(b)(5). 

991See 15 U.S.C. 78k–1(b)(5)(A) 

under the Exchange Act,974 which sets 

forth the Commission’s interpretation of 

its cross-border authority.975 Rule 

250.1(a) provides that the antifraud 

provisions of the securities laws apply 

to: ‘‘(1) Conduct within the United 

States that constitutes significant steps 

in furtherance of the violation; or (2) 

Conduct occurring outside the United 

States that has a foreseeable substantial 

effect within the United States.’’ 

Nothing in this Regulation SBSR limits 

the broad cross-border application of the 

anti-fraud provisions as set forth in Rule 

250.1. 

D. International Coordination Generally 

Several commenters urged the 

Commission to coordinate their efforts 

to implement Title VII requirements 

with those of foreign regulators who 

also are imposing new requirements on 

the OTC derivatives markets.976 For 

example, one commenter urged the SEC 

and CFTC ‘‘to harmonize their real-time 

reporting regimes with each other and 

with those of comparable international 

regulators.’’ 977 Similarly, a second 

commenter stated that the SEC and 

CFTC ‘‘should work with foreign 

regulators that plan to create their own 

real-time reporting regimes to 

harmonize their requirements regarding 

the timing of dissemination and the data 

to be disseminated.’’ 978 The same 

commenter urged the SEC and CFTC ‘‘to 

continue their efforts in establishing a 

globally harmonized approach to 

creating [LEIs].’’ 979 Other commenters 

believed generally that global 

coordination is necessary to develop 

LEIs and other identification codes.980

The Commission agrees broadly with 

these commenters that international 

coordination will be helpful in 

developing robust and efficient regimes 

for regulating cross-border securitybased swap activity and overseeing the 

security-based swap market. The 

Commission is cognizant of its duty 

under Section 752(a) of the Dodd-Frank 

Act 981 and remains committed to 

engaging in bilateral and multilateral 

discussions with foreign regulatory 

authorities to carry out this goal. The 

Commission staff has consulted and 

coordinated with the CFTC, prudential 

regulators,982 and foreign regulatory 

authorities consistent with the 

consultation provisions of the DoddFrank Act,983 and more generally as part 

of its domestic and international 

coordination efforts. The Commission 

staff has participated in numerous 

bilateral and multilateral discussions 

with foreign regulatory authorities 

addressing the regulation of OTC 

derivatives.984 Through these 

discussions and the Commission’s 

participation in various international 

task forces and working groups, it has 

gathered information about foreign 

regulatory reform efforts and discussed 

the possibility of conflicts and gaps, as 

well as inconsistencies and 

duplications, between U.S. and foreign 

regulatory regimes. The Commission has 

taken and will continue to take these 

discussions into consideration in 

developing rules, forms, and 

interpretations for implementing Title 

VII of the Dodd-Frank Act. 

XVII. Rule 909—SIP Registration 

Section 3(a)(22)(A) of the Exchange 

Act 985 defines a SIP as ‘‘any person 

engaged in the business of (i) collecting, 

processing, or preparing for distribution 

or publication, or assisting, participating 

in, or coordinating the distribution or 

publication of, information with respect 

to transactions in or quotations for any 

security (other than an exempted 

security) or (ii) distributing or 

publishing (whether by means of a 

ticker tape, a communications network, 

a terminal display device, or otherwise) 

on a current and continuing basis, 

information with respect to such 

transactions or quotations.’’ Securitybased swaps are securities under the 

Exchange Act.986 Because Regulation 

SBSR requires registered SDRs to collect 

security-based swap transaction reports 

from participants and to distribute data 

from such reports, registered SDRs will 

be SIPs for purposes of the Exchange 

Act. 

Section 11A(c)(1) of the Exchange 

Act 987 provides that the Commission 

may prescribe rules requiring SIPs to, 

among other things, assure ‘‘the fairness 

and usefulness of the form and 

content’’ 988 of the information that they 

disseminate, and to assure that ‘‘all 

other persons may obtain on terms 

which are not unreasonably 

discriminatory’’ the transaction 

information published or distributed by 

SIPs.989 Section 11A(c)(1) applies 

regardless of whether a SIP is registered 

with the Commission as such. 

The provisions of Section 11A(b)(5) 

and11A(b)(6) of the Exchange Act, 

however, apply only to registered SIPs. 

Requiring a registered SDR to register 

with the Commission as a SIP would 

subject that entity to Section 11A(b)(5) 

of the Exchange Act,990 which requires 

a registered SIP to notify the 

Commission whenever it prohibits or 

limits any person’s access to its services. 

Upon its own motion or upon 

application by any aggrieved person, the 

Commission could review the registered 

SIP’s action.991 If the Commission finds 

that the person has been discriminated 

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992See 15 U.S.C. 78k–1(b)(5)(B). 

993See 15 U.S.C. 78k–1(b)(6) (providing that the 

Commission, by order, may censure or place 

limitations upon the activities, functions, or 

operations of any registered SIP or suspend for a 

period not exceeding 12 months or revoke the 

registration of the SIP, if the Commission finds, on 

the record after notice and opportunity for hearing, 

that such censure, placing of limitations, 

suspension, or revocation is in the public interest, 

necessary or appropriate for the protection of 

investors or to assure the prompt, accurate, or 

reliable performance of the functions of such SIP, 

and that such SIP has violated or is unable to 

comply with any provision of this title or the rules 

or regulations thereunder). 

994 15 U.S.C. 78k–1(b)(1). 

995 15 U.S.C. 78c(a)(22)(B) (defining ‘‘exclusive 

processor’’ as any securities information processor 

or self-regulatory organization which, directly or 

indirectly, engages on an exclusive basis on behalf 

of any national securities exchange or registered 

securities association, or any national securities 

exchange or registered securities association which 

engages on an exclusive basis on its own behalf, in 

collecting, processing, or preparing for distribution 

or publication any information with respect to (1) 

transactions or quotations on or effected or made by 

means of any facility of such exchange or (2) 

quotations distributed or published by means of any 

electronic system operated or controlled by such 

association). 

996See DTCC III at 9. 

997See id. 

998See SDR Adopting Release, Section 

VI(A)(1)(c). Form SDR is being adopted by the 

Commission as part of the SDR Adopting Release. 

Form SDR will be used 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 a SIP, and 

for amendments by registered SIPs that are not 

dually registered as an SDR and a SIP. 

999See Viola Letter at 3–4. 

1000See Nebraska v. EPA, 331 F.3d 995, 997 (D.C. 

Cir. 2003) (‘‘Agencies do not ordinarily have 

jurisdiction to pass on the constitutionality of 

federal statutes.’’) (citing Thunder Basin Coal Co. v. 

Reich, 510 U.S. 200, 215 (1994)); Todd v. SEC, 137 

F.2d 475, 478 (6th Cir. 1943) (same); William J. 

Haberman, 53 SEC 1024, 1029 note 14 (1998) 

(‘‘[W]e have no power to invalidate the very statutes 

that Congress has directed us to enforce.’’) (citing 

Milton J. Wallace, 45 SEC 694, 697 (1975); Walston 

& Co., 5 SEC 112, 113 (1939)). 

against unfairly, it could require the SIP 

to provide access to that person.992

Section 11A(b)(6) of the Exchange Act 

also authorizes the Commission to take 

certain regulatory action as may be 

necessary or appropriate against a 

registered SIP.993

Section 11A(b)(1) of the Exchange 

Act 994 provides that a SIP not acting as 

the ‘‘exclusive processor’’ 995 of any 

information with respect to quotations 

for or transactions in securities is 

exempt from the requirement to register 

with the Commission as a SIP unless the 

Commission, by rule or order, 

determines that the registration of such 

SIP ‘‘is necessary or appropriate in the 

public interest, for the protection of 

investors, or for the achievement of the 

purposes of [Section 11A].’’ An SDR 

does not engage on an exclusive basis 

on behalf of any national securities 

exchange or registered securities 

association in collecting, processing, or 

preparing for distribution or publication 

any information with respect to 

transactions or quotations in securities; 

therefore, an SDR does not fall under 

the statutory definition of ‘‘exclusive 

processor.’’ 

To subject an SDR to the requirements 

of Sections 11A(b)(5) and 11A(b)(6), the 

Commission would need, by rule or 

order, to make the determination under 

Section 11A(b)(1) noted above. 

Accordingly, the Commission proposed 

Rule 909 to require a registered SDR 

also to register with the Commission as 

a SIP on existing Form SIP. The 

Commission requested comment on this 

proposed requirement, and whether it 

should combine Form SIP and Form 

SDR to create a joint registration form. 

In the Cross-Border Proposing Release, 

the Commission re-proposed Rule 909 

without revision. 

The Commission believes that 

requiring registered SDRs to register as 

SIPs will help to ensure fair access to 

important security-based swap 

transaction data reported to and 

publicly disseminated by them. The 

Commission believes that the additional 

authority over a registered SDR/SIP 

provided by Sections 11A(b)(5) and 

11A(b)(6) of the Exchange Act will 

ensure that these entities offer securitybased swap market data on terms that 

are fair and reasonable and not 

unreasonably discriminatory. Therefore, 

the Commission believes that registering 

SDRs as SIPs is necessary or appropriate 

in the public interest, for the protection 

of investors, or for the achievement of 

the purposes of Section 11A of the 

Exchange Act. Section 11A of the 

Exchange Act establishes broad goals for 

the development of the securities 

markets and charges the Commission 

with establishing rules and policies that 

are designed to further these objectives. 

Section 11A(a) states, among other 

things, that it is in the public interest 

and appropriate for the protection of 

investors and the maintenance of fair 

and orderly markets to assure 

economically efficient execution of 

securities transactions; the availability 

to brokers, dealers, and investors of 

information with respect to quotations 

for and transactions in securities; and an 

opportunity for investors’ orders to be 

executed without the participation of a 

dealer. Requiring registered SDRs also to 

register with the Commission as SIPs is 

designed to help achieve these 

objectives in the still-developing 

security-based swap market. 

One commenter stated that, because 

of the duplicative nature of the 

information required by Form SDR and 

Form SIP, the Commission should 

combine the two forms so that an SDR 

could register as both an SDR and a SIP 

using only one form.996 As an 

alternative, the commenter suggested 

that an SDR be permitted to use either 

Form SDR or Form SIP to register as 

both an SDR and a SIP.997

Rule 909, as re-proposed, stated that 

‘‘[a] registered security-based swap data 

repository shall also register with the 

Commission as a securities information 

processor on Form SIP.’’ For reasons 

discussed in the SDR Adopting Release, 

the Commission agrees that Form SDR 

should be revised to accommodate SIP 

registration.998 Accordingly, Rule 909, 

as adopted, eliminates the reference to 

Form SIP and states instead that ‘‘[a] 

registered security-based swap data 

repository shall also register with the 

Commission as a securities information 

processor on Form SDR.’’ There are no 

filing requirements in addition to the 

Form SDR for a person to register as 

both a SIP and an SDR. 

XVIII. Constitutional Questions About 

Reporting and Public Dissemination 

One commenter argued that the 

reporting and dissemination 

requirements of Regulation SBSR could 

violate the First and Fifth Amendments 

to the Constitution by compelling ‘‘noncommercial speech’’ without satisfying 

a strict scrutiny standard and by 

‘‘taking’’ transaction and/or holding 

data without just compensation.999

As a preliminary matter, the 

Commission presumes ‘‘that Congress 

acted constitutionally when it passed 

the statute.’’ 1000 Furthermore, the 

Commission has carefully considered 

the commenter’s arguments and 

pertinent judicial precedent, and 

believes that the commenter does not 

raise any issue that would preclude the 

Commission’s adoption of Regulation 

SBSR’s regulatory reporting and public 

dissemination requirements 

substantially as proposed and reproposed. The Commission does not 

believe that the public dissemination 

requirements of Regulation SBSR violate 

the First Amendment. Under the federal 

securities laws, the Commission 

imposes a number of requirements that 

compel the provision of information to 

the Commission itself or to the public. 

The Supreme Court has suggested that 

only limited scrutiny under the First 

Amendment applies to securities 

regulation, and that the government 

permissibly regulates ‘‘public 

expression by issuers of and dealers in 

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1001See, e.g., Paris Adult Theatre I v. Slaton, 413 

U.S. 49, 64 (1973) (stating also that the First 

Amendment does not ‘‘preclude[ ] States from 

having ‘blue sky’ laws to regulate what sellers of 

securities may write or publish . . . ’’). See also 

SEC v. Wall St. Pub. Inst., Inc., 851 F.2d 365, 373 

(D.C. Cir. 1988) (‘‘Speech relating to the purchase 

and sale of securities . . . forms a distinct category 

of communications’’ in which ‘‘the government’s 

power to regulate [speech about securities] is at 

least as broad as with respect to the general rubric 

of commercial speech’’). 

1002See, e.g., Rumsfeld v. Forum for Academic 

and Institutional Rights, Inc., 547 U.S. 47, 61–62 

(2006); Am. Meat Inst. v. U.S. Dep’t of Agric., 760 

F.3d 18, 21–22 (D.C. Cir. 2014); N.Y. State Rest. 

Ass’n v. N.Y. City Bd. of Health, 556 F.3d 114, 132 

(2d Cir. 2009) (citing Nat’l Elec. Mfrs. Ass’n v. 

Sorrell, 272 F.3d 104, 113–115 (2d Cir. 2001)). 

1003See Ruckleshaus v. Monsanto Co., 467 U.S. 

986, 1000–01, 1005 (1984). 

1004 Id. at 1005 (quoting PruneYard Shopping 

Center v. Robins, 447 U.S. 74, 83 (1980)). 

1005See District Intown Properties Ltd. P’ship v. 

District of Columbia, 198 F.3d 874, 883 (D.C. Cir. 

1999) (requiring a Fifth Amendment claim to ‘‘put 

forth striking evidence of economic effects’’). 

1006 District Intown Properties Ltd. P’ship v. 

District of Columbia, 198 F.3d 874, 884 (D.C. Cir. 

1999); see also Ruckelshaus v. Monsanto Co., 467 

U.S. 986, 1008–09 (1984) (finding no reasonable 

investment-backed expectations because ‘‘the 

possibility was substantial’’ in an industry long 

‘‘the focus of great public concern and significant 

government regulation’’ that Congress ‘‘would find 

disclosure to be in the public interest’’); Maine 

Educ. Ass’n Benefits Trust v. Cioppa, 695 F.3d 154– 

156 (1st Cir. 2012) (finding no reasonable 

investment-backed expectations because the Maine 

legislature’s ‘‘continued expansion of this right of 

access’’ to information about insurance plans to a 

type of plan not covered by previous statutes 

providing a right of access was ‘‘reasonably 

foreseeable’’ in light of ‘‘the historically heavy and 

continuous regulation of insurance in Maine’’). 

1007See Section 13(n) of the Exchange Act, 15 

U.S.C. 78m. 

1008See MFA Letter at 6. 

1009See ISDA I at 4; ISDA/SIFMA I at 9, note 12 

(noting that, with a single SDR, there would be no 

redundancy of platforms, no need for additional 

levels of data aggregation for each asset class, 

reduced risk of errors, and greater transparency). 

1010MarkitSERV I at 8. The commenter also urged 

the Commission to ‘‘ensure that there is consistency 

between the fields that different SBS SDRs in the 

same asset class would collect and report in order 

to lay the foundation for the data to be 

consolidatable.’’ Id. See also DTCC IX at 3. See 

supra Section II(B)(2) for discussion of the 

Commission’s approach to ensure consistency. 

Another commenter also noted that ‘‘if there is 

more than one registered SDR for an asset class, it 

may prove difficult for the Commission to ensure 

that all registered SDRs calculate the same block 

thresholds for the same SBS instruments.’’ WMBAA 

II at 4. As discussed in more detail above in Section 

VII, the Commission is not yet adopting or 

proposing block trade rules. 

1011See DTCC II at 15. 

1012 Id. 

1013 DTCC IV at 5. 

1014 15 U.S.C. 78m(n)(5)(D)(i). 

securities.’’ 1001 And in other contexts, 

the required disclosure of purely factual 

and uncontroversial information has 

also been subjected to only limited First 

Amendment scrutiny.1002

Nor does the Commission believe that 

public dissemination requirements of 

Regulation SBSR violate the Fifth 

Amendment. To constitute a regulatory 

taking, the government action must (1) 

affect a property interest, and (2) go ‘‘too 

far’’ in so doing.1003 The Supreme Court 

has identified several factors to be 

considered in determining whether the 

government action goes too far, such as 

‘‘the character of the governmental 

action, its economic impact, and its 

interference with reasonable 

investment-backed expectations.’’ 1004

The requirements at issue here directly 

advance the government’s legitimate 

interest in enhancing price discovery 

by, among other things, reducing 

information asymmetries, enhancing 

transparency, and improving confidence 

in the market. The character of the 

government action, therefore, weighs 

against Rule 902(a) being a taking. The 

Commission further believes that the 

regulatory reporting and public 

dissemination requirements of 

Regulation SBSR do not impose an 

unconstitutional economic impact 1005

or interfere with reasonable investmentbacked expectations. Regulation SBSR 

does not interfere with market 

participants’ reasonable investmentbacked expectations because the 

financial markets are an industry with a 

long tradition of regulation focused on 

promoting disclosure of information to 

investors. Businesses that operate in an 

industry with a history of regulation 

have no reasonable expectation that 

regulation will not be strengthened to 

achieve established legislative ends.1006

Although security-based swaps did not 

become securities and thus did not 

become fully subject to the regulatory 

regime for securities regulation until 

after passage of the Dodd-Frank Act, the 

Commission believes that the economic 

similarity of markets in securities and 

security-based swaps strongly suggests 

that market participants could have 

anticipated regulation at a future date. 

Furthermore, the Commission believes 

that the commenter has provided no 

argument to support the proposition 

that the mere fact that security-based 

swaps were not fully subject to the 

Exchange Act until passage of the DoddFrank Act necessarily implies that it 

was unconstitutional for Congress to 

amend the Exchange Act to cover these 

securities. 

XIX. What happens if there are 

multiple SDRs? 

The provisions of Title VII that 

amended the Exchange Act to require 

the registration of security-based swap 

data repositories do not require that 

there be only a single SDR; in fact, these 

provisions contemplate that there could 

be multiple SDRs registered with the 

Commission.1007 Therefore, no 

provision of Regulation SBSR, as 

adopted, is designed to require or 

promote the use of only a single SDR. 

The Commission believes, however, that 

it must consider how the Title VII goals 

of monitoring and reducing systemic 

risk and promoting transparency in the 

security-based swap market will be 

achieved if there are multiple registered 

SDRs. 

One commenter believed that a 

diverse range of options for reporting 

security-based swap data would benefit 

the market and market participants.1008

However, other commenters raised 

various concerns with having multiple 

registered SDRs. Two commenters 

recommended that the Commission 

designate a single registered SDR per 

asset class.1009 Similarly, a third 

commenter stated that ‘‘the Commission 

should consider designating one 

[registered SDR] per SBS asset class to 

act as the industry consolidator of SBS 

data for the Commission and for the 

purpose of public reporting.’’ 1010 This 

commenter also recommended that all 

life cycle events be reported to the same 

registered SDR that received the original 

transaction report and that registered 

SDRs be required to accept all securitybased swaps in an asset class to further 

reduce fragmentation of data across 

multiple SDRs. 

Another commenter warned of the 

risks of security-based swaps being 

reported to multiple SDRs, stating that, 

‘‘[u]nless data fragmentation can be 

avoided, the primary lessons of the 2008 

financial crisis, as related to OTC 

derivatives trading, will not have been 

realistically or adequately taken into 

account.’’ 1011 This commenter noted 

the ‘‘large one-way trades put on by AIG 

in mortgage related credit derivatives’’ 

and stated that ‘‘if AIG had chosen to try 

to hide [its] trades by reporting to 

multiple repositories, these systemically 

risky positions would not have been 

discovered absent a ‘super repository’ 

that aggregated the trade level data of 

the various reporting repositories in a 

manner as to detect the large one-way 

aggregate positions.’’ 1012 The same 

commenter stated in a subsequent 

comment letter that, if there are 

multiple registered SDRs, 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.’’ 1013 One option 

suggested by this commenter was 

utilizing Section 13(n)(5)(D)(i) of the 

Exchange Act,1014 which requires an 

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1015 DTCC I at 7. 

1016See Barnard I at 3; Better Markets II at 6; 

FINRA Letter at 5; MarkitSERV I at 7. 

1017MarkitSERV I at 7. 

1018See FINRA Letter at 5 (also noting that 

mandating the consolidation of security-based swap 

transaction data would help to assure uniformity, 

thereby promoting market integrity and investor 

protection). 

1019Better Markets II at 6. However, the 

commenter cautioned that the security-based swap 

data dissemination regime must avoid the direct 

data feeds that have developed in the equity 

markets because these data feeds allow ‘‘highfrequency traders to bypass the aggregation and 

dissemination procedure, at the expense of retail 

and other investors.’’ Id. 

1020 Id. at 4. 

1021See MarkitSERV I at 7–8. 

1022 In the Regulation SBSR Proposing Release, 

the Commission stated that requiring registered 

SDRs to be the registered entities with the duty to 

disseminate security-based swap transaction 

information—rather than, for example, SB SEFs, 

clearing agencies, or the counterparties 

themselves—would produce some degree of 

mandated consolidation of that information and 

help to provide consistency in the form of the 

reported information. See 75 FR 75227. However, 

the Commission acknowledges that this approach 

cannot guarantee consolidation of the published 

data because of the possibility of multiple registered 

SDRs. 

1023 DTCC IV at 5. 

1024Thus, the Commission concurs with the 

commenter who recommended that all life cycle 

events be reported to the same registered SDR that 

received the original transaction report. See 

MarkitSERV I at 8. 

SDR to ‘‘provide direct electronic access 

to the Commission (or any designee of 

the Commission, including another 

registered entity).’’ The commenter 

explained that, using this authority, 

‘‘the Commission could designate one 

[SDR] as the recipient of information 

from other [SDRs] in order to have 

consolidation and direct electronic 

access for the Commission.’’ 1015

Four commenters urged the 

Commission to mandate the 

consolidation of publicly disseminated 

security-based swap data.1016 One of 

these commenters stated that ‘‘in order 

to most effectively increase 

transparency in the swaps markets, it 

will be important for the real-time 

swaps data to be available on a 

consolidated basis.’’ 1017 The second 

commenter believed that a central 

consolidator or the Commission must 

have the authority to compel all 

participants, including registered SDRs, 

to submit data to assure that there is a 

single, comprehensive, and accurate 

source for security-based swap data.1018

A third commenter, citing the regime for 

producing consolidated public 

information in the U.S. equity markets, 

stated that ‘‘there is no obvious reason 

why a similar regime could not succeed 

for security-based swaps.’’ 1019 In 

addition, this commenter believed that 

‘‘the ideal approach would be 

collaboration by the SEC and the CFTC 

to create (or facilitate the direct creation 

of) a single, central system that performs 

these data dissemination 

functions.’’ 1020 The fourth commenter 

cautioned that the failure to make realtime data available on a consolidated 

basis would especially disadvantage less 

frequent and smaller users of the 

transaction data, who would not be able 

to obtain an accurate view of market 

activity because of the cost and 

complexity of accessing multiple data 

sources.1021

The Commission shares the concerns 

of these commenters. The regulatory 

goals underpinning the Title VII 

requirements for regulatory reporting 

and public dissemination of securitybased swap transaction information 

could be frustrated if the information 

cannot be easily aggregated and 

normalized. The Commission notes, 

however, that the statutory provisions 

allow for the possibility of multiple 

SDRs.1022 The Commission therefore 

seeks to develop a regulatory framework 

that would accommodate multiple 

SDRs, but mitigates the undesirable 

fragmentation of regulatory data that 

would come from incompatible data 

standards. 

At the same time, the Commission 

generally agrees with the commenter 

who stated that 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.’’ 1023 The 

requirement that all life cycle events 

must be reported to the same registered 

SDR that received the report of the 

initial transaction is designed to 

minimize some potential problems of 

having multiple registered SDRs, such 

as overstating open interest. Although 

the reporting side can choose the 

registered SDR to which to report the 

initial transaction, all subsequent life 

cycle events must then be reported to 

that registered SDR. The Commission 

believes that this requirement will 

facilitate its ability to track securitybased swaps over their duration and 

minimize instances of double counting 

the same economic activity, which 

could occur if the records of life cycle 

event reports did not indicate their 

relationship to earlier occurring 

transactions.1024

Similarly, the Commission is adopting 

Rules 902(c)(4) and 907(a)(4) to address 

potential issues arising from nonmandatory reports (which could include 

duplicate reports of transactions 

reported to a second SDR when a 

mandatory report has already been 

provided to a first SDR). Rule 902(c)(4) 

prohibits a registered SDR from publicly 

disseminating a report of a nonmandatory transaction; this requirement 

is designed to prevent market observers 

from over-estimating the true amount of 

market activity, which could occur if 

the same transaction was disseminated 

by two SDRs. Rule 907(a)(4) requires 

registered SDRs to establish and 

maintain policies and procedures, 

among other things, for how 

participants must identify nonmandatory reports to the SDR, so that 

the SDR will be able to avoid publicly 

disseminating them. 

The Commission believes that 

problems associated with the existence 

of multiple registered SDRs can be 

minimized to the extent that such SDRs 

refer to the same persons or things in 

the same manner. Thus, final Rule 903 

provides that, if an IRSS that meets 

certain criteria is recognized by the 

Commission and has assigned a UIC to 

a person, unit of a person, or product, 

all registered SDRs must use that UIC in 

carrying out their responsibilities under 

Regulation SBSR. As discussed in 

Section X(B)(2), supra, the Commission 

has recognized the GLEIS—through 

which LEIs can be obtained—as an IRSS 

that meets the criteria of Rule 903. 

Therefore, if an entity has an LEI issued 

by or through the GLEIS, that LEI must 

be used for all purposes under 

Regulation SBSR. Furthermore, Rule 

903(a)—in connection with the 

Commission’s recognition of the 

GLEIS—requires all persons who are 

participants of at least one registered 

SDR to obtain an LEI from or through 

the GLEIS for use under Regulation 

SBSR, and each participant that acts as 

a guarantor of a direct counterparty’s 

performance of any obligation under a 

security-based swap that is subject to 

Rule 908(a) shall, if the direct 

counterparty has not already done so, 

obtain a UIC for identifying the direct 

counterparty from or through that 

system, if that system permits thirdparty registration without a requirement 

to obtain prior permission of the direct 

counterparty. 

The Commission is particularly 

hopeful that a robust system for product 

IDs could greatly improve the usability 

of security-based swap data, both for 

regulators and for market observers that 

obtain publicly disseminated 

transaction information. The product ID 

could minimize administrative burdens 

by rendering unnecessary the separate 

reporting of several data elements. 

Product IDs also should more easily 

distinguish standardized from nonstandardized products and, thus, should 

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1025See 75 FR 75227. 

1026 Id. 

1027 In response to the commenter who 

recommended requiring registered SDRs to accept 

all security-based swaps in an asset class to reduce 

fragmentation of data, the Commission notes that 

Rule 13n–5(b)(1)(ii) under the Exchange Act, 

adopted as part of the SDR Adopting Release, 

requires an SDR that accepts reports for any 

security-based swap in a particular asset class to 

accept reports for all security-based swaps in that 

asset class that are reported to the SDR in 

accordance with that SDR’s policies and 

procedures. 

1028The Commission notes that, under Rule 

902(c)(6), most clearing transactions will not be 

publicly disseminated. Therefore, to the extent that 

a registered SDR receives only clearing transactions, 

it would likely be required to publicly disseminate 

few if any security-based swap transactions. 

1029See DTCC I at 7 (‘‘Under Section 13 of the 

Exchange Act . . . security-based swap data 

repositories shall ‘provide direct electronic access 

to the Commission (or any designee of the 

Commission, including another registered entity.’ 

Under this authority, the Commission could 

designate one security-based swap data repository 

as the recipient of information from other security 

based-swap data repositories in order to have 

consolidation and direct access for the 

Commission’’) (citation omitted). 

1030See SDR Adopting Release, Section 

VI(D)(2)(c)(ii). 

1031See id. The SDR Adopting Release states, 

further, that ‘‘[t]he Commission recognizes that as 

the [security-based swap] market develops, new or 

different data fields may be needed to accurately 

represent new types of [security-based swap data], 

in which case the Commission may provide 

updated specifications of formats and taxonomies to 

reflect these new developments. Therefore, the 

Commission intends to publish guidance, as 

appropriate, on the form and manner that will be 

acceptable to it for the purposes of direct electronic 

access’’ (internal citations omitted). 

1032See 75 FR 75245–46. 

1033 17 CFR 240.31. 1034 15 U.S.C. 78ee. 1035Section 991 of the Dodd Frank Act provides, 

in relevant part: ‘‘(1) AMENDMENTS.—Section 31 

of the Securities Exchange Act of 1934 (15 U.S.C. 

78ee) is amended . . . in subsection (e)(2), by 

striking ‘September 30’ and inserting ‘September 

25’.’’ 

1036 17 CFR 240.31(a)(10)(ii). 

1037 15 U.S.C. 78ee(c). 

1038 15 U.S.C. 78c(a) 

1039See 15 U.S.C. 78c(a)(10). 

1040A national securities exchange also would be 

liable for fees in connection with any transactions 

in security-based swaps executed on its market. See 

15 U.S.C. 78ee(b). 

1041See Regulation SBSR Proposing Release, 75 

FR 75245–46. 

1042 15 U.S.C. 78ee(f) (‘‘The Commission, by rule, 

may exempt any sale of securities or any class of 

facilitate aggregation of the public feeds 

issued from different registered SDRs. 

The Commission did not propose to 

take any specific actions towards 

consolidation of the security-based 

swap data disseminated by different 

registered SDRs. As the Commission 

stated in the Regulation SBSR Proposing 

Release, it considered mandating one 

consolidated reporting entity to 

disseminate all security-based swap 

transaction data for each asset class by 

requiring each registered SDR in an 

asset class to provide all of its securitybased swap data to a ‘‘central processor’’ 

that would also be a registered SDR.1025

The Commission noted that there is 

substantial precedent for this approach 

in the equity markets, where market 

participants may access a consolidated 

quote for national markets system 

securities and a consolidated tape 

reporting executed transactions. The 

Commission stated, however, that such 

approach ‘‘may not be warranted given 

the present [security-based swap] 

market structure.’’ 1026

The Commission continues to believe 

there is no need at this time to require 

consolidation of the publicly 

disseminated security-based swap 

data.1027 Although it is likely that there 

will be multiple registered SDRs, it is 

unclear at present the extent to which 

each will be publicly disseminating a 

significant number of transactions.1028

Furthermore, the Commission currently 

believes that, to the extent that there are 

different SDR data feeds that warrant 

consolidation and that such feeds 

cannot readily be aggregated by market 

observers themselves, certain market 

data vendors may be able to do so for 

commercially reasonable fees. As 

different SDRs register with the 

Commission and these SDRs implement 

Regulation SBSR, the Commission will 

monitor the situation and consider 

taking such action as it deems necessary 

in order to better carry about the Title 

VII policy of promoting greater 

transparency in the security-based swap 

market. 

The Commission also acknowledges 

the recommendation made by one 

commenter to use Section 13(n)(5)(D)(i) 

of the Exchange Act to direct all 

regulatory reports received by multiple 

registered SDRs into a single 

‘‘aggregator’’ SDR.1029 The Commission 

believes that Rule 13n–4(b)(5), as 

adopted,1030 helps to address these 

concerns. Rule 13n–4(b)(5) requires an 

SDR to provide the Commission with 

direct electronic access to the data 

stored by the SDR. As stated in the SDR 

Adopting Release: 

data [provided by an SDR to the Commission] 

must be in a form and manner acceptable to 

the Commission . . . [T]he 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.1031

Thus, the Commission does not 

believe that it is necessary or 

appropriate at this time to direct 

registered SDRs to provide their 

transaction data to a single ‘‘aggregator’’ 

SDR, because the SDR rules are 

designed to facilitate the Commission’s 

ability to aggregate information directly. 

As registered SDRs and their 

participants develop experience with 

the Regulation SBSR reporting regime 

and the Commission develops 

experience with overseeing that regime, 

the Commission may consider reevaluating the need for or the 

desirability of an aggregator SDR in the 

future. 

XX. Section 31 Fees 

In the Regulation SBSR Proposing 

Release,1032 the Commission also 

proposed certain amendments to Rule 

31 under the Exchange Act,1033 which 

governs the calculation and collection of 

fees and assessments owed by selfregulatory organizations to the 

Commission pursuant to Section 31 of 

the Exchange Act.1034

Section 991 of the Dodd-Frank Act 

amended Section 31(e)(2) of the 

Exchange Act to provide that certain 

fees and assessments required under 

Section 31 will be required to be paid 

by September 25, rather than September 

30.1035 Therefore, the Commission 

proposed to make a corresponding 

change to the definition of ‘‘due date’’ 

in Rule 31(a)(10)(ii) under the Exchange 

Act 1036 by replacing a reference to 

‘‘September 30’’ with a reference to 

‘‘September 25.’’ 

The Commission also proposed to 

exempt security-based swap 

transactions from the application of 

Section 31 transaction fees. Section 

31(c) of the Exchange Act 1037 requires 

a national securities association to pay 

fees based on the ‘‘aggregate dollar 

amount of sales transacted by or through 

any member of such association 

otherwise than on a national securities 

exchange of securities . . . registered on 

a national securities exchange or subject 

to prompt last sale reporting pursuant to 

the rules of the Commission or a 

registered national securities 

association.’’ Pursuant to Section 761(a) 

of the Dodd-Frank Act,1038 securitybased swaps are securities.1039

Accordingly, when security-based swap 

transactions become subject to prompt 

last-sale reporting pursuant to the rules 

of the Commission, the members of a 

national securities association that effect 

sales of security-based swaps other than 

on an exchange would become liable for 

Section 31 fees for any such sales.1040

Because of certain potential difficulties 

in fairly and evenly applying Section 31 

fees for sales of security-based 

swaps,1041 the Commission proposed to 

exercise its authority under Section 

31(f) of the Exchange Act 1042 to exempt 

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sales of securities from any fee or assessment 

imposed by this section, if the Commission finds 

that such exemption is consistent with the public 

interest, the equal regulation of markets and brokers 

and dealers, and the development of a national 

market system.’’). 

1043See OneChicago I at 2–3 (arguing that, 

because ‘‘exchange for physical’’ (‘‘EFP’’) 

transactions conducted on OneChicago are 

economically similar to security-based swap 

transactions, EFP transactions also should be 

exempt from Section 31 fees or, alternatively, that 

security-based swaps should be subject to Section 

31 fees); OneChicago II (same). 

1044See supra Section VII (discussing phased 

approach to public dissemination and block trades, 

which will permit security-based swap transactions 

to be reported any time up to 24 hours after the time 

of execution (or, if 24 hours after the time of 

execution would fall on a day that is not a business 

day, by the same time on the next day that is a 

business day) during the first phase). 

1045 44 U.S.C. 3501 et seq. 

1046See Regulation SBSR Proposing Release, 75 

FR 75251–61. 

1047See Cross-Border Proposing Release, 78 FR 

31115–18. 

1048 44 U.S.C. 3507; 5 CFR 1320.11. 

1049 In addition, the Commission, in separate 

releases, is adopting rules relating to SDR 

registration, duties, and core principles and 

proposing amendments to Regulation SBSR. 

1050See supra notes 11–12 and accompanying 

text. 

1051A reportable event includes both an initial 

security-based swap transaction, required to be 

reported pursuant to Rule 901(a), as well as a life 

cycle event, the reporting of which is governed by 

Rule 901(e). 

all such sales from the application of 

Section 31 fees. To carry out that 

objective, the Commission proposed to 

add a new subparagraph (ix) to Rule 

31(a)(11), which defines the term 

‘‘exempt sale,’’ to include as an exempt 

sale ‘‘[a]ny sale of a security-based 

swap.’’ The Commission also proposed 

to add a new paragraph (19) to Rule 

31(a) to provide a definition for the term 

‘‘security-based swap.’’ 

One commenter submitted two 

comment letters on this aspect of the 

proposal relating to Rule 31.1043

The Commission is not adopting these 

proposed revisions to Rule 31(a). As 

discussed above, the Commission is not 

yet requiring that security-based swap 

transactions be publicly disseminated in 

real time. Because security-based swaps 

are not yet subject to prompt last-sale 

reporting pursuant to the rules of the 

Commission or a national securities 

association,1044 sales of security-based 

swaps are not yet subject to Section 31 

fees. In the future, the Commission 

anticipates soliciting public comment 

on block thresholds and the timeframe 

in which non-block security-based swap 

transactions must be publicly 

disseminated. At such time, when 

implementation of prompt last-sale 

public dissemination of security-based 

swap transactions would subject them 

to Section 31 fees, the Commission can 

revisit whether to adopt the proposed 

exemption for security-based swaps 

from Section 31 fees. 

XXI. Paperwork Reduction Act 

Certain provisions of Regulation SBSR 

contain ‘‘collection of information 

requirements’’ within the meaning of 

the Paperwork Reduction Act of 1995 

(‘‘PRA’’).1045 The Commission 

published notices requesting comment 

on the collection of information 

requirements relating to Regulation 

SBSR, as originally proposed, in the 

Regulation SBSR Proposing Release 1046

and, as re-proposed, in the Cross-Border 

Proposing Release 1047 and submitted 

relevant information to the Office of 

Management and Budget (‘‘OMB’’) for 

review in accordance with the PRA.1048

The titles for the collections are: (1) 

Rule 901—Reporting Obligations—For 

Reporting Sides; (2) Rule 901— 

Reporting Obligations—For Registered 

SDRs; (3) Rule 902—Public 

Dissemination of Transaction Reports; 

(4) Rule 904—Operating Hours of 

Registered Security-Based Swap Data 

Repositories; (5) Rule 905—Correction 

of Errors in Security-Based Swap 

Information—For Reporting Sides; (6) 

Rule 905—Correction of Errors in 

Security-Based Swap Information— 

Non-Reporting Sides; (7) Rule 906(a)— 

Other Duties of All Participants—For 

Registered SDRs; (8) Rule 906(a)—Other 

Duties of All Participants—For NonReporting Sides; (9) Rule 906(b)—Other 

Duties of All Participants—For All 

Participants; (10) Rule 906(c)—Other 

Duties of All Participants—For Covered 

Participants; (11) Rule 907—Policies 

and Procedures of Registered SecurityBased Swap Data Repositories; and (12) 

Rule 908(c)—Substituted Compliance 

(OMB Control No. 3235–0718). 

Compliance with these collections of 

information requirements is mandatory. 

An agency may not conduct or sponsor, 

and a person is not required to respond 

to, a collection of information unless the 

agency displays a currently valid 

control number. 

The Commission is adopting 

Regulation SBSR, which contains these 

12 collections of information, largely as 

re-proposed, with certain revisions 

suggested by commenters or designed to 

clarify the rules.1049 The rules, as 

adopted, establish a ‘‘reporting 

hierarchy’’ that specifies the side that 

has the duty to report a security-based 

swap that is a covered transaction 1050

and provides for public dissemination 

of security-based swap transaction 

information (except as provided in Rule 

902(c)). Registered SDRs are required to 

establish and maintain certain policies 

and procedures regarding how 

transaction data are reported and 

disseminated, and participants of 

registered SDRs that are registered 

security-based swap dealers or 

registered major security-based swap 

participants are required to establish 

and maintain policies and procedures 

that are reasonably designed to ensure 

that they comply with applicable 

reporting obligations. Regulation SBSR 

also requires a person that registers with 

the Commission as an SDR also to 

register with the Commission as a SIP. 

The hours and costs associated with 

complying with Regulation SBSR 

constitute reporting and cost burdens 

imposed by each collection of 

information. Certain estimates (e.g., the 

number of reporting sides, the number 

of non-reporting sides, the number of 

participants, and the number of 

reportable events 1051 pertaining to a 

security-based swap transaction) 

contained in the Commission’s earlier 

PRA assessments have been updated to 

reflect the rule text of Regulation SBSR, 

as adopted, as well as additional 

information and data now available to 

the Commission, as discussed in further 

detail below. The Commission believes 

that the methodology used for 

calculating the re-proposed paperwork 

burdens set forth in the Cross-Border 

Proposing Release is appropriate and 

has received no comments to the 

contrary. The revised paperwork 

burdens estimated by the Commission 

herein are consistent with those made in 

connection with the re-proposal of 

Regulation SBSR, which was included 

in the Cross-Border Proposing Release. 

However, as described in more detail 

below, certain estimates have been 

modified, as necessary, to conform to 

the adopted rules and to reflect the most 

recent data available to the Commission. 

The Commission requested comment 

on the collection of information 

requirements included in both the 

Regulation SBSR Proposing Release and 

the Cross-Border Proposing Release. As 

noted above, the Commission received 

86 comment letters on the Regulation 

SBSR Proposing Release and six 

comment letters on the Cross-Border 

Proposing Release that specifically 

referenced Regulation SBSR. Although 

the comment letters did not specifically 

address the Commission’s estimates for 

the proposed collection of information 

requirements, views of commenters 

relevant to the Commission’s analysis of 

burdens, costs, and benefits of 

Regulation SBSR are discussed below. 

The rules containing these specific 

collections of information are discussed 

further below. 

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1052See Regulation SBSR Proposing Release, 75 

FR 75246. 

1053See supra notes 11–12 and accompanying 

text. 

1054See supra Section VII(B)(1) (discussing Rule 

901(j) and the rationale for 24-hour reporting 

timeframe). In addition, as discussed in more detail 

in Section VII(B), supra, if 24 hours after the time 

of execution would fall on a non-business day (i.e., 

a Saturday, Sunday, or U.S. federal holiday), 

reporting would be required by the same time on 

the next business day. As discussed in Section 

XV(C)(4), supra, Rule 908(a)(1)(ii), as adopted, 

provides that a security-based swap that is subject 

to regulatory reporting and public dissemination 

solely by operation of Rule 908(a)(1)(ii)—i.e., 

because the security-based swap has been accepted 

for clearing by a clearing agency having its 

principal place of business in the United States— 

must be reported within 24 hours of acceptance for 

clearing. 

1055See Cross-Border Proposing Release, 78 FR 

31113 (lowering the estimate of reporting sides from 

1,000 to 300). 

1056See id. at 31103. 

A. Definitions—Rule 900 

Rule 900 sets forth definitions of 

various terms used in Regulation SBSR. 

In the Regulation SBSR Proposing 

Release, the Commission stated its belief 

that Rule 900, since it contains only 

definitions of relevant terms, would not 

be a ‘‘collection of information’’ within 

the meaning of the PRA.1052 Although 

Rule 900, as adopted, contains revisions 

to re-proposed Rule 900, including 

additions and deletions of certain 

defined terms and modification of 

others, the Commission continues to 

believe that Rule 900 does not constitute 

a ‘‘collection of information’’ within the 

meaning of the PRA. 

B. Reporting Obligations—Rule 901 

Rule 901, as adopted, sets forth 

various requirements relating to the 

reporting of covered transactions. Rule 

901 of Regulation SBSR, as adopted, 

contains ‘‘collection of information 

requirements’’ within the meaning of 

the PRA. The title of this collection is 

‘‘Rule 901—Reporting Obligations.’’ 

1. Summary of Collection of Information 

Title VII of the Dodd-Frank Act 

amended the Exchange Act to require 

the reporting of security-based swap 

transactions. Accordingly, the 

Commission is adopting Rule 901 under 

the Exchange Act to implement this 

requirement. Rule 901 specifies, with 

respect to each reportable event 

pertaining to covered transactions, who 

is required to report, what data must be 

reported, when it must be reported, 

where it must be reported, and how it 

must be reported. Rule 901(a), as 

adopted, establishes a ‘‘reporting 

hierarchy’’ that specifies the side that 

has the duty to report a security-based 

swap that is a covered transaction.1053

The reporting side, as determined by the 

reporting hierarchy, is required to 

submit the information required by 

Regulation SBSR to a registered SDR. 

The reporting side may select the 

registered SDR to which it makes the 

required report. 

Pursuant to Rule 901(b), as adopted, 

if there is no registered SDR that will 

accept the report required by Rule 

901(a), the person required to make the 

report must report the transaction to the 

Commission. Rule 901(c) sets forth the 

primary trade information and Rule 

901(d) sets forth the secondary trade 

information that must be reported. 

Under the final rules, covered 

transactions—regardless of their 

notional amount—must be reported to a 

registered SDR at any point up to 24 

hours after the time of execution, or, in 

the case of a security-based swap that is 

subject to regulatory reporting and 

public dissemination solely by 

operation of Rule 908(a)(1)(ii), within 24 

hours after the time of acceptance for 

clearing.1054 Except as required by Rule 

902(c), the information reported 

pursuant to Rule 901(c) must be 

publicly disseminated. Information 

reported pursuant to Rule 901(d) is for 

regulatory purposes only and will not be 

publicly disseminated. 

Rule 901(e) requires the reporting of 

life cycle events, and adjustments due to 

life cycle events, within 24 hours of the 

time of occurrence, to the entity to 

which the original transaction was 

reported. The report must contain the 

transaction ID of the original 

transaction. 

In addition to the reporting duties that 

reporting sides incur under Rule 901, 

Rule 901 also imposes certain duties on 

a registered SDR that receives securitybased swap transaction data. Rule 901(f) 

requires a registered SDR to timestamp, 

to the second, any information 

submitted to it pursuant to Rule 901, 

and Rule 901(g) requires a registered 

SDR to assign a transaction ID to each 

security-based swap, or establish or 

endorse a methodology for transaction 

IDs to be assigned by third parties. Rule 

901(h) requires reporting sides to 

electronically transmit the information 

required by Rule 901 in a format 

required by the registered SDR. 

Rule 901(i) requires reporting of preenactment security-based swaps and 

transitional security-based swaps to the 

extent that information about such 

transactions is available. 

As detailed in Sections II to V, supra, 

in adopting Rule 901, the Commission 

has made certain changes to Rule 901, 

both as originally proposed and as reproposed in the Cross-Border Proposing 

Release, in response to comments or in 

order to clarify various provisions. The 

Commission believes that these changes 

do not substantially alter the underlying 

method of computing the paperwork 

burdens, but do result in changes to the 

number of impacted entities and the 

number to transactions covered by the 

rules, thus impacting the paperwork 

burden totals that were previously 

estimated for Rule 901. 

2. Use of Information 

The security-based swap transaction 

information required to be reported 

pursuant to Rule 901 will be used by 

registered SDRs, market participants, 

the Commission, and other relevant 

authorities. The information reported by 

reporting sides pursuant to Rule 901 

will be used by registered SDRs to 

publicly disseminate reports of securitybased swap transactions, as well as to 

offer a resource for the Commission and 

other relevant authorities to obtain 

detailed information about the securitybased swap market. Market participants 

will use the public market data feed, 

among other things, to assess the current 

market for security-based swaps and to 

assist in the valuation of their own 

positions. The Commission and other 

relevant authorities will use information 

about security-based swap transactions 

reported to and held by registered SDRs 

to monitor and assess systemic risks, as 

well as for market surveillance 

purposes. 

3. Respondents 

Rule 901(a) assigns reporting duties 

for covered transactions. In the CrossBorder Proposing Release, the 

Commission revised its preliminary 

estimate to 300 respondents.1055 The 

Commission continues to believe that it 

is reasonable to use 300 as an estimate 

of ‘‘reporting sides’’ (as that term was 

used in the Cross-Border Proposing 

Release). 

The Commission notes that, since 

issuing the Regulation SBSR Proposing 

Release, the Commission has obtained 

additional and more granular data 

regarding participation in the securitybased swap market from DTCC–TIW. 

These historical data suggest that, 

among the 300 reporting sides, 

approximately 50 are likely to be 

required to register with the 

Commission as security-based swap 

dealers and approximately five are 

likely to register as major security-based 

swap participants.1056 These data 

further suggest that these 55 reporting 

sides likely will account for the vast 

majority of recent security-based swap 

transactions and reports and that there 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14675 

1057As a result, the Commission generally will 

continue to use 300 as an estimate of the number 

of reporting sides. In cases where a rule is more 

limited in its application, for example Rule 906(c), 

the Commission may use a different number that 

reflects some subset of the estimated 300 reporting 

sides. See also Cross-Border Adopting Release, 79 

FR 47300 (stating that 55 firms might register as 

security-based swap dealers or major security-based 

swap participants). 

1058See Regulation SBSR Proposing Release, 75 

FR 75247; See also Cross-Border Proposing Release, 

78 FR 31113. 

1059See Regulation SBSR Proposing Release, 75 

FR 75248. 

1060 In the Regulation SBSR Proposing Release, 

the Commission proposed the term ‘‘reporting 

party’’ to describe the entity with the duty to report 

a particular security-based swap transaction. See 75 

FR 75211. In the Cross-Border Proposing Release, 

the Commission revised the term ‘‘reporting party’’ 

to ‘‘reporting side’’ as part of the re-proposal of 

Regulation SBSR. See 78 FR 31059. 

1061See Regulation SBSR Proposing Release, 75 

FR 75248. 

1062See id. 

1063See id. 

1064See id. at 75250. 

1065See id. 

1066See id. In the Cross-Border Proposing 

Release, the Commission noted that the Regulation 

SBSR Proposing Release incorrectly stated this total 

as $301,000 per reporting party. The correct number 

is $201,000 per reporting party ($200,000+$1,000). 

See 78 FR 31113, note 1259. 

1067See Regulation SBSR Proposing Release, 75 

FR 75248. 

1068See Cross-Border Proposing Release, 78 FR 

31114. 

1069According to data published by the Bank for 

International Settlements, the global notional 

amount outstanding in equity forwards and swaps 

as of December 2013 was $2.28 trillion. The 

notional amount outstanding in single-name CDS 

was approximately $11.32 trillion, in multi-name 

index CDS was approximately $8.75 trillion, and in 

multi-name, non-index CDS was approximately 

$950 billion. See Semi-annual OTC derivatives 

statistics at end-December 2013 (June 2014), Table 

19, available at http://www.bis.org/statistics/

dt1920a.pdf (last visited September 22, 2014). For 

the purposes of this analysis, the Commission 

assumes that multi-name index CDS are not narrowContinued 

are only a limited number of securitybased swap transactions that do not 

include at least one of these larger 

counterparties on either side.1057

Rule 901 imposes certain duties on 

registered SDRs. In the Regulation SBSR 

Proposing Release, the Commission 

preliminarily estimated that the number 

of registered SDRs would not exceed 

ten, an estimate that was affirmed in the 

Cross-Border Proposing Release.1058 The 

Commission continues to believe that it 

is reasonable to estimate ten registered 

SDR respondents for the purpose of 

estimating collection of information 

burdens for Regulation SBSR. 

4. Total Initial and Annual Reporting 

and Recordkeeping Burdens 

Pursuant to Rule 901, covered 

transactions must be reported to a 

registered SDR or to the Commission. 

Together, sections (a), (b), (c), (d), (e), 

(h), and (j) of Rule 901 set forth the 

parameters that govern how reporting 

sides report covered transactions. Rule 

901(i) addresses the reporting of preenactment and transitional securitybased swaps. These reporting 

requirements impose initial and ongoing 

burdens on reporting sides. The 

Commission believes that these burdens 

will be a function of, among other 

things, the number of reportable events 

and the data elements required to be 

reported for each such event. Rule 901(f) 

requires a registered SDR to the time 

stamp, to the second, all reported 

information, and Rule 901(g) requires a 

registered SDR to assign a transaction ID 

to each security-based swap, or establish 

or endorse a methodology for 

transaction IDs to be assigned by third 

parties. These requirements impose 

initial and ongoing burdens on 

registered SDRs. 

a. Baseline Burdens 

In the Regulation SBSR Proposing 

Release, the Commission estimated that 

respondents would face three categories 

of burdens to comply with Rule 901.1059

First, each entity that would incur a 

duty to report security-based swap 

transactions pursuant to Regulation 

SBSR (a ‘‘reporting party’’ 1060) would 

likely have to develop an internal order 

and trade management system (‘‘OMS’’) 

capable of capturing the relevant 

transaction information.1061 Second, 

each such entity would have to 

implement a reporting mechanism.1062

Third, each such entity would have to 

establish an appropriate compliance 

program and support for the operation 

of any OMS and reporting 

mechanism.1063 In the Regulation SBSR 

Proposing Release, the Commission 

preliminarily estimated that the initial, 

aggregate annualized burden associated 

with Rule 901 would be 1,438 hours per 

reporting party—for a total of 1,438,300 

hours for all reporting parties—in order 

to develop an OMS, implement a 

reporting mechanism, and establish an 

appropriate compliance program and 

support system.1064 The Commission 

preliminarily estimated that the ongoing 

aggregate annualized burden associated 

with Rule 901 would be 731 hours per 

reporting party, for a total of 731,300 

hours for all reporting parties.1065 The 

Commission further estimated that the 

initial aggregate annualized dollar cost 

burden on reporting parties associated 

with Rule 901 would be $201,000 per 

reporting party, for a total of 

$201,000,000 for all reporting 

parties.1066

b. Burdens of Final Rule 901 

For Reporting Sides. The reporting 

hierarchy is designed to place the duty 

to report covered transactions on 

counterparties who are most likely to 

have the resources and who are best 

able to support the reporting function. 

Reporting sides that fall under the 

reporting hierarchy in Rule 901(a)(2)(ii) 

incur certain burdens as a result thereof 

with respect to their reporting of 

covered transactions. As stated above, 

the Commission believes that an 

estimate of 300 reporting sides that 

would incur the duty to report under 

Regulation SBSR is reasonable for 

estimating collection of information 

burdens under the PRA. This estimate 

includes all of those persons that incur 

a reporting duty under Regulation 

SBSR, as adopted, including registered 

security-based swap dealers and 

registered major security-based swap 

participants. This estimate also includes 

some smaller counterparties to securitybased swaps that could incur a reporting 

duty, but many fewer than estimated in 

the PRA of the Regulation SBSR 

Proposing Release. 

As discussed in more detail in Section 

V, supra, Rule 901(a)(2)(ii) adopts the 

reporting hierarchy set forth in the 

Cross-Border Proposing Release, but 

limits its application to uncleared 

transactions. The Commission believes, 

however, that this limitation will not 

materially change the number of 

reporting sides for PRA purposes, as 

there likely would be a significant 

overlap between the approximately 300 

reporting sides reporting uncleared 

transactions and those reporting other 

security-based swaps. 

In the Regulation SBSR Proposing 

Release, the Commission preliminarily 

estimated that there would be 15.5 

million reportable events associated 

with security-based swap transactions 

per year.1067 In the Cross-Border 

Proposing Release, in addition to 

lowering its estimate of the number of 

reporting sides from 1,000 to 300, the 

Commission also revised its estimate of 

the number of reportable events to 

approximately 5 million.1068 Since 

issuing the Cross-Border Proposing 

Release, however, the Commission has 

obtained additional and more granular 

data regarding participation in the 

security-based swap market from 

DTCC–TIW. As a result, the 

Commission is now further revising its 

estimate of the number of reportable 

events. Accordingly, the Commission 

now estimates that there will be 

approximately 3 million reportable 

events per year under Rule 901, as 

adopted.1069 The Commission further 

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based index CDS and, therefore, are not securitybased swaps. The Commission also assumes that all 

instruments reported as equity forwards and swaps 

are security-based swaps, potentially resulting in 

underestimation of the proportion of the securitybased swap market represented by single-name 

CDS. Based on those assumptions, single-name CDS 

appear to constitute roughly 82% of the securitybased swap market. Although the BIS data reflect 

the global OTC derivatives market, and not just the 

U.S. market, the Commission believes that it is 

reasonable to assume these ratios would be similar 

in the U.S. market. The Commission now estimates 

that there were approximately 2.26 million singlename CDS transactions in 2013. Because singlename CDS appear to constitute roughly 78% of the 

security-based swap market, the Commission now 

estimates that there are approximately 3 million 

security-based swap transactions (i.e., 2,260,000/

0.78=2,898,329 reportable events). 

1070See 78 FR 31115. 

1071 In the Regulation SBSR Proposing Release, 

the Commission preliminarily estimated that 

reporting specific security-based swap transactions 

to a registered SDR—separate from the establishing 

of infrastructure and compliance systems that 

support reporting—would impose an annual 

aggregate cost of approximately $5,400,000. See 75 

FR 75265. The Commission further estimated that 

Rule 901 would impose an aggregate total first-year 

cost of approximately $1,039,000,000 and an 

ongoing annualized aggregate cost of approximately 

$703,000,000. See id. at 75280. See also CrossBorder Proposing Release, 78 FR 31115 (stating the 

Commission’s preliminary belief that the reporting 

of a single reportable event would be de minimis 

when compared to the burdens of establishing the 

reporting infrastructure and compliance systems). 

1072 In the Regulation SBSR Proposing Release, 

the Commission estimated that it would take 

approximately 0.005 hours for each security-based 

swap transaction to be reported. See 75 FR 75249, 

note 195. The Commission calculates the following: 

((900,000 × 0.005)/(300 reporting sides)) = 15 

burden hours per reporting side or 4,500 total 

burden hours attributable to the initial reporting of 

security-based swaps. 

1073 In the Regulation SBSR Proposing Release, 

the Commission estimated that it would take 

approximately 0.005 hours for each security-based 

swap transaction to be reported. See 75 FR 75249, 

note 195. The Commission calculates the following: 

((1,100,000 × 0.005)/(300 reporting sides)) = 18.33 

burden hours per reporting side or 5,500 total 

burden hours attributable to the reporting of life 

cycle events under Rule 901(e). 

1074The Commission derived its estimate from 

the following: (355 hours (one-time hourly burden 

for establishing and OMS) + 172 hours (one-time 

hourly burden for establishing security-based swap 

reporting mechanisms) + 180 hours (one-time 

hourly burden for compliance and ongoing support) 

= 707 hours (one-time total hourly burden). See 

Regulation SBSR Proposing Release, 75 FR 75248– 

50, notes 186, 194, and 201. (436 hours (annualongoing hourly burden for internal order 

management) + 33.3 hours (revised annual-ongoing 

hourly burden for security-based swap reporting 

mechanisms) + 218 hours (annual-ongoing hourly 

burden for compliance and ongoing support) = 

687.3 hours (one-time total hourly burden. See id. 

at 75248–50, notes 187 and 201 (707 one-time 

hourly burden + 687 revised annual-ongoing hourly 

burden = 1,394 total first-year hourly burden). 

1075The Commission derived its estimate from 

the following: (1,394 hours per reporting side × 300 

reporting sides) = 418,200 hours. 

1076See Cross-Border Proposing Release, 78 FR 

31112–15. 

1077The Commission derived its estimate from 

the following: (687 hours per reporting side × 300 

reporting sides) = 206,100 hours. 

1078The Commission derived its estimate from 

the following: ($201,000 per reporting side × 300 

reporting sides) = $60,300,000. See Cross-Border 

Proposing Release, 78 FR 31113–15. The 

Commission originally estimated this burden based 

on discussions with various market participants. 

See Regulation SBSR Proposing Release, 75 FR 

75247–50. 

1079See 75 FR 75250–51. 

1080The Commission has adopted additional 

rules under the Exchange Act relating to the duties, 

data collection and maintenance requirements, and 

automated systems requirements of SDRs. See SDR 

Adopting Release. 

1081See Regulation SBSR Proposing Release, 75 

FR 75250. This figure is based on discussions with 

various market participants and is calculated as 

follows: [((Sr. Programmer at 80 hours) + (Sr. 

Systems Analyst at 20 hours) + (Compliance 

Manager at 8 hours) + (Director of Compliance at 

4 hours) + (Compliance Attorney at 8 hours)) × (10 

registered SDRs)] = 1,200 burden hours, which is 

120 hours per registered SDR. 

estimates that approximately 2 million 

of these reportable events will consist of 

uncleared transactions (i.e., those 

transactions that will be reported to a 

registered SDR by the reporting sides). 

The Commission noted in the CrossBorder Proposing Release, and 

continues to believe, that the reduction 

in the estimate of the number of 

reportable events per year is likely a 

result of several factors.1070

The Commission believes that, once a 

respondent’s reporting infrastructure 

and compliance systems are in place, 

the burden of reporting each individual 

reportable event will be small when 

compared to the burdens of establishing 

the reporting infrastructure and 

compliance systems.1071 As stated 

above, the Commission estimates that 2 

million of the 3 million total reportable 

events would consist of the initial 

reporting of security-based swaps as 

well as the reporting of any life cycle 

events. The Commission estimates that 

of the 2 million reportable events, 

approximately 900,000 would involve 

the reporting of new security-based 

swap transactions, and approximately 

1,100,000 would involve the reporting 

of life cycle events under Rule 901(e). 

The Commission estimates that Rule 

901(a) would result in reporting sides 

having a total burden of 4,500 hours 

attributable to the initial reporting of 

security-based swaps by reporting sides 

to registered SDRs under Rules 901(c) 

and 901(d) over the course of a year.1072

The Commission further estimates that 

reporting sides would have a total 

burden of 5,500 hours attributable to the 

reporting of life cycle events under Rule 

901(e) over the course of a year.1073

Therefore, the Commission believes that 

Rule 901, as adopted, would result in a 

total reporting burden for reporting 

sides under Rules 901(c) and (d) along 

with the reporting of life cycle events 

under Rule 901(e) of 10,000 burden 

hours per year. The Commission 

continues to believe that many 

reportable events will be reported 

through electronic means and that the 

ratio of electronic reporting to manual 

reporting is likely to increase over time. 

The Commission continues to believe 

that the bulk of the burden hours 

estimated above will be attributable to 

manually reported transactions. Thus, 

reporting sides that capture and report 

transactions electronically will likely 

incur bear fewer burden hours than 

those reporting sides that capture and 

report transactions manually. 

Based on the foregoing, the 

Commission estimates that Rule 901, as 

adopted, will impose an estimated total 

first-year burden of approximately 1,394 

hours 1074 per reporting side for a total 

first-year burden of 418,200 hours for all 

reporting sides.1075 The Commission 

estimates that Rule 901, as adopted, will 

impose ongoing annualized aggregate 

burdens of approximately 687 hours 1076

per reporting side for a total aggregate 

annualized cost of 206,100 hours for all 

reporting sides.1077 The Commission 

further estimates that Rule 901, as 

adopted, will impose initial and 

ongoing annualized dollar cost burdens 

of $201,000 per reporting side, for total 

aggregate initial and ongoing annualized 

dollar cost burdens of $60,300,000.1078

For Registered SDRs. In the 

Regulation SBSR Proposing Release, the 

Commission set forth estimated burdens 

on registered SDRs related to Rule 

901.1079 The Commission continues to 

believe that these estimated burdens are 

reasonable. 

Rule 901(f) requires a registered SDR 

to time-stamp, to the second, 

information that it receives. Rule 901(g) 

requires a registered SDR to assign a 

unique transaction ID to each securitybased swap it receives or establish or 

endorse a methodology for transaction 

IDs to be assigned by third parties. The 

Commission continues to believe that 

such design elements will pose some 

additional burdens to incorporate in the 

context of designing and building the 

technological framework that will be 

required of an SDR to become 

registered.1080 Therefore, the 

Commission estimates that Rules 901(f) 

and 901(g) will impose an initial onetime aggregate burden of 1,200 burden 

hours, which corresponds to 120 burden 

hours per registered SDR.1081 This 

figure is based on an estimate of ten 

registered SDRs, which the Commission 

continues to believe is reasonable. 

Once operational, these elements of 

each registered SDR’s system will have 

to be supported and maintained. 

Accordingly, the Commission estimates 

that Rule 901(f) and 901(g) will impose 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14677 

1082See Regulation SBSR Proposing Release, 75 

FR 75250. This figure is based on discussions with 

various market participants as follows: [((Sr. 

Programmer at 60 hours) + (Sr. Systems Analyst at 

48 hours) + (Compliance Manager at 24 hours) + 

(Director of Compliance at 12 hours) + (Compliance 

Attorney at 8 hours)) × (10 SDRs)] = 1,520 burden 

hours, which is 152 hours per registered SDR. 

1083See Regulation SBSR Proposing Release, 75 

FR 75250. This figure is based on the following: 

[(1,200) + (1,520)] = 2,720 burden hours, which 

corresponds to 272 burden hours per registered 

SDR. 

1084See supra note 1083. 

1085See Regulation SBSR Proposing Release, 75 

FR 75250. 

1086 DTCC currently compiles information on the 

credit default swap market. See http://

www.dtcc.com/about/businesses-and-subsidiaries/

ddr-us.aspx (last visited September 22, 2014). 

1087See SDR Adopting Release, Section VI(E)(4). 

1088See supra Section VI(D). 

1089See SDR Adopting Release, Sections VI(D)(2) 

and VI(I)(1). 1090See Rule 907(a)(4). 

an annual aggregate burden of 1,520 

burden hours, which corresponds to 152 

burden hours per registered SDR.1082

This figure represents an estimate of the 

burden for a registered SDR for support 

and maintenance costs for the registered 

SDR’s systems to time stamp incoming 

submissions and assign transaction IDs. 

Thus, the Commission estimates that 

the first-year aggregate annualized 

burden on registered SDRs associated 

with Rules 901(f) and 901(g) will be 

2,720 burden hours, which corresponds 

to 272 burden hours per registered 

SDR.1083 Correspondingly, the 

Commission estimates that the ongoing 

aggregate annualized burden associated 

with Rules 901(f) and 901(g) will be 

1,520 burden hours, which corresponds 

to 152 burden hours per registered 

SDR.1084 The above burden estimates 

pertaining to Rules 901(f) and 901(g) are 

identical to those set forth in the 

Regulation SBSR Proposing Release.1085

Since Regulation SBSR, as adopted, 

requires reporting for only covered 

transactions, registered SDRs will be 

required to receive, process, and 

potentially disseminate a smaller 

number of security-based swaps than 

originally envisioned. Because the bulk 

of an SDR’s burdens and costs under 

Regulation SBSR are not transactionbased, however, the Commission has 

determined that the burden and cost 

estimates set forth in the Cross-Border 

Proposing Release remain valid for the 

purposes of the PRA. 

In addition, the Commission 

recognizes that, since the publication of 

the Regulation SBSR Proposing Release, 

many entities already have spent 

considerable time and resources 

building the infrastructure that will 

support reporting of security-based 

swaps. Indeed, some reporting is 

already occurring voluntarily.1086 As a 

result, the Commission notes that the 

burdens and costs calculated herein 

could be greater than those actually 

incurred by affected parties as a result 

of the adoption of Regulation SBSR. 

Nonetheless, the Commission believes 

that its estimates represent a reasonable 

upper bound of the actual burdens and 

costs required to comply with 

Regulation SBSR. 

5. Recordkeeping Requirements 

Rule 13n–5(b)(4) under the Exchange 

Act requires an SDR to maintain the 

transaction data and related identifying 

information that it collects for not less 

than five years after the applicable 

security-based swap expires, and 

historical positions for not less than five 

years.1087 Accordingly, security-based 

swap transaction reports received by a 

registered SDR pursuant to Rule 901 

will be required to be retained by the 

registered SDR for not less than five 

years. 

6. Collection of Information Is 

Mandatory 

Each collection of information 

discussed above is mandatory. 

7. Confidentiality of Responses to 

Collection of Information 

For the majority of security-based 

swap transactions, all of the information 

collected pursuant to Rule 901(c) will be 

widely available to the public because 

these transactions will be publicly 

disseminated by a registered SDR 

pursuant to Rule 902. However, certain 

security-based swaps are not subject to 

Rule 902’s public dissemination 

requirement; 1088 therefore, information 

about these transactions will not be 

publicly available. In addition, reporting 

sides must provide certain information 

about security-based swap transactions 

pursuant to Rule 901(d). Rule 901(d) 

information is for regulatory purposes 

and will not be publicly disseminated. 

An SDR, pursuant to Section 13(n)(5) 

of the Exchange Act and Rules 13n– 

4(b)(8) and 13n–9 thereunder, must 

maintain the privacy of security-based 

swap information,1089 including 

information reported pursuant to Rule 

901(d) of Regulation SBSR, as well as 

information about a security-based swap 

transaction reported pursuant to Rule 

901(c) where the transaction falls into a 

category enumerated in Rule 902(c). To 

the extent that the Commission receives 

these kinds of information under 

Regulation SBSR, such information will 

be kept confidential, subject to the 

provisions of applicable law. 

C. Public Dissemination of Transaction 

Reports—Rule 902 

Rule 902(a), as adopted, requires a 

registered SDR to publicly disseminate 

a transaction report immediately upon 

receipt of information about a securitybased swap, or a life cycle event or 

adjustment due to a life cycle event (or 

upon re-opening following a period 

when the registered SDR was closed), 

except in certain limited circumstances 

described in Rule 902(c). A published 

transaction report must consist of all the 

information reported pursuant to Rule 

901(c), plus any condition flags required 

by the policies and procedures of the 

registered SDR to which the transaction 

is reported. Certain provisions of Rule 

902 of Regulation SBSR contain 

‘‘collection of information 

requirements’’ within the meaning of 

the PRA. The title of this collection is 

‘‘Rule 902—Public Dissemination of 

Transaction Reports.’’ 

1. Summary of Collection of Information 

As adopted, Rule 902(a) generally 

requires that a registered SDR publicly 

disseminate a transaction report for each 

security-based swap transaction, or a 

life cycle event or adjustment due to a 

life cycle, immediately upon receipt of 

information about the security-based 

swap submitted by a reporting side 

pursuant to Rule 901(c). The transaction 

report must contain all of the 

information reported pursuant to Rule 

901(c) along with any condition flags 

required by the policies and procedures 

of the registered SDR to which the 

transaction is reported.1090 If its systems 

are unavailable to publicly disseminate 

these transaction data immediately 

upon receipt, the registered SDR is 

required to disseminate the transaction 

data immediately upon re-opening. Rule 

902(a), as adopted, provides registered 

SDRs with the authority and discretion 

to establish the content, format, and 

mode of dissemination through its 

policies and procedures, as long as it 

does so in compliance with the 

information required to be disseminated 

by Rule 901(c). 

Rule 902(b), as proposed and reproposed, addressed how a registered 

SDR would be required to publicly 

disseminate transaction reports of block 

trades. As discussed in more detail 

above, the Commission is not adopting 

Rule 902(b). 

Rule 902(c), as adopted, prohibits a 

registered SDR from disseminating: (1) 

The identity of any counterparty to a 

security-based swap; (2) with respect to 

a security-based swap that is not cleared 

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14678 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1091See SDR Adopting Release, Section VI(E)(1). 

1092See SDR Adopting Release, Section VII(D)(2). 

1093See Regulation SBSR Proposing Release, 75 

FR 75252. 

1094See Regulation SBSR Proposing Release, 75 

FR 75252. See also SDR Adopting Release, Section 

VII(D)(2). This estimate was based on discussions 

with industry members and market participants, 

including entities that may register as SDRs under 

Title VII, and includes time necessary to design and 

program a registered SDR’s system to calculate and 

disseminate initial and subsequent trade reports. 

1095See Regulation SBSR Proposing Release, 75 

FR 75252. See also Cross-Border Proposing Release, 

78 FR 31198. 

1096See SDR Adopting Release, Section VII(D)(2) 

for the total burden associated with establishing 

SDR technology systems. The Commission derived 

this estimated burden from the following: 

[((Attorney at 1,400 hours) + (Compliance Manager 

at 1,600 hours) + (Programmer Analyst at 4,000 

hours) + (Senior Business Analyst at 1,400 hours)) 

× (10 registered SDRs)] = 84,000 burden hours, 

which corresponds to 8,400 hours per registered 

SDR. 

1097See SDR Adopting Release, Section VII(D)(2) 

for the total ongoing annual burdens associated 

with operating and maintaining SDR technology 

systems. The Commission derived this estimated 

burden from the following: [((Attorney at 840 hours) 

+ (Compliance Manager at 960 hours) + 

(Programmer Analyst at 2,400 hours) + (Senior 

Business Analyst at 840 hours)) × (10 registered 

SDRs)] = 50,400 burden hours, which corresponds 

to 5,040 hours per registered SDR. 

1098These estimates are based on the following: 

[(84,000 one-time burden hours) + (50,400 annual 

burden hours)] = 134,400 burden hours, which 

corresponds to 13,440 hours per registered SDR; 

[($20 million one-time dollar cost burden) + ($12 

million annual dollar cost burden)] = $32 million 

cost burden, which corresponds to $3.2 million per 

registered SDR. 

1099See SDR Adopting Release, Section VI(G)(2). 

1100See SDR Adopting Release, Sections VI(D)(2) 

and VI(I)(1). 

1101See supra Section II (describing UICs that 

must be reported to registered SDRs pursuant to 

Regulation SBSR). 

at a registered clearing agency and that 

is reported to a registered SDR, any 

information disclosing the business 

transactions and market positions of any 

person; (3) any information regarding a 

security-based swap reported pursuant 

to Rule 901(i); (4) any non-mandatory 

report; (5) any information regarding a 

security-based swap that is required to 

be reported pursuant to Rule 901 and 

Rule 908(a)(1) but is not required to be 

publicly disseminated pursuant to Rule 

908(a)(2); (6) any information regarding 

certain clearing transactions; and (7) any 

information regarding the allocation of a 

security-based swap. 

Rule 902(d) provides that no person 

shall make available to one or more 

persons (other than a counterparty or a 

post-trade processor) transaction 

information relating to a security-based 

swap before the reporting side transmits 

the primary trade information about the 

security-based swap to a registered SDR. 

2. Use of Information 

The public dissemination 

requirements contained in Rule 902 are 

designed to promote post-trade 

transparency of security-based swap 

transactions. 

3. Respondents 

The collection of information 

associated with the Rule 902 will apply 

to registered SDRs. As noted above, the 

Commission believes that an estimate of 

ten registered SDRs is reasonable for 

purposes of its analysis of burdens 

under the PRA. 

4. Total Initial and Annual Reporting 

and Recordkeeping Burdens 

Rule 13n–5(b) sets forth requirements 

for collecting and maintaining 

transaction data that each SDR will be 

required to follow.1091 The SDR 

Adopting Release describes the relevant 

burdens and costs that complying with 

Rule 13n–5(b) will entail.1092

In the Regulation SBSR Proposing 

Release, the Commission stated its 

preliminary belief that a registered SDR 

would be able to integrate the capability 

to publicly disseminate security-based 

swap transaction reports required under 

Rule 902 as part of its overall system 

development for transaction data.1093

Based on discussions with industry 

participants, the Commission estimates 

that, to implement and comply with the 

public dissemination requirement of 

Rule 902, each registered SDR will incur 

a burden equal to an additional 20% of 

the first-year and ongoing burdens 

discussed in the SDR Registration 

Proposing Release.1094 This estimate 

was first proposed in the Regulation 

SBSR Proposing Release and reiterated 

in the Cross-Border Proposing Release, 

and the Commission believes that it 

remains valid.1095

Based on the above, the Commission 

estimates that the initial one-time 

aggregate burden imposed by Rule 902 

for development and implementation of 

the systems needed to disseminate the 

required transaction information, 

including the necessary software and 

hardware, will be approximately 8,400 

hours and a dollar cost of $2 million for 

each registered SDR, which aggregates 

to 84,000 hours and a dollar cost of $20 

million for all SDR respondents.1096 In 

addition, the Commission estimates that 

annual aggregate burden (initial and 

ongoing) imposed by the Rule 902 will 

constitute approximately 5,040 hours 

and a dollar cost of $1.2 million for each 

registered SDR, which aggregates to 

50,400 hours and a dollar cost of $12 

million for all SDR respondents.1097

Thus, the Commission estimates that the 

total first-year (initial) aggregate 

annualized burden on registered SDRs 

associated with public dissemination 

requirement under Rule 902 will be 

approximately 134,400 hours and a 

dollar cost of $32 million, which 

corresponds to a burden of 13,440 hours 

and a dollar cost of $3.2 million for each 

registered SDR.1098

5. Recordkeeping Requirements 

Pursuant to Rule 13n–7(b) under the 

Exchange Act, a registered SDR is 

required 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 or regulations thereunder, 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.1099 This requirement 

encompasses all security-based swap 

transaction reports disseminated by a 

registered SDR pursuant to Rule 902 and 

are required to be retained for not less 

than five years. 

6. Collection of Information Is 

Mandatory 

Each collection of information 

discussed above Is mandatory. 

7. Confidentiality of Responses to 

Collection of Information 

Most of the information required 

under Rule 902 will be widely available 

to the public to the extent it is 

incorporated into security-based swap 

transaction reports that are publicly 

disseminated by a registered SDR 

pursuant to Rule 902. However, Rule 

902(c) prohibits public dissemination of 

certain kinds of transactions and certain 

kinds of transaction information. An 

SDR, pursuant to Sections 13(n)(5) of 

the Exchange Act and Rules 13n–4(b)(8) 

and 13n–9 thereunder will be under an 

obligation to maintain the privacy of 

this security-based swap 

information.1100 To the extent that the 

Commission receives confidential 

information pursuant to this collection 

of information, such information must 

be kept confidential, subject to the 

provisions of applicable law. 

D. Coded Information—Rule 903 

Regulation SBSR, as adopted, permits 

or, in some instances, requires securitybased swap counterparties to report 

coded information to registered SDRs 

using UICs. These UICs will be used to 

identify products, transactions, and 

persons, as well as certain business 

units and employees of legal 

persons.1101 Rule 903 establishes 

standards for assigning and using coded 

information in security-based swap 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14679 

1102See Regulation SBSR Proposing Release, 75 

FR 75252–53. 

1103See Cross-Border Proposing Release, 78 FR 

31117. 

1104See supra Section X(B)(2). 

1105As noted in Section XXII(B)(1), infra, the 

available data do not include transactions between 

two foreign security-based swap market participants 

on foreign underlying reference entities. As a result, 

this estimate may not include certain foreign 

counterparties to security-based swaps. 

1106Some counterparties reported in the 

transaction data may be guarantors of other nonU.S.-person-direct counterparties and, if so, may be 

responsible for obtaining and maintaining more 

than one LEI. As such, precisely quantifying the 

number of LEIs required by Rule 903(a) is not 

possible at this time. However, because many of 

these direct non-U.S.-person counterparties are 

likely from jurisdictions where regulators mandate 

the use of LEIs, the Commission believes that these 

counterparties will already have registered LEIs and 

will continue to maintain them. 

1107The European Market Infrastructure 

Regulation requires use of codes to identify 

counterparties. See ‘‘Trade Reporting’’ (available at: 

http://www.esma.europa.eu/page/Trade-reporting) 

(last visited January 10, 2015). 

1108 In the Regulation SBSR Proposing Release, 

the Commission used an estimate of 5,000 

participant respondents that might incur reporting 

duties under Regulation SBSR. This estimate 

included an estimated 1,000 entities regularly 

engaged in the CDS marketplace as well as 4,000 

potential security-based swap counterparties that 

were expected to transact security-based swaps less 

frequently but that nonetheless would be 

considered ‘‘participants.’’ See Regulation SBSR 

Proposing Release, 75 FR 75254. Based on more 

recent data, the Commission has revised the 

estimated number of participant respondents to 

4,800. The Commission notes that registered 

security-based swap dealers and major securitybased swap participants will, for some transactions, 

be the non-reporting side and are therefore included 

in this estimate. 

1109This figure is based on the following: 

[Compliance Attorney at 1 hour/year) × (1,300 

participants)] = 1,300 burden hours. 

reporting and dissemination to help 

ensure that codes are assigned in an 

orderly manner and that relevant 

authorities, market participants, and the 

public are able to interpret coded 

information stored and disseminated by 

registered SDRs. 

In the Regulation SBSR Proposing 

Release, the Commission stated its belief 

that Rule 903 would not be a ‘‘collection 

of information’’ within the meaning of 

the PRA because the rule would merely 

permit reporting parties and registered 

SDRs to use codes in place of certain 

data elements, subject to certain 

conditions.1102 In re-proposing Rule 903 

in the Cross-Border Proposing Release, 

the Commission made only technical 

and conforming changes to Rule 903 to 

incorporate the use of the term 

‘‘side.’’ 1103 Rule 903, as adopted, 

includes a requirement that, if the 

Commission has recognized an IRSS 

that assigns UICs to persons, each 

participant of a registered SDR shall 

obtain a UIC from or through that 

IRSS.1104 Because the Commission also 

is recognizing the GLEIS—which issues 

LEIs—as an IRSS, any person who is a 

participant of one or more registered 

SDRs will have to obtain an LEI from or 

through the GLEIS. Therefore, the 

Commission now believes that Rule 903 

constitutes a ‘‘collection of information’’ 

within the meaning of the PRA. The title 

of this collection is ‘‘Rule 903—Coded 

Information.’’ 

1. Summary of Collection of Information 

Rule 903(a) provides that, if an IRSS 

that meets certain criteria is recognized 

by the Commission and has assigned a 

UIC to a person, unit of a person, or 

product (or has endorsed a methodology 

for assigning transaction IDs), all 

registered SDRs must use that UIC in 

carrying out their responsibilities under 

Regulation SBSR. If no such system has 

been recognized by the Commission, or 

if such a system has not assigned a UIC 

to a particular person, unit of a person, 

or product (or has not endorsed a 

methodology for assigning transaction 

IDs), the registered SDR must assign a 

UIC to that person, unit of a person, or 

product using its own methodology (or 

endorse a methodology for assigning 

transaction IDs). The following UICs are 

contemplated by Regulation SBSR: 

Branch ID, broker ID, counterparty ID, 

execution agent ID, platform ID, product 

ID, trader ID, trading desk ID, 

transaction ID, and ultimate parent ID. 

UICs are intended to allow registered 

SDRs and the Commission and other 

relevant authorities to aggregate 

transaction information across a variety 

of vectors. For example, the trader ID 

will allow the Commission and other 

relevant authorities to identify all trades 

carried out by an individual trader. The 

product ID will allow the Commission 

and other relevant authorities to identify 

all transactions in a particular securitybased swap product. The transaction ID 

will allow counterparties and the 

registered SDR to link a series of life 

cycle events to each other and to the 

original transaction. As discussed in 

Section X(B)(2), supra, the Commission 

has recognized the GLEIS as an IRSS 

that meets the criteria of Rule 903. 

Therefore, if an entity has an LEI issued 

by or through the GLEIS, that LEI must 

be used for all purposes under 

Regulation SBSR. Furthermore, each 

participant that acts as a guarantor of a 

direct counterparty’s performance of 

any obligation under a security-based 

swap that is subject to § 242.908(a) 

shall, if the direct counterparty has not 

already done so, obtain a UIC for 

identifying the direct counterparty from 

or through that system, if that system 

permits third-party registration without 

a requirement to obtain prior permission 

of the direct counterparty. 

2. Use of Information 

The information provided pursuant to 

Rule 903 is necessary to for any person 

who is a participant of at least one 

registered SDR to be identified by an LEI 

for reporting purposes under Regulation 

SBSR. 

3. Respondents 

Rule 903 applies to any person who 

is a participant of at least one registered 

SDR. The Commission estimates that 

there may be up to 4,800 security-based 

swap counterparties that are 

participants of one or more registered 

SDRs.1105 The Commission recognizes 

that, since the publication of the 

Regulation SBSR Proposing Release, 

many persons who are likely to become 

participants of one or more registered 

SDRs already have LEIs issued by or 

through the GLEIS. As a result, the 

burdens and costs actually incurred by 

participants as a result of the adoption 

of Regulation SBSR are likely to be less 

than the burdens and costs calculated 

herein. Specifically, as discussed in 

further detail in Section XXII(C)(4)(b), 

infra, based on transaction data from 

DTCC–TIW, the Commission believes 

that no fewer than 3,500 of 

approximately 4,800 accounts that 

participated in the market for singlename CDS in 2013 currently have 

LEIs.1106 The Commission assumes that 

no market participants that currently 

have LEIs would continue to maintain 

their LEIs in the absence of Rule 903(a) 

in order to arrive at an upper bound on 

the ongoing costs associated with Rule 

903(a). The Commission believes that 

this is a conservative approach, since 

regulators in certain other jurisdictions 

mandate the use of an LEI.1107

Consequently, the Commission 

estimates, for purposes of the PRA, that 

there may be as many as 1,300 

participant respondents who will need 

to obtain an LEI and as many as 4,800 

participants who will need to maintain 

an LEI.1108

4. Total Initial and Annual Reporting 

and Recordkeeping Burdens 

The Commission estimates that firstyear aggregate burden imposed by Rule 

903 will be 1,300 hours, which 

corresponds to 1 hour per participant, to 

account for the initial burdens of 

obtaining an LEI.1109 The Commission 

estimates that the ongoing burden 

imposed by Rule 903 will be 4,800 

hours, which corresponds to 1 hour per 

participant, to account for ongoing 

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14680 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1110This figure is based on the following: 

[(Compliance Attorney at 1 hour/year) × (4,800 

participants)] = 4,800 burden hours. 

1111See ‘‘GMEI Utility: Frequently Asked 

Questions’’ (available at: https://

www.gmeiutility.org/frequentlyAskedQuestions.jsp, 

detailing registration and maintenance costs for 

LEIs issued by GMEI, an endorsed pre-LOU of the 

interim GLEIS) (last visited January 4, 2015). 

1112This figure is based on the following: [($220 

registration cost) × (1,300 participants not currently 

registered)] = $286,000. 

1113This figure is based on the following: [($120 

annual maintenance cost) × (4,800 participants not 

currently registered)] = $576,000. The Commission 

notes that, for those participants obtaining an LEI 

in the first year, the annual maintenance cost will 

be incurred beginning in the year following 

registration. 

1114See Securities Exchange Act Release No. 

71958 (April 17, 2014), 79 FR 25193 (May 2, 2014) 

(‘‘SD/MSP Recordkeeping Proposing Release’’) 

(proposing recordkeeping and reporting 

requirements for security-based swap dealers, major 

security-based swap participants, and brokerdealers). 1115See Rule 904(c). 

1116See Rule 904(e). 

1117See Regulation SBSR Proposing Release, 75 

FR 75253. 

1118See id. 

1119The Commission does not believe that Rule 

904(c) will result in any burden within the meaning 

of the PRA. Rule 904(c) does not create new or 

additional duties to report security-based swap 

transactions. 

administration of the LEI.1110 In 

addition, for these participants, the 

assignment of an LEI will entail both 

one-time and ongoing costs assessed by 

local operation units (‘‘LOUs’’) of the 

GLEIS. The current cost for registering 

a new LEI is approximately $220, with 

an additional cost of $120 per year for 

maintaining an LEI.1111 For those 

participants that do not already have an 

LEI, the initial one-time cost would be 

$286,000, or $220 per participant.1112

All participants would be required to 

maintain their LEI resulting in an 

annual cost of $576,000, or $120 per 

participant.1113

5. Recordkeeping Requirements 

The applications that participants 

must complete in order to obtain an LEI 

issued by or through the GLEIS are not 

subject to any specific recordkeeping 

requirements for participants, to the 

extent that these participants are nonregistered persons.1114 The Commission 

expects, however, that in the normal 

course of their business a participant of 

a registered SDR would keep records of 

the information entered in connection 

with its LEI application, such as the 

participant’s legal name, registered 

address, headquarters address, and the 

entity’s legal form. 

6. Collection of Information Is 

Mandatory 

Each collection of information 

discussed above is mandatory. 

7. Confidentiality of Responses to 

Collection of Information 

The Commission believes that 

information submitted by participants 

in order to obtain an LEI issued by or 

through the GLEIS generally will be 

public. 

E. Operating Hours of Registered 

SDRs—Rule 904 

Rule 904, as adopted, requires a 

registered SDR to have systems in place 

to continuously receive and disseminate 

information regarding security-based 

swap data with certain exceptions. 

Certain provisions of Rule 904 contain 

‘‘collection of information 

requirements’’ within the meaning of 

the PRA. The title of this collection is 

‘‘Rule 904—Operating Hours of 

Registered SDRs.’’ 

1. Summary of Collection of Information 

Rule 904 requires a registered SDR to 

operate continuously, subject to two 

exceptions. First, under Rule 904(a) a 

registered SDR may establish normal 

closing hours during periods when, in 

its estimation, the U.S. market and 

major foreign markets are inactive. A 

registered SDR is required to provide 

reasonable advance notice to 

participants and to the public of its 

normal closing hours. Second, under 

Rule 904(b) a registered SDR may 

declare, on an ad hoc basis, special 

closing hours to perform system 

maintenance that cannot wait until 

normal closing hours. A registered SDR 

is required, to the extent reasonably 

possible under the circumstances, to 

avoid scheduling special closing hours 

during when, in its estimation, the U.S. 

market and major foreign markets are 

most active; and provide reasonable 

advance notice of its special closing 

hours to participants and to the public. 

Rule 904(c) specifies requirements for 

handling and disseminating reported 

data during a registered SDR’s normal 

and special closing hours. During 

normal closing hours and, to the extent 

reasonably practicable, during special 

closing hours, a registered SDR is 

required to have the capability to 

receive and hold in queue transaction 

data it receives.1115 Pursuant to Rule 

904(d), immediately upon system reopening, the registered SDR is required 

to publicly disseminate any transaction 

data required to be reported under Rule 

901(c) that it received and held in 

queue, in accordance with the 

requirements of Rule 902. Pursuant to 

Rule 904(e), if a registered SDR cannot 

hold in queue transaction data to be 

reported, immediately upon re-opening 

the SDR is required to send a message 

to all participants that it has resumed 

normal operations. Thereafter, any 

participant that had an obligation to 

report transaction information to the 

registered SDR, but could not due to the 

registered SDR’s inability to receive and 

hold in queue such transaction 

information, must promptly report the 

information to the registered SDR.1116

The Commission originally stated its 

belief that there were not any costs or 

burdens applicable to participants as a 

result of Rule 904(e).1117 The 

Commission continues to believe that 

this conclusion is appropriate. 

Specifically, the Commission believes 

that the process by which the registered 

SDR will notify participants that it has 

resumed operations would be 

automated. As a result, the Commission 

believes that the costs associated with 

building out the systems necessary for 

such notifications have already been 

accounted for in the costs of developing 

the registered SDRs systems associated 

with the receipt of security-based swap 

information under Rule 901.1118 As a 

result, the Commission continues to 

believe that Rule 904(e) is not a 

collection of information for 

participants. 

2. Use of Information 

The information provided pursuant to 

Rule 904 is necessary to allow 

participants and the public to know the 

normal and special closing hours of the 

registered SDR, and to allow 

participants to take appropriate action 

in the event that the registered SDR 

cannot accept security-based swap 

transaction reports from 

participants.1119

3. Respondents 

Rule 904 applies to all registered 

SDRs. As noted above, the Commission 

estimates that there will be ten 

registered SDRs. 

4. Total Initial and Annual Reporting 

and Recordkeeping Burdens 

The Commission continues to 

estimate that that the one-time, initial 

burden, as well as ongoing annualized 

burden for each registered SDR 

associated with Rule 904 will be only 

minor additional burden beyond that 

necessary to ensure its basic operating 

capability under both Regulation SBSR 

and the SDR Registration Rules. The 

Commission estimates that the annual 

aggregate burden (first-year and 

ongoing) imposed by Rule 904 will be 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14681 

1120See Regulation SBSR Proposing Release, 75 

FR 75253. This figure is based on the following: 

[(Operations Specialist at 3 hours/month) × (12 

months/year) × (10 registered SDRs)] = 360 burden 

hours. 

1121Markit I at 4. 

1122See, e.g., DDR Rulebook, Section 7.1 (DDR 

System Accessibility) (‘‘Data submitted during DDR 

System down time is stored and processed once the 

service has resumed’’), available at http://

www.dtcc.com/∼/media/Files/Downloads/legal/

rules/DDR_Rulebook.pdf (last visited October 7, 

2014). 

1123The requirement in Rule 904(e) for 

participants to report information to the registered 

SDR upon receiving a notice that the registered SDR 

resumed its normal operations is already 

considered as part of the participant’s reporting 

obligations under Rule 901 and thus is already 

included in the burden estimate for Rule 901. 1124See SDR Adopting Release, Section VI(G)(2) 

360 hours, which corresponds to 36 

hours per registered SDR.1120

One commenter asserted that the 

proposed requirement for a registered 

SDR to receive and hold in the queue 

the data required to be reported during 

its closing hours ‘‘exceeds the 

capabilities of currently-existing 

reporting infrastructures.’’ 1121 However, 

the Commission notes that this 

comment was submitted in January 

2011; since the receipt of this comment, 

provisionally registered CFTC SDRs that 

are likely also to register as SDRs with 

the Commission appear to have 

developed the capability of receiving 

and holding data in queue during their 

closing hours.1122 Thus, the 

Commission continues to believe that 

requiring registered SDRs to hold data 

in queue during their closing hours 

would not create a significant burden 

for registered SDRs. 

The Commission does not believe 

Rule 904 imposes any separate 

collection of information on participants 

of registered SDRs not already 

accounted for under Rule 901.1123 Any 

respondent unable to report to a 

registered SDR, because such registered 

SDR was unable to receive the 

transaction report, would have to delay 

the submission of the transaction report. 

The Commission does not believe that 

the number of transaction reports 

impacted by this requirement would 

impact the burdens contained in this 

PRA. 

5. Recordkeeping Requirements 

Rule 13n–7(b) under the Exchange 

Act requires an 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 or 

regulations thereunder, 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.1124 This requirement 

encompasses notices issued by a 

registered SDR to its participants under 

Rule 904. 

6. Collection of Information Is 

Mandatory 

Each collection of information 

discussed above is mandatory. 

7. Confidentiality of Responses to 

Collection of Information 

Any notices issued by a registered 

SDR to its participants, such as the 

notices required under Rule 904, would 

be publicly available. 

F. Correction of Errors in Security-Based 

Swap Information—Rule 905 

Rule 905, as adopted, establishes 

procedures for correcting errors in 

reported and disseminated securitybased swap information. 

Certain provisions of Rule 905 of 

Regulation SBSR contain ‘‘collection of 

information requirements’’ within the 

meaning of the PRA. The title of this 

collection is ‘‘Rule 905—Correction of 

Errors in Security-Based Swap 

Information.’’ 

1. Summary of Collection of Information 

Rule 905 establishes duties for 

security-based swap counterparties and 

registered SDRs to correct errors in 

information that previously has been 

reported. 

Counterparty Reporting Error. Under 

Rule 905(a)(1), where a side that was not 

the reporting side for a security-based 

swap transaction discovers an error in 

the information reported with respect to 

such security-based swap, the 

counterparty must promptly notify the 

reporting side of the error. Under Rule 

905(a)(2), where a reporting side for a 

security-based swap transaction 

discovers an error in the information 

reported with respect to a security-based 

swap, or receives notification from its 

counterparty of an error, the reporting 

side must promptly submit to the entity 

to which the security-based swap was 

originally reported an amended report 

pertaining to the original transaction. 

The amended report must be submitted 

to the registered SDR in a manner 

consistent with the policies and 

procedures of the registered SDR 

required pursuant to Rule 907(a)(3). 

Duty of Registered SDR to Correct. 

Rule 905(b) sets forth the duties of a 

registered SDR relating to corrections. If 

the registered SDR either discovers an 

error in a transaction on its system or 

receives notice of an error from a 

reporting side, Rule 905(b)(1) requires 

the registered SDR to verify the accuracy 

of the terms of the security-based swap 

and, following such verification, 

promptly correct the erroneous 

information contained in its system. 

Rule 905(b)(2) further requires that, if 

such erroneous information relates to a 

security-based swap that the registered 

SDR previously disseminated and falls 

into any of the categories of information 

enumerated in Rule 901(c), the 

registered SDR must publicly 

disseminate a corrected transaction 

report of the security-based swap 

promptly following verification of the 

trade by the counterparties to the 

security-based swap, with an indication 

that the report relates to a previously 

disseminated transaction. 

2. Use of Information 

The security-based swap transaction 

information required to be reported 

pursuant to Rule 905 will be used by 

registered SDRs, participants, the 

Commission, and other relevant 

authorities. Participants will be able to 

use such information to evaluate and 

manage their own risk positions and 

satisfy their duties to report corrected 

information to a registered SDR. A 

registered SDR will need the required 

information to correct security-based 

swap transaction records, in order to 

maintain an accurate record of a 

participant’s positions as well as to 

disseminate corrected information. The 

Commission and other relevant 

authorities will need the corrected 

information to have an accurate 

understanding of the market for 

surveillance and oversight purposes. 

3. Respondents 

Rule 905 applies to all participants of 

registered SDRs. As noted above, the 

Commission estimates that there will be 

approximately 300 reporting sides that 

incur the duty to report security-based 

swap transactions pursuant to Rule 901. 

In addition, the Commission estimates 

that there may be up to 4,800 securitybased swap counterparties that are 

participants of one or more registered 

SDRs. Because any of these 

counterparties who are participants 

could become aware of errors in their 

reported transaction data, the 

Commission estimates that there may be 

as many as 4,800 respondents for 

purposes of the PRA. 

Rule 905 also applies to registered 

SDRs. As noted above, the Commission 

estimates there will be ten registered 

SDRs. 

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14682 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1125See Regulation SBSR Proposing Release, 75 

FR 75254. 1126See Regulation SBSR Proposing Release, 75 

FR 75254–55. This figure is calculated as follows: 

[(((172 burden hours for one-time development of 

reporting system) × (0.05)) + ((33 burden hours 

annual maintenance of reporting system) × (0.05)) 

+ ((180 burden hours one-time compliance program 

development) × (0.1)) + ((218 burden hours annual 

support of compliance program) × (0.1))) × (300 

reporting sides)] = 15,015 burden hours, which is 

50 burden hours per reporting side. The burden 

hours for annual maintenance of the reporting 

system has been updated to reflect new information 

on the number of reportable events. See supra note 

1075. 

1127See Regulation SBSR Proposing Release, 75 

FR 75254–55. This figure is calculated as follows: 

[(((33 burden hours annual maintenance of 

reporting system) × (0.05)) + ((218 burden hours 

annual support of compliance program) × (0.1))) × 

(300 reporting sides)] = 7,035 burden hours, which 

is 23.5 burden hours per reporting side. The burden 

hours for annual maintenance of the reporting 

system has been updated to reflect new information 

on the number of reportable events. See supra note 

1075. 

1128This burden was calculated using the same 

methodology as was used in the Regulation SBSR 

Proposing Release, updated to account for new 

estimates of the number of error notifications 

resulting from updates in the number of reportable 

events. See Regulation SBSR Proposing Release, 75 

FR 75255. This figure is based on the following: 

[(1.14 error notifications per non-reporting-side 

participant per day) × (365 days/year) × 

(Compliance Clerk at 0.5 hours/report) × (4,800 

participants)] = 998,640 burden hours, which 

corresponds to 208.05 burden hours per nonreporting-side participant. 

1129This figure is based on the following: 

[((2,000,000 estimated annual security-based swap 

transactions) / (4,800 participants)) / (365 days/

year)] = 1.14 transactions per day, on average. 

1130See Regulation SBSR Proposing Release, 75 

FR 75255. This figure is based on the following: 

[(Sr. Programmer at 80 hours) + (Compliance 

Manager at 160 hours) + (Compliance Attorney at 

250 hours) + (Compliance Clerk at 120 hours) + (Sr. 

System Analyst at 80 hours) + (Director of 

Compliance at 40 hours)] = 730 burden hours. 

1131See Regulation SBSR Proposing Release, 75 

FR 75255. This figure is based on the following: 

[(Sr. Programmer at 160 hours) + (Compliance 

Manager at 320 hours) + (Compliance Attorney at 

500 hours) + (Compliance Clerk at 240 hours) + (Sr. 

System Analyst at 160 hours) + (Director of 

Compliance at 80 hours)] = 1,460 burden hours. 

1132This figure is based on the following: [(730 

burden hours to develop protocols) + (1,460 burden 

hours annual support)) × (10 registered SDRs)] = 

21,900 burden hours, which corresponds to 2,190 

burden hours per registered SDR. 

1133This figure is based on the following: [(1,460 

burden hours annual support) × (10 registered 

SDRs)] = 14,600 burden hours, which corresponds 

to 1,460 burden hours per registered SDR. 

4. Total Initial and Annual Reporting 

and Recordkeeping Burdens 

The duty to promptly submit 

amended transaction reports to the 

appropriate registered SDR after 

discovery of an error, as required under 

Rule 905(a)(2), will impose burdens on 

reporting sides. The duty to promptly 

notify the relevant reporting side after 

discovery of an error, as required under 

Rule 905(a)(1), will impose burdens on 

non-reporting-side participants. 

With respect to reporting sides, the 

Commission believes that Rule 905(a) 

will impose an initial, one-time burden 

associated with designing and building 

the reporting side’s reporting system to 

be capable of submitting amended 

security-based swap transactions to a 

registered SDR. The Commission 

believes that designing and building 

appropriate reporting system 

functionality to comply with Rule 

905(a)(2) will be a component of, and 

represent an incremental ‘‘add-on’’ to, 

the cost to build a reporting system and 

develop a compliance function as 

required under Rule 901. Based on 

discussions with industry participants, 

the Commission estimates this 

incremental burden to be equal to 5% of 

the one-time and annual burdens 

associated with designing and building 

a reporting system that is in compliance 

with Rule 901, plus 10% of the 

corresponding one-time and annual 

burdens associated with developing the 

reporting side’s overall compliance 

program required under Rule 901. This 

estimate is based on similar calculations 

contained in the Regulation SBSR 

Proposing Release,1125 updated to 

reflect new estimates relating to the 

number of reportable events and the 

number of reporting sides. Thus, for 

reporting sides, the Commission 

estimates that Rule 905(a) will impose 

an initial (first-year) aggregate burden of 

15,015 hours, which is 50.0 burden 

hours per reporting side,1126 and an 

ongoing aggregate annualized burden of 

7,035 hours, which is 23.5 burden hours 

per reporting side.1127

The Commission believes that the 

actual submission of amended 

transaction reports required under Rule 

905(a)(2) will not result in a material 

burden because this will be done 

electronically though the reporting 

system that the reporting side must 

develop and maintain to comply with 

Rule 901. The overall burdens 

associated with such a reporting system 

are addressed in the Commission’s 

analysis of Rule 901. 

With regard to non-reporting-side 

participants, the Commission believes 

that Rule 905(a) will impose an initial 

and ongoing burden associated with 

promptly notifying the relevant 

reporting party after discovery of an 

error as required under Rule 905(a)(1). 

The Commission estimates that the 

annual burden will be 998,640 hours, 

which corresponds to 208.05 burden 

hours per non-reporting-side 

participant.1128 This figure is based on 

the Commission’s estimate of (1) 4,800 

participants; and (2) 1 transaction per 

day per non-reporting-side 

participant.1129 The burdens of Rule 905 

on reporting sides and non-reportingside participants will be reduced to the 

extent that complete and accurate 

information is reported to registered 

SDRs in the first instance pursuant to 

Rule 901. 

Rule 905(b) requires a registered SDR 

to develop protocols regarding the 

reporting and correction of erroneous 

information. The Commission believes, 

however, that this duty would represent 

only a minor extension of other duties 

for which the Commission is estimating 

burdens, and consequently, will not 

impose substantial additional burdens 

on a registered SDR. A registered SDR 

will be required to have the ability to 

collect and maintain security-based 

swap transaction reports and update 

relevant records under the rules adopted 

in the SDR Adopting Release. Likewise, 

a registered SDR must have the capacity 

to disseminate additional, corrected 

security-based swap transaction reports 

under Rule 902. The burdens associated 

with Rule 905—including systems 

development, support, and 

maintenance—are addressed in the 

Commission’s analysis of those other 

rules. Thus, the Commission believes 

that Rule 905(b) will impose only an 

incremental additional burden on 

registered SDRs. The Commission 

estimates that developing and publicly 

providing the necessary procedures will 

impose on each registered SDR an initial 

one-time burden on each registered SDR 

of approximately 730 burden hours.1130

The Commission estimates that to 

review and update such procedures on 

an ongoing basis will impose an annual 

burden on each SDR of approximately 

1,460 burden hours.1131

Accordingly, the Commission 

estimates that the initial (first-year) 

aggregate annualized burden on 

registered SDRs under Rule 905 will be 

21,900 burden hours, which 

corresponds to 2,190 burden hours for 

each registered SDR.1132 The 

Commission further estimates that the 

ongoing aggregate annualized burden on 

registered SDRs under Rule 905 will be 

14,600 burden hours, which 

corresponds to 1,460 burden hours for 

each registered SDR.1133 This estimated 

burden is consistent with what the 

Commission proposed in the Regulation 

SBSR Proposing Release. 

5. Recordkeeping Requirements 

Security-based swap transaction 

reports received pursuant to Rule 905 

are subject to Rule 13n–5(b)(4) under 

the Exchange Act. This rule requires an 

SDR to maintain the transaction data 

and related identifying information for 

not less than five years after the 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14683 

1134See SDR Adopting Release, Section VI(E)(4). 

1135See SDR Adopting Release, Section VI(G)(2). 

1136The Commission originally estimated that 

there would be up to 5,000 participants. As 

discussed above, based on more updated and 

granular information available to the Commission, 

this estimate has been revised. See Regulation SBSR 

Proposing Release, 75 FR 75256. 

applicable security-based swap expires 

and historical positions for not less than 

five years.1134

With respect to information 

disseminated by a registered SDR in 

compliance with Rule 905(b)(2), Rule 

13n–7(b) under the Exchange Act 

requires an SDR to keep and preserve at 

least one copy of all documents, 

including all policies and procedures 

required by the Exchange Act and the 

rules or regulations thereunder, 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.1135 This requirement 

encompasses amended security-based 

swap transaction reports disseminated 

by the registered SDR. 

6. Collection of Information Is 

Mandatory 

Each collection of information 

discussed above is mandatory. 

7. Confidentiality of Responses to 

Collection of Information 

Information collected pursuant to 

Rule 905 will be widely available to the 

extent that it corrects information 

previously reported pursuant to Rule 

901(c) and incorporated into securitybased swap transaction reports that are 

publicly disseminated by a registered 

SDR pursuant to Rule 902. Most of the 

information required under Rule 902 

will be widely available to the public to 

the extent it is incorporated into 

security-based swap transaction reports 

that are publicly disseminated by a 

registered SDR pursuant to Rule 902. 

However, Rule 902(c) prohibits public 

dissemination of certain kinds of 

transactions and certain kinds of 

transaction information. An SDR, 

pursuant to Sections 13(n)(5) of the 

Exchange Act and Rules 13n–4(b)(8) and 

13n–9 thereunder is required to 

maintain the privacy of this securitybased swap information. To the extent 

that the Commission receives 

confidential information pursuant to 

this collection of information, such 

information will be kept confidential, 

subject to the provisions of applicable 

law. 

G. Other Duties of Participants—Rule 

906 

Rule 906(a), as adopted, establishes 

procedures designed to ensure that a 

registered SDR obtains UICs for both 

counterparties to a security-based swap. 

Rule 906(b) requires each participant of 

a registered SDR to provide to the 

registered SDR information sufficient to 

identify its ultimate parent(s) and any 

affiliate(s) of the participant that also are 

participants of the registered SDR. Rule 

906(c) requires each participant that is 

a registered security-based swap dealer 

or registered major security-based swap 

participant to establish, maintain, and 

enforce written policies and procedures 

(updated at least annually) that are 

reasonably designed to ensure 

compliance with any security-based 

swap transaction reporting obligations 

in a manner consistent with Regulation 

SBSR. 

Certain provisions of Rule 906 of 

Regulation SBSR contain ‘‘collection of 

information requirements’’ within the 

meaning of the PRA. The title of this 

collection is ‘‘Rule 906—Duties of All 

Participants.’’ 

Although the Commission is adopting 

Rule 906 with certain minor changes 

from the version re-proposed in the 

Cross-Border Proposing Release, these 

changes do not increase the number of 

respondents to Rule 906 or affect the 

estimated burdens on respondents to 

Rule 906. Therefore, the Commission is 

not revising its estimate of the burdens 

associated with Rule 906. 

1. Summary of Collection of Information 

Rule 906(a) sets forth a procedure 

designed to ensure that a registered SDR 

obtains relevant UICs for both sides of 

a security-based swap, not just of the 

reporting side. Rule 906(a) requires a 

registered SDR to identify any securitybased swap reported to it for which the 

registered SDR does not have a 

counterparty ID and (if applicable) 

broker ID, trading desk ID, and trader ID 

of each counterparty. Rule 906(a) further 

requires the registered SDR, once a day, 

to send a report to each participant 

identifying, for each security-based 

swap to which that participant is a 

counterparty, the security-based swap(s) 

for which the registered SDR lacks 

counterparty ID and (if applicable) 

broker ID, trading desk ID, and trader 

ID. A participant that receives such a 

report must provide the missing ID 

information to the registered SDR 

within 24 hours. 

Rule 906(b) requires each participant 

of a registered SDR to provide the 

registered SDR with information 

sufficient to identify the participant’s 

ultimate parent(s) and any affiliate(s) of 

the participant that are also participants 

of the registered SDR. 

Rule 906(c) requires each participant 

that is a registered security-based swap 

dealer or registered major security-based 

swap participant to establish, maintain, 

and enforce written policies and 

procedures that are reasonably designed 

to ensure compliance with any securitybased swap transaction reporting 

obligations in a manner consistent with 

Regulation SBSR. In addition, Rule 

906(c) requires each such participant to 

review and update its policies and 

procedures at least annually. 

2. Use of Information 

The information required to be 

provided by participants pursuant to 

Rule 906(a) will complete missing 

elements of security-based swap 

transaction reports so that the registered 

SDR has, and can make available to the 

Commission and other relevant 

authorities, accurate and complete 

records for reported security-based 

swaps. 

Rule 906(b) will be used to ensure 

that the registered SDR has, and can 

make available to the Commission and 

other relevant authorities, group-wide 

security-based swap position 

information. This information will assist 

the Commission and other relevant 

authorities with monitoring systemic 

risks in the security-based swap market. 

The policies and procedures required 

under Rule 906(c) will be used by 

participants to aid in their compliance 

with Regulation SBSR, and also used by 

the Commission as part of its ongoing 

efforts to monitor and enforce 

compliance with the federal securities 

laws, including Regulation SBSR. 

3. Respondents 

Rules 906(a) and 906(b) apply to all 

participants of registered SDRs. Based 

on the information currently available to 

the Commission, the Commission now 

believes that there may be up to 4,800 

participants.1136 Rule 906(c) applies to 

participants that are registered securitybased swap dealers or registered major 

security-based swap participants. The 

Commission estimates that there will be 

55 registered security-based swap 

dealers and registered major securitybased swap dealers. 

Rule 906 also imposes certain duties 

on registered SDRs. As noted above, the 

Commission estimates that there will be 

ten registered SDRs. 

4. Total Initial and Annual Reporting 

and Recordkeeping Burdens 

a. For Registered SDRs 

Rule 906(a) requires a registered SDR, 

once a day, to send a report to each 

participant identifying, for each 

security-based swap to which that 

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14684 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1137See Regulation SBSR Proposing Release, 75 

FR 75256. The Commission has derived the total 

estimated burdens based on the following estimates, 

which are based on the information provided to the 

Commission: (Senior Systems Analyst at 40 hours) 

+ (Sr. Programmer at 40 hours) + (Compliance 

Manager at 16 hours) + (Director of Compliance at 

8 hours) + (Compliance Attorney at 8 hours) = 112 

burden hours. 

1138See Regulation SBSR Proposing Release, 75 

FR 75256–57. The Commission has derived the total 

estimated burdens based on the following estimates, 

which are based on the information provided to the 

Commission: (Senior Systems Analyst at 24 hours) 

+ (Sr. Programmer at 24 hours) + (Compliance Clerk 

at 260 hours) = 308 burden hours. 

1139See Regulation SBSR Proposing Release, 75 

FR 75256–57. The Commission derived its estimate 

from the following: [(112 + 308 burden hours) × (10 

registered SDRs)] = 4,200 burden hours, which 

corresponds to 420 burden hours per registered 

SDR. 

1140See Regulation SBSR Proposing Release, 75 

FR 75256–57. The Commission derived its estimate 

from the following: [(308 burden hours) × (10 

registered SDRs)] = 3,080 burden hours, which 

corresponds to 308 burden hours per registered 

SDR. 

1141This burden was calculated using the same 

methodology as was used in the Regulation SBSR 

Proposing Release, updated to account for new 

estimates of the number of missing information 

reports resulting from updates in the number of 

reportable events. See Regulation SBSR Proposing 

Release, 75 FR 75256–57. This figure is based on 

the following: [(1.14 missing information reports 

per participant per day) × (365 days/year) × 

(Compliance Clerk at 0.1 hours/report) × (4,800 

participants) = 199,728 burden hours, which 

corresponds to 41.6 burden hours per participant. 

1142This figure is based on the following: 

[((2,000,000 estimated annual security-based swap 

transactions) / 4,800 participants)) / (365 days/

year)] = 1.14 transactions per day, or approximately 

1 transaction per day. 

1143The Commission estimates that, during the 

first year, each participant will submit an initial 

report and one update report and, in subsequent 

years, will submit two update reports. 

1144See Regulation SBSR Proposing Release, 75 

FR 75257. This figure is based on the following: 

[(Compliance Clerk at 0.5 hours per report) × (2 

reports/year/SDR connection) × (2 SDR 

connections/participant) × (4,800 participants)] = 

9,600 burden hours, which corresponds to 2 burden 

hours per participant. 

1145See Regulation SBSR Proposing Release, 75 

FR 75257. This figure is based on the following: 

[(Sr. Programmer at 40 hours) + (Compliance 

Manager at 40 hours) + (Compliance Attorney at 40 

hours) + (Compliance Clerk at 40 hours) + (Sr. 

Systems Analyst at 32 hours) + (Director of 

Compliance at 24 hours)] = 216 burden hours per 

covered participant. 

1146See Regulation SBSR Proposing Release, 75 

FR 75257. 

1147See Regulation SBSR Proposing Release, 75 

FR 75257. This figure is based on the following: 

[(Sr. Programmer at 8 hours) + (Compliance 

Manager at 24 hours) + (Compliance Attorney at 24 

hours) + (Compliance Clerk at 24 hours) + (Sr. 

Systems Analyst at 16 hours) + (Director of 

Compliance at 24 hours)] = 120 burden hours per 

covered participant. 

1148This figure is based on the following: [(216 

+ 120 burden hours) × (55 covered participants)] = 

18,480 burden hours. 

1149This figure is based on the following: [(120 

burden hours) × (55 covered participants)] = 6,600 

burden hours. 

1150This figure is based on the following: [(4,200 

burden hours for registered SDRs under Rule 

906(a)) + (199,728 burden hours for participants 

participant is a counterparty, any 

security-based swap(s) for which the 

registered SDR lacks counterparty ID 

and (if applicable) broker ID, trading 

desk ID, and trader ID. The Commission 

estimates that there will be a one-time, 

initial burden of 112 burden hours for 

a registered SDR to create a report 

template and develop the necessary 

systems and processes to produce a 

daily report required by Rule 906(a).1137

Further, the Commission estimates that 

there will be an ongoing annualized 

burden of 308 burden hours for a 

registered SDR to generate and issue the 

daily reports, and to enter into its 

systems the ID information supplied by 

participants in response to the daily 

reports.1138

Accordingly, the Commission 

estimates that the initial aggregate 

annualized burden for registered SDRs 

under Rule 906(a) will be 4,200 burden 

hours for all SDR respondents, which 

corresponds to 420 burden hours per 

registered SDR.1139 The Commission 

estimates that the ongoing aggregate 

annualized burden for registered SDRs 

under Rule 906(a) will be 3,080 burden 

hours, which corresponds to 308 burden 

hours per registered SDR.1140

b. For Participants 

i. Rule 906(a) 

Rule 906(a) requires any participant of 

a registered SDR that receives a report 

from that registered SDR to provide the 

missing UICs to the registered SDR 

within 24 hours. Because all SDR 

participants will likely be the nonreporting side for at least some 

transactions to which they are a 

counterparty, the Commission believes 

that all participants will be impacted by 

Rule 906(a). The Commission estimates 

that the initial and ongoing annualized 

burden under Rule 906(a) for all 

participants will be 199,728 burden 

hours, which corresponds to 41.6 

burden hours per participant.1141 This 

figure is based on the Commission’s 

estimates of (1) 4,800 participants; and 

(2) approximately 1.14 transactions per 

day per participant.1142

ii. Rule 906(b) 

Rule 906(b) requires every participant 

to provide the registered SDR an initial 

parent/affiliate report and subsequent 

reports, as needed. The Commission 

estimates that there will be 4,800 

participants, that each participant will 

connect to two registered SDRs on 

average, and that each participant will 

submit two reports each year.1143

Accordingly, the Commission estimates 

that the initial and ongoing aggregate 

annualized burden associated with Rule 

906(b) will be 9,600 burden hours, 

which corresponds to 2 burden hours 

per participant.1144 The aggregate 

burden represents an upper estimate for 

all participants; the actual burden will 

likely decrease because certain larger 

participants are likely to have multiple 

affiliates, and one member of the group 

could report ultimate parent and 

affiliate information on behalf of all of 

its affiliates at the same time. 

b. For Covered Participants 

Rule 906(c) requires each participant 

that is a registered security-based swap 

dealer or registered major security-based 

swap participant (each, a ‘‘covered 

participant’’) to establish, maintain, and 

enforce written policies and procedures 

that are reasonably designed to ensure 

compliance with any security-based 

swap transaction reporting obligations 

in a manner consistent with Regulation. 

Rule 906(c) also requires the review and 

updating of such policies and 

procedures at least annually. The 

Commission estimates that the one-time, 

initial burden for each covered 

participant to adopt written policies and 

procedures as required under Rule 

906(c) will be approximately 216 

burden hours.1145 As discussed in the 

Regulation SBSR Proposing Release,1146

this figure is based on the estimated 

number of hours to develop a set of 

written policies and procedures, 

program systems, implement internal 

controls and oversight, train relevant 

employees, and perform necessary 

testing. In addition, the Commission 

estimates the burden of maintaining 

such policies and procedures, including 

a full review at least annually, as 

required by Rule 906(c), will be 

approximately 120 burden hours for 

each covered participant.1147 This figure 

includes an estimate of hours related to 

reviewing existing policies and 

procedures, making necessary updates, 

conducting ongoing training, 

maintaining internal controls systems, 

and performing necessary testing. 

Accordingly, the Commission estimates 

that the initial aggregate annualized 

burden associated with Rule 906(c) will 

be 18,480 burden hours, which 

corresponds to 336 burden hours per 

covered participant.1148 The 

Commission estimates that the ongoing 

aggregate annualized burden associated 

with Rule 906(c) will be 6,600 burden 

hours, which corresponds to 120 burden 

hours per covered participant.1149

Therefore, the Commission estimates 

that the total initial aggregate 

annualized burden associated with Rule 

906 will be 232,008 burden hours,1150

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14685 

under Rule 906(a)) + (9,600 burden hours for 

participants under Rule 906(b)) + (18,480 burden 

hours for covered participants under Rule 906(c))] 

= 232,008 burden hours. 

1151This figure is based on the following: [(3,080 

burden hours for registered SDRs under proposed 

Rule 906(a)) + (199,728 burden hours for 

participants under proposed Rule 906(a)) + (9,600 

burden hours for participants under proposed Rule 

906(b)) + (6,600 burden hours for covered 

participants under proposed Rule 906(c))] = 219,008 

burden hours. 

1152See Securities Exchange Act Release No. 

71958 (April 17, 2014), 79 FR 25193 (May 2, 2014) 

(‘‘SD/MSP Recordkeeping Proposing Release’’) 

(proposing recordkeeping and reporting 

requirements for security-based swap dealers, major 

security-based swap participants, and brokerdealers). 

1153See SDR Adopting Release, Section VI(E)(4). 

1154See SD/MSP Recordkeeping Proposing 

Release, 79 FR 25193. 

1155See Regulation SBSR Proposing Release, 75 

FR 75259. This figure is based on the following: 

[(Sr. Programmer at 1,667 hours) + (Compliance 

Manager at 3,333 hours) + (Compliance Attorney at 

5,000 hours) + (Compliance Clerk at 2,500 hours) 

+ (Sr. System Analyst at 1,667 hours) + (Director of 

Compliance at 833 hours)] = 15,000 burden hours 

per registered SDR. These burdens are the result of 

Rule 907 only and do not account for any burdens 

that result from the SDR Rules. Such burdens are 

addressed in a separate release. See SDR Adopting 

Release, Section VII. 

1156See Regulation SBSR Proposing Release, 75 

FR 75259. This figure also includes time necessary 

to design and program systems and implement 

policies and procedures to assign certain UICs, as 

required by Rule 907(a)(5). 

1157See Regulation SBSR Proposing Release, 75 

FR 75259. This figure is based on the following: 

[(Sr. Programmer at 3,333 hours) + (Compliance 

Manager at 6,667 hours) + (Compliance Attorney at 

10,000 hours) + (Compliance Clerk at 5,000 hours) 

+ (Sr. System Analyst at 3,333 hours) + (Director of 

Compliance at 1,667 hours)] = 30,000 burden hours 

per registered SDR. 

1158This figure is based on the following: 

[((15,000 burden hours per registered SDR) + 

(30,000 burden hours per registered SDR)) × (10 

registered SDRs)] = 450,000 initial annualized 

aggregate burden hours during the first year. 

and the total ongoing aggregate 

annualized burden will be 219,008 

burden hours for all participants.1151

5. Recordkeeping Requirements 

The daily reports that participants 

complete in order to provide missing 

UICs to a registered SDR pursuant to 

Rule 906(a) and the initial parent/

affiliate reports and subsequent reports 

required by Rule 906(b) are not subject 

to any specific recordkeeping 

requirements for participants to the 

extent that these participants are nonregistered persons.1152 With regard to 

these reports, as well as any other 

information that a registered SDR may 

receive from participants pursuant to 

Rule 906, Rule 13n–5(b)(4) requires an 

SDR to maintain this information for not 

less than five years after the applicable 

security-based swap expires.1153

The Commission has proposed but 

not yet adopted recordkeeping 

requirements for registered securitybased swap dealers and registered major 

security-based swap participants.1154

6. Collection of Information Is 

Mandatory 

Each collection of information 

discussed above is mandatory. 

7. Confidentiality of Responses to 

Collection of Information 

The collection of information required 

by Rule 906 will not be widely 

available. To the extent that the 

Commission receives confidential 

information pursuant this collection of 

information, such information will be 

kept confidential, subject to applicable 

law. 

H. Policies and Procedures of Registered 

SDRs—Rule 907 

Rule 907, as adopted, requires each 

registered SDR to establish and maintain 

policies and procedures addressing 

various aspects of Regulation SBSR 

compliance. Certain provisions of Rule 

907 of Regulation SBSR contain 

‘‘collection of information 

requirements’’ within the meaning of 

the PRA. The title of this collection is 

‘‘Rule 907—Policies and Procedures of 

Registered SDRs.’’ 

1. Summary of Collection of Information 

Rule 907(a) requires a registered SDR 

to establish and maintain written 

policies and procedures that detail how 

it will receive and publicly disseminate 

security-based swap transaction 

information. Rule 907(a)(4) requires 

policies and procedures for assigning 

‘‘special circumstances’’ flags to the 

necessary transaction reports. 

Rule 907(c) requires a registered SDR 

to make its policies and procedures 

available on its Web site. Rule 907(d) 

requires a registered SDR to review, and 

update as necessary, the policies and 

procedures that it is required to have by 

Regulation SBSR at least annually. Rule 

907(e) requires a registered SDR to 

provide to the Commission, upon 

request, information or reports related to 

the timeliness, accuracy, and 

completeness of data reported to it 

pursuant to Regulation SBSR and the 

registered SDR’s policies and 

procedures established thereunder. 

2. Use of Information 

The policies and procedures required 

under Rules 907(a) and 907(b) will be 

used by reporting sides to understand 

the specific data elements of securitybased swap transactions that they must 

report and the specific data formats and 

other reporting protocols that they will 

be required to use. These policies and 

procedures will be used generally by 

registered SDRs to aid in their 

compliance with Regulation SBSR, and 

also by the Commission as part of its 

ongoing efforts to monitor and enforce 

compliance with the federal securities 

laws, including Regulation SBSR. 

Finally, any information or reports 

provided to the Commission pursuant to 

Rule 907(e) will be used by the 

Commission to assess the timeliness, 

accuracy, and completeness of reported 

transaction data and assist the 

Commission’s efforts to enforce 

applicable security-based swap 

reporting rules. 

3. Respondents 

Rule 907 applies to registered SDRs. 

As noted above, the Commission 

estimates that there will be ten 

registered SDRs. 

4. Total Initial and Annual Reporting 

and Recordkeeping Burdens 

The Commission estimates that the 

one-time, initial burden for a registered 

SDR to adopt written policies and 

procedures as required under Rule 907 

will be approximately 15,000 hours.1155

As discussed in the Regulation SBSR 

Proposing Release, this figure is based 

on the estimated number of hours to 

develop a set of written policies and 

procedures, program systems, 

implement internal controls and 

oversight, train relevant employees, and 

perform necessary testing.1156 In 

addition, the Commission estimates the 

annual burden of maintaining such 

policies and procedures, including a full 

review at least annually, making 

available its policies and procedures on 

the registered SDR’s Web site, and 

information or reports on noncompliance, as required under Rule 

907(e), will be approximately 30,000 

hours for each registered SDR.1157 As 

discussed in the Regulation SBSR 

Proposing Release, this figure includes 

an estimate of hours related to 

reviewing existing policies and 

procedures, making necessary updates, 

conducting ongoing training, 

maintaining relevant systems and 

internal controls systems, performing 

necessary testing, monitoring 

participants, and compiling data. 

The Commission estimates that the 

initial annualized burden associated 

with Rule 907 will be approximately 

45,000 hours per registered SDR, which 

corresponds to an initial annualized 

aggregate burden of approximately 

450,000 hours.1158 The Commission 

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14686 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1159See Regulation SBSR Proposing Release, 75 

FR 75259. This figure is based on the following: 

[(Sr. Programmer at 3,333 hours) + (Compliance 

Manager at 6,667 hours) + (Compliance Attorney at 

10,000 hours) + (Compliance Clerk at 5,000 hours) 

+ (Sr. System Analyst at 3,333 hours) + (Director of 

Compliance at 1,667 hours)] = 30,000 burden hours 

per registered SDR. 

1160See Regulation SBSR Proposing Release, 75 

FR 75259. This figure is based on the following: 

[(30,000 burden hours per registered SDR) × (10 

registered SDRs)] = 300,000 ongoing, annualized 

aggregate burden hours. 

1161See 17 CFR 200.0–13; Cross-Border Adopting 

Release, 79 FR 47357–60. 1162See Cross-Border Proposing Release, 78 FR 

31109–10. 1163See id. at 31110. Rule 908(c)(2)(ii), as 

adopted, allows ‘‘[a] party that potentially would 

comply with requirements under [Regulation SBSR] 

. . . or any foreign financial regulatory authority or 

authorities supervising such a person’s securitybased swap activities may file an application.’’ 

estimates that the ongoing annualized 

burden associated with Rule 907 will be 

approximately 30,000 hours per 

registered SDR,1159 which corresponds 

to an ongoing annualized aggregate 

burden of approximately 300,000 

hours.1160

5. Recordkeeping Requirements 

Rule 13n–7(b) under the Exchange 

Act requires an 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 or 

regulations thereunder, 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. This requirement will 

encompass policies and procedures 

established by a registered SDR 

pursuant to Rule 907, and any 

information or reports provided to the 

Commission pursuant to Rule 907(e). 

6. Collection of Information Is 

Mandatory 

Each collection of information 

discussed is mandatory. 

7. Confidentiality of Responses to 

Collection of Information 

All of the policies and procedures 

required by Rule 907 will have to be 

made available by a registered SDR on 

its Web site and will not, therefore, be 

confidential. Any information obtained 

by the Commission from a registered 

SDR pursuant to Rule 907(e) relating to 

the timeliness, accuracy, and 

completeness of data reported to the 

registered SDR will be kept confidential 

subject to the provisions of applicable 

law. 

I. Cross-Border Matters—Rule 908 

Rule 908(a), as adopted, defines when 

a security-based swap transaction will 

be subject to regulatory reporting and/or 

public dissemination. Specifically, Rule 

908(a)(1)(i), as adopted, provides that a 

security-based swap shall be subject to 

regulatory reporting and public 

dissemination if ‘‘[t]here is a direct or 

indirect counterparty that is a U.S. 

person on either or both sides of the 

transaction.’’ Rule 908(a)(1)(ii), as 

adopted, provides that a security-based 

swap shall be subject to regulatory 

reporting and public dissemination if 

‘‘[t]he security-based swap is submitted 

to a clearing agency having its principal 

place of business in the United States.’’ 

Rule 908(a)(2), as adopted, provides that 

a security-based swap not included 

within the above provisions would be 

subject to regulatory reporting but not 

public dissemination ‘‘if there is a direct 

or indirect counterparty on either or 

both sides of the transaction that is a 

registered security-based swap dealer or 

a registered major security-based swap 

participant.’’ 

Regulation 908(b), as adopted, defines 

when a person might incur obligations 

under Regulation SBSR. Specifically, 

Rule 908(b) provides that, 

notwithstanding any other provision of 

Regulation SBSR, a person shall not 

incur any obligation under Regulation 

SBSR unless it is a U.S. person, a 

registered security-based swap dealer or 

registered major security-based swap 

participant. 

Rules 908(a) and 908(b) do not impose 

any collection of information 

requirements. To the extent that a 

security-based swap transaction or 

counterparty is subject to Rule 908(a) or 

908(b), respectively, the collection of 

information burdens are calculated as 

part of the underlying rule (e.g., Rule 

901, which imposes the basic duty to 

report security-based swap transaction 

information). 

Rule 908(c), as adopted, sets forth the 

requirements surrounding requests for 

substituted compliance. As adopted, 

Rule 908(c)(1) sets forth the general rule 

that compliance with the regulatory 

reporting and public dissemination 

requirements in sections 13(m) and 13A 

of the Act (15 U.S.C. 78m(m) and 78m– 

1), and the rules and regulations 

thereunder, may be satisfied by 

compliance with the rules of a foreign 

jurisdiction that is the subject of a 

Commission order described in Rule 

908(c)(2), provided that at least one of 

the direct counterparties is either a nonU.S. person or a foreign branch. 

Rule 908(c) contains ‘‘collection of 

information requirements’’ within the 

meaning of the PRA. The title of this 

collection is ‘‘Rule 908(c)—Substituted 

Compliance.’’ 

1. Summary of Collection of Information 

A party that potentially would 

comply with requirements under 

Regulation SBSR pursuant to a 

substituted compliance order or any 

foreign financial regulatory authority or 

authorities supervising such a person’s 

security-based swap activities, may file 

an application requesting that the 

Commission make a substituted 

compliance determination pursuant to 

Rule 0–13 under the Exchange Act.1161

Such entity will be required to provide 

the Commission with any supporting 

documentation as the Commission may 

request, in addition to information that 

the entity believes is necessary for the 

Commission to make a determination, 

such as information demonstrating that 

the requirements applied in the foreign 

jurisdiction are comparable to the 

Commission’s and describing the 

methods used by relevant foreign 

financial regulatory authorities to 

monitor compliance with those 

requirements. 

2. Use of Information 

The Commission will use the 

information collected pursuant to Rule 

908(c)(2)(ii) to evaluate requests for 

substituted compliance with regard to 

regulatory reporting and public 

dissemination of security-based swaps. 

3. Respondents 

In the Cross-Border Proposing 

Release, the Commission preliminarily 

estimated that requests for substituted 

compliance determinations might arise 

in connection with security-based swap 

market participants and transactions in 

up to 30 discrete jurisdictions.1162

Because only a small number of 

jurisdictions have substantial OTC 

derivatives markets and are 

implementing OTC derivatives reforms, 

the Commission preliminarily estimated 

that it would receive approximately ten 

requests in the first year for substituted 

compliance determinations with respect 

to regulatory reporting and public 

dissemination pursuant to Rule 

908(c)(2)(ii), and two requests each 

subsequent year.1163 Although the range 

of entities that are allowed to submit 

applications for substituted compliance 

has increased, the Commission does not 

believe that this warrants a change in its 

estimate of the number of requests that 

the Commission will receive. The 

Commission continues to believe that 

other considerations will determine the 

number of applications that it will 

receive, such as which jurisdictions 

have regulatory structures similar 

enough to the Commission’s as to merit 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14687 

1164The Commission staff estimates that the 

paperwork burden associated with making a 

substituted compliance request pursuant to Rule 

908(c)(2)(ii) will be approximately 80 of in-house 

counsel time, plus $80,000 for the services of 

outside professionals (based on 200 hours of 

outside counsel time × $400). See id., Cross-Border 

Proposing Release, 78 FR 31110 

1165 If and when the Commission grants a request 

for substituted compliance, subsequent applications 

might be able to leverage work done on the initial 

application. However, the Commission is unable to 

estimate the amount by which the cost could 

decrease without knowing the extent to which 

different jurisdictions have similar regulatory 

structures. 

1166The Commission staff estimates that the 

paperwork burden associated with making a 

substituted compliance request pursuant to Rule 

242.908(c)(2)(ii) will be up to approximately 800 

hours (80 hours of in-house counsel time × 10 

respondents), plus $800,000 for the services of 

outside professionals (based on 200 hours of 

outside counsel time × $400 × 10 respondents). See 

Cross-Border Proposing Release, 78 FR 31110. 

1167The Commission staff estimates that the 

paperwork burden associated with making a 

substituted compliance request pursuant to Rule 

242.908(c)(2)(ii) would be up to approximately 160 

hours (80 hours of in-house counsel time × 2 

respondents) + plus $160,000 for the services of 

outside professionals (based on 200 hours of 

outside counsel time × $400 × 2 respondents). See 

Cross-Border Proposing Release, 78 FR 31110. 

1168See Regulation SBSR Proposing Release, 75 

FR 75261. 

1169See SDR Adopting Release, Section 

VI(A)(1)(c). 

a request and the number of entities 

potentially impacted by Regulation 

SBSR. 

4. Total Initial and Annual Reporting 

and Recordkeeping Burdens 

Rule 908(c)(2)(ii), as adopted, applies 

to any person that requests a substituted 

compliance determination with respect 

to regulatory reporting and public 

dissemination of security-based swaps. 

In connection with each request, the 

requesting party must provide the 

Commission with any supporting 

documentation that the entity believes 

is necessary for the Commission to make 

a determination, including information 

demonstrating that the requirements 

applied in the foreign jurisdiction are 

comparable to the Commission’s and 

describing the methods used by relevant 

foreign financial regulatory authorities 

to monitor compliance with those 

requirements. The Commission initially 

estimated, in the Cross-Border 

Proposing Release, that the total 

paperwork burden associated with 

submitting a request for a substituted 

compliance determination with respect 

to regulatory reporting and public 

dissemination will be approximately 

1,120 hours, plus $1,120,000 for 14 

requests.1164 This estimate includes all 

collection burdens associated with the 

request, including burdens associated 

with analyzing whether the regulatory 

requirements of the foreign jurisdiction 

impose a comparable, comprehensive 

system for the regulatory reporting and 

public dissemination of all securitybased swaps. Furthermore, this estimate 

assumes that each request will be 

prepared de novo, without any benefit 

of prior work on related subjects. The 

Commission notes, however, that as 

such requests are developed with 

respect to certain jurisdictions, the cost 

of preparing such requests with respect 

to other foreign jurisdictions could 

decrease.1165

Assuming ten requests in the first 

year, the Commission staff estimated an 

aggregated burden for the first year will 

be 800 hours, plus $800,000 for the 

services of outside professionals.1166

The Commission preliminarily 

estimated that it would receive 2 

requests for substituted compliance 

determinations pursuant to Rule 

908(c)(2)(ii) in each subsequent year. 

Assuming the same approximate time 

and costs, the aggregate burden for each 

year following the first year will be up 

to 160 hours of company time and 

$160,000 for the services of outside 

professionals.1167

5. Recordkeeping Requirements 

Rule 908(c)(2)(ii) does not impose any 

recordkeeping requirements on entities 

that submit requests for a substituted 

compliance determination. The 

Commission has proposed but not yet 

adopted recordkeeping requirements for 

registered security-based swap dealers. 

6. Collection of Information Is 

Mandatory 

The collection of information 

discussed above is mandatory for any 

entity seeking a substituted compliance 

determination from the Commission 

regarding regulatory reporting and 

public dissemination of security-based 

swaps. 

7. Confidentiality of Responses to 

Collection of Information 

The Commission generally intends to 

make public the information submitted 

to it pursuant to any request for a 

substituted compliance determination 

under Rule 908(c)(2)(ii), including 

supporting documentation provided by 

the requesting party. However, a 

requesting party may submit a 

confidential treatment request pursuant 

to Rule 24b–2 under the Exchange Act 

to object to public disclosure. 

J. Registration of SDRs as Securities 

Information Processors—Rule 909 

Rule 909 requires a registered SDR 

also to register with the Commission as 

a SIP on Form SDR. Previously, in the 

Regulation SBSR Proposing Release, the 

Commission had proposed the use of a 

separate form, Form SIP. Based on the 

use of that form, the Commission stated 

in the Regulation SBSR Proposing 

Release that Rule 909 contained 

‘‘collection of information 

requirements’’ within the meaning of 

the PRA and thus, the Commission 

preliminarily estimated certain burdens 

on registered SDRs that would result 

from Rule 909.1168 As a result of the 

consolidation of SDR and SIP 

registration on a single form, the 

Commission now believes that Rule 909 

does not constitute a separate 

‘‘collection of information’’ within the 

meaning of the PRA.1169

XXII. Economic Analysis 

The Commission is sensitive to the 

economic consequences and effects, 

including costs and benefits, of its rules. 

Some of these costs and benefits stem 

from statutory mandates, while others 

are affected by the discretion exercised 

in implementing the mandates. The 

following economic analysis identifies 

and considers the costs and benefits— 

including the effects on efficiency, 

competition, and capital formation— 

that may result from the rules, as 

adopted . These costs and benefits are 

discussed below and have informed the 

policy choices described throughout 

this release. 

The Dodd-Frank Act amended the 

Exchange Act to require the regulatory 

reporting and public dissemination of 

all security-based swaps. To implement 

these requirements, Regulation SBSR 

requires that all security-based swaps to 

be reported to a registered SDR, and 

requires the registered SDR immediately 

to disseminate a subset of that 

information to the public. Regulation 

SBSR specifies the security-based swap 

information that must be reported, who 

has the duty to report, and the 

timeframes for reporting and 

disseminating information. Regulation 

SBSR also requires registered SDRs to 

establish policies and procedures 

governing the reporting and 

dissemination process, including 

procedures for utilizing unique 

identification codes for legal entities, 

units of legal entities (such as branches, 

trading desks, and individual traders), 

products, and transactions. In the 

Regulation SBSR Proposing Release, the 

Commission highlighted certain 

overarching benefits to the securitybased swap markets that it preliminarily 

believed would result from the adoption 

of Regulation SBSR. These potential 

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14688 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1170See Regulation SBSR Proposing Release, 75 

FR 75261–62. 

1171See Cross-Border Proposing Release, 78 FR 

31196–97. 

1172While certain parties that generally will have 

the heaviest duties to report transactions (e.g., 

registered security-based swap dealers and 

registered major security-based swap participants) 

will incur costs, the costs of those parties generally 

will be lower than they would be for other parties 

(e.g., non-dealers) because those parties may 

already have the necessary infrastructure in place 

to report transactions and they will benefit from 

economies of scale due to the high volume of 

transactions that flows through them compared to 

other parties. Although security-based swap dealers 

and major security-based swap participants might 

pass on these costs, at least in part, to their nonreporting counterparties, the costs that are passed 

on to non-reporting parties are likely to be lower 

than the costs that the non-reporting parties would 

face if they had direct responsibility to report these 

transactions. 

1173See Cross-Border Proposing Release, 78 FR 

31192. 

1174See Analysis of Post-Trade Transparency, in 

which Commission staff describes the effects of 

post-trade transparency on relatively illiquid swaps. 

1175See Cross-Border Adopting Release, 79 FR 

47283–85. 

1176See, e.g., Markus K. Brunnermeier and Lasse 

Heje Pedersen, ‘‘Market Liquidity and Funding 

Liquidity,’’ Review of Financial Studies (2009); 

Denis Gromb and Dimitri Vayanos, ‘‘A Model of 

Financial Market Liquidity,’’ Journal of the 

European Economic Association (2010). 

benefits include, generally, improved 

market quality, improved risk 

management, greater efficiency, and 

improved Commission oversight.1170

In the Cross-Border Proposing 

Release, the Commission re-proposed 

Regulation SBSR in its entirety and 

considered the changes to the initial 

assessments of costs and benefits 

associated with the re-proposed rules. In 

doing so, the Commission explained 

that Regulation SBSR is intended to 

further the goals highlighted in the 

Regulation SBSR Proposing Release, 

while further limiting, to the extent 

practicable, the overall costs to the 

security-based swap market associated 

with regulatory reporting and public 

dissemination in cross-border 

situations.1171 The adopted rules are 

designed to limit overall costs by 

imposing reporting duties and the 

associated costs on those parties who 

are most likely to have the necessary 

infrastructure in place to carry out the 

reporting function.1172 As the 

Commission noted, many of the 

revisions set forth in the re-proposal 

were suggested by commenters to the 

initial proposal and were designed, 

among other things, to better align 

reporting duties with larger entities that 

have greater resources and capability to 

report and to reduce the potential for 

duplicative reporting. The Commission 

stated that the revisions should help to 

limit, to the extent practicable, the 

overall costs to the security-based swap 

market associated with reporting in 

cross-border situations.1173

The Commission is now adopting 

Regulation SBSR, with certain revisions 

discussed in Sections I through XVII, 

supra. 

In assessing the economic impact of 

the rules, the Commission refers to the 

broader costs and benefits associated 

with the application of the adopted 

rules 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 

infrastructure participants (such as 

SDRs) in the security-based swap 

market. In several places the 

Commission also considers how the 

programmatic costs and benefits might 

change when comparing the adopted 

approach to other alternatives suggested 

by comment letters. The Commission’s 

analysis also considers ‘‘assessment’’ 

costs—those that arise from current and 

future market participants expending 

resources to determine whether they are 

subject to Regulation SBSR, and could 

incur expenses in making this 

determination even if they ultimately 

are not subject to rules for which they 

made an assessment. 

The Commission’s analysis also 

recognizes that certain market 

participants are subject to Regulation 

SBSR while potentially also being 

subject to requirements imposed by 

other regulators. Concurrent, and 

potentially duplicative or conflicting, 

regulatory requirements could be 

imposed on persons because of their 

resident or domicile status or because of 

the place their security-based swap 

transactions are conducted. Rule 908(c) 

establishes a mechanism whereby 

market participants who would be 

subject to both Regulation SBSR and a 

foreign regulatory regime could, subject 

to certain conditions, ‘‘substitute 

compliance’’ with the foreign regulatory 

regime for compliance with Regulation 

SBSR. 

A. Broad Economic Considerations 

Among the primary economic 

considerations for promulgating the 

rules on the regulatory reporting and 

public dissemination of security-based 

swap information are the risks to 

financial stability posed by securitybased swap activity and exposures and 

the effect that the level of transparency 

in the security-based swap market may 

have on market participants’ ability to 

efficiently execute trades. For example, 

on one hand, an increased level of 

transparency may make trading more 

efficient since market participants have 

additional information on which to base 

their trading decisions. On the other 

hand, if post-trade transparency makes 

hedging of large trades or trades in 

illiquid securities more difficult, it may 

make execution of these trades less 

efficient.1174

As the Commission has noted 

previously,1175 the security-based swap 

market allows participants 

opportunities for efficient risk sharing. 

By transacting in security-based swaps, 

firms can lay off financial and 

commercial risks that they are unwilling 

to bear to counterparties who may be 

better-equipped to bear them. Risk 

transfer is accomplished through 

contractual obligations to exchange cash 

flows with different risk characteristics. 

These opportunities for risk sharing, 

however, also represent opportunities 

for risk transmission through a variety 

of channels. For instance, a credit event 

that triggers a large payout to one 

counterparty by a seller of credit 

protection, may render that protection 

seller unable to meet other payment 

obligations, placing its other 

counterparties under financial strain. In 

addition to the risk of sequential 

counterparty default, security-based 

swap relationships can transmit risks 

across asset classes and jurisdictional 

boundaries through liquidity and asset 

price channels. 

Unlike most other securities 

transactions, security-based swaps 

entail ongoing financial obligations 

between counterparties during the life 

of a transaction that could span several 

years. As a result of these ongoing 

obligations, market participants are 

exposed not only to the market risk of 

assets that underlie a security-based 

swap contract, but also to the credit risk 

of their counterparties until the 

transaction is terminated. These 

exposures create a web of financial 

relationships in which the failure of a 

single large firm active in the securitybased swap market can have 

consequences beyond the firm itself. A 

default by such a firm, or even the 

perceived lack of creditworthiness of 

that firm, could produce contagion 

through sequential counterparty default 

or reductions in liquidity, willingness to 

extend credit, and valuations for 

financial instruments.1176

Currently, the security-based swap 

market is an OTC market without 

standardized reporting or public 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14689 

1177There is voluntary reporting as well as 

voluntary clearing, as discussed in Section XXII(B). 

However, transaction level information is not made 

public through these channels. Only limited 

information (e.g., trading volume and notional 

outstanding) is available publicly on an aggregate 

basis, and often with a delay. 

1178Throughout Section XXII, the term ‘‘dealers’’ 

refers to security-based swap market participant 

that engage in dealing activities while the term 

‘‘registered dealers’’ are those required to register 

with the Commission. See Intermediary Definitions 

Adopting Release, 77 FR 30596; Cross-Border 

Adopting Release, 79 FR 47277. 

1179The DTCC public Web site can be found at 

http://www.dtcc.com/repository-otc-data.aspx, last 

visited September 22, 2014. See also Analysis of 

Post-Trade Transparency. 

1180See Section 3(a)(68) of the Exchange Act. See 

also Product Definitions Adopting Release, 77 FR 

48208. 

1181See Cross-Border Proposing Release, 78 FR 

31120. 

1182The Commission notes that DTCC–TIW’s 

entity domicile determinations may not reflect the 

definition of ‘‘U.S. person’’ in Rule 900(ss). 

1183Commission staff estimates, using data from 

2013, that the transaction data include 77% of all 

single-name CDS transactions reported to DTCC– 

TIW. 

1184See 15 U.S.C. 80b1–80b21. Transacting agents 

engage in the security-based swap market, without 

relying on an intermediary, on behalf of principals. 

For example, a university endowment may hold a 

position in a security-based swap that is built up 

by an investment adviser that transacts on the 

endowment’s behalf. In this case, the university 

endowment is a principal that uses the investment 

adviser as a transacting agent. 

dissemination requirements.1177 Market 

participants observe only the details of 

transactions for which they are a 

counterparty, and there is no 

comprehensive and widely available 

source of information about transactions 

after they occur (post-trade 

transparency). As a result, the ability of 

a market participant to evaluate a 

potential transaction depends on its 

own transaction history and indicative 

(non-binding) quotes that it may obtain 

through fee-based services, and OTC 

market participants with the largest 

order flow have an informational 

advantage over other market 

participants. The value of private 

information to large dealers may, in 

part, explain why security-based swap 

market participants do not have 

sufficient incentive to voluntarily 

implement post-trade transparency.1178

Additionally, unless all market 

participants are subject to reporting 

rules, market participants who may 

prefer a more transparent market 

structure may not believe that the 

benefits of disseminating data about 

their own limited order flow justifies 

the costs associated with building and 

paying for the necessary infrastructure 

to support public dissemination of 

transaction information. 

The discussion below presents an 

overview of the OTC derivatives 

markets, a consideration of the general 

costs and benefits of the regulatory 

reporting and public dissemination 

requirements, and a discussion of the 

costs and benefits of each rule within 

Regulation SBSR. The economic 

analysis concludes with a discussion of 

the potential effects of Regulation SBSR, 

as adopted, on efficiency, competition, 

and capital formation. 

B. Baseline 

To assess the economic impact of the 

final rules described in this release, the 

Commission is using as a baseline the 

security-based swap market as it exists 

at the time of this release, including 

applicable rules adopted by the 

Commission but excluding rules that 

have been proposed but not yet 

finalized. The analysis includes the 

statutory and regulatory provisions that 

currently govern the security-based 

swap market pursuant to the DoddFrank Act. The Commission also has 

considered, where appropriate, the 

impacts on market practice of other 

regulatory regimes. 

1. Current Security-Based Swap Market 

The Commission’s analysis of the 

state of the current security-based swap 

market is based on data obtained from 

DTCC–TIW, particularly data regarding 

the activity of market participants in the 

single-name credit default swap (CDS) 

market during the period from 2008 to 

2013. Some of the Commission staff’s 

analysis regarding the impact of CFTC 

trade reporting rules entails the use of 

open positions and transaction activity 

data for index credit default swap 

(index CDS) and single-name CDS 

during the period from July 1, 2011 to 

June 30, 2013, obtained from the DTCC– 

TIW and through the DTCC public Web 

site of weekly stock and volume 

reports.1179 The data for index CDS 

encompasses CDS on both broad-based 

security indices and narrow-based 

security indices, and ‘‘security-based 

swap’’ in relevant part encompasses 

swaps based on single securities or on 

narrow-based security indices.1180

While other trade 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 securitybased swaps). As such, the Commission 

is unable to analyze security-based 

swaps other than those described above. 

However, the Commission believes that 

the single-name CDS data are 

representative of the market and 

therefore can directly inform the 

analysis of the state of the current 

security-based swap market.1181

The Commission believes that the 

data underlying its analysis provides 

reasonably comprehensive information 

regarding the single-name CDS 

transactions and composition of the 

single-name CDS market participants. 

The Commission notes that the data 

available from DTCC–TIW do not 

encompass those CDS transactions that 

both: (1) Do not involve U.S. 

counterparties 1182; and (2) are based on 

reference entities domiciled outside the 

United States (non-U.S. reference 

entities). Notwithstanding this 

limitation, the Commission believes that 

the DTCC–TIW data provide 

information that is sufficient for the 

purpose of identifying the types of 

market participants active in the 

security-based swap market and the 

general characteristics of transactions 

within that market.1183

a. Security-Based Swap Market 

Participants 

The available data supports the 

characterization of the security-based 

swap market as one that relies on 

intermediation by a small number of 

entities that engage in dealing activities. 

In addition to this small number of 

dealing entities, thousands of other 

participants appear as counterparties to 

security-based swap contracts in the 

sample, and include, but are not limited 

to, investment companies, pension 

funds, private (hedge) funds, sovereign 

entities, and industrial companies. Most 

non-dealer users of security-based 

swaps do not directly engage in the 

trading of swaps with other non-dealers, 

but use dealers, banks, or investment 

advisers as intermediaries or agents to 

establish their positions. Based on an 

analysis of the counterparties to trades 

reported to the DTCC–TIW, there are 

1,800 entities that engaged directly in 

trading between November 2006 and 

December 2013. 

Table 1, below, highlights that close 

to three-quarters of these entities 

(DTCC-defined ‘‘firms’’ shown in 

DTCC–TIW, which are referred to here 

as ‘‘transacting agents’’) were identified 

as investment advisers, of which 

approximately 40% (about 30% of all 

transacting agents) were registered 

investment advisers under the 

Investment Advisers Act of 1940.1184

Although investment advisers comprise 

the vast majority of transacting agents, 

the transactions that they executed 

account for only 9.7% of all single-name 

CDS trading activity reported to the 

DTCC–TIW, measured by number of 

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14690 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1185Each transaction has two transaction sides, 

i.e., two transaction counterparties. 

1186The 1,800 entities included all DTCC-defined 

‘‘firms’’ shown in DTCC–TIW as transaction 

counterparties that report at least one transaction to 

DTCC–TIW as of December 2013. The staff in the 

Division of Economic and Risk Analysis classified 

these firms, which are shown as transaction 

counterparties, by machine matching names to 

known third-party databases and by manual 

classification. This is consistent with the 

methodology used in the re-proposal. See CrossBorder Proposing Release, 78 FR 31120 note 1304. 

Manual classification was based in part on searches 

of the EDGAR and Bloomberg databases, the 

Commission’s Investment Adviser Public 

Disclosure database, and a firm’s public Web site 

or the public Web site of the account represented 

by a firm. The staff also referred to ISDA protocol 

adherence letters available on the ISDA Web site. 

1187For the purpose of this analysis, the ISDArecognized dealers are those identified by ISDA as 

belonging to the G14 or G16 dealer group during the 

period: 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, e.g., http://www.isda.org/ 

c_and_a/pdf/ISDA-Operations-Survey-2010.pdf 

(last visited September 22, 2014). 

1188 ‘‘Accounts’’ as defined in the DTCC–TIW 

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

definition of ‘‘U.S. person’’ provided by Rule 3a71– 

3(a)(4)(i)(C) under the Exchange Act. 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. 

1189Unregistered investment advisers include all 

investment advisers not registered under the 

Investment Advisers Act and may include 

investment advisers registered with a state or a 

foreign authority. 

1190See Section 15F(h)(2)(C) of the Exchange Act, 

15 U.S.C. 78o–10(h)(2)(C) (defining ‘‘special entity’’ 

to include a federal agency; a state, state agency, 

city, county, municipality, or other political 

subdivision of a state; any employee benefit plan; 

any governmental plan; or any endowment). 

1191There remain over 4,000 DTCC ‘‘accounts’’ 

unclassified by type. Although unclassified, each 

was manually reviewed to verify that it was not 

likely to be a special entity and instead was likely 

to be an entity such as a corporation, an insurance 

company, or a bank. 

1192Private funds for the purpose of this analysis 

encompass various unregistered pooled investment 

vehicles, including hedge funds, private equity 

funds, and venture capital funds. 

transaction-sides.1185 The vast majority 

of transactions (84.1%) measured by 

number of transaction-sides were 

executed by ISDA-recognized 

dealers.1186

TABLE 1—THE NUMBER OF TRANSACTING AGENTS 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 1187 ........................................................................................................ 17 0 .9 84 .1 

Other ................................................................................................................................................ 115 6 .4 1 .0 

Total .......................................................................................................................................... 1,800 100 100 

Principal holders of CDS risk 

exposure are represented by ‘‘accounts’’ 

in the DTCC–TIW.1188 The staff’s 

analysis of these accounts in DTCC–TIW 

shows that the 1,800 transacting agents 

classified in Table 1 represent over 

10,054 principal risk holders. Table 2, 

below, classifies these principal risk 

holders by their counterparty type and 

whether they are represented by a 

registered or unregistered investment 

adviser.1189 For instance, 256 banks in 

Table 1 allocated transactions across 

369 accounts, of which 30 were 

represented by investment advisers. In 

the remaining 339 instances, banks 

traded for their own accounts. 

Meanwhile, 17 ISDA-recognized dealers 

in Table 1 allocated transactions across 

69 accounts. 

Among the accounts, there are 1,086 

special entities 1190 and 636 investment 

companies registered under the 

Investment Company Act.1191 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 that could not be 

classified appear to be private funds.1192

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14691 

1193This column reflects the number of 

participants who are also trading for their own 

accounts. 

TABLE 2—THE NUMBER AND PERCENTAGE OF ACCOUNT HOLDERS—BY TYPE—WHO PARTICIPATE IN THE SECURITYBASED SWAP 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 registered investment adviser Represented by an unregistered investment adviser Participant is transacting 

agent 1193

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

DFA 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 3,130 68% 1,294 28% 200 4% 

All ...................................................... 10,054 6,453 64% 2,847 28% 752 7% 

i. Participant Domiciles 

The security-based swap market is 

global in scope, with counterparties 

located across multiple jurisdictions. A 

U.S.-based holding company may 

conduct dealing activity through a 

foreign subsidiary that faces both U.S. 

and foreign counterparties, and the 

foreign subsidiary may be guaranteed by 

its parent, making the parent 

responsible for performance under these 

security-based swaps. 

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14692 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1194Following publication of the Warehouse 

Trust Guidance on CDS data access, DTCC–TIW 

surveyed market participants, asking for the 

physical address associated with each of their 

accounts (i.e., where the account is organized as a 

legal entity). This is designated the registered office 

location by the DTCC–TIW. When an account does 

not report a registered office location, the 

Commission has assumed that the settlement 

country reported by the investment adviser or 

parent entity to the fund or account is the place of 

domicile. This treatment assumes that the registered 

office location reflects the place of domicile for the 

fund or account. 1195See supra note 3. 

1196See Cross-Border Adopting Release, 79 FR 

47331. 1197 Id. at 47296, note 150 (describing the 

methodology employed by the Commission to 

estimate the number of potential security-based 

swap dealers). 1198 Id. at 47297, note 153 (describing the 

methodology employed by the Commission to 

estimate the number of potential major securitybased swap participants). 

As depicted in Figure 1, over time a 

greater share of accounts entering the 

market 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 while 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 

stimuli. There are, however, alternative 

explanations for the shifts in new 

account domicile that can be observed 

in Figure 1. Changes in the domicile of 

new accounts through time may reflect 

improvements in reporting by market 

participants to DTCC–TIW.1195

Additionally, because the data include 

only accounts that are domiciled in the 

United States, transact with U.S.- 

domiciled counterparties, or transact in 

single-name CDS 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. 

ii. Current Estimates of Dealers and 

Major Participants 

In its economic analysis of rules 

defining ‘‘security-based swap dealer’’ 

and ‘‘major security-based swap 

participant,’’ the Commission noted, 

using DTCC–TIW data for the year 

ending in December 2012, that it 

expected 202 entities to engage in dealer 

de minimis analysis.1196 Further, the 

Commission’s analysis of single-name 

CDS transactions data suggested that 

only a subset of these entities engage in 

dealing activity and estimated 50 

registered dealers as an upper bound 

based on the threshold for the de 

minimis exception adopted in that 

release.1197 The Commission also 

undertook an analysis of the number of 

security-based swap market participants 

likely to register as major security-based 

swap participants, and estimated a 

range of between zero and five such 

participants.1198 Based on data for the 


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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14693 

1199See infra Section XXII(B)(3). 

1200The start of this decline predates the 

enactment of the Dodd-Frank Act and the proposal 

of rules thereunder. For the purpose of establishing 

an economic baseline, this seems to indicate that 

CDS market demand shrank prior to the enactment 

of the Dodd-Frank Act, and therefore the causes of 

trading volume declines may be independent of 

those related to the development of security-based 

swap market regulation. If the security-based swap 

market experiences further declines in trading 

activity, it would be difficult to identify the effects 

of the newly-developed security-based swap market 

regulation apart from changes in trading activity 

that may be due to natural market forces or the 

anticipation of (or reaction to) proposed (or 

adopted) Title VII requirements. These estimates 

differ from previous estimates as a result of staff 

experience with transaction-level data provided by 

DTCC–TIW. First, the aggregate level of transaction 

activity presented in Figure 2 more accurately 

reflects the notional amounts associated with 

partial assignments and terminations of existing 

security-based swap contracts. Second, the 

treatment of assignments in Figure 2 includes the 

counterparty type (dealer or non-dealer) of 

counterparties vacating trades in assignments as 

well as those entering. 

year ending in December 2013, the 

Commission continues to believe that 50 

represents an upper bound on the 

number of dealers expected to register 

and between zero and five major 

participants will register. As a result of 

further experience with the DTCC–TIW 

data, the Commission now estimates, 

based on data for the year ending in 

December 2013, that the number of 

participants likely to engage in dealer de 

minimis analysis is approximately 170. 

Forty-eight of these participants are 

domiciled outside of the United States 

and have $2 billion in transactions with 

U.S. counterparties or that otherwise 

may have to be counted for purposes of 

the de minimis analysis. 

iii. Security-Based Swap Data 

Repositories 

There are currently no SDRs 

registered with the Commission. 

However, the CFTC has provisionally 

registered four swap data repositories to 

accept credit derivatives. The 

Commission believes that these entities 

may register with the Commission as 

SDRs. Because most participants in the 

security-based swap market also 

participate in the swap market,1199 other 

persons might, in the future, seek to 

register with both the CFTC and the 

Commission as SDRs. In addition, once 

a swap data repository has established 

infrastructure sufficient to allow it to 

register with the CFTC, the costs for it 

to also register with the Commission as 

an SDR and adapt its business for 

security-based swap activity will likely 

be low relative to the costs for a wholly 

new entrant. 

b. Security-Based Swap Transaction 

Activity 

Single-name CDS contracts make up 

the vast majority of security-based swap 

products and most are written on 

corporate issuers, corporate debt 

securities, sovereign countries, or 

sovereign debt securities (reference 

entities and reference securities). Figure 

2, below, describes the percentage of 

global, notional transaction volume in 

U.S. single-name CDS reported to the 

DTCC–TIW between January 2008 and 

December 2013, separated by whether 

transactions are between two ISDArecognized dealers (interdealer 

transactions) or whether a transaction 

has at least one non-dealer counterparty. 

The level of trading activity with 

respect to U.S. single-name CDS in 

terms of notional volume has declined 

from more than $6 trillion in 2008 to 

less than $3 trillion in 2013.1200 While 

notional volume has declined over the 

past six years, the share of interdealer 

transactions has remained fairly 

constant and interdealer transactions 

continue to represent the bulk of trading 

activity, whether measured in terms of 

notional value or number of transactions 

(see Figure 2). 

The high level of interdealer trading 

activity reflects the central position of a 

small number of dealers who each 

intermediate trades among many 

hundreds of counterparties. While the 

Commission is unable to quantify the 

current level of trading costs for singlename CDS, it appears that the market 

power enjoyed by dealers as a result of 

their small number and the large 

proportion of order flow they privately 

observe is a key determinant of trading 

costs in this market. 

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14694 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1201See supra notes 788 and 1183. 

Against this backdrop of declining 

North American corporate single-name 

CDS activity, about half of the trading 

activity in North American corporate 

single-name CDS reflected in the set of 

data that the Commission analyzed was 

between counterparties domiciled in the 

United States and counterparties 

domiciled abroad. Basing counterparty 

domicile on the self-reported registered 

office location of the DTCC–TIW 

accounts, the Commission estimates that 

only 13% of the global transaction 

volume by notional volume between 

2008 and 2013 was between two U.S.- 

domiciled counterparties, compared to 

48% entered into between one U.S.- 

domiciled counterparty and a foreigndomiciled counterparty and 39% 

entered into between two foreigndomiciled counterparties (see Figure 

3).1201

When the domicile of DTCC–TIW 

accounts are instead defined according 

to the domicile of their ultimate parents, 

headquarters, or home offices (e.g., 

classifying a foreign branch or foreign 

subsidiary of a U.S. entity as domiciled 

in the United States), the fraction of 

transactions entered into between two 

U.S.-domiciled counterparties increases 

to 29%, and to 53% for transactions 

entered into between a U.S.-domiciled 

counterparty and a foreign-domiciled 

counterparty. 

Differences in classifications across 

different definitions of domicile 

illustrate the effect of participant 

structures that operate across 

jurisdictions. Notably, the proportion of 

activity between two foreign-domiciled 

counterparties drops from 39% to 18% 

when domicile is defined as the 

ultimate parent’s domicile. As noted 

earlier, foreign subsidiaries of U.S. 

persons, foreign branches of U.S. 

persons, and U.S. subsidiaries of foreign 

persons, and U.S. branches of foreign 

persons may transact with U.S. and 

foreign counterparties. However, this 

decrease in share suggests that the 

activity of foreign subsidiaries of U.S. 

persons and foreign branches of U.S. 

persons is generally higher than the 

activity of U.S. subsidiaries of foreign 

persons and U.S. branches of foreign 

persons. 

By either of those definitions of 

domicile, the data indicate that a large 

fraction of North American corporate 

single-name CDS transaction volume is 

entered into between counterparties 

domiciled in two different jurisdictions 

or between counterparties domiciled 

outside the United States. For the 

purpose of establishing an economic 

baseline, this observation indicates that 

a large fraction of security-based swap 

activity would be affected by the scope 

of any cross-border approach we take in 

applying the Title VII requirements. 

Further, the large fraction of North 

American corporate single-name CDS 

transactions between U.S.-domiciled 

and foreign-domiciled counterparties 

also highlights the extent to which 

security-based swap activity transfers 

risk across geographical boundaries, 

both facilitating risk sharing among 

market participants and allowing for 

risk transmission between jurisdictions. 


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Figure 3: The fraction of notional volume in North American corporate single-name CDS 

between (1) two U.S.-domiciled accounts, (2) one U.S.-domiciled account and one non-U.S.-

domiciled account, and (3) two non-U.S.-domiciled accounts, computed from January 2008 

through December 2013. 

60% 

50% 

40% 

30% 

20% 

10% 

0% 

Single Name CDS Transactions by Domicile 

(% of notional volume, 2008 - 2013) 

Foreign-Foreign US-Foreign US-US 

• Registered office location Parent company domicile 
14696 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1202The left-most bar, labeled ‘‘0’’, represents the 

number of trades with notional values greater than 

$0 and less than $1 million, while the next bar 

represents the number of trades with notional 

values greater than or equal to $1 million and less 

than $2 million, and so on. The right-most bar, 

labeled ‘‘30’’, represents the number of trades with 

notional values of exactly $30 million. 

Figures 4 and 5 present the frequency 

distribution of trades by size for two 

subsamples of transactions observed in 

2013. A salient feature of the trade size 

distribution is that trades tend to be 

clustered at ‘‘round’’ numbers: $1 

million, $5 million, $10 million, etc. 

While large and very large trades do 

occur, less than 1% of the transactions 

in our sample were for notional 

amounts greater than $100 million. 


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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14697 

1203The left-most bar, labeled ‘‘30’’, represents 

the number of trades with notional values greater 

than $30 and less than $50 million, while the next 

bar represents the number of trades with notional 

values greater than or equal to $50 million and less 

than $70 million, and so on. The right-most bar, 

labeled ‘‘710’’, represents the number of trades with 

notional value greater than $710 million. 

1204See ‘‘ISDA CDS Marketplace: Exposures and 

Activity’’ (available at http://

www.isdacdsmarketplace.com/exposures_and_

activity (last visited September 22, 2014). 

1205See 75 FR 75247. 

1206See id. at 75248. 

1207See 78 FR 31114. 1208See supra note 1070. 

c. Counterparty Reporting 

While there is no mandatory reporting 

requirement for the single-name CDS 

market yet, virtually all market 

participants voluntarily report their 

trades to DTCC–TIW, in some cases 

with the assistance of post-trade 

processors, which maintains a legal 

record of transactions.1204 Among other 

things, this centralized record-keeping 

facilitates settlement of obligations 

between counterparties when a default 

event occurs as well as bulk transfers of 

positions between accounts at a single 

firm or between firms. In addition, 

while there is not yet a mandatory 

clearing requirement in the single-name 

CDS market, market participants may 

choose to clear transactions voluntarily. 

However, neither voluntary reporting 

nor voluntary clearing results in data 

that are available to the public on a 

trade-by-trade basis. 

In the Regulation SBSR Proposing 

Release, the Commission preliminarily 

estimated that there would be 1,000 

reporting parties 1205 and 15.5 million 

reportable events per year.1206 In the 

Cross-Border Proposing Release, the 

Commission revised its estimate of the 

number of reporting sides from 1,000 to 

300 and revised its estimate of the 

number of reportable events from 15.5 

million to approximately 5 million.1207

These revised estimates were a result of 

the Commission obtaining additional 

and more granular data regarding 

participation in the security-based swap 

market from DTCC–TIW. As discussed 

above, since issuing the Cross-Border 

Proposing Release, the Commission has 

obtained additional and even more 

granular data regarding participation in 

the security-based swap market from 

DTCC–TIW. As a result, the 

Commission is now further revising its 

estimate of the number of reportable 

events. Accordingly, the Commission 

now estimates that 300 reporting sides 

will be required to report an aggregate 

total of approximately 3 million 

reportable events per year under Rule 

901, as adopted.1208

TABLE 3—TRADE REPORTS BY

TRANSACTION TYPE, 2013 

Count 

Interdealer ............................. 1,231,796 

Dealer—Non-Dealer ............. 482,860 

Clearinghouse ....................... 546,041 

Total ............................... 2,260,577 


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14698 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1209Regulation SBSR would also cover equity 

swaps (other than broad-based equity index swaps). 

However, the Commission has access to limited 

information concerning the equity swap market. As 

a result, the Commission’s analysis is largely 

focused on the single-name CDS market, for which 

the Commission has information. 

1210Based on the transaction data from the 

DTCC–TIW, Commission staff has estimated that, 

during the three-year period from January 2011 

until December 2013, approximately 21% of all 

transactions in CDS with North American singlename corporate reference entities and 

approximately 21% of all transactions in CDS with 

European single-name corporate reference entities 

were cleared. 

1211Available at https://www.theice.com/

marketdata/reports/98 (last visited October 20, 

2014). 

1212Available at http://www.bis.org/statistics/

derstats.htm (last visited October 20, 2014). 

1213See Cross-Border Adopting Release, 79 FR 

47278. 

1214See id. at 47301. 

1215See id. at 47315. 

1216See id. at 47332. 

d. Sources of Security-Based Swap 

Information 

There currently is no robust, widely 

accessible source of information about 

individual security-based swap 

transactions. Nevertheless, market 

participants can gather certain limited 

information for the single-name 

CDS 1209 market from a variety of 

sources. First, indicative quotes can be 

obtained through market data vendors 

such as Bloomberg or Markit. These 

quotes typically do not represent firm 

commitments to buy or sell protection 

on particular reference entities. Since 

there is no commitment to buy or sell 

associated with indicative quotes, there 

are fewer incentives for market 

participants that post indicative quotes 

to quote prices that accurately reflect 

the fundamental value of the asset to be 

traded. However, market participants 

can glean information from indicative 

quotes that may inform their trading. 

Second, there is limited, publiclydisseminated information about 

security-based swap market activity 

presented at an aggregate level. As 

mentioned above, market participants 

sometimes voluntarily clear their 

transactions, e.g., through ICE Clear 

Credit.1210 To support their risk 

management activities, clearing agencies 

compute and disseminate information 

such as end-of-day prices and 

aggregated volume to their clearing 

members. ICE Clear Credit also provides 

aggregated volume data.1211

Additionally, some large multilateral 

organizations periodically report 

measures of market activity. For 

example, the Bank for International 

Settlements (‘‘BIS’’) reports gross 

notional outstanding for single-name 

CDS and equity forwards and swaps 

semiannually.1212

Finally, market intermediaries may 

draw inferences about security-based 

swap market activity from observing 

their customers’ order flow or through 

inquiries made by other market 

participants who seek liquidity. This 

source of information is most useful for 

market participants with a large market 

share. As noted above, the ability to 

observe a larger amount of order flow 

allows for more precise estimates of 

demand. 

The paucity of publicly-available 

security-based swap data suggests a 

number of frictions that likely 

characterize the current state of 

efficiency, competition, and capital 

formation in the security-based swap 

market. As noted in Section XXII(A), 

without public dissemination of 

transaction information, security-based 

swap market participants with the 

largest order flow have an informational 

advantage over smaller competitors and 

counterparties. Moreover, as suggested 

by Table 1, there is a great deal of 

heterogeneity in the level of order flow 

observed by market participants, with a 

small group of large dealers 

participating in most transactions. 

These large market participants can use 

this advantage to consolidate their own 

market power by strategically filling 

orders when it is to their advantage and 

leaving less profitable trades to 

competitors. 

Asymmetric information and dealer 

market power can result in financial 

market inefficiencies. With only a small 

number of liquidity suppliers competing 

for order flow, bid-ask spreads in the 

market may be wider than they would 

be under perfect competition between a 

larger number of liquidity suppliers. If 

this is the case, then it is possible that 

certain non-dealers who might 

otherwise benefit from risk-sharing 

afforded by security-based swap 

positions may avoid participating in the 

market because it is too costly for them 

to do so. For instance, if wide bid-ask 

spreads in the CDS market reduced the 

level of credit risk hedging by market 

participants, the result could be an 

inefficient allocation of credit risk in the 

economy as a whole. Additionally, 

financial market participants may avoid 

risk-sharing opportunities in the 

security-based swap market if they 

determine that lack of oversight by 

relevant authorities leaves the market 

prone to disruption. For example, if the 

threat of sequential counterparty default 

reduces security-based swap dealers’ 

liquidity, then market participants may 

reduce their participation if they 

perceive a high risk that they will be 

unable to receive the contractual cash 

flows associated with their securitybased swap positions. These sources of 

inefficiency can adversely affect capital 

formation if an inability for lenders and 

investors to efficiently hedge their 

economic exposures diminishes their 

willingness to fund certain borrowers 

and issuers with risky but profitable 

investing opportunities. 

Lack of publicly-available transaction 

information could affect capital 

formation in other ways. Information 

about security-based swap transactions 

can be used as input into valuation 

models. For example, the price of a 

single-name CDS contract can be used to 

produce estimates of default risk for a 

particular firm and these estimates can, 

in turn, be used by managers and 

investors to value the firm’s projects. In 

the absence of last-sale information in 

the CDS market, market participants 

may build models of default risk using 

price data from other markets. They 

may, for instance, look to the firm’s 

bond and equity prices, the prices of 

swaps that may have similar default risk 

exposure, or to the prices of comparable 

assets more generally. 

2. Global Regulatory Efforts 

a. Dealer and Major Swap Participant 

Definitions for Cross-Border SecurityBased Swaps 

The Commission adopted final rules 

governing the application of the 

‘‘security-based swap dealer’’ and 

‘‘major security-based swap participant’’ 

definitions with respect to cross-border 

security-based swap activity and 

exposures.1213 The final rules generally 

require, among other things, that nonU.S. persons assess whether their 

dealing activities with and exposures 

against U.S. persons or with recourse 

guarantees against U.S. persons rise 

above de minimis levels.1214 In the 

Cross-Border Adopting Release, the 

Commission discussed the costs that 

non-U.S. persons would incur in order 

to perform this assessment and the 

likely number of participants whose 

activity and exposures would likely be 

large enough to make such an 

assessment prudent.1215 These costs 

included amounts related to collecting, 

analyzing, and monitoring 

representations about the U.S.-person 

status of counterparties, and whether 

particular transactions had recourse 

guarantees against U.S. persons.1216

b. International Regulatory 

Developments 

International efforts to coordinate the 

regulation of the OTC derivatives 

markets are underway, and suggest that 

many foreign participants will face 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14699 

1217See G20 Meeting, Pittsburgh, United States, 

September 2009, available at: http://

www.treasury.gov/resource-center/international/g7- 

g20/Documents/pittsburgh_summit_leaders_

statement_250909.pdf (last visited September 22, 

2014). 

1218See, e.g., G20 Meeting, St. Petersburg, Russia, 

September 2013, para. 71, available at https://

www.g20.org/sites/default/files/g20_resources/

library/Saint_Petersburg_Declaration_ENG_0.pdf 

(last visited September 22, 2014); G20 Meeting, 

Cannes, France, November 2011, available at 

https://www.g20.org/sites/default/files/g20_

resources/library/Declaration_eng_Cannes.pdf (last 

visited September 22, 2014). 

1219The FSB has published seven progress 

reports on OTC derivatives markets reform 

implementation that are available at http://

www.financialstabilityboard.org/list/fsb_

publications/index.htm. 

1220See ‘‘Interpretive Guidance and Policy 

Statement Regarding Compliance With Certain 

Swap Regulations’’ (July 17, 2013), 78 FR 45292 

(July 26, 2013) (‘‘CFTC Cross-Border Guidance’’). 

See also Sec. Indus. & Fin. Mkts. Ass’n v. CFTC, 

Civil Action No. 13–1916 (PLF), slip op. at 89 

(D.D.C. September 16, 2014). 

1221See, e.g., SIFMA/FIA/Roundtable Letter at 3. 

1222See Sections XXII(B)(1)(b), XXII(C)(2), and 

XXII(D)(2)(b). See also Amy K. Edwards, Lawrence 

Harris, & Michael S. Piwowar, Corporate Bond 

Market Transparency and Transaction Costs, J. of 

Fin., Vol. 62, at 1421–1451 (2007). It should be 

noted that Michael Piwowar, one of the co-authors 

of the first article cited, is currently an SEC 

Commissioner, and Amy Edwards, another of that 

article’s co-authors, currently serves as an Assistant 

Director in the Commission’s Division of Economic 

and Risk Analysis. 

substantive regulation of their securitybased swap activities that resemble 

rules the Commission is implementing. 

In 2009, leaders of the Group of 20 

(‘‘G20’’)—whose membership includes 

the United States, the European Union, 

and 18 other countries—called for 

global improvements in the functioning, 

transparency, and regulatory oversight 

of OTC derivatives markets.1217 In 

subsequent summits, the G20 leaders 

have reiterated their commitment to 

OTC derivatives regulatory reform and 

encouraged international consultation 

in developing standards for these 

markets.1218 The FSB is a forum for 

international coordination of OTC 

derivatives reform and provides 

progress reports to the G20.1219

Jurisdictions with major OTC 

derivatives markets have taken steps 

toward substantive regulation of these 

markets, though the pace of regulation 

varies. Rulemaking and legislation has 

focused on four general areas: Post-trade 

reporting and public dissemination of 

transaction data, moving OTC 

derivatives onto centralized trading 

platforms, clearing of OTC derivatives, 

and margin requirements for OTC 

derivatives transactions. 

Transaction reporting requirements 

have entered into force in Europe, 

Australia, Singapore, and Japan, with 

other jurisdictions in the process of 

proposing legislation and rules to 

implement these requirements. For 

example, in Canada, Ontario, Quebec, 

and Manitoba have transaction reporting 

requirements in force, while other 

provinces have proposed rules in that 

area. The European Union is currently 

considering updated rules for markets in 

financial instruments that will address 

derivatives market transparency and 

trading derivatives on regulated trading 

platforms. 

3. Cross-Market Participation 

A single-name CDS contract covers 

default events for a single reference 

entity or reference security. These 

entities and securities are often part of 

broad-based indices on which market 

participants write index CDS. Index 

CDS contracts make payouts that are 

contingent on the default of one or more 

index components and allow 

participants to gain exposure to the 

credit risk of the basket of reference 

entities that comprise the index, which 

is a function of the credit risk of the 

index components. As a result of this 

construction, a default event for a 

reference entity that is an index 

component will result in payoffs on 

both single-name CDS written on the 

reference entity and index CDS written 

on indices that contain the reference 

entity. Because of this relationship 

between the payoffs of single-name and 

index CDS, prices of these products 

depend upon one another. 

Because payoffs associated with these 

single-name CDS and index CDS are 

dependent, hedging opportunities exist 

across these markets. Participants who 

sell protection on reference entities 

through a series of single-name CDS 

transactions can lay off some of the 

credit risk of their resulting positions by 

buying protection on an index that 

includes those reference entities. 

Entities that are active in one market are 

likely to be active in the other. 

Commission staff analysis of 

approximately 4,200 DTCC–TIW 

accounts that participated in the market 

for single-name CDS in 2013 revealed 

that approximately 2,200 of those 

accounts, or 52%, also participated in 

the market for index CDS. Of the 

accounts that participated in both 

markets, data regarding transactions in 

2013 suggest that, conditional on an 

account transacting in notional volume 

of index CDS in the top third of 

accounts, the probability of the same 

account landing in the top third of 

accounts in terms of single-name CDS 

notional volume is approximately 62%; 

by contrast, the probability of the same 

account landing in the bottom third of 

accounts in terms of single-name CDS 

notional volume is only 15%. 

The CFTC’s cross-border guidance 

and swap reporting rules have likely 

influenced the information that market 

participants collect and maintain about 

the swap transactions they enter into 

and the counterparties that they 

face.1220 Compliance with the CFTC’s 

cross-border guidance and swap 

reporting rules would require swap 

counterparties to collect and maintain 

data items required by the CFTC 

regulation if they had not done so 

before. To the extent that the same or 

similar information is needed to comply 

with Regulation SBSR, market 

participants can use infrastructure 

already in place as a result of CFTC 

regulation to comply with Regulation 

SBSR and the costs to these market 

participants would be reduced. 

Commenters generally expressed 

concern about potential differences 

between CFTC rules and rules 

promulgated by the Commission.1221 In 

adopting Regulation SBSR, the 

Commission has been cognizant of the 

parallel rules imposed by the CFTC and 

the costs that would be imposed on 

market participants that must comply 

with both agencies’ rules. 

C. Programmatic Costs and Benefits of 

Regulation SBSR 

The Commission preliminarily 

identified certain benefits of Regulation 

SBSR in both the Regulation SBSR 

Proposing Release and the Cross-Border 

Proposing Release. After careful 

consideration of all the issues raised by 

commenters, the Commission continues 

to believe that Regulation SBSR will 

result in certain benefits. These include 

promoting price discovery and lowering 

trading costs by improving the level of 

information to all market participants 

and by providing a means for the 

Commission and relevant authorities to 

gain a better understanding of the 

trading behaviors of participants in the 

security-based swap market and to 

identify large counterparty 

exposures.1222 Additionally, the 

Commission believes that Regulation 

SBSR will improve risk management by 

those market participants that choose to 

supplement their existing risk 

management programs with publicly 

disseminated data. Risk management 

relies on accurate pricing, and valuation 

models generally yield better estimates 

with last-sale information being 

available as input. 

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14700 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1223See supra notes 11–12 and accompanying 

text. 1224Such relevant authorities are enumerated in 

Section 13(n)(5)(G) of the Exchange Act, 15 U.S.C. 

78m(n)(5)(G). See supra note 64. 1225See supra notes 160 and 162. 

1. Regulatory Reporting 

a. Programmatic Benefits 

Rule 901, as adopted, requires all 

security-based swaps that are covered 

transactions 1223 to be reported to a 

registered SDR, establishes a ‘‘reporting 

hierarchy’’ that determines which side 

must report the transaction, and sets out 

the data elements that must be reported. 

The Commission believes that requiring 

regulatory reporting of covered 

transactions will yield a number of 

benefits. First, Rule 901 will provide a 

means for the Commission and other 

relevant authorities to gain a better 

understanding of the security-based 

swap market,1224 including the size and 

scope of that market, as the Commission 

would have access to transaction data 

held by any registered SDR. The 

Commission and other relevant 

authorities can analyze the securitybased swap market and potentially 

identify exposure to risks undertaken by 

individual market participants or at 

various levels of aggregation, as well as 

credit exposures that arise between 

counterparties. Additionally, regulatory 

reporting will help the Commission and 

other relevant authorities in the 

valuation of security-based swaps. For 

example, an improved ability of relevant 

authorities to value security-based swap 

exposures may assist these authorities 

in assessing compliance with rules 

related to capital requirements by 

entities that maintain such exposures on 

their balance sheets. Taken together, 

regulatory data will enable the 

Commission and other relevant 

authorities to conduct robust monitoring 

of the security-based swap market for 

potential risks to financial markets and 

financial market participants. 

Second, data reported pursuant to 

Rule 901 should improve relevant 

authorities’ ability to oversee the 

security-based swap market to detect, 

deter, and punish market abuse. The 

Commission and other relevant 

authorities will be able, for example, to 

observe trading activity at the level of 

both trading desk and individual trader, 

using trading desk IDs and trader IDs, 

respectively. While the Commission 

acknowledges commenters’ concerns 

regarding the costs associated with 

establishing and maintaining UICs, it 

has considered these costs in light of its 

belief that aggregation of the 

information contained in registered 

SDRs using appropriate UICs—such as 

broker ID, trader ID, and trading desk 

ID—will facilitate the ability of the 

Commission and other relevant 

authorities to examine for 

noncompliance and pursue enforcement 

actions, as appropriate.1225

Rule 901 could result in benefits by 

encouraging the creation and 

widespread use of generally accepted 

standards for reference information by 

security-based swap market participants 

and infrastructure providers (such as 

SDRs and clearing agencies). For 

example, Rule 901(c)(1) requires the 

reporting of a product ID, for securitybased swaps that can be categorized as 

belonging to a product group. The 

development and wider usage of 

product IDs could result in greater 

efficiencies for market participants, 

infrastructure providers, and regulators, 

as identifying information about 

security-based swap products can be 

conveyed with a single ID code in place 

of several, perhaps dozens, of separate 

data elements. The development and 

wider usage of UICs generally will 

provide market participants with a more 

reliable means of identifying to each 

other the same products, persons, units 

of persons, and transactions. The costs 

associated with misidentifying these 

aspects of a transaction include 

additional time and resources spent to 

reconcile differing data elements across 

transaction records. Misidentification 

could also result in the cancellation of 

a transaction if, for example, it reveals 

disagreement between counterparties 

about the economic attributes of the 

transaction, such as the reference 

obligation underlying a CDS contract. 

UICs also could lead to greater 

regulatory efficiencies, as the 

Commission and other relevant 

authorities would have greater ability to 

aggregate transactions along a number of 

different vectors. Relevant authorities 

will have greater ability to observe 

patterns and connections in trading 

activity, such as whether a trader had 

engaged in questionable trading activity 

across different security-based swap 

products. The reporting of this 

information will facilitate more effective 

oversight, enforcement, and surveillance 

of the security-based swap market by 

the Commission and other relevant 

authorities. These identifiers also will 

facilitate aggregation and monitoring of 

the positions of security-based swap 

counterparties, which could be of 

significant benefit to the Commission 

and other relevant authorities. 

The time stamp and transaction ID 

requirements under Rules 901(f) and 

901(g), respectively, should facilitate 

data management by the registered SDR, 

as well as market supervision and 

oversight by the Commission and other 

regulatory authorities. The transaction 

ID required by Rule 901(g) also will 

provide an important benefit by 

facilitating the linking of subsequent, 

related security-based swap transactions 

that may be submitted to a registered 

SDR (e.g., a transaction report regarding 

a security-based swap life cycle event, 

or report to correct an error in a 

previously submitted report). 

Counterparties, the registered SDR, the 

Commission, and other relevant 

authorities also will benefit by having 

the ability to track changes to a securitybased swap over the life of the contract, 

as each change can be linked to the 

initially reported transaction using the 

transaction ID. 

By requiring reporting of preenactment and transitional securitybased swap transactions to the extent 

the information is available, Rule 901(i) 

will provide the Commission and other 

relevant authorities with insight as to 

outstanding notional size, number of 

transactions, and number and type of 

participants in the security-based swap 

market. To the extent pre-enactment and 

transitional security-based swap 

transaction information is available and 

reported, Rule 901(i) may contribute to 

the development of a well regulated 

market for security-based swaps by 

providing a benchmark against which to 

assess the development of the securitybased swap market over time. The data 

reported pursuant to Rule 901(i) also 

could help the Commission prepare the 

reports that it is required to provide to 

Congress. At the same time, Rule 901(i) 

limits the scope of the transactions, and 

the information pertaining to those 

transactions, that must be reported in a 

manner designed to minimize undue 

burdens on security-based swap 

counterparties. First, Rule 901(i) 

requires reporting only of those 

security-based swaps that were open as 

of the date of enactment (July 21, 2010) 

or opened thereafter. As discussed in 

Section II(C)(2), supra, Rule 901(i) 

requires reporting of the information 

required by Rules 901(c) and 901(d) 

only to the extent such information is 

available. Finally, the duty to report 

historical security-based swaps in a 

particular asset class is triggered only 

when there exists a registered SDR that 

can accept security-based swaps in that 

asset class. 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14701 

1226Certain estimates used throughout this 

Section XXII (e.g., the number of impacted entities, 

the number of reportable events, and the hourly 

cost rates used for each job category) have been 

updated from those estimated in the Cross-Border 

Proposing Release to reflect the rule text of 

Regulation SBSR, as adopted, as well as additional 

information and data now available to the 

Commission. 

1227See also Regulation SBSR Proposing Release, 

75 FR 75264. 

1228See id. at 75247. 

1229See Cross-Border Proposing Release, 78 FR 

31113. 

1230See id. at 31103. 

1231As a result, the Commission generally will 

use 300 as an estimate of the number of reporting 

sides for §§ 900–909 of Regulation SBSR. In cases 

where a rule is more limited in its application, for 

example Rule 906(c), the Commission may use a 

different number that reflects some subset of the 

estimated 300 reporting sides. 

1232This estimate is based on the following: [((Sr. 

Programmer (160 hours) at $303 per hour) + (Sr. 

Systems Analyst (160 hours) at $260 per hour) + 

(Compliance Manager (10 hours) at $283 per hour) 

+ (Director of Compliance (5 hours) at $446 per 

hour) + (Compliance Attorney (20 hours) at $334 

per hour)) × 300 reporting sides)] = $30,546,000, or 

approximately $30,600,000, or approximately 

$102,000 per reporting side. See Regulation SBSR 

Proposing Release, 75 FR 75264. These estimates 

have been adjusted to reflect the Commission’s new 

estimate of the number of reporting sides. All 

hourly cost figures are based upon data from 

SIFMA’s Management & Professional Earnings in 

the Securities Industry 2013 (modified by the SEC 

staff to account for an 1800-hour-work-year and 

multiplied by 5.35 to account for bonuses, firm size, 

employee benefits, and overhead). 

1233This estimate is based on discussions of 

Commission staff with various market participants, 

as well as the Commission’s experience regarding 

connectivity between securities market participants 

for data reporting purposes. The Commission 

derived the total estimated expense from the 

following: ($100,000 hardware- and softwarerelated expenses, including necessary backup and 

redundancy, per SDR connection) × (2 SDR 

connections per reporting side) × (300 reporting 

sides) = $60,000,000, or $200,000 per reporting 

side. See Regulation SBSR Proposing Release, 75 FR 

75265. These estimates have been adjusted to reflect 

the Commission’s new estimate of the number of 

reporting sides. 1234This figure is based on discussions with 

various market participants and is calculated as 

follows: [((Sr. Programmer (80 hours) at $303 per 

hour) + (Sr. Systems Analyst (80 hours) at $260 per 

hour) + (Compliance Manager (5 hours) at $283 per 

hour) + (Director of Compliance (2 hours) at $446 

per hour) + (Compliance Attorney (5 hours) at $334 

per hour) × (300 reporting sides)] = $14,705,100, or 

approximately $14,700,000, or approximately 

$49,000 per reporting side. See Regulation SBSR 

Proposing Release, 75 FR 75265, adjusted to reflect 

the Commission’s new estimate of the number of 

reporting sides. 

1235This estimate is based on the following: [((Sr. 

Programmer (32 hours) at $303 per hour) + (Sr. 

Systems Analyst (32 hours) at $260 per hour) + 

(Compliance Manager (60 hours) at $283 per hour) 

+ (Compliance Clerk (240 hours) at $64 per hour) 

+ (Director of Compliance (24 hours) at $446 per 

hour) + (Compliance Attorney (48 hours) at $334 

per hour)) × 300 reporting sides)] = $23,127,600, or 

approximately $23,100,000, or approximately 

$77,000 per reporting side. See Regulation SBSR 

Proposing Release, 75 FR 75264–5, adjusted to 

reflect the Commission’s new estimate of the 

number of reporting sides. 

1236This estimate is based on discussion of 

Commission staff with various market participants 

and is calculated as follows: [$250/gigabyte of 

storage capacity × (4 gigabytes of storage) × (300 

reporting sides)] = $300,000, or $1,000 per reporting 

side. See Regulation SBSR Proposing Release, 75 FR 

75265, adjusted to reflect the Commission’s new 

estimate of the number of reporting sides. 

1237See Regulation SBSR Proposing Release, 75 

FR 75208, notes 195 and 299. 

b. Programmatic Costs 

i. Reporting Security-Based Swap 

Transactions to a Registered SDR—Rule 

901 

The security-based swap reporting 

requirements contained in Rule 901 will 

impose initial and ongoing costs on 

reporting sides.1226 The Commission 

continues to believe that certain of these 

costs would be a function of the number 

of reportable events and the data 

elements required to be submitted for 

each reportable event. The Commission 

continues to believe that security-based 

swap market participants will face three 

categories of costs to comply with Rule 

901. First, each reporting side will likely 

have to establish and maintain an 

internal OMS capable of capturing 

relevant security-based swap transaction 

information so that it could be reported. 

Second, each reporting side will have to 

implement a reporting mechanism. 

Third, each reporting side will have to 

establish an appropriate compliance 

program and support for operating any 

OMS and reporting mechanism.1227

Such systems and mechanisms would 

likely be necessary to report data within 

the timeframe set forth in Rule 901(j), as 

it is unlikely that manual processes 

could capture and report the numerous 

required data elements relating to a 

security-based swaps. Many market 

participants may already have OMSs in 

place to facilitate voluntary reporting of 

security-based swap transactions or 

clearing activity. As a result, any 

additional costs related to systems and 

infrastructure will be limited to those 

reporting sides that either invest in new 

systems or must upgrade existing 

systems to meet minimum requirements 

for reporting. To the extent that the cost 

estimates discussed below do not take 

this cost limiting fact into account, they 

are an upper bound for the estimated 

costs. 

Although the Commission initially 

estimated that there would be 1,000 

reporting sides,1228 in the Cross-Border 

Proposing Release the Commission 

revised that estimate to 300.1229 No 

comments were received on the number 

of entities that would be reporting sides 

under Regulation SBSR. The 

Commission notes that, since issuing 

the Regulation SBSR Proposing Release, 

the Commission has obtained additional 

and more granular data regarding its 

estimate of the number of reporting 

sides. These historical data suggest that, 

among these 300 reporting sides, 

approximately 50 are likely to be 

required to register with the 

Commission as security-based swap 

dealers and up to five are likely to 

register as major security-based swap 

participants.1230 These data further 

suggest that these 55 potential 

registrants likely will account for the 

vast majority of recent security-based 

swap transactions and transaction 

reports that will need to be reported by 

reporting sides, and that there are only 

a limited number of security-based swap 

transactions that do not include at least 

one of these potential registrants on 

either side.1231

The Commission estimates that 

internal order management costs related 

to Rule 901 will result in initial onetime aggregate costs of approximately 

$30,600,000, which corresponds to 

approximately $102,000 for each 

reporting side.1232 The Commission 

continues to estimate that the cost to 

establish and maintain connectivity to a 

registered SDR to facilitate the reporting 

required by Rule 901 would impose an 

annual (first-year and ongoing) aggregate 

cost of approximately $60,000,000, 

which corresponds to $200,000 for each 

reporting side.1233 The Commission 

continues to estimate, as a result of 

having to establishing a reporting 

mechanism for security-based swap 

transactions, reporting sides will 

experience certain development, testing 

and support costs. Such costs would 

amount to an initial one-time aggregate 

cost of approximately $14,700,000, 

which corresponds to an initial onetime cost of approximately $49,000 for 

each reporting side.1234 The 

Commission estimates that internal 

order management costs related to Rule 

901 will impose ongoing annual 

aggregate costs of approximately 

$23,100,000, which corresponds to 

approximately $77,000 per reporting 

side.1235 In addition, the Commission 

estimates that all reporting sides will 

incur an initial and ongoing aggregate 

annual cost of $300,000, which 

corresponds to $1,000 for each reporting 

side.1236

The Commission, in the Regulation 

SBSR Proposing Release, estimated that 

reporting specific security-based swap 

transactions to a registered SDR as 

required by Rule 901 will impose an 

annual aggregate cost (first-year and 

ongoing) of approximately $5,400 for 

each reporting party.1237 This estimate 

was revised in the Cross-Border 

Proposing Release and this adopting 

release to reflect improved information 

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1238The Commission believes that 900,000 of the 

2 million reportable events will be the result of 

reporting the initial security-based swap transaction 

under Rule 901(c). As a result, the Commission 

estimates: ((900,000 × 0.005 hours per transaction)/ 

(300 reporting sides)) = 15 burden hours per 

reporting side, or 4,500 total burden hours. The 

resulting cost of such reporting would be: 

[((Compliance Clerk (7.5 hours) at $64 per hour) + 

(Sr. Computer Operator (7.5 hours) at $87 per hour)) 

× (300 reporting sides)] = approximately $340,000, 

or $1,133 per reporting side. 

1239The Commission believes that 1,100,000 of 

the 2 million reportable events will be the result of 

reporting life cycle events under Rule 901(e). As a 

result, the Commission estimates: ((1,100,000 × 

0.005 hours per transaction)/(300 reporting sides)) 

= 18.33 burden hours per reporting side, or 5,500 

total burden hours. The resulting cost of such 

reporting would be: [((Compliance Clerk (9.17 

hours) at $64 per hour) + (Sr. Computer Operator 

(9.17 hours) at $87 per hour)) × (300 reporting 

sides)] = approximately $415,000, or $1,383 per 

reporting side. 

1240The Commission believes that the per 

reportable event transaction cost will not change 

and that only approximately 2 million of these 

events will be reported by the reporting sides. As 

a result, the Commission now estimates: ((2 million 

× 0.005 hours per transaction)/(300 reporting sides)) 

= 33.3 burden hours per reporting side, or 10,000 

total burden hours. The Commission therefore 

estimates the total cost to be: [((Compliance Clerk 

(16.7 hours) at $64 per hour) + (Sr. Computer 

Operator (16.7 hours) at $87 per hour)) × (300 

reporting sides)] = approximately $750,000, or 

$2,500 per reporting side. See Regulation SBSR 

Proposing Release, 75 FR 75208, notes 195 and 299. 

These estimates have been adjusted to reflect the 

Commission’s new estimates of the number of 

reporting sides and number of reportable events. 

1241This figure is based on discussions with 

various market participants and is calculated as 

follows: [((Sr. Programmer (100 hours) at $303 per 

hour) + (Sr. Systems Analyst (40 hours) at $260 per 

hour) + (Compliance Manager (20 hours) at $283 

per hour) + (Director of Compliance (10 hours) at 

$446 per hour) + (Compliance Attorney (10 hours) 

at $334 per hour) × (300 reporting sides)] = 

approximately $16,200,000, or $54,000 per 

reporting side. See Regulation SBSR Proposing 

Release, 75 FR 75266. These estimates have been 

adjusted to reflect the Commission’s new estimate 

of the number of reporting sides. 

1242This figure is based on discussions with 

various market participants and is calculated as 

follows: [((Sr. Programmer (16 hours) at $303 per 

hour) + (Sr. Systems Analyst (16 hours) at $260 per 

hour) + (Compliance Manager (30 hours) at $283 

per hour) + (Compliance Clerk (120 hours) at $64 

per hour) + (Director of Compliance (12 hours) at 

$446 per hour) + (Compliance Attorney (24 hours) 

at $334 per hour) × (300 reporting sides)] = 

$11,563,800, or approximately $11,550,000, or 

approximately $38,500 per reporting side. See 

Regulation SBSR Proposing Release, 75 FR 75266. 

These estimates have been adjusted to reflect the 

Commission’s new estimate of the number of 

reporting sides. 

1243This estimate is based on the following: 

(($102,000 + $200,000 + $49,000 + $2,500 + $54,000 

+ $77,000 + $1,000 + $38,500) × (300 reporting 

sides)) = $157,200,000, which corresponds to 

approximately $524,000 per reporting side. See 

Regulation SBSR Proposing Release, 75 FR 75264– 

6. These estimates have been adjusted to reflect the 

Commission’s new estimate of the number of 

reporting sides. 

1244This estimate is based on the following: 

(($200,000 + $2,500 + $77,000 + $1,000 + $38,500) 

× (300 reporting sides)) = $95,700,000, or 

approximately $319,000 per reporting side. See 

Regulation SBSR Proposing Release, 75 FR 75264– 

66. These estimates have been adjusted to reflect 

the Commission’s new estimate of the number of 

reporting sides. 

1245See also Regulation SBSR Proposing Release, 

75 FR 75266. 

1246The Commission notes, however, that nonreporting sides would be required to provide certain 

information about a reportable transaction. See Rule 

906(a), as originally proposed (requiring reporting, 

if applicable, of participant ID, broker ID, trading 

relating to the number of transactions 

and reporting sides. The Commission 

believes that the cost of reporting initial 

security-based swap transactions under 

Rule 901(c) will be approximately 

$340,000, or approximately $1,100 per 

reporting side.1238 The Commission 

further believes that the cost of 

reporting life cycle events under Rule 

901(e) will be approximately $415,000, 

or approximately $1,400 per reporting 

side.1239 As a result, the Commission 

believes that the total cost (first-year and 

ongoing) of reporting security-based 

swap transactions under Rule 901, as 

adopted, will be approximately 

$750,000, or $2,500 per reporting 

side.1240

The Commission estimates that 

designing and implementing an 

appropriate compliance and support 

program will impose an initial one-time 

aggregate cost of approximately 

$16,200,000, which corresponds to a 

cost of approximately $54,000 for each 

reporting side.1241

The Commission estimates that 

maintaining its compliance and support 

program would impose an ongoing 

annual aggregate cost of approximately 

$11,550,000, which corresponds to a 

cost of approximately $38,500 for each 

reporting side.1242

Summing these costs, the Commission 

estimates that the initial, aggregate 

annual costs associated with Rule 901 

would be approximately $157,200,000, 

which corresponds to approximately 

$524,000 per reporting side.1243 The 

Commission estimates that the ongoing 

aggregate annual costs associated with 

Rule 901 will be approximately 

$95,700,000, which corresponds to 

approximately $319,000 per reporting 

side.1244

The Commission continues to believe 

that the costs associated with required 

reporting pursuant to Regulation SBSR 

could represent a barrier to entry for 

new, smaller firms that might not have 

the ability to comply with the proposed 

reporting requirements or for whom the 

expected benefits of compliance might 

not justify the costs of compliance. To 

the extent that Regulation SBSR might 

deter new firms from entering the 

security-based swap market, this would 

be a cost of the regulation and could 

negatively impact competition. 

Nevertheless, the Commission continues 

to believe that the reporting 

requirements will not impose 

insurmountable barriers to entry, as 

firms that are reluctant to acquire and 

build reporting infrastructure could 

engage with third-party service 

providers to carry out any reporting 

duties incurred under Regulation 

SBSR.1245

In the Cross-Border Proposing 

Release, the Commission stated its 

preliminary belief that the 

infrastructure-related costs identified in 

the Regulation SBSR Proposing Release 

associated with Rule 901, on a perentity basis, would remain largely 

unchanged as a result of the re-proposal. 

The Commission preliminarily 

estimated and continues to believe that 

the marginal burden of reporting 

additional transactions once a 

respondent’s reporting infrastructure 

and compliance systems are in place 

would be de minimis when compared to 

the costs of putting those systems in 

place and maintaining them over time. 

This is because the only additional costs 

of reporting an individual transaction 

would be entering the required data 

elements into the firm’s OMS, which 

could subsequently deliver the required 

transaction information to a registered 

SDR. In many cases, particularly with 

increased standardization of 

instruments and use of electronic 

trading, transaction information could 

more frequently be generated and 

maintained in electronic form, which 

could then be provided to a registered 

SDR through wholly automated 

processes. The Commission does not 

believe that the additional changes 

made to Rule 901 in this adopting 

release will have any measureable 

impact on the costs previously 

discussed in both the Regulation SBSR 

Proposing Release and the Cross-Border 

Proposing Release. As a result, the 

Commission believes that these 

previous estimates remain applicable. 

In the Cross-Border Proposing 

Release, the Commission noted that 

each reporting side would be required to 

report, on average, more security-based 

swap transactions than envisioned 

under the original proposal. The 

Commission further noted that smaller 

unregistered counterparties, that would 

have been required to report a small 

number of security-based swap 

transactions under the original proposal 

would, under re-proposed Rule 901(a), 

be less likely to have to incur reporting 

duties under Regulation SBSR, and thus 

less likely to have to incur the initial 

infrastructure-related costs of 

reporting.1246 The Commission noted its 

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desk ID, and trader ID). See also Regulation SBSR 

Proposing Release, 75 FR 75221 (discussing 

rationale for proposed Rule 906(a)). 1247See, e.g., DTCC II at 8; ICI Letter at 5; Cleary 

III at 31. See also Vanguard Letter at 6; Cleary III 

at 28 (stating that requiring U.S. end users to report 

security-based swaps entered into with non-U.S. 

person security-based swap dealers would be 

unduly burdensome for end users and could 

negatively impact the competitiveness of affected 

U.S. markets). 

1248See supra notes 11–12 and accompanying 

text. 

1249This figure is calculated follows: [((Sr. 

Programmer (80 hours) at $303 per hour) + (Sr. 

Systems Analyst (20 hours) at $260 per hour) + 

(Compliance Manager (8 hours) at $283 per hour) 

+ (Director of Compliance (4 hours) at $446 per 

hour) + (Compliance Attorney (8 hours) at $334 per 

hour) × (10 registered SDRs)] = $361,600, or 

approximately $360,000. All hourly cost figures are 

based upon data from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2013 (modified by the SEC staff to account for an 

1,800-hour-work-year and multiplied by 5.35 to 

account for bonuses, firm size, employee benefits, 

and overhead). See also Regulation SBSR Proposing 

Release, 75 FR 75266, note 309. 

1250This figure is calculated as follows: [((Sr. 

Programmer (60 hours) at $303 per hour) + (Sr. 

Systems Analyst (48 hours) at $260 per hour) + 

(Compliance Manager (24 hours) at $283 per hour) 

+ (Director of Compliance (12 hours) at $446 per 

hour) + (Compliance Attorney (8 hours) at $334 per 

hour) × (10 registered SDRs)] = $454,760, or 

approximately $455,000. See also Regulation SBSR 

Proposing Release, 75 FR 75266, note 310. 

1251This figure is based on the following: 

(($36,160 + $45,476) × (10 registered SDRs) = 

$816,360, or approximately $815,000, which 

corresponds to $81,636, or approximately $81,500 

per registered SDR. See also Regulation SBSR 

Proposing Release, 75 FR 75266, note 311. 

1252See supra Section XXII (PRA discussion 

revising the Commission’s estimate of the number 

of reportable events). 

preliminary agreement with certain 

commenters 1247 that basing the 

reporting duty primarily on status as a 

security-based swap dealer or major 

security-based swap participant rather 

than on whether or not the entity is a 

U.S. person would, in the aggregate, 

reduce costs to the security-based swap 

market. 

In the Cross-Border Proposing 

Release, the Commission noted two 

additional factors that could serve to 

limit the average per-transaction costs 

across all affected entities. First, to the 

extent that security-based swap 

instruments become more standardized 

and trade more frequently on electronic 

platforms (rather than manually), the act 

of reporting transactions to a registered 

SDR should become less costly. These 

trends are likely to reduce the number 

of transactions that would necessitate 

the manual capture of bespoke data 

elements, which is likely to take more 

time and be more expensive than 

electronic capture. Second, the larger 

entities that would incur additional 

reporting duties under re-proposed 

Rules 901(a) and 908(a)(1)(iii)—i.e., 

non-U.S. person security-based swap 

dealers and major security-based swap 

participants—can benefit from certain 

economies of scale in carrying out 

reporting duties that might elude 

smaller, unregistered counterparties. 

The Commission continues to believe 

that these factors could limit the average 

per-transaction costs across all affected 

entities. However, the extent of these 

effects is difficult to quantify. It is 

difficult to predict how many 

transactions each reporting side will 

report under manual versus electronic 

capture. Furthermore, the Commission 

currently does not have information 

about the exact reporting systems and 

the associated cost structures of 

reporting sides. Therefore, while the 

Commission has considered the likely 

effects of electronic trade capture and 

more concentrated reporting obligations 

qualitatively, as above, the Commission 

is not able to quantify these effects. 

After reviewing comment letters 

received in response to the Regulation 

SBSR Proposing Release and the CrossBorder Proposing Release, as well as 

evaluating the most recent data 

available to the Commission, the 

Commission believes that these cost 

estimates, as adjusted to account for 

more recent data on the number of 

reporting sides, remain valid. The 

Commission has received no comments 

to the contrary. 

ii. Registered SDRs—Receipt and 

Processing of Security-Based Swap 

Transactions—Rule 901 

Rule 901, as adopted, requires all 

security-based swaps that are covered 

transactions 1248 to be reported to a 

registered SDR, establishes a ‘‘reporting 

hierarchy’’ that determines which side 

must report the transaction, and sets out 

the data elements that must be reported. 

Together, sections (a), (b), (c), (d), (e), 

and (h) of Rule 901 set forth the 

parameters that govern how reporting 

sides must report security-based swap 

transactions. Rule 901(i) addresses the 

reporting of pre-enactment and 

transitional security-based swaps. 

In both the Regulation SBSR 

Proposing Release and the Cross-Border 

Proposing Release, the Commission 

discussed the potential costs to 

registered SDRs resulting from Rule 901. 

The Commission preliminarily 

estimated that the number of registered 

SDRs would not exceed ten in both 

releases. No comments discussed the 

potential number of entities that might 

register with the Commission as SDRs 

and incur duties under Regulation 

SBSR. The Commission continues to 

believe that it is reasonable to estimate 

ten registered SDRs for purposes of 

evaluating the costs and benefits of 

Regulation SBSR. 

As discussed above, Rule 901 imposes 

certain minor, additional requirements 

on registered SDRs, in addition to the 

major duties imposed on SDRs by Rules 

902 and 907 of Regulation SBSR and the 

rules adopted as part of the SDR 

Adopting Release. Rule 901(f) requires a 

registered SDR to time stamp, to the 

lowest second increment practicable but 

in any event no greater than a second, 

its receipt of any information submitted 

to it pursuant to Rules 901(c), (d), or (e). 

Rule 901(g) requires a registered SDR to 

assign a transaction ID to each securitybased swap reported or establish or 

endorse a methodology for transaction 

IDs to be assigned by third parties. 

Consequently, the Commission 

estimates that Rules 901(f) and 901(g) 

will impose an initial aggregate onetime cost of approximately $360,000, 

which corresponds to $36,000 per 

registered SDR.1249 With regard to 

ongoing costs, the Commission 

estimates that Rules 901(f) and 901(g) 

would impose an ongoing aggregate 

annual cost of $455,000, which 

corresponds to $45,500 per registered 

SDR.1250 This figure represents an 

estimate of the support and 

maintenance costs for the time stamp 

and transaction ID assignment elements 

of a registered SDR’s systems. 

The Commission estimates that the 

initial aggregate annual cost associated 

with Rules 901(f) and 901(g) will be 

approximately $815,000, which 

corresponds to $81,500 per registered 

SDR.1251 The above costs per registered 

SDR are generally consistent with those 

set forth in the Cross-Border Proposing 

Release. It is possible, however, that the 

costs may be lower than previously 

estimated, as the Commission is now 

estimating fewer reportable events per 

year (5 million in the Cross-Border 

Proposing Release versus 2 million 

events to be reported by the reporting 

sides).1252 In addition, to the extent that 

those persons planning on registering as 

SDRs have already expended resources 

in anticipation of the adoption of 

Regulation SBSR and as a result of 

CFTC regulations that are already in 

place, the costs to become a registered 

SDR could be significantly lower. As a 

result, the Commission’s estimates 

should be viewed as an upper bound of 

the potential costs of Regulation SBSR. 

After reviewing comment letters 

received in response to the Regulation 

SBSR Proposing Release and CrossBorder Proposing Release, as well as 

evaluating the most recent data 

available to the Commission, the 

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1253See Edwards, et al., supra note 1223 supra. 

1254As noted in Section XXII(B)(1)(b), dealing 

activity in the single-name CDS market is 

concentrated among a small number of firms that 

each enjoy informational advantages as a result of 

the large quantity of order flow they privately 

observe. Implicit transaction costs are the difference 

between the transaction price and the fundamental 

value, which could reflect adverse selection or 

could reflect compensation for inventory risk. In 

addition to these implicit transaction costs, 

security-based swap market participants may face 

explicit transaction costs such as commissions and 

other fees that dealers might charge non-dealers for 

access to the market. 

1255See infra Section XXII(D)(2)(b). See also 

Regulation SBSR Proposing Release, 75 FR 75267. 

1256The size of benefits arising from the use of 

publicly disseminated transaction data for SB SEF 

trading depend on the trading models that SB SEFs 

support pursuant to rules ultimately adopted by the 

Commission. See SB SEF Proposing Release, 76 FR 

10948. 

1257See Philip Bond, Alex Edmans, and Itay 

Goldstein, ‘‘The Real Effects of Financial Markets,’’ 

Annual Review of Financial Economics, Vol. 4 

(October 2012) (reviewing the theoretical literature 

on the feedback between financial market price and 

the real economy). See also Sugato Chakravarty, 

Huseyin Gulen, and Stewart Mayhew, ‘‘Informed 

Trading in Stock and Option Markets,’’ Journal of 

Finance, Vol. 59, No. 3 (2004) (estimating that the 

proportion of information about underlying stocks 

revealed first in option markets ranges from 10% to 

20%). 

1258See, e.g., Edwards, et al., supra note 1223; 

Hendrik Bessembinder, William F. Maxwell, & 

Kumar Venkataraman, Market Transparency, 

Liquidity Externalities, and Institutional Trading 

Costs in Corporate Bonds, J. of Fin. Econ., Vol. 82, 

at 251–288 (2006). 

1259 In the Regulation SBSR Proposing Release, 

the Commission requested comment on whether 

post-trade transparency would have a similar effect 

on the security-based swap market as it has in other 

securities markets—and if not, why not. No 

commenters responded to the Commission’s 

request. 

Commission continues to believe that its 

overall approach to the estimate of costs 

imposed on registered SDRs remain 

valid. The Commission received no 

comments to the contrary. 

2. Public Dissemination 

Rule 902 requires the public 

dissemination of security-based swap 

transaction information. Rule 902(a), as 

adopted, sets out the core requirement 

that a registered SDR, immediately upon 

receipt of a transaction report of a 

security-based swap or life cycle event, 

must publicly disseminate information 

about the security-based swap or life 

cycle event, plus any condition flags 

contemplated by the registered SDR’s 

policies and procedures that are 

required by Rule 907. 

a. Programmatic Benefits 

There are benefits to public 

dissemination of security-based swap 

information, as is required by Rule 902. 

Among other things, by reducing 

information asymmetries, post-trade 

transparency has the potential to 

facilitate price discovery and price 

competition,1253 lower implicit 

transaction costs,1254 improve valuation 

of security-based swap products, and 

increase liquidity in the security-based 

swap market.1255

Requiring public dissemination of 

security-based swap transactions will 

provide all market participants and 

market observers with more extensive 

and more accurate information upon 

which to make trading and valuation 

determinations. In the absence of posttrade transparency, larger dealers 

possess private information in the form 

of transactions prices and volumes, and 

larger dealers enjoy a greater 

informational advantage than smaller 

dealers. As noted above in Section 

XXII(B), the bulk of security-based swap 

activity is dealer-intermediated. Nondealers and small dealers who perceive 

the informational advantage of their 

counterparties may be less willing to 

trade. By reducing the information 

advantage of large dealers, the public 

dissemination of security-based swap 

data may improve the negotiating 

position of smaller market participants 

such as non-dealers and small dealers, 

allowing them to access liquidity and 

risk sharing opportunities in the 

security-based swap market at lower 

implicit transaction costs. 

While the Commission has not yet 

adopted rules governing trading of 

security-based swaps on centralized 

venues such as exchanges and SB SEFs, 

post-trade transparency may have 

particular benefits for exchange or SB 

SEF trading.1256 In particular, providers 

of liquidity can use publicly 

disseminated transaction data as a key 

input into their orders and quotations, 

thereby increasing the efficiency of 

price formation. Market participants 

seeking liquidity can use recent last-sale 

prices in the same or similar products 

as a basis for initiating negotiations with 

liquidity providers. Liquidity seekers 

also can use public dissemination of 

other market participants’ recent 

transactions in the same or similar 

products to evaluate the quality of 

quotes being offered or the quality of an 

execution given by a liquidity provider. 

Furthermore, public dissemination of all 

transactions may suggest to all market 

participants profitable opportunities to 

offer or take liquidity, based on the 

prices at which recent transactions were 

effected. 

Moreover, the Commission believes 

that post-trade pricing and volume 

information could allow valuation 

models to be adjusted to reflect how 

security-based swap counterparties have 

valued a security-based swap product at 

a specific moment in time. Post-trade 

transparency of security-based swap 

transactions also could improve market 

participants’ and market observers’ 

ability to value security-based swaps, 

especially in opaque markets or markets 

with low liquidity where recent 

quotations or last-sale prices may not 

exist or, if they do exist, may not be 

widely available. For example, a singlename CDS contract that expires in five 

years may yield information relevant for 

pricing other five-year CDS on the same 

firm, and will also provide information 

on default probabilities that may help 

price other CDS on the same firm with 

different maturities, or on other firms in 

the same industry. 

By improving valuations, post-trade 

transparency of security-based swap 

transactions could contribute to more 

efficient capital allocation. In particular, 

under the post-trade transparency 

regime of Regulation SBSR, market 

observers, whether or not they engage in 

the security-based swap transactions, 

could use information produced and 

aggregated by the security-based swap 

market as an input to both real 

investment decisions as well as 

financial investments in related markets 

for equity and debt.1257 Improved 

valuation, together with more efficient 

prices, that may arise as a result of 

publicly disseminated transaction 

information, could directly contribute to 

efficiency of capital allocation by firms 

whose obligations are referenced by 

security-based swaps. 

A number of studies of the corporate 

bond market have found that post-trade 

transparency, resulting from the 

introduction of TRACE, has reduced 

implicit transaction costs.1258 Post-trade 

transparency could have the same effect 

in the security-based swap market. The 

Commission acknowledges that the 

differences between the security-based 

swap market and other securities 

markets might be sufficiently great that 

post-trade transparency might not have 

the same effects in the security-based 

swap market.1259 Nevertheless, 

similarities in the way the securitybased swap market and corporate bond 

market are structured—both markets 

evolved as dealer-centric OTC markets 

with limited pre- or post-trade 

transparency—suggest that some of the 

benefits that result from post-trade 

transparency in the corporate bond 

market also would arise in the securitybased swap market as well. 

Public dissemination of securitybased swap transactions is also designed 

to promote better valuation of securitybased swaps themselves, as well as of 

underlying and related assets. In 

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1260See supra Section XXII(B)(1)(b) (describing 

current level of trading activity and liquidity in the 

security-based swap market). 

1261See Gjergji Cici, Scott Gibson, and John J. 

Merrick, Jr., ‘‘Missing the Marks? Dispersion in 

Corporate Bond Valuations Across Mutual Funds,’’ 

Journal of Financial Economics, Volume 101, Issue 

1 (July 2011), at 206–26. 

1262See, e.g., Chakravarty, et al., note 1258, supra 

(estimating that the proportion of information about 

underlying stocks revealed first in option markets 

ranges from 10 to 20%). 

1263See WMBAA II at 7; ISDA/SIFMA I at 5; 

ISDA/SIFMA Block Trade Study at 2, 26–27; 

Vanguard Letter at 5; Goldman Sachs Letter at 6; 

SIFMA I at 5; J.P. Morgan Letter at 12–13; MFA I 

at 4; MFA III at 8; UBS Letter at 2; FIA/FSF/ISDA/ 

SIFMA Letter at 6. 

1264See Rule 902(c) (requiring that certain types 

of security-based swaps not be publicly 

disseminated). 

transparent markets with sufficient 

liquidity, valuations generally can be 

derived from recent quotations and/or 

last-sale information. However, in 

opaque markets or markets with low 

liquidity—such as the current market 

for security-based swaps—recent 

quotations or last-sale information may 

not exist for many products or, if they 

do exist, may not be widely 

available.1260 Therefore, market 

participants holding assets that trade in 

opaque markets or markets with low 

liquidity frequently rely instead on 

pricing models to value their positions. 

These models could be imprecise or be 

based on assumptions subject to the 

evaluator’s discretion. Thus, market 

participants holding the same or similar 

assets but using different valuation 

models might arrive at significantly 

different valuations. 

All other things being equal, valuation 

models—particularly for assets in 

illiquid markets, such as corporate 

bonds or security-based swaps—that 

include last-sale information in the 

valuation models generally will be more 

informative than models that do not or 

cannot include such inputs. Models 

without such inputs could be imprecise 

or be based on assumptions subject to 

the evaluator’s discretion without 

having last-sale information to help 

identify or correct flawed assumptions. 

As discussed in Section XXII(B)(1)(d), 

valuation models typically have many 

inputs even in the absence of last-sale 

information. However, in general, 

models improve if the information set is 

broadened to include additional data 

related to fundamental value, and lastsale information is of particular 

relevance for pricing models. Research 

suggests that post-trade transparency 

helps reduce the range of valuations of 

assets that trade infrequently,1261 and it 

is likely that the security-based swap 

market participants and market 

observers will devise means to 

incorporate last-sale reports of the asset 

to be valued, reports of related assets, or 

reports of benchmark products that 

include the asset to be valued or closely 

related assets into their valuation 

models. This should result in more 

accurate valuations of security-based 

swaps generally, as all market 

participants and market observers 

would have the benefit of knowing how 

counterparties to a security-based swap 

valued the security-based swap at a 

specific moment in the recent past. 

In addition, post-trade transparency of 

security-based swaps that are CDS 

should promote better valuation of debt 

instruments and better understanding of 

the creditworthiness of debt issuers 

generally. CDS are contracts that offer 

protection against events of default by a 

debt issuer, such as a bankruptcy, debt 

restructuring, or a failure to pay. All 

other things being equal, CDS protection 

on a more creditworthy issuer costs less 

than CDS protection on a less 

creditworthy issuer. Furthermore, the 

cost of CDS protection on a single issuer 

may change over time: If the issuer’s 

financial position strengthens, it is less 

likely to default on its debt and the cost 

of CDS protection on the issuer 

generally will decrease; if the issuer’s 

financial condition weakens, the cost of 

CDS protection on the issuer generally 

will increase. Mandatory post-trade 

transparency of CDS transactions will 

offer market participants and market 

observers the ability to assess the 

market’s view of the creditworthiness of 

entities underlying CDS contracts, 

which often are large and systemically 

significant debt issuers. Currently, lastsale information of CDS transactions 

generally is known only to the 

participants involved in a transaction 

(such as dealers who execute with 

clients and brokers who may be 

involved in negotiating transactions). 

Public dissemination of security-based 

swap transactions—both CDS and 

equity-based swaps—as required by 

Regulation SBSR, will reduce the 

information asymmetry between 

insiders who are involved in particular 

transactions and all others, and is thus 

designed to promote greater price 

efficiency in security-based swap 

markets, the related index swap 

markets, and the markets for the 

underlying securities.1262

Public dissemination of transactions 

in CDS that are based on reference 

entities that issue TRACE-eligible debt 

securities should reinforce the pricing 

signals derived from individual 

transactions in debt securities generated 

by TRACE. Since prices in debt 

securities of an issuer and prices of CDS 

with that debt security as reference 

entity are related, any pricing signal 

received as a result of a trade in one 

asset market may inform prices in the 

other. In addition, if prices of debt 

securities in TRACE and last-sale 

information of related CDS are not 

consistent with each other, market 

participants may avail themselves of 

arbitrage opportunities across these two 

markets, thereby aligning the respective 

prices and enhancing price efficiency in 

both markets. Similarly, public 

dissemination of transactions in singlename security-based swaps should 

reinforce the pricing signals derived 

from public dissemination of 

transactions in index swaps, where the 

index includes those individual 

securities. In addition, post-trade 

transparency of security-based swap 

CDS under Regulation SBSR should 

indirectly bring greater transparency 

into the market for debt instruments 

(such as sovereign debt securities) that 

are not subject to mandatory public 

dissemination through TRACE or any 

other means by providing indirect 

pricing information. For example, lastsale information for CDS referencing 

sovereign debt may inform prices of the 

underlying sovereign debt. 

b. Programmatic Costs 

Market participants may experience 

costs as a result of revealing the true 

size of their trades if public 

dissemination of this information makes 

it more difficult to hedge their positions. 

Further, public dissemination of true 

transaction sizes could result in higher 

costs if it allows market participants to 

infer the identities of particular 

counterparties. Thus, some commenters 

have argued for dissemination of the 

notional amount of block trades through 

a ‘‘masking’’ or ‘‘size plus’’ convention 

comparable to that used by TRACE, in 

which transactions larger than a 

specified size would be reported as 

‘‘size plus.’’ 1263 The Commission 

considered this alternative, but has 

elected to require a registered SDR to 

publicly disseminate (for all 

dissemination-eligible transactions 1264), 

immediately upon receipt of the 

transaction report, all of the elements 

required by Rule 901(c), including the 

true notional amount of the transaction. 

The Commission notes, first of all, that 

a dissemination cap could deprive the 

market of important information about 

overall exposure. With a cap in place, 

market participants would not have 

information about the true size of very 

large trades, thereby reducing the 

precision with which they could 

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1265Market participants typically hedge only a 

small fraction of large trades and, if they hedge, 

they tend to do so within one day. See Hedging 

Analysis. 

1266 ISDA IV at 16. 

1267See Hedging Analysis. 

1268See Analysis of Post-Trade Transparency. 

1269See supra note 1259. 

1270See, e.g., Brunnermeier and Pedersen; Gromb 

and Vayanos, note 1177, supra. 

1271See supra Section VI(D). In addition, 

registered SDRs shall not publicly disseminate 

reports of pre-enactment or transitional securitybased swaps. 

1272See SDR Adopting Release, Section VIII(D)(2). 

See also Regulation SBSR Proposing Release, 75 FR 

75269. 

estimate the level of risk arising from 

those large trades. Furthermore, as 

noted above in Section VII(B)(4), the 

Commission believes that a 24-hour 

timeframe for reporting of transaction 

information during the interim phase of 

Regulation SBSR should address any 

concerns about disseminating the true 

notional amount of any transaction and 

give market participants who choose to 

hedge adequate time to accomplish a 

majority of their hedging activity 1265

before transaction data are publicly 

disseminated. During the interim phase, 

the Commission will be able to collect 

and analyze transaction information to 

develop an understanding of how 

market participants are reacting to the 

introduction of mandated post-trade 

transparency. 

Under Rule 902(a), a registered SDR 

will be required to publicly disseminate 

a condition flag indicating whether two 

counterparties to a security-based swap 

are registered security-based swap 

dealers. The Commission received one 

comment expressing concern that 

disseminating such information would 

reduce the anonymity of counterparties, 

ultimately resulting in ‘‘worse pricing 

and reduced liquidity for endusers.’’ 1266 Public dissemination of this 

information will indicate that a 

transaction involved two counterparties 

that are dealers. Although flagging 

transactions between two registered 

security-based swap dealers does indeed 

provide information to the public that 

the transaction involved two dealers, 

thus restricting the set of possible 

counterparties, the Commission believes 

that, since the majority of transactions 

in the security-based swap market are 

between dealers, market observers are 

unlikely to be able to identify particular 

counterparties using this information. 

Another potential cost of post-trade 

transparency is that it may increase 

inventory risks. Dealers often enter 

trades with their customers as a 

liquidity supplier. Dealers trying to 

hedge inventory following a trade might 

be put in a weaker bargaining position 

relative to subsequent counterparties if 

transactions prices and volumes are 

publicly-disseminated. With mandated 

post-trade transparency, the market will 

see when a large transaction or a 

transaction in an illiquid security occurs 

and is aware that the dealer who took 

the other side may attempt to hedge the 

resulting position. As a result, other 

market participants may change their 

pricing unfavorably for the dealer, 

making it more expensive for the dealer 

to hedge its position. Dealers could 

respond either by raising the liquidity 

premium charged to their clients or 

refusing to accommodate such trades. 

Such behavior could lead to lower 

trading volume or reduce the ability of 

certain market participants to manage 

risk, either of which could adversely 

affect all market participants. An 

increase in post-trade transparency 

could also drive trades to other markets 

or instruments that offer the opacity 

desired by traders, which could increase 

fragmentation, since trading would 

occur at more trading centers, or 

potentially reduce liquidity. This 

possibility is consistent with the 

argument that large, informed traders 

may prefer a less transparent trading 

environment that allows them to 

minimize the price impact of their 

trades. Public dissemination of securitybased swap transaction information, 

therefore, could cause certain market 

participants to trade less frequently or to 

exit the market completely. A reduction 

in market activity by these participants, 

especially if they are large, informed 

traders, could have an adverse effect on 

market liquidity. 

We are currently unable to quantify 

the costs associated with market exit or 

reduced liquidity that might result from 

post-trade transparency. This is due to 

two factors: (1) Lack of robust data; and 

(2) lack of experimental conditions 

necessary for identifying the impact of 

post-trade transparency on the costs of 

hedging. As noted above, Commission 

staff has undertaken a study that 

attempts to identify instances of hedging 

behavior by dealers in the single-name 

CDS market. Subject to the data 

limitations described in the study, the 

low levels of such behavior suggest that, 

in aggregate, post-trade transparency is 

unlikely to drive down liquidity or 

increase the liquidity premium charged 

by dealers to non-dealers as a result of 

increasing the cost of hedging.1267

Commission staff has also undertaken a 

study of the effects of the introduction 

of mandatory post-trade transparency in 

the index CDS market pursuant to CFTC 

rules. Subject to the data limitations in 

the study, and the fact that the securitybased swap and the swap markets are 

related but not identical, staff found 

little empirical evidence that the 

introduction of mandatory post-trade 

transparency in the index CDS market 

resulted in reduced trading activity, 

liquidity, or risk exposure in the index 

CDS market.1268 Moreover, studies of 

the corporate bond market, another 

largely OTC market, do not find 

evidence of market exit or reduced 

liquidity associated with posttransparency.1269

Another potential cost of post-trade 

transparency as required under Rule 902 

is that market observers could 

misinterpret or place undue importance 

on particular last-sale information that 

might not accurately reflect the market. 

For example, if a large market 

participant failed, it could be required 

to liquidate its portfolio at ‘‘fire sale’’ 

prices. If market observers were not 

aware of any unusual conditions 

surrounding particular transaction 

prints, they might interpret fire sale 

prices to indicate changes to the 

economic fundamentals of securitybased swap positions that they hold. If 

some of these market participants mark 

down the value of their portfolios, the 

result could be additional margin calls 

and further market stress. In these 

circumstances, use of valuation models 

that include last-sale data, but do not 

condition those data on the information 

about unusual conditions could lead to 

market de-stabilization.1270

Rule 902(a) requires a registered SDR 

to publicly disseminate a transaction 

report of any security-based swap 

immediately upon receipt of transaction 

information about the security-based 

swap, except in in certain limited 

circumstances.1271 The published 

transaction report must consist of all the 

information reported pursuant to Rule 

901(c), plus the execution time stamp 

and any necessary flags required by the 

registered SDR to which the transaction 

is reported. 

Implementing and complying with 

the public dissemination requirement of 

Rule 902 will add 20% to the start-up 

and ongoing operational expenses that 

would otherwise be required of a 

registered SDR.1272 In particular, the 

Commission continues to estimate that 

the initial one-time aggregate costs for 

development and implementation of the 

systems needed to disseminate the 

required transaction information would 

be $20,000,000, which corresponds to 

$2,000,000 per registered SDR. Further, 

the Commission continues to estimate 

that aggregate annual costs for systems 

and connectivity upgrades associated 

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1273See supra Sections VI(D) and VI(G). 

1274See supra Section XI(B). 

1275Cleary II at 17. 

1276See Regulation SBSR Proposing Release, 75 

FR 75227–28. 

1277 Id. 

1278 If reporting would take place on a nonbusiness day (i.e., a Saturday, Sunday, or U.S. 

federal holiday), then reporting would be required 

by the same time on the next day that is a business 

day. 

1279See Hedging Analysis. 

1280The Commission staff analysis represents an 

update and extension of earlier work by staff of the 

Federal Reserve Bank of New York (Chen et al.), 

which identified same-day and next-day sameinstrument dealer hedging activity within a threemonth (May 1, 2010–July 31, 2010) sample of 

DTCC–TIW transaction data. Similar to the 

Commission staff analysis, these authors’ results 

suggest that ‘‘large customer CDS trades are not 

typically hedged via offsetting trades in the same 

instrument soon after they have been transacted.’’ 

The authors conclude by saying that ‘‘requiring 

same day reporting of CDS trading activity may not 

significantly disrupt same day hedging activity, 

since little such activity occurs in the same 

instrument.’’ See Chen et al., supra note 510, at 17. 

with public dissemination would be 

approximately $12,000,000, which 

corresponds to $1,200,000 per registered 

SDR. Thus the initial aggregate costs 

associated with Rule 902 are estimated 

to be $32,000,000, which corresponds to 

$3,200,000 per registered SDR. To the 

extent that those market participants 

planning on registering as SDRs have 

already expended resources if they 

voluntarily report their transactions or 

because they are registered SDRs with 

the CFTC, the costs to become a 

registered SDR could be significantly 

lower. As a result, the Commission’s 

estimates should be viewed as an upper 

bound of the potential costs of 

Regulation SBSR. 

c. Alternative Approaches to Public 

Dissemination 

The Commission considered 

alternative approaches to the public 

dissemination of transactions 

information. First, the Commission has 

considered, but is not adopting, an 

exemption from Regulation SBSR’s 

regulatory reporting or public 

dissemination requirements for interaffiliate security-based swaps, although 

the Commission generally believes that 

a registered SDR should consider 

establishing a flag for inter-affiliate 

security-based swaps to help market 

observers better understand the 

information that is publicly 

disseminated.1273

Commenters had raised concerns 

about the public dissemination of interaffiliate transactions, comments that the 

Commission carefully considered in its 

adoption of Rule 902.1274 As an 

example, one commenter argued that 

‘‘public reporting of inter-affiliate 

transactions could seriously interfere 

with the internal risk management 

practices of a corporate group’’ and that 

‘‘[p]ublic disclosure of a transaction 

between affiliates could prompt other 

market participants to act in a way that 

would prevent the corporate group from 

following through with its risk 

management strategy by, for instance, 

causing adverse price movements in the 

market that the risk-carrying affiliate 

would use to hedge.’’ 1275 As stated 

above, the Commission agrees generally 

that corporate groups should engage in 

appropriate risk management practices. 

However, the Commission does not 

agree that Regulation SBSR, as adopted, 

is inimical to effective risk management. 

The Commission notes that, during the 

interim phase of Regulation SBSR, all 

security-based swaps—regardless of 

size—must be reported within 24 hours 

from the time of execution and—except 

with regard to transactions falling 

within Rule 908(a)(2)—immediately 

publicly disseminated. As discussed in 

Section VII above, this reporting 

timeframe is designed, in part, to 

minimize any potential for market 

disruption resulting from public 

dissemination of any security-based 

swap transaction during the interim 

phase of Regulation SBSR. The 

Commission anticipates that, during the 

interim period, it will collect and 

analyze data concerning the sizes of 

transactions that potentially affect 

liquidity in the market. The 

Commission sees no basis for 

concluding, at this time, that interaffiliate security-based swaps are more 

difficult to hedge than other types of 

security-based swaps, or that the 

hedging of these transactions presents 

unique concerns that would not also 

arise in connection with the hedging of 

a security-based swap that was not an 

inter-affiliate transaction. Therefore, the 

Commission does not agree with the 

commenters’ concern that public 

dissemination of inter-affiliate securitybased swaps will impede the ability of 

corporate groups to hedge. 

Second, the Commission considered 

other mechanisms for public 

dissemination, but has determined not 

to adopt any of them.1276 In the 

Regulation SBSR Proposing Release, the 

Commission discussed a ‘‘first touch’’ 

approach to public dissemination, 

whereby a security-based swap dealer or 

major security-based swap participant 

that is a counterparty to a security-based 

swap would be responsible for 

dissemination. Under a ‘‘modified first 

touch’’ approach, a platform on which 

a transaction was effected would be 

required to publicly disseminate a 

transaction occurring on its market. 

However, under either of these alternate 

approaches, market observers would be 

required to obtain and consolidate 

information from potentially dozens of 

different sources. As the Commission 

stated in the Regulation SBSR Proposing 

Release: ‘‘Requiring registered SDRs to 

be the registered entities with the duty 

to disseminate information would 

produce some degree of mandated 

consolidation of [security-based swap] 

transaction data and help to provide 

consistency in the form of the reported 

information. This approach is designed 

to limit the costs and difficulty to 

market participants of obtaining and 

assembling data feeds from multiple 

venues that might disseminate 

information using different 

formats.’’ 1277

Moreover, even though the alternative 

approaches noted above would allow 

market participants to circumvent 

registered SDRs while fulfilling the 

public dissemination requirement, 

neither alternative would reduce costs 

to market participants, since reporting 

sides would be required to report 

transactions to an SDR to fulfil the 

regulatory reporting requirement. The 

Commission received no comments that 

disagreed with the proposed approach 

imposing the duty to disseminate 

security-based swap transaction 

information on registered SDRs, and has 

adopted it as proposed. 

3. Interim Phase for Reporting and 

Public Dissemination 

As discussed in more detail above, the 

rules, as adopted, establish an interim 

phase of Regulation SBSR. During this 

interim phase, all covered 

transactions—regardless of their 

notional size—must be reported to a 

registered SDR no later than 24 hours 

after the time of execution.1278 The 

registered SDR will be required to 

publicly disseminate a report of the 

transaction immediately upon receipt of 

the information, except for the 

information described in Rule 902(c). 

Commission staff has undertaken an 

analysis of the inventory management of 

dealers in the market for single-name 

CDS based on transaction data from 

DTCC–TIW.1279 The analysis shows 

that, when large trades in single-name 

CDS are hedged using offsetting trades 

in the single-name CDS with the same 

reference entity, the majority of hedging 

activity takes places within one day.1280

The Commission acknowledges the 

concerns of a commenter that this 

analysis does not consider hedging 

activity that might occur between 

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1281See ISDA IV at 15 (stating that ‘‘participants 

may enter into risk mitigating transactions using 

other products that are more readily available at the 

time of the initial trade (for example CD index 

product [sic], CDS in related reference entities, 

bonds or loans issued by the reference entity or a 

related entity, equities or equity options)).’’ The 

commenter further ‘‘interprets the data in the study 

to imply that such temporary hedges in other asset 

classes (rather than offsetting transactions in the 

precise reference entity originally traded) are the 

norm for an illiquid market.’’ Id. 

1282The Commission notes that the impact of 

cross-market hedging may depend on the market 

characteristics for hedging assets. If dealers use 

corporate bonds to hedge large single-name CDS 

exposures, then the relative illiquidity of the 

corporate bond market may make dealers’ ability to 

hedge sensitive to public dissemination of singlename CDS transaction information. However, the 

commenter did not provide support for the 

proposition that dealers rely on the corporate bond 

or equity markets to hedge single-name CDS 

exposure. Appropriate data are not currently 

available to the Commission. By contrast, if dealers 

use more liquid assets to hedge—such as index 

CDS—then the relative liquidity of the market for 

hedging assets may make it less likely that dealers’ 

orders are identified as hedging demand. This, in 

turn, reduces the likelihood that dealers will face 

higher costs of hedging as a result of public 

dissemination of the original security-based swap 

transaction. 

1283See id. (stating that ‘‘If a reference entity 

trades less frequently than once per day, and a 

particular reference entity/maturity combination 

trades less frequently than that, it is unlikely that 

a dealer could hedge a large transaction using CDS 

in the same reference entity even over a period of 

five days’’). 

1284 In response to this comment, Commission 

staff examined the average trading frequency and 

volume of the reference entities represented in the 

sample of large transactions relative to reference 

entities in the overall sample. According to this 

supplemental analysis, for over 90% of the 

reference entities in the sample of ‘‘seed 

transactions’’ (as defined in the Hedging Analysis,) 

transaction activity took place, on average, one or 

more times per day between April 2013 and March 

2014. Commission staff also examined transaction 

activity in the six-month period prior to the sample 

used in the Hedging Analysis to avoid confounding 

its measures of trading activity with the large 

transactions and subsequent hedging activity it 

identified within the original study period. In the 

six months prior to April 2013, approximately 85% 

of reference entities in the sample of seed 

transactions were involved in transaction activity 

an average of one or more times per day. 

1285See supra note 486. 

1286See ISDA IV at 15 (noting that liquidity of 

CDS contracts on a reference entity may be a 

determinant of the risk management strategies of 

dealers attempting to hedge exposures generated 

when they engage in single-name CDS transactions). 

1287See Hedging Analysis. 

markets.1281 For example, dealers may 

use index CDS contracts to hedge 

exposures in single-name CDS. 

However, the Commission notes that the 

presence of hedging opportunities in 

other markets—particularly more liquid 

markets such as the market for index 

CDS—may increase the speed with 

which dealers are able to hedge 

security-based swap exposures, and may 

limit the extent to which public 

dissemination of transaction data with 

24 hours of execution impairs their 

ability to hedge large exposures.1282

The same commenter further argued 

that, if single-name CDS on a reference 

entity trade infrequently, dealers may 

not have opportunities to hedge using 

the same instrument in a short period of 

time.1283 The Commission 

acknowledges that some market 

participants may take more than 24 

hours to hedge exposures that result 

from large transactions in security-based 

swaps. As noted below, if a liquidity 

provider engages in a large trade in an 

illiquid security but cannot hedge its 

inventory risk within 24 hours, the 

result could be higher costs for liquidity 

provision. However, based on 

supplemental staff analysis of singlename CDS transaction data, the vast 

majority of large CDS transactions in the 

Hedging Analysis were written on 

reference entities with transaction 

activity occurring more than once per 

day, on average.1284 Hence, based on the 

available data, the Commission does not 

conclude that the liquidity of the singlename CDS included in the Hedging 

Analysis was insufficient to allow 

dealers ample opportunities to hedge 

exposures within five days. Taking into 

consideration staff analysis and 

comments on this analysis, the 

Commission continues to believe that a 

24-hour time frame for reporting of 

transaction information should allow 

market participants who choose to 

hedge adequate time to accomplish a 

majority of their hedging activity before 

transaction data is publicly 

disseminated. 

Although any reporting side could 

take a full 24 hours to report a given 

trade under the interim phase, the final 

rules may provide incentives for 

reporting sides to submit trade reports 

in substantially less than 24 hours. In 

particular, as discussed above in Section 

VII(B)(1), because Rule 902(d) embargos 

transaction information until the 

information is transmitted to a 

registered SDR, any SB SEF that wants 

to continue the use of work-ups must 

ensure that transactions are reported to 

a registered SDR no later than the time 

at which a completed transaction is 

broadcast to the users of the SB SEF. 

Reporting sides may choose to report 

trades in less than 24 hours because 

their gains from work-ups exceed costs 

stemming from public dissemination. 

a. Programmatic Benefits 

The Commission notes that the 

interim phase of Regulation SBSR will 

result in increased transparency in the 

security-based swap market, as 

compared to the current market. Several 

commenters expressed concern that a 

public dissemination regime with 

improper block trade thresholds could 

harm market liquidity.1285 A phased 

approach seeks to create some measure 

of post-trade transparency in the 

security-based swap market while 

avoiding the creation of inappropriate 

block standards. 

This interim phase will afford the 

Commission the opportunity to use data 

made available by registered SDRs to 

consider the potential impact, across 

different security-based swap asset 

classes, of various public dissemination 

times on transaction costs, hedging 

activity, and price efficiency for trades 

involving a range of notional amounts in 

instruments of varying liquidity.1286

Analysis of additional data is important 

for two key reasons. First, while the 

Commission has used available data to 

inform its current approach to 

regulatory reporting, the Commission 

expects the market to evolve in response 

to substantive regulation pursuant to 

Regulation SBSR and other Title VII 

rulemaking. In particular, additional 

post-trade transparency afforded by the 

interim phase may alter market 

participants’ trading strategies in ways 

that will likely affect what constitutes 

an appropriate block trade threshold in 

an environment with post-trade 

transparency. Such changes to the 

regulatory environment for securitybased swap transactions make 

additional data analysis critical to 

robust determination of block 

thresholds and associated dissemination 

delays. 

Second, the Commission believes that 

data elements such as reporting and 

execution time stamps required under 

Rule 901 will make data collected from 

registered SDRs more suitable than 

currently available data for examining 

relationships between reporting delays, 

notional amounts and other variables of 

economic interest. For example, as 

noted by Commission staff in its 

analysis of inventory risk management 

in the security-based swap market, 

although the CDS transaction data 

currently available to the Commission 

includes both the date and time at 

which DTCC received and recorded the 

transaction, only the date of the 

execution is reported to DTCC, and not 

the actual time of the execution.1287

Under Regulation SBSR, Commission 

staff will be able to identify not only the 

execution time, to the second, but also 

the length of time between when a 

transaction is executed and when a 

registered SDR receives the associated 

transaction report. 

Accordingly, the Commission is 

directing its staff to issue a report, for 

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each asset class, regarding block 

thresholds and dissemination delays for 

large notional security-based swap 

transactions in each asset class. The 

reports are intended to inform the 

Commission’s specification of criteria 

for determining what constitutes a block 

trade and the appropriate time delay for 

reporting block trades. The Commission 

will take into account the reports, along 

with public comment on the reports, in 

determining block thresholds and 

associated reporting delays. 

Each report will be linked to the 

availability of data from registered SDRs 

in that each report must be complete no 

later than two years following the 

initiation of public dissemination from 

the first registered SDR in that asset 

class. The Commission believes that this 

timeframe is necessary for a thorough 

analysis of the transaction data. First, a 

two-year timeframe will help ensure 

that Commission staff’s econometric 

analysis will have statistical power 

sufficient to draw clear conclusions 

about the effects of notional amount and 

reporting delay on price impact, 

hedging activity, and price efficiency. 

Second, the Commission believes that 

this timeframe is sufficiently large to 

capture seasonal effects, such as 

periodic ‘‘rolls’’, that may affect trading 

behavior in the security-based swap 

market. Finally, a sufficiently long 

timeframe increases the likelihood that 

Commission staff can separate potential 

market impacts resulting from the 

introduction of mandated post-trade 

transparency from short-term 

macroeconomic trends and shocks that 

also could affect market behavior. 

While allowing time for data 

gathering and analysis by Commission 

staff that will inform the Commission 

about appropriate block thresholds and 

reporting delays, the interim approach 

to reporting and public dissemination 

may moderate the economic effects 

flowing from public dissemination of 

transaction data. By providing reporting 

sides up to 24 hours during the interim 

phase of Regulation SBSR in which to 

report their transactions, market 

observers will experience delays in 

obtaining information about market 

activity compared to an alternative 

policy of implementing a requirement 

for real-time reporting and public 

dissemination at the present time. For 

example, if there is a spike in activity 

or a significant price movement in a 

particular security-based swap product, 

market observers might not become 

aware of this until 24 hours afterwards. 

Larger dealers that observe more order 

flow and execute more transactions than 

other market participants would, during 

the interim phase, continue to enjoy an 

informational advantage over others 

who are not yet aware of recently 

executed transactions. 

b. Programmatic Costs 

While the Commission has considered 

whether there could be a reduction in 

the programmatic benefits of public 

dissemination associated with providing 

too much time before a security-based 

swap transaction must be reported and 

publicly disseminated, the Commission 

also has considered that 24 hours might 

be too little time for liquidity providers 

to manage inventory risk. If a liquidity 

provider who engages in a large trade, 

or in a trade in an illiquid security, 

cannot offset the risk within 24 hours, 

the costs for providing liquidity could 

rise, resulting in less liquidity provision 

(i.e., less size provided at the desired 

price, or the same size provided at 

worse prices). This result might be 

avoided in a regulatory environment 

offering a longer delay between the time 

of execution of a security-based swap 

and the time that it must be reported 

and publicly disseminated. 

4. Use of UICs 

Rule 903(a) provides that, if an IRSS 

meeting certain criteria is recognized by 

the Commission and issues a UIC, that 

UIC must be used by all registered SDRs 

and their participants in carrying out 

duties under Regulation SBSR. Under 

Rule 903(a), if the Commission has 

recognized such an IRSS that assigns 

UICs to persons, each participant of a 

registered SDR shall obtain a UIC from 

or through that system. If no IRSS that 

can issue particular types of UICs has 

been recognized, the registered SDR is 

required to assign such UICs using its 

own methodology. 

The following UICs are specifically 

required by Regulation SBSR: 

Counterparty ID, product ID, transaction 

ID, broker ID, branch ID, trading desk 

ID, trader ID, execution agent ID, 

platform ID, and ultimate parent ID. The 

security-based swap market data 

typically include fee-based codes, and 

all market participants and market 

observers must pay license fees and 

agree to various usage restrictions to 

obtain the information necessary to 

interpret the codes. Under Rule 903(b), 

a registered SDR may permit 

information to be reported pursuant to 

Rule 901, and may publicly disseminate 

that information pursuant to Rule 902, 

using codes in place of certain data 

elements only if the information 

necessary to interpret those codes is 

widely available to users of the 

information on a non-fee basis. 

a. Programmatic Benefits 

UICs will provide market participants 

that use a common registered SDR with 

a uniform way to refer to their 

counterparties and other persons or 

business units that might be involved in 

a transaction (such as brokers, trading 

desks, and individual traders). UICs are 

designed to allow registered SDRs, 

relevant authorities, and other users of 

data to quickly and reliably aggregate 

security-based swap transaction 

information by UIC along several 

dimensions (e.g., by product, by 

individual trader, or by corporate group 

(i.e., entities having the same ultimate 

parent)). The requirement for a 

registered SDR to refer to each person, 

unit of a person, product, or transaction 

with a single identifying code is 

designed to facilitate the performance of 

market analysis studies, surveillance 

activities, and systemic risk monitoring 

by relevant authorities through the 

streamlined presentation of securitybased swap transaction data. These 

benefits apply on an SDR level, as each 

registered SDR is required to assign 

UICs using its own methodology if a 

relevant UIC is not available from an 

IRSS. 

To the extent that multiple SDRs use 

the same UICs, these benefits would 

apply across SDRs. In particular, 

because the Commission has recognized 

the GLEIS—through which LEIs can be 

obtained—as an IRSS that meets the 

criteria of Rule 903, if an entity has an 

LEI issued by or through the GLEIS, 

then that LEI must be used for all 

purposes under Regulation SBSR. The 

Commission believes that this will 

facilitate aggregation by relevant 

authorities for surveillance and 

monitoring purposes. Nevertheless, the 

Commission acknowledges potential 

impediments to uniformity of UICs 

across registered SDRs. While registered 

SDRs are required to use an LEI issued 

by the GLEIS to identify a counterparty 

to a reported transaction, this 

requirement extends to only those 

counterparties that have been assigned 

an LEI by the GLEIS. Under Rule 903(a), 

these counterparties will include all 

SDR participants that are U.S. persons, 

including special entities and 

investment advisers, as well as all SDR 

participants that are registered securitybased swap dealers and registered major 

security-based swap participants. 

Additionally, these counterparties will 

include non-U.S. subsidiaries of U.S. 

persons, when their performance under 

security-based swaps is guaranteed by a 

U.S. affiliate. For a person who is a 

counterparty to a security-based swap 

reported on a mandatory basis to a 

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14710 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1288The fees that a new entrant would have to 

pay for the use of fee-based codes are a cost that 

may deter a potential market participant from 

entering the security-based swap market. Currently, 

there is no mandated post-trade transparency and 

the security-based swap market is an OTC market 

and opaque, which is a barrier to enter for the 

market, as new entrants are at an informational 

disadvantage compared to established market 

participants, especially large dealers with 

significant order flow. 

1289The Commission is aware of one such 

product identification system that involves six-digit 

reference entity identifiers and three-digit reference 

obligations identifiers as well as a standard threedigit maturity identifier. 

1290See ISDA III at 2. 

1291See supra Section XXII(C)(1)(c); Section 

XXII(E)(1)(a) (detailing the data elements that must 

be reported); Section XXII(C)(6)(d) (detailing the 

requirement that SDRs develop policies and 

procedures for the reporting of the required data 

elements). See also note 160, supra. 

1292See supra Section XXII(C)(1). 

1293See supra Section XXII(C)(6)(d). 

registered SDR, who does not meet these 

conditions, and who has not obtained 

an LEI from the GLEIS, a registered SDR 

will be required to assign a UIC to that 

market participant using its own 

methodology. For such counterparties, 

this could result in the proliferation of 

multiple UIC assignments for the same 

entity to the extent that they are 

counterparties to security-based swaps 

that are reported across several SDRs 

that each assign a unique UIC. 

This could pose challenges to the 

relevant authorities and other users of 

data to quickly and reliably aggregate 

security-based swap transaction 

information, and potentially impede the 

performance of market analysis studies 

and surveillance activities. In particular, 

mapping the unique identifiers across 

SDRs would entail a manual process of 

connecting like entities initially, and 

maintaining such a mapping over time 

to the extent that an entity’s 

organizational structure changes in a 

way that requires a change to the UIC. 

This manual process could slow or 

introduce errors into the analysis of 

transaction activity or economic 

exposures of such counterparties. 

Requiring all participants and the 

entities to which they provide 

guarantees to utilize LEIs under 

Regulation SBSR should minimize these 

potential difficulties. Using the same 

LEI for these counterparties across all 

registered SDRs eliminates the need for 

such mapping. 

Even absent uniformity of UICs, the 

use of such codes by a registered SDR 

and its participants could give rise to 

other significant potential benefits. The 

use of codes could improve the accuracy 

of the trade reporting system by 

streamlining the provision of data to the 

registered SDR. The product ID, for 

example, replaces several data elements 

that otherwise would have to be 

reported separately, thus enforcing the 

internal consistency of those data 

elements and reducing the likelihood of 

reporting errors. 

In adopting Rule 903, the Commission 

has considered not only the benefits of 

using unique identification codes 

generally, but also the benefits of 

ensuring that such codes can be readily 

understood. Rule 903(b), as adopted, 

provides that a registered SDR may 

permit the use of codes in place of 

certain data elements for use in 

regulatory reporting and public 

dissemination of security-base swap 

transaction information only if the 

information necessary to interpret such 

codes is widely available to users of the 

information on a non-fee basis. This 

provision is intended to prevent any 

person who develops identification 

codes that might be used for the 

reporting or public dissemination of 

security-based swap transactions to 

charge fees or require other 

compensation from market participants, 

registered SDRs, other market 

infrastructure providers, and users of 

security-based swap data. Open access 

to UICs will promote the usage of public 

information about the security-based 

swap market, thereby furthering the 

statutory goals of Title VII. Rule 903(b) 

eliminates the possibility that market 

participants could be compelled to 

include fee-based codes in the 

transaction information that they are 

required to provide to a registered SDR, 

or that registered SDRs could be 

compelled to pay fees to code creators 

to be able to interpret the transaction 

information that is reported to them, or 

that market observers are compelled to 

pay fees to code creators to be able to 

interpret the security-based swap 

transaction information that is publicly 

disseminated. Rule 903(b) is designed to 

reduce barriers to entry into the 

security-based swap market 1288 by 

counterparties as well as service 

providers, because it minimizes the 

need for them to pay fees to code 

creators as a cost of entry. 

b. Programmatic Costs 

Rule 903 could also impose certain 

costs on current security-based swap 

market participants. Currently, private 

coding systems exist in the securitybased swap market.1289 To the extent 

that owners of these private coding 

systems do not make information to 

understand these codes widely available 

on a non-fee basis, Rule 903 would 

prohibit the use of such codes in the 

reporting or public dissemination of 

security-based swap transaction 

information carried out pursuant to 

Regulation SBSR. As a result of Rule 

903, owners of these coding systems 

that otherwise might be used to report 

security-based swap transaction 

information will be restricted in their 

ability to profit from utilization of their 

codes for reporting under Regulation 

SBSR, although such codes could still 

be used for other purposes. To the 

extent that these owners currently 

generate revenue through fees charged 

to users of security-based swap data, 

Rule 903 could lower their revenues and 

cause them to increase revenues from 

other sources, including from those 

entities that wish to have identifiers 

assigned to them. Thus, Rule 903 may 

result in a reallocation of the costs 

associated with developing and 

maintaining UICs from users of data to 

producers of data. 

Further, to the extent that market 

participants who currently utilized feebased codes must reconfigure their 

systems and internal processes to use 

other codes (such as those issued by a 

registered SDR) that are compliant with 

Rule 903(b), the costs of such 

reconfiguration can be attributed to Rule 

903(b). One commenter believed that 

reporting these UICs would require 

‘‘great cost and effort’’ from firms, 

including the costs associated with 

establishing and maintaining UICs in 

the absence of a global standard.1290 The 

Commission also acknowledges 

commenter concerns that there could be 

a certain degree of cost and effort 

associated with incorporating new UICs 

into firms’ internal processes and 

record-keeping systems.1291 However, 

the Commission believes that these 

costs are justified in the context of the 

programmatic benefits discussed in 

Section XXII(C)(4)(a), supra, such as the 

ability of relevant authorities to easily 

aggregate transaction reports on a 

variety of dimensions. The costs of 

developing such UICs are included in 

the discussion of the implementation of 

Rules 901 (detailing the data elements 

that must be reported 1292) and 907 

(detailing the requirement that SDRs 

develop policies and procedures for the 

reporting of the required data 

elements 1293). 

Any person who is a participant of a 

registered SDR must obtain an LEI from 

or through the GLEIS. Based on 

transaction data from DTCC–TIW, the 

Commission believes that no fewer than 

3,500 of approximately 4,800 accounts 

that participated in the market for 

single-name CDS in 2013 currently have 

LEIs and are likely to maintain these 

LEIs in the absence of Regulation 

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1294See supra note 1109. Commission staff used 

counterparty information provided by Avox to 

match account numbers in the DTCC–TIW 2013 

transactions data to their LEIs. Of 4,760 

participating accounts, 3,533 had LEI information 

in their Avox counterparty record. 

1295See ‘‘Endorsed Pre-LOUs of the Interim 

Global Legal Entity Identifier System (GLEIS)’’, 

January 2, 2015 (available at http://www.leiroc.org/ 

publications/gls/lou_20131003_2.pdf). 

1296Commission staff converted all foreign 

currency amounts to U.S. dollars and added taxes 

and surcharges where these amounts were 

available. 

1297This estimate is based on one hour of a 

compliance attorney at $334 per hour and is based 

upon data from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2013 (modified by the SEC staff to account for an 

1,800-hour-work-year and multiplied by 5.35 to 

account for bonuses, firm size, employee benefits, 

and overhead). 

1298The lower end of the range for costs in the 

first year is calculated as: [(LEI Registration) $84 + 

(Administration) $334] × 1,300 participants = 

$543,400. The upper end of the range for costs in 

the first year is calculated as: [(LEI Registration) 

$220 + (Administration) $334] × 1,300 participants 

= $720,200. The lower end of the range for costs in 

subsequent years is calculated as: [(LEI 

Maintenance) $48 + (Administration) $334] × 4,800 

participants = $1,833,600. The upper end of the 

range for costs in subsequent years is calculated as: 

[(LEI Maintenance) $156 + (Administration) $334] 

× 4,800 participants = $2,352,000. 

SBSR.1294 Therefore, the Commission 

believes that no more than 

approximately 1,300 DTCC–TIW 

accounts will have to obtain LEIs in 

order to comply with Rule 903(a). For 

these participants, the assignment of an 

LEI will result in one-time costs 

assessed by local operation units 

(‘‘LOUs’’) of the GLEIS associated with 

registering a new LEI. In addition to 

registration costs, LOUs assess an 

annual fee for LEI maintenance. The 

Commission assumes that no market 

participants that currently have LEIs 

would continue to maintain their LEIs 

in the absence of Rule 903(a) in order to 

arrive at an upper bound on the ongoing 

costs associated with Rule 903(a). 

The prices for registering a new LEI 

and maintaining an existing LEI vary by 

LOU. Commission staff collected 

registration and maintenance charges for 

nearly all of the pre-LOUs currently 

endorsed by the interim GLEIS.1295

Based on these charges, the Commission 

estimates a per-entity registration cost of 

between $84 and $220 and a per-entity 

maintenance cost of between $48 and 

$156.1296

The Commission is aware of two 

factors that may reduce these costs over 

time. First, the GLEIS operates on a costrecovery model. If the marginal cost of 

an LEI is low, then an increase in the 

volume of LEIs will reduce the average 

cost of obtaining an LEI. These cost 

savings will be passed through to 

market participants in the form of lower 

prices. Second, the ability of market 

participants to port LEIs to the LOU of 

their choice will result in competitive 

pressure that may limit the prices that 

LOUs are able to charge for services. 

The governance system of the GLEIS is 

in place to help ensure that these 

economic factors will be operative. 

The Commission expects that, in 

addition to the costs of obtaining an LEI 

from an LOU, each entity that registers 

a new LEI as a result of Rule 903(a) will 

incur start-up and ongoing 

administrative costs of no more than 

$334 per year.1297 The Commission 

believes, therefore, that the upper bound 

on aggregate costs to market participants 

arising from the obligation to obtain an 

LEI lies between $500,000 and $700,000 

in the first year and between $1,600,000 

and $2,100,000 in subsequent years.1298

5. Cross-Border Aspects of Regulation 

SBSR 

Rule 908(a)(1), as adopted, identifies 

the security-based swaps that will be 

subject to regulatory reporting and 

public dissemination. Rule 908(a)(2), as 

adopted, identifies the security-based 

swaps that will be subject to regulatory 

reporting but will not be publicly 

disseminated. Rule 908(b) provides that 

non-U.S. persons (except for non-U.S. 

persons that are registered securitybased swap dealers or registered major 

security-based swap participants) have 

no duties under Regulation SBSR. Rule 

908(c) provides that the Title VII 

requirements relating to regulatory 

reporting and public dissemination of 

security-based swaps may be satisfied 

by compliance with the rules of a 

foreign jurisdiction if the Commission 

determines that the jurisdiction has 

requirements that are comparable to 

those of Regulation SBSR. 

As discussed further in Section 

XXII(D), the security-based swap market 

is a global market characterized by a 

high level of interconnectedness and 

significant information asymmetries. 

Because U.S. market participants and 

transactions regulated under Title VII 

are a subset of the overall global 

security-based swap market and the 

swap markets more generally, concerns 

surrounding risk and liquidity 

spillovers are part of the framework in 

which the Commission analyzes the 

effects of these rules. Additionally, 

relevant authorities in other 

jurisdictions are currently engaged in 

implementing their own regulatory 

reforms of the OTC derivatives markets. 

Because a large portion of securitybased swap activity involves both U.S.- 

person and non-U.S. person 

counterparties, a key consideration in 

the Commission’s analysis of the 

economic effects of these rules is the 

extent to which their application 

complements or conflicts with rules 

promulgated by foreign regulators. 

a. Programmatic Benefits 

Rule 908 provides that a transaction 

will be subject to regulatory reporting if 

there is a direct or indirect counterparty 

on either or both sides that is a U.S. 

person, a registered security-based swap 

dealer, or a registered major securitybased swap participant, or if the 

transaction is submitted to a clearing 

agency having its principal place of 

business in the United States. 

The Commission anticipates that 

regulatory data that it receives from 

registered SDRs will aid in its 

understanding of counterparty 

relationships in the global securitybased swap market that are most likely 

to affect the U.S. financial markets. 

Such market data will allow the 

Commission to view, for example, large 

security-based swap exposures of U.S. 

persons, registered security-based swap 

dealers, registered major security-based 

swap participants, and U.S. clearing 

agencies that could have the potential to 

destabilize U.S. financial markets. 

Moreover, because registered securitybased swap dealers and members of U.S. 

clearing agencies are likely to 

participate in other asset markets, 

regulatory reporting could help the 

Commission estimate the risk that a 

corporate event could impair the ability 

of these market participants to trade in 

other asset markets. An improved ability 

to measure such risks could help the 

Commission evaluate the ability of the 

Title VII regulatory regime to limit the 

risk of contagion between the securitybased swap market and other asset 

markets. 

A second key programmatic benefit of 

regulatory reporting is that it would aid 

the Commission in detecting and taking 

appropriate action against market abuse. 

With comprehensive data on transaction 

volumes and prices involving U.S. 

persons, the Commission could help 

ensure that all market participants are 

able to benefit from the risk-sharing 

afforded by the security-based swap 

market on fair terms. 

Finally, security-based swap 

transaction data reported to registered 

SDRs would aid the Commission and 

other relevant authorities in enforcing 

other Title VII rules and deter 

noncompliance. For example, the CrossBorder Adopting Release set forth de 

minimis levels of activity and exposures 

above which market participants would 

have to either register as security-based 

swap dealers or as major security-based 

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14712 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1299See Cross-Border Adopting Release, 79 FR 

47301. 

1300See Cross-Border Proposing Release, 78 FR 

31202. 

1301See supra Section XXII(C)(1) (discussing the 

quantifiable costs of regulatory reporting). 

1302The efficiency implications for public 

dissemination of cross-border activity is discussed 

in Section XXII(D)(4)(b), infra. 

1303See Cross-Border Adopting Release, 79 FR 

47278–372 (discussing recourse guarantees). 

1304This estimate is based on information 

indicating that the average costs associated with 

preparing and submitting an application to the 

Commission for an order for exemptive relief under 

Section 36 of the Exchange Act in accordance with 

the procedures set forth in Rule 0–12 under the 

Exchange Act, 17 CFR 240.0–12. A substituted 

compliance request contemplated by Rule 908(c) 

would be made under Rule 0–13 under the 

Exchange Act, which sets forth procedures similar 

to those used by the Commission in considering 

exemptive order applications under Section 36. The 

Commission estimates that preparation of a request 

would require approximately 80 hours of in-house 

counsel time and 200 hours of outside counsel time. 

Such estimate takes into account the time required 

to prepare supporting documents necessary for the 

Commission to make a substituted compliance 

determination, including, without limitation, 

information regarding applicable requirements 

established by the foreign financial regulatory 

authority or authorities, as well as the methods 

used by the foreign financial regulatory authority or 

authorities to monitor compliance with these rules. 

Based upon data from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2013 (modified by the SEC staff to account for an 

1,800-hour work-year and multiplied by 5.35 to 

account for bonuses, firm size, employee benefits, 

and overhead), the Commission estimates that the 

average national hourly rate for an in-house 

attorney is $380. The Commission estimates the 

costs for outside legal services to be $400 per hour. 

Accordingly, the Commission estimates the total 

cost to submit a request for a substituted 

compliance determination to be approximately 

$110,000 ($30,400 (based on 80 hours of in-house 

counsel time × $380) + $80,000 (based on 200 hours 

of outside counsel time × $400)). 

1305See Cross-Border Proposing Release, 78 FR 

31202. 

swap participants.1299 Regulatory 

reporting could help deter participants 

that engage in high transaction volume 

with counterparties that are expected to 

have a significant portion of their 

financial and legal relationships exist 

within the United States from avoiding 

the obligation to register with the 

Commission when their activity 

surpasses these thresholds. 

Rule 908(a)(2) determines the scope of 

transactions subject to public 

dissemination requirements. A securitybased swap must be publicly 

disseminated if there is a direct or 

indirect counterparty that is a U.S. 

person on either or both sides of the 

transaction, or if the transaction is 

submitted to a clearing agency having 

its principal place of business in the 

United States. Certain of the 

programmatic benefits of public 

dissemination are similar to those of 

regulatory reporting. For instance, 

public dissemination of transaction 

prices will enable U.S. persons to 

compare a quote provided by a 

registered security-based swap dealer 

against recent transaction prices for 

security-based swaps referencing the 

same or similar underlying entities. In 

addition, market participants will be 

able to analyze whether the price they 

paid for credit protection is 

commensurate with prices revealed by 

transaction activity immediately 

following their transaction. In both of 

these cases, public dissemination 

enables market participants to evaluate 

the quality of the prices that dealers 

offer, providing registered securitybased swap dealers with additional 

incentives to quote narrower spreads. 

Rule 908(c) provides that the Title VII 

requirements relating to regulatory 

reporting and public dissemination of 

security-based swaps may be satisfied 

by compliance with the rules of a 

foreign jurisdiction if the Commission 

determines that the jurisdiction has 

requirements that are comparable to 

those of Regulation SBSR. In addition, 

to the extent that a market participant is 

able to take advantage of a substituted 

compliance determination made under 

Rule 908(c), the Commission does 

believe some cost reduction may be 

realized. If a market participant does not 

report to an SDR registered with the 

Commission, such market participant 

(whether it be a reporting side or not) 

would be able to avoid those costs 

detailed in this adopting release. A 

market participant evaluating whether 

or not to take advantage of substituted 

compliance would consider these 

potential cost reductions along with the 

costs it would incur in assessing the 

feasibility of substituted compliance 

and meeting any conditions attached to 

a substituted compliance determination 

by the Commission.1300 While, the 

Commission is, at this time, unable to 

estimate the net savings—as no 

substituted compliance determinations 

have been made—the highest level of 

savings possible for a reporting side that 

avails itself of substituted compliance is 

the aggregate cost of regulatory reporting 

under the final rules.1301

b. Programmatic Costs 

Rules 908(a)(1) and (2) require 

regulatory reporting of transactions that 

involve U.S. person counterparties, are 

submitted to U.S. clearing agencies, or 

that involve registered security-based 

swap dealers or registered major 

security-based swap participants. 

Other jurisdictions are developing 

rules relating to post-trade transparency 

for security-based swaps at different 

paces. The Commission is mindful that, 

in the near term and until full 

implementation of post-trade 

transparency requirements in the other 

jurisdictions that are comparable to 

those in Regulation SBSR, Rule 

908(a)(1) may intensify incentives for 

non-U.S. market participants to avoid 

contact with U.S. counterparties 

(whether acting directly or as guarantors 

of non-U.S. persons) in an effort to 

avoid the public dissemination 

requirements. This could result in 

reduced liquidity for U.S. market 

participants.1302

The Commission cannot readily 

quantify the costs that might result from 

reduced market access for U.S. persons 

or counterparties whose security-based 

swap activities benefit from recourse to 

U.S. persons because the Commission 

does not know what rules other 

jurisdictions may implement or the 

times at which they may implement 

their rules. However, while the 

Commission has not quantified these 

costs, it assessed them qualitatively and 

considered them in formulating the 

scope for requirements under the final 

rules.1303

As discussed in Section XXII(C)(5), 

supra, the Commission believes that 

most of the costs related to the crossborder application of Regulation SBSR 

are subsumed in the costs of Rules 901 

and 902, with one exception. 

Specifically, requests for a substituted 

compliance determination would result 

in costs of preparing such requests. The 

Commission estimates the costs of 

submitting a request pursuant to Rule 

908(c) would be approximately 

$110,000.1304 The Commission further 

estimates that it will receive 10 requests 

in the first year and two requests each 

subsequent year, for a total cost in the 

first year of $1,100,000 and a total cost 

in each subsequent year of $220,000. 

Once such request is made, however, 

other market participants in the same 

jurisdiction that wish to rely on 

substituted compliance with respect to 

regulatory reporting and public 

dissemination would be able to rely on 

the Commission’s substituted 

compliance determination. Accordingly, 

the assessment costs would only need to 

be incurred once with respect to the 

same area of a foreign regulatory system. 

c. Assessment Costs 

The Commission believes that the 

assessment costs associated with 

determining the status of counterparties 

and the location of transactions should 

be primarily one-time costs of 

establishing a practice or compliance 

procedure. As discussed in the CrossBorder Proposing Release,1305 the 

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1306See id., note 1954. 

1307See id. at 31203. 

1308See id. 

1309See id., note 1957. 

1310Markit I at 4. 

1311See supra note 668. 

1312The Commission derived this number as 

follows: [(Operations Specialist (36 hours) at $125 

per hour) × (10 registered SDRs)] = $45,000, which 

corresponds to $4,500 per registered SDR. 

assessment costs associated with the 

substituted compliance would, in part, 

flow from the assessment of whether the 

counterparties to a security-based swap 

transaction satisfy the conditions of 

Rule 908(a). This assessment may be 

done by an in-house counsel reviewing 

readily ascertainable information. The 

Commission believes that the cost 

involved in making such assessment 

should not exceed one hour of in-house 

counsel’s time or $380.1306

The Commission believes that market 

participants will likely incur costs 

arising from the need to identify and 

maintain records concerning the status 

of their counterparties and the location 

of any clearing agency used. The 

Commission anticipates that potential 

applicants for substituted compliance 

are likely to request representations 

from their transaction counterparties to 

determine the counterparties’ status. 

The Commission believes that the 

assessment costs associated with 

determining the status of counterparties 

should be primarily one-time costs of 

establishing a practice or compliance 

procedure of requesting and collecting 

representations from trading 

counterparties and maintaining the 

representations collected as part of the 

recordkeeping procedures and limited 

ongoing costs associated with requesting 

and collecting representations.1307 As 

discussed in the Cross-Border Proposing 

Release, the Commission believes that 

such one-time costs would be 

approximately $15,160.1308 The 

Commission believes that requesting 

and collecting representations would be 

part of the standardized transaction 

process reflected in the policies and 

procedures regarding security-based 

swap sales and trading practices and 

should not result in separate assessment 

costs.1309 To the extent that market 

participants have incurred costs relating 

to similar or same assessments for other 

Title VII requirements, their assessment 

costs with respect to substituted 

compliance may be less. 

6. Other Programmatic Effects of 

Regulation SBSR 

a. Operating Hours of Registered SDRs— 

Rule 904 

Paragraphs (c) to (e) of Rule 904 

specify requirements for receiving, 

handling, and disseminating reported 

data during a registered SDR’s normal 

and special closing hours. The 

Commission believes that these 

provisions will provide benefits in that 

they clarify how security-based swaps 

executed while a registered SDR is in 

normal or special closing hours would 

be reported and disseminated. The 

Commission believes that the costs of 

requirements under these rules will be 

related to providing notice to 

participants of its normal and special 

closing hours and to provide notice to 

participants that the SDR is available to 

accept transaction data after its system 

is unavailable. 

One commenter asserted that the 

proposed requirement for a registered 

SDR to receive and hold in the queue 

the data required to be reported during 

its closing hours ‘‘exceeds the 

capabilities of currently-existing 

reporting infrastructures.’’ 1310 However, 

the Commission notes that this 

comment was submitted in January 

2011; since the receipt of this comment, 

swap data repositories that are 

provisionally registered with the CFTC 

that are likely also to register as SDRs 

with the Commission appear to have 

developed the capability of receiving 

and holding data in queue during their 

closing hours.1311 Thus, the 

Commission continues to believe that 

requiring registered SDRs to hold data 

in queue during their closing hours 

would not create a significant burden 

for registered SDRs. 

Rule 904, as adopted, requires a 

registered SDR to have systems in place 

to receive and disseminate information 

regarding security-based swap data on a 

near-continuous basis, except during 

‘‘normal closing hours’’ and ‘‘special 

closing hours.’’ A registered SDR will be 

permitted to establish ‘‘normal closing 

hours,’’ which may occur only when, in 

the estimation of the registered SDR, the 

U.S. markets and other major markets 

are inactive. In addition, a registered 

SDR will be permitted to declare, on an 

ad hoc basis, special closing hours to 

perform routine system maintenance, 

subject to certain requirements. The reproposal of Regulation SBSR in the 

Cross-Border Proposing Release only 

made minor technical changes to Rule 

904. 

The Commission continues to believe 

that a registered SDR will not incur 

significant costs in connection with 

Rule 904. The requirement for a 

registered SDR to provide reasonable 

advance notice to participants and to 

the public of its normal and special 

closing hours, and to provide notice to 

participants that the SDR is available to 

accept transaction data after its system 

was unavailable will likely entail only 

a modest annual cost. The Commission 

estimates that the ongoing aggregate 

annual cost would be $45,000, which 

corresponds to $4,500 per registered 

SDR.1312

The Commission does not believe 

there are significant one-time costs 

related to Rule 904. The Commission 

believes that, other than the costs 

related to the notice provisions cited 

above, any additional costs are 

subsumed in the costs associated with 

Rules 901 and 902. For example, the 

requirement for reporting sides to report 

information to the registered SDR upon 

receiving a notice that the registered 

SDR has resumed its normal operations 

would be part of the reporting sides’ 

reporting obligations under Rule 901. 

The requirement to disseminate 

transaction reports held in queue should 

not present any costs in addition to 

those already contained in Rule 902. 

The Commission believes that the 

systems of the SDR would already have 

to account for system upgrades and 

maintenance, power outages, system 

overloads or other malfunctions or 

contingencies and as a result there 

would not be any additional 

quantifiable costs to also account for 

normal closing hours. Furthermore, to 

the extent that market participants have 

already expended resources in 

anticipation of the adoption of 

Regulation SBSR, the costs could be 

significantly lower. As a result, the 

Commission’s estimates should be 

viewed as an upper bound of the 

potential costs of Regulation SBSR. 

After reviewing comment letters 

received in response to the Regulation 

SBSR Proposing Release and the CrossBorder Proposing Release, the 

Commission continues to believe that 

these cost estimates pertaining to Rule 

904, as adopted, remain valid. The 

Commission has received no comments 

to the contrary. 

b. Error Reporting—Rule 905 

Rule 905 requires any counterparty to 

a security-based swap that discovers an 

error in previously-reported information 

to take action to ensure that corrected 

information is provided to the registered 

SDR to which the initial transaction was 

reported. The rule also requires a 

registered SDR to verify any error 

reports that it receives and correct and, 

if necessary, publicly disseminate a 

corrected transaction report. This rule 

should enhance the overall reliability of 

security-based swap transaction data 

that must be maintained by registered 

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14714 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1313The Commission continues to believe that the 

actual submission of amended transaction reports 

required under Rule 905(a)(2) would not result in 

material, independent costs because this would be 

done electronically though the reporting system 

that the reporting party must develop and maintain 

to comply with Rule 901. The costs associated with 

such a reporting system are addressed in the 

Commission’s analysis of Rule 901. See supra 

Section XXII(C)(1)(b). 

1314See Regulation SBSR Proposing Release, 75 

FR 75271–72. 

1315See id. 

1316This figure is calculated as follows: 

[((($49,000 one-time reporting system development 

costs) × (0.05)) + (($2,500 annual maintenance of 

reporting system) × (0.05)) + (($54,000 one-time 

compliance program development) × (0.1)) + 

(($38,500 annual support of compliance program) × 

(0.1))) × (300 reporting sides)] = $3,547,500, or 

$11,825 per reporting side. 

1317This figure is calculated as follows: [((($2,500 

annual maintenance of reporting system) × (0.05)) 

+ ((38,500 annual support of compliance program) 

× (0.1))) × (300 reporting sides)] = $1,192,500, or 

approximately $4,000 per reporting side. 1318This figure is based on the following: [(1.14 

error notifications per non-reporting-side 

participant per day) × (365 days/year) × 

(Compliance Clerk (0.5 hours/report) at $64 per 

hour) × (4,800 participants)] = $63,912,960, or 

approximately $64,000,000, which corresponds to 

approximately $13,000 per participant. 1319This figure is based on the following: [((2 

million estimated annual security-based swap 

transactions)/(4,800 participants))/(365 days/year)] 

= 1.14 transactions per day. 1320See SDR Adopting Release, Sections VIII and 

IX. 1321This figure is based on the following: [(Sr. 

Programmer (80 hours) at $303 per hour) + 

(Compliance Manager (160 hours) at $283 per hour) 

+ (Compliance Attorney (250 hours) at $334 per 

hour) + (Compliance Clerk (120 hours) at $64 per 

hour) + (Sr. Systems Analyst (80 hours) at $260 per 

hour) + (Director of Compliance (40 hours) at $446 

per hour) = $199,340, or approximately $200,000 

per registered SDR. 

1322This figure is based on the following: [(Sr. 

Programmer (160 hours) at $303 per hour) + 

(Compliance Manager (320 hours) at $283 per hour) 

+ (Compliance Attorney (500 hours) at $334 per 

hour) + (Compliance Clerk (240 hours) at $64 per 

hour) + (Sr. Systems Analyst (160 hours) at $260 

per hour) + (Director of Compliance (80 hours) at 

$446 per hour)] = $398,680, or approximately 

$400,000 per registered SDR. 

SDRs. For registered SDRs, the ability to 

verify disputed information, process a 

transaction report cancellation, accept a 

new security-based swap transaction 

report, and update relevant records are 

all capabilities that the registered SDR 

must implement to comply with its 

obligations under Regulation SBSR. 

Likewise, to comply with Rule 905, a 

registered SDR must disseminate a 

corrected transaction report in instances 

where the initial report included 

erroneous primary trade information. 

This will allow market observers to 

receive updated transaction information 

from the same source that publicly 

disseminated the original transaction 

and allow them to integrate updated 

transaction information into their 

understanding of the security-based 

swap market. 

Requiring participants to promptly 

correct erroneous transaction 

information should help ensure that the 

Commission and other relevant 

authorities have an accurate view of 

risks in the security-based swap market. 

Correcting inaccurate security-based 

swap transaction data held by a 

registered SDR also could benefit market 

participants by helping them to 

accurately value the security-based 

swaps they carry on their books. 

The Commission believes that the 

costs of requirements under these rules 

will be related to developing and 

publicly providing the necessary 

protocols for carrying out error 

correction and reporting. 

Rule 905(a), as adopted, establishes 

procedures for correcting errors in 

reported and disseminated securitybased swap information, recognizing 

that any system for transaction reporting 

must accommodate for the possibility 

that certain data elements may be 

incorrectly reported. Rule 905(b), as 

adopted, sets forth the duties of a 

registered SDR to verify disputed 

information and make necessary 

corrections. If the registered SDR either 

discovers an error in a transaction on its 

system or receives notice of an error 

from a counterparty, Rule 905(b)(1) 

requires the registered SDR to verify the 

accuracy of the terms of the securitybased swap and, following such 

verification, promptly correct the 

erroneous information contained in its 

system. Rule 905(b)(2) will further 

require that, if the erroneous transaction 

information contained any data that fall 

into the categories enumerated in Rule 

901(c) as information required to be 

reported, the registered SDR would be 

required to publicly disseminate a 

corrected transaction report of the 

security-based swap promptly following 

verification of the trade by the 

counterparties to the security-based 

swap. 

The Commission continues to believe 

that promptly submitting an amended 

transaction report to the appropriate 

registered SDR after discovery of an 

error as required under Rule 905(a)(2) 

will impose costs on reporting sides. 

Likewise, the Commission continues to 

believes that promptly notifying the 

relevant reporting side after discovery of 

an error as required under Rule 

905(a)(1) will impose costs on nonreporting-party participants. 

With respect to reporting side, the 

Commission continues to believe that 

Rule 905(a) will impose an initial, onetime cost associated with designing and 

building the reporting entity’s reporting 

system to be capable of submitting 

amended security-based swap 

transactions to a registered SDR. In 

addition, reporting sides will face 

ongoing costs associated with 

supporting and maintaining the error 

reporting function.1313

The Commission continues to believe 

that designing and building appropriate 

reporting system functionality to 

comply with Rule 905(a)(2) will be a 

component of, and represent an 

incremental ‘‘add-on’’ to, the cost to 

build a reporting system and develop a 

compliance function as required under 

Rule 901. 

The Commission estimates this 

incremental burden to be equal to 5% of 

the one-time and annual costs 

associated with designing and building 

a reporting system that is in compliance 

with Rule 901,1314 plus 10% of the 

corresponding one-time and annual 

costs associated with developing the 

reporting side’s overall compliance 

program required under Rule 901.1315

Thus, for reporting sides, the 

Commission estimates that Rule 905(a) 

will impose an initial (first-year) 

aggregate cost of $3,547,500, which is 

approximately $11,825 per reporting 

side,1316 and an ongoing aggregate 

annual cost of $1,192,500, which is 

approximately $4,000 per reporting 

side.1317

With regard to participants who are 

not assigned the duty to report a 

particular transaction, the Commission 

believes that Rule 905(a) will impose an 

initial and ongoing cost associated with 

promptly notifying the relevant 

reporting side after discovery of an error 

as required under Rule 905(a)(1). The 

Commission estimates that such annual 

cost will be approximately $64,000,000, 

which corresponds to approximately 

$13,000 per participant.1318 This figure 

is based on the Commission’s estimates 

of (1) 4,800 participants; and (2) 1.14 

transactions per day per participant.1319

Rule 905 also imposes duties on 

security-based swap counterparties and 

registered SDRs to correct errors in 

reported and disseminated information. 

The costs associated with establishing 

these capabilities, including systems 

development, support, and 

maintenance, are largely addressed in 

the Commission’s analysis of those 

rules.1320 The Commission estimates 

that to develop and publicly provide the 

necessary protocols for carrying out 

these functions would impose on each 

registered SDR a cost of approximately 

$200,000.1321 The Commission 

estimates that to review and update 

such protocols will impose an annual 

cost on each registered SDR of 

$400,000.1322

Accordingly, the Commission 

estimates that the initial aggregate 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14715 

1323This figure is based on the following: 

[($199,340 to develop protocols) + ($398,680 for 

annual support)) × (10 registered SDRs)] = 

$5,980,200, or approximately $6,000,000, which 

corresponds to approximately $600,000 per 

registered SDR. 

1324The Commission does not believe that the 

change in Rule 906(b) from ‘‘participant ID’’ to 

‘‘counterparty ID’’ will result in any change in the 

cost to participants. The information to be provided 

is similar in scope and will, in the Commission’s 

estimation, better accomplish the objective of 

ensuring that a registered SDR can identify each 

counterparty to a security-based swap. 

1325This figure is based on the following: [(1.14 

missing information reports per participant per day) 

× (365 days/year) × (Compliance Clerk (0.1 hours) 

at $64 per hour) × (4,800 participants)] = 

$12,782,592, or approximately $12,800,000, which 

corresponds to approximately $2,700 per 

participant. 

1326This figure is based on the following: [((2 

million estimated annual security-based swap 

transactions)/(4,800 participants))/(365 days/year)] 

= 1.14 transactions per day. See supra Section XXI. 

1327This figure is based on the following: 

[(Compliance Clerk (0.5 hours) at $64 per hour) × 

(1 report)] = $32. 

1328 During the first year, the Commission 

believes each participant would submit its initial 

report and one update report. In subsequent years, 

the Commission estimates that each participant 

would submit two update reports. 

annual cost on registered SDRs under 

Rule 905, as adopted, will be 

approximately $6,000,000, which 

corresponds to approximately $600,000 

for each registered SDR.1323 The 

Commission further estimates that the 

ongoing aggregate annual cost on 

registered SDRs under Rule 905, as 

adopted, will be approximately 

$4,000,000, which corresponds to 

approximately $400,000 for each 

registered SDR. 

c. Other Participants’ Duties—Rule 906 

Rule 906(a) requires a registered SDR 

to send a notice to security-based swap 

counterparties that are participants of 

that SDR about any UIC information 

missing from transaction reports. Rule 

906(a) also obligates such participants to 

provide the missing UIC information to 

the registered SDR upon receipt of such 

notice. Rule 906(a) is designed to enable 

a registered SDR to obtain a complete 

record of the necessary information for 

each security-based swap transaction 

and thereby enable the Commission and 

other relevant authorities to obtain a 

comprehensive picture of security-based 

swap transactions, which will facilitate 

surveillance and supervision of the 

security-based swap markets. More 

complete security-based swap records 

may provide the Commission necessary 

information to investigate specific 

transactions and market participants. 

Rule 906(b) is designed to enhance 

the Commission’s ability to monitor and 

surveil the security-based swap markets 

by requiring each participant of a 

registered SDR to report the identity of 

its ultimate parent and any affiliates that 

also are participants of that registered 

SDR. Obtaining this ultimate parent and 

affiliate information will be helpful for 

understanding the risk exposures of not 

only individual participants, but also for 

related participants operating within a 

larger financial group. The Commission 

expects these costs of requiring 

participants to provide ultimate parent 

and affiliate information to registered 

SDRs will be modest and, in any event, 

believes that the costs of providing this 

information are justified. Having 

information on the ultimate parent and 

affiliate would enhance the ability of the 

Commission to monitor security-based 

swap exposures within ownership 

groups, allowing it to better assess the 

overall risk exposure of these groups. 

The Commission is also attempting to 

reduce these burdens by requiring 

participants to report the identity only 

of their ultimate parent(s) but not any 

intermediate parent(s). The Commission 

further notes that a participant is not 

required to provide any information 

about an affiliate, other than its 

counterparty ID.1324 The participant is 

not required to provide any transaction 

or other information on the affiliate’s 

behalf. 

Rule 906(c) is designed to enhance the 

overall reliability security-based swap 

transaction data that is required to be 

reported to a registered SDR pursuant to 

Rule 901 by requiring registered 

security-based swap dealers and 

registered major security-based swap 

participants to establish, maintain, and 

enforce written policies and procedures 

addressing compliance with Regulation 

SBSR. Rule 901(a) should result in 

reliable reporting of security-based swap 

transaction data by requiring key 

participants to focus internal procedures 

on the reporting function. Reliable 

reporting would benefit counterparties, 

relevant authorities, and the market 

generally, by reducing the likelihood of 

errors in regulatory and publicly 

disseminated data. This could allow 

relevant authorities and the public to 

have confidence in the data and 

minimize the need to make corrections 

in the future. 

The Commission believes that the 

costs of requirements under these rules 

will be related to developing the written 

policies and procedures necessary to 

satisfy Rule 901’s reporting 

requirements. Once development is 

complete, SDRs will face ongoing costs 

associated with maintaining and 

enforcing these policies and procedures. 

Rule 906(a) requires a registered SDR, 

once a day, to send a report to each 

participant identifying, for each 

security-based swap to which that 

participant is a counterparty, any 

security-based swap(s) for which the 

registered SDR lacks counterparty ID 

and (if applicable) broker ID, trading 

desk ID, and trader ID. Rule 906(a) 

requires a participant that receives such 

a report to provide the missing 

information to the registered SDR 

within 24 hours. Rule 906(b) requires 

participants to provide a registered SDR 

with information identifying the 

participant’s affiliate(s) that are also 

participants of the registered SDR, as 

well as its ultimate parent(s). 

Additionally, under Rule 906(b), 

participants are required to promptly 

notify the registered SDR of any changes 

to the information previously provided. 

Rule 906(c) requires a participant that is 

a registered security-based swap dealer 

or registered major security-based swap 

participant to establish, maintain, and 

enforce written policies and procedures 

that are reasonably designed to ensure 

compliance with any security-based 

swap transaction reporting obligations 

in a manner consistent with Regulation 

SBSR. 

Rule 906(a) requires a participant that 

receives a daily report from a registered 

SDR to provide the missing UICs to the 

registered SDR within 24 hours. The 

Commission believes that Rule 906(a) 

will result in an initial and ongoing 

aggregate annual cost for all participants 

since even participants that are the 

reporting side for some transactions will 

be the non-reporting side for other 

transactions. The Commission estimates 

that Rule 906(a) will result in an initial 

and ongoing aggregate annual cost for 

participants of approximately 

$12,800,000, which corresponds to a 

cost of approximately $2,700 per 

participant.1325 This figure was based 

on the Commission’s preliminary 

estimates of (1) 4,800 participants and 

(2) 1.14 transactions per day per 

participant.1326

Rule 906(b) requires every participant 

to provide a registered SDR an initial 

parent/affiliate report, using ultimate 

parent IDs and counterparty IDs, and 

updating that information, as necessary. 

The Commission continues to believe 

that the cost for each participant to 

submit an initial or update report will 

be $32.1327 The Commission estimates 

that each participant will submit two 

reports each year.1328 In addition, the 

Commission estimates that there may be 

4,800 security-based swap participants 

and that each one may connect to two 

registered SDRs. Accordingly, the 

Commission estimates that the initial 

and ongoing aggregate annual cost 

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14716 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1329This figure is based on the following: [($32/ 

report) × (2 reports/year/registered SDR connection) 

× (2 registered SDR connections/participant) × 

(4,800 participants)] = $614,400, which corresponds 

to $128 per participant. 

1330As is explained in the Paperwork Reduction 

Act discussion, the Commission estimates that there 

will be approximately 50 registered security-based 

swap dealers and 5 registered major security-based 

swap participants for a total of 55 respondents. See 

supra Section XXII(C)(1)(b)(i). 

1331The Commission derived its estimate from 

the following: [(Sr. Programmer (40 hours) at $303 

per hour) + (Compliance Manager (40 hours) at 

$283 per hour) + (Compliance Attorney (40 hours) 

at $334 per hour) + (Compliance Clerk (40 hours) 

at $64 per hour) + (Sr. Systems Analyst (32 hours) 

at $260 per hour) + (Director of Compliance (24 

hours) at $446 per hour)] = $58,384, or 

approximately $58,000 per covered participant. 

1332See Cross-Border Proposing Release, 78 FR 

30994, note 256. 

1333The Commission derived its estimate from 

the following: [(Sr. Programmer (8 hours) at $303 

per hour) + (Compliance Manager (24 hours) at 

$283 per hour) + (Compliance Attorney (24 hours) 

at $334 per hour) + (Compliance Clerk (24 hours) 

at $64 per hour) + (Sr. Systems Analyst (16 hours) 

at $260 per hour) + (Director of Compliance (24 

hours) at $446 per hour)] = $33,632, or 

approximately $34,000 per covered participant. 

1334The Commission derived its estimate from 

the following: [($58,000 + $34,000) × (55 covered 

participants)] = $5,060,000, or approximately 

$92,000 per covered participant. 

1335The Commission derived its estimate from 

the following: [($34,000) × (55 covered 

participants)] = $1,870,000. 

1336The Commission derived its estimate from 

the following: [(Senior Systems Analyst (40 hours) 

at $260 per hour) + (Sr. Programmer (40 hours) at 

$303 per hour) + (Compliance Manager (16 hours) 

at $283 per hour) + (Director of Compliance (8 

hours) at $446 per hour) + (Compliance Attorney (8 

hours) at $334)] = $33,288, or approximately 

$33,000 per registered SDR. 

1337The Commission derived its estimate from 

the following: [(Senior Systems Analyst (24 hours) 

at $260 per hour) + (Sr. Programmer (24 hours) at 

$303 per hour) + (Compliance Clerk (260 hours) at 

$64 per hour)] = $30,152, or approximately $30,000 

per registered SDR. 

1338The Commission derived its estimate from 

the following: [($33,288 + $30,152) × (10 registered 

SDRs)] = $634,400, or approximately $630,000, 

which corresponds to $63,440, or approximately 

$63,000 per registered SDR. 

associated with Rule 906(b) will be 

$614,400, which corresponds to $128 

per participant.1329

Rule 906(c) requires each participant 

of a registered SDR that is a registered 

security-based swap dealer or registered 

major security-based swap participant to 

establish, maintain, and enforce written 

policies and procedures that are 

reasonably designed to ensure 

compliance with any security-based 

swap transaction reporting obligations 

in a manner consistent with Regulation 

SBSR.1330 Rule 906(c) also requires the 

review and updating of such policies 

and procedures at least annually. The 

Commission continues to estimate that 

developing and implementing written 

policies and procedures as required 

under the Rule 906 could result in a 

one-time initial cost to each registered 

security-based swap dealer or registered 

major security-based swap participant of 

approximately $58,000.1331 This figure 

includes the estimated cost to develop 

a set of written policies and procedures, 

program systems, implement internal 

controls and oversight, train relevant 

employees, and perform necessary 

testing.1332 In addition, the Commission 

estimates that the annual cost to 

maintain such policies and procedures, 

including a full review at least annually, 

as required under the adopted rule, will 

be approximately $34,000 for each 

registered security-based swap dealer or 

registered major security-based swap 

participant.1333 This figure is based on 

an estimate of the cost to review existing 

policies and procedures, make any 

necessary updates, conduct ongoing 

training, maintain relevant systems and 

internal controls systems, and perform 

necessary testing. 

Accordingly, the Commission 

estimates that the initial aggregate 

annual cost associated with Rule 906(c) 

would be approximately $5,060,000, 

which corresponds to $92,000 per 

covered participant.1334 The 

Commission further estimates that the 

ongoing aggregate annual cost 

associated with Rule 906(c) will be 

approximately $1,870,000, which 

corresponds to $34,000 per covered 

participant.1335

Rule 906(a) requires a registered SDR, 

once a day, to send a report to each 

participant identifying, for each 

security-based swap to which that 

participant is a counterparty, the 

security-based swap(s) for which the 

registered SDR lacks counterparty ID 

and (if applicable) broker ID, branch ID, 

execution agent ID, trading desk ID, and 

trader ID. Under Rule 906(a), a 

participant that receives such a report 

will be required to provide the missing 

ID information to the registered SDR 

within 24 hours. 

The Commission believes that each 

registered SDR would face a one-time, 

initial cost of approximately $33,000 to 

create a report template and develop the 

necessary systems and processes to 

produce a daily report required by Rule 

906(a).1336 The Commission further 

believes that there will be an ongoing 

annual cost for a registered SDR to 

generate and issue the daily reports, and 

to enter into its systems the ID 

information supplied by participants in 

response to the daily reports, of 

approximately $30,000.1337

The Commission continues to 

estimate that the initial aggregate annual 

cost for registered SDRs associated with 

Rule 906(a) would be approximately 

$630,000, which corresponds to $63,000 

per registered SDR.1338 The Commission 

estimates that the ongoing aggregate 

annual cost for registered SDRs 

associated with Rule 906(a) will be 

approximately $300,000, which 

corresponds to $30,000 per for 

registered SDR. 

d. Registered SDR Policies and 

Procedures—Rule 907 

Rule 907(a) requires a registered SDR 

to establish and maintain written 

policies and procedures with respect to 

the receipt, reporting, and 

dissemination of security-based swap 

transaction data pursuant to Regulation 

SBSR. Under Rules 907(a)(1) and (2), a 

registered SDR’s policies and 

procedures must specify the data 

elements of a security-based swap that 

must be reported and the reporting 

format that must be used for submitting 

information. Under Rule 907(a)(3), the 

registered SDR’s policies and 

procedures must specify procedures for 

reporting life cycle events and 

corrections to previously submitted 

information. Rule 907(a)(4) requires 

policies and procedures for flagging 

transactions having special 

characteristics. Rules 907(a)(5) requires 

policies and procedures for assigning 

UICs in a manner consistent with Rule 

903. Rule 907(a)(6) requires policies and 

procedures for periodically obtaining 

from each of its participants the 

ultimate parent and affiliate information 

required to be submitted to the SDR by 

Rule 906(b). 

By requiring SDRs to establish and 

maintain policies and procedures 

pursuant to Rule 907(a)(1), SDRs likely 

will have to consult with their 

participants in devising flexible and 

efficient methods of obtaining high 

quality transaction data from market 

participants. This rule allows SDRs to 

adjust their policies and procedures as 

market conventions and technologies 

change. For example, registered SDRs 

will have the flexibility to incorporate 

new reporting methodologies more 

quickly. In addition, Rule 907(a)(1) 

should reduce the likelihood that 

financial innovation that leads to a new 

security-based swap products will 

disrupt regulatory reporting and public 

dissemination of transaction 

information related to the new product. 

At the same time, the Commission 

believes that there are benefits to 

enforcing minimum standards for 

reporting transaction information, 

standards that will be established as a 

result of the requirement that SDRs 

develop policies and procedures in 

accordance with Rule 907. As noted in 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14717 

1339See DTCC II at 16; ISDA I at 4; ISDA/SIFMA 

I at 8. 

1340The Commission derived its estimate from 

the following: [(Sr. Programmer (1,667 hours) at 

$303 per hour) + (Compliance Manager (3,333 

hours) at $283 per hour) + (Compliance Attorney 

(5,000 hours) at $334 per hour) + (Compliance Clerk 

(2,500 hours) at $64 per hour) + (Sr. Systems 

Analyst (1,667 hours) at $260 per hour) + (Director 

of Compliance (833 hours) at $446 per hour)] = 

$4,083,278, or approximately $4,100,000 per 

registered SDR. The Commission believes that 

potential SDRs that have similar policies and 

procedures in place may find that these costs would 

be lower, while potential SDRs that do not have 

similar policies and procedures in place may find 

that the potential costs would be higher. 

1341The Commission derived its estimate from 

the following: [(Sr. Programmer (3,333 hours) at 

$303 per hour) + (Compliance Manager (6,667 

hours) at $283 per hour) + (Compliance Attorney 

(10,000 hours) at $334 per hour) + Compliance 

Clerk (5,000 hours) at $64 per hour) + (Sr. Systems 

Analyst (3,333 hours) at $260 per hour) + (Director 

of Compliance (1,667 hours) at $446 per hour)] = 

$8,166,722, or approximately $8,200,000 per 

Continued 

Section XXII(B)(1)(a)(iii), the 

Commission anticipates that a small 

number of registered SDRs will serve 

the security-based swap market. These 

SDRs may enjoy market power relative 

to their participants, and we believe that 

imposing minimum standards on them 

is reasonable to mitigate the risk that 

imperfect competition leads to low 

quality data collection. 

Further, the requirement in Rule 

907(c) that a registered SDR make 

publicly available on its Web site the 

policies and procedures required by 

Regulation SBSR will allow the public 

to better understand and interpret the 

data publicly disseminated by SDRs. For 

example, under Rule 907(a)(4)(i), a 

registered SDR will have policies and 

procedures that identify the 

characteristics of a security-based swap 

that could, in the fair and reasonable 

estimation of the registered SDR, cause 

a person without knowledge of these 

characteristics to receive a distorted 

view of the market. Making publicly 

available a description of the flags that 

it requires will allow the public to 

interpret the flags they observe in 

publicly disseminated data. Rule 907(d) 

requires registered SDRs to review, and 

update as necessary, the policies and 

procedures required by Regulation 

SBSR at least annually, and indicate the 

date on which they were last reviewed. 

Finally, Rule 907(e) requires a 

registered SDR to provide to the 

Commission, upon request, information 

or reports related to the timeliness, 

accuracy, and completeness of data 

reported to the registered SDR pursuant 

to Regulation SBSR and the registered 

SDR’s policies and procedures 

established thereunder. Rule 907(e) will 

assist the Commission in examining for 

compliance with Regulation SBSR and 

in bringing enforcement or other 

administrative actions as necessary or 

appropriate. Required data submissions 

that are untimely, inaccurate, or 

incomplete could diminish the value of 

publicly disseminated reports that are 

designed to promote transparency and 

price discovery. 

The Commission believes that the 

costs of requirements under Rule 907(a) 

are related to developing policies and 

procedures. Rules 907(c) and 907(d) 

require a registered SDR to update its 

policies and procedures as necessary 

and to post these policies and 

procedures on its Web site. Rule 907(e) 

requires a registered SDR to provide the 

Commission with information related to 

the timeliness, accuracy, and 

completeness of data reported to it 

pursuant to Regulation SBSR and the 

registered SDR’s policies and 

procedures established thereunder. 

Under Regulation SBSR, registered 

SDRs have the flexibility to determine 

the precise means through which they 

will accept reports of security-based 

swap transaction data. Rather than 

setting—by rule—a fixed schedule of 

data elements that must be reported as 

well as the specific reporting language 

or reporting protocols that must be used, 

Regulation SBSR instead requires 

registered SDRs to establish and 

maintain policies and procedures that 

detail these requirements. Persons 

seeking to register as SDRs may have 

ongoing discussions with their 

participants—both before and after 

registration—about the appropriate 

means of permitting reporting in a 

manner that captures all the elements 

required by Rule 901 while minimizing 

the administrative burden on reporting 

sides. Also, the data elements necessary 

to understand a trade could evolve over 

time as new contracts are developed, or 

that the most efficient means of 

reporting also could evolve as new 

technologies or reporting languages are 

devised. In light of these considerations, 

the Commission believes that registered 

SDRs and, to the extent that SDRs seek 

discussion with them, market 

participants will be in a better position 

to define the necessary reporting 

elements over time as the security-based 

swap market evolves. 

As discussed above in Section IV, the 

Commission considered the alternative 

of requiring reporting parties to use a 

single reporting language or protocol in 

submitting data to registered SDRs, and 

three commenters encouraged the use of 

the FpML standard.1339

While specifying a single, acceptable 

standard would remove any ambiguity 

surrounding data formats that reporting 

parties could use for transaction reports, 

the Commission has chosen not to adopt 

such an approach, for three reasons. 

First, market participants may have 

preferences over the different opensource structured data formats available. 

By allowing registered SDRs to choose 

from among formats widely used by 

participants, the adopted approach 

allows SDRs to coordinate with their 

participants to select standards that 

allow reporting parties to efficiently 

carry out their obligations under Rule 

901. Second, allowing SDRs flexibility 

in the formats they accept should help 

ensure that they can accommodate 

innovations in the security-based swap 

market that lead to changes in data 

elements that must be reported under 

Rule 901. Third, the Commission 

believes that, so long as registered SDRs 

can make security-based swap 

transaction data accessible to the 

Commission using a uniform format and 

taxonomy, it may not be necessary to 

require reporting sides to report 

transaction data to registered SDRs 

using a single format or taxonomy. This 

approach gives a registered SDR the 

opportunity to differentiate its services 

by offering reporting sides the ability to 

report using different formats and 

taxonomies, if the SDR can convert 

these transaction reports into the 

uniform format and taxonomy pursuant 

to which the Commission will require 

the SDR to make transaction data 

accessible to the Commission. 

The Commission believes that ten 

registered SDRs will be subject to Rule 

907, and that developing and 

implementing written policies and 

procedures as required under Rule 907, 

will result in an initial, one-time cost to 

each registered SDR of approximately 

$4,100,000.1340 This figure includes the 

estimated cost to develop a set of 

written policies and procedures, 

program systems, implement internal 

controls and oversight, train relevant 

employees, perform necessary testing, 

monitor participants, and compile data. 

In addition, the Commission believes 

that its estimate for maintaining such 

policies and procedures, including a full 

review at least annually; making its 

policies and procedures publicly 

available on its Web site; and providing 

the Commission, upon request, 

information or reports related to the 

timeliness, accuracy, and completeness 

of data reported to it pursuant to 

Regulation SBSR, and the registered 

SDR’s policies and procedures is 

reasonable. As a result, the Commission 

believes its preliminary estimate of 

approximately $8,200,000 for each 

registered SDR is valid.1341 This figure 

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14718 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

registered SDR. The Commission believes that 

potential SDRs that have similar policies and 

procedures in place may find that these costs would 

be lower, while potential SDRs that do not have 

similar policies and procedures in place may find 

that the potential costs would be higher. 1342 In the Regulation SBSR Proposing Release, 

the Commission also included ‘‘calculate and 

publish block trade thresholds’’ as one of the items 

in the list of items that an SDR would need to 

undertake on an ongoing basis with respect to its 

policies and procedures under Rule 907. See 

Regulation SBSR Proposing Release, 75 FR 75276– 

77. Although the Commission is not adopting Rule 

907(b) at this time, the costs discussed herein 

pertain to all of the policies and procedures of a 

registered SDR. The Commission does not believe 

that not adopting Rule 907(b), which applies only 

to policies and procedures relating to block trades, 

would have had a measureable impact on the costs 

related to developing the policies and procedures 

of the registered SDR. As a result, the Commission 

believes that its cost estimate continues to be valid. 

1343The Commission derived its estimate from 

the following: [((4,083,278) + ($8,166,722)) × (10 

registered SDRs)] = $122,500,000, or approximately 

$123,000,000. 

1344The Commission derived its estimate from 

the following: [($8,166,722) × (10 registered SDRs)] 

= $81,667,220, or approximately $82,000,000. 

1345See Cross-Border Proposing Release, 78 FR 

30994, note 256. 

1346See SDR Adopting Release, Rules 13n– 

5(b)(1)(iii) and 13n–5(b)(3). 

1347 15 U.S.C. 78k–1(b)(5). 

1348See 15 U.S.C. 78k–1(b)(5)(B). 

1349 15 U.S.C. 78k–1(b)(6). 

1350See supra note 994. 

1351See SDR Adopting Release, Section VIII(D)(1). 

1352See id. 

1353 15 U.S.C. 78c(f). 

1354 15 U.S.C. 78w(a)(2). 

is based on an estimate of the cost to 

review existing policies and procedures, 

make necessary updates, conduct 

ongoing training, maintain relevant 

systems and internal controls systems, 

perform necessary testing, monitor 

participants, and collect data.1342

Accordingly, the Commission estimates 

that the initial annual cost associated 

with Rule 907 will be approximately 

$12,250,000 per registered SDR, which 

corresponds to an initial annual 

aggregate cost of approximately 

$122,500,000.1343 The Commission 

estimates that the ongoing annual cost 

associated with Rule 907 will be 

approximately $8,200,000 per registered 

SDR, which corresponds to an ongoing 

annual aggregate cost of approximately 

$82,000,000.1344 These figures are 

based, in part, on the Commission’s 

experience with other rules that require 

entities to establish and maintain 

compliance with policies and 

procedures.1345

Finally, the Commission continues to 

believe that the Rule 907(e) requirement 

that a registered SDR must provide to 

the Commission, upon request, such 

information as the Commission 

determines necessary or appropriate for 

the Commission to perform the duties of 

the Commission, registered SDRs will 

incur costs. The Commission notes, 

however, that any such costs are already 

covered by rules governing SDRs 

adopted in the SDR Adopting Release 

and, thus, do not need to be separately 

considered here. Specifically, Rule 13n– 

5(b) requires a registered 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, 

and also to ensure that the transaction 

data and positions that it maintains are 

complete and accurate.1346 The 

Commission further believes that these 

capabilities will enable a registered SDR 

to provide the Commission information 

or reports as may be requested pursuant 

to Rule 907(e). The Commission 

believes that Rule 907(e) will not 

impose any costs on a registered SDR 

beyond those imposed by Rule 13n– 

5(b). Furthermore, to the extent that 

market participants have already 

expended resources in anticipation of 

the adoption of Regulation SBSR, the 

costs could be significantly lower. As a 

result, the Commission’s estimates 

should be viewed as an upper bound of 

the potential costs of Regulation SBSR. 

After reviewing comment letters 

received in response to the Regulation 

SBSR Proposing Release and the CrossBorder Proposing Release, as well as 

evaluating the most recent data 

available to the Commission, the 

Commission continues to believe that 

these cost estimates related to Rule 907, 

as adopted, remain valid. 

e. SIP Registration by Registered SDRs— 

Rule 909 

Rule 909 requires a registered SDR to 

register with the Commission as a SIP. 

SIP registration of a registered SDR will 

help ensure fair access to important 

security-based swap transaction data 

reported to and publicly disseminated 

by the registered SDR. Specifically, 

requiring a registered SDR to register 

with the Commission as a SIP will 

subject it to Section 11A(b)(5) of the 

Exchange Act,1347 which provides that a 

registered SIP must notify the 

Commission whenever it prohibits or 

limits any person’s access to its services. 

If the Commission finds that the person 

has been discriminated against unfairly, 

the Commission can require the SIP to 

provide access to that person.1348

Section 11A(b)(6) of the Exchange 

Act 1349 also provides the Commission 

authority to take certain regulatory 

action as may be necessary or 

appropriate against a registered SIP.1350

Potential users of security-based swap 

market data will benefit from the 

Commission having the additional 

authority over a registered SDR/SIP 

provided by Sections 11A(b)(5) and 

11A(b)(6) to help ensure that these 

persons offer their security-based swap 

market data on terms that are fair and 

reasonable and not unreasonably 

discriminatory. 

Because the Commission is adopting 

a revised Form SDR that incorporates 

certain requests for information derived 

from Form SIP and will not require 

submission of a separate Form SIP, all 

programmatic costs of completing Form 

SDR are included in the Commission’s 

SDR Adopting Release.1351 As proposed 

and re-proposed, Regulation SBSR 

would have required the use of a 

separate form, existing Form SIP, for 

this purpose. In response to comments, 

however, the Commission is adopting a 

revised Form SDR that incorporates 

certain requests for information derived 

from Form SIP, and will not require 

submission of a separate Form SIP. All 

programmatic costs of completing Form 

SDR are scored in the SDR Adopting 

Release.1352 Therefore, final Rule 909 

itself imposes no programmatic costs on 

registered SDRs. 

7. Definitions—Rule 900 

The Commission believes that Rule 

900 will not entail any material costs to 

market participants. Rule 900 defines 

terms used in Regulation SBSR and does 

not, in itself, impose any obligations or 

duties. To the extent that the scope of 

a particular definition subjects a person 

to one or more provisions of Regulation 

SBSR, the costs and benefits of that rule 

are assessed (and, where feasible, 

calculated) in light of the scope of 

persons affected. With respect to the 

definition of ‘‘U.S. person,’’ the 

Commission believes that the 

Commission’s Title VII rules would 

benefit from having the same terms 

throughout and could, therefore, reduce 

assessment costs for market participants 

that might be subject to these rules. 

D. Effects on Efficiency, Competition, 

and Capital Formation 

1. Introduction 

Section 3(f) of the Exchange Act 1353

requires the Commission, whenever it 

engages in rulemaking and is required to 

consider or determine whether an action 

is necessary or appropriate in the public 

interest, also to consider, in addition to 

the protection of investors, whether the 

action would promote efficiency, 

competition, and capital formation 

(‘‘ECCF’’). In addition, Section 23(a)(2) 

of the Exchange Act 1354 requires the 

Commission, when making rules under 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14719 

1355See supra Section XXII(B)(1)(d) (describing 

current state of efficiency in the security-based 

swap market). 

1356 If financial market participants invest their 

money in cash or Treasury securities, rather than 

riskier assets such as stocks or corporate bonds, this 

may make it more difficult for companies to raise 

capital and invest in capital goods. 

the Exchange Act, to consider the 

impact of such rules on competition. 

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. 

Regulation SBSR’s effects on 

efficiency, competition, and capital 

formation are often closely related to 

one another, and it is difficult to 

distinguish between the effects of the 

final rules on each of these elements. 

For example, elements of a securitybased swap market structure that foster 

competition between liquidity suppliers 

may result in narrower spreads and 

higher trading volume, eventually 

resulting in greater price efficiency. 

Similarly, a security-based swap market 

that provides low-cost opportunities for 

firms to hedge commercial and financial 

risks as a result of low implicit 

transaction costs may encourage capital 

formation by allowing these firms to 

share risks with market participants that 

are better able to bear them, thereby 

reducing their need to engage in 

precautionary savings. However, as the 

last example indicates, the final rules’ 

effects on capital formation often arise 

indirectly through their effects on 

efficiency and competition. 

The following discussion of the 

effects of Regulation SBSR on efficiency, 

competition, and capital formation 

considers the regime that Regulation 

SBSR establishes for regulatory 

reporting and public dissemination as 

well as the particular means of 

implementation that the Commission 

has chosen, relative to alternative means 

of implementation considered. Because 

the various elements of these rules will 

affect the behavior of counterparties, 

infrastructure providers, and market 

participants in general, the Commission 

has considered the economic effects at 

each of these levels, including cases in 

which policy alternatives that may be 

privately efficient for individual actors, 

may nevertheless fail to be efficient for 

the overall market. 

Regulation SBSR establishes a regime 

for regulatory reporting and public 

dissemination of security-based swap 

transaction data. Under the final rules, 

the Commission and other relevant 

authorities will have access to detailed 

information about security-based swap 

transaction activity and about the risk 

exposures of security-based swap 

counterparties to both reference entities 

and to each other. At the same time, the 

public will enjoy unprecedented access 

to pricing and volume data of securitybased swap transactions. Post-trade 

transparency in the security-based swap 

market will reduce information 

asymmetries, thereby allowing even 

small counterparties to base their 

trading decisions on information about 

activity in the broader market, which 

they would not be able to observe 

without post-trade transparency. 

Moreover, public dissemination of 

security-based swap transactions could 

be used as an input to economic 

decisions in other markets (e.g., the 

corporate equity or bond markets). 

2. Regulatory Reporting 

As a result of the final rules, the 

Commission and other relevant 

authorities will have access, through 

registered SDRs, to comprehensive 

information about the security-based 

swap market. This information should 

improve relevant authorities’ ability to 

oversee the security-based swap market 

both for systemic risk purposes and to 

detect, deter, and address market abuse. 

Regulatory access to security-based 

swap data will facilitate monitoring of 

risk exposures with implications for 

financial stability that market 

participants do not internalize. For 

example, Regulation SBSR will provide 

relevant authorities with visibility into 

the security-based swap positions of a 

participant’s ultimate parent. Regulation 

SBSR also will allow relevant 

authorities to detect unusual activity at 

a very granular level, by trading desk or 

even individual trader. Similarly, by 

filtering exposures to single-name CDS 

via the product ID, relevant authorities 

will be able to better understand any 

potential risk to financial stability that 

could arise if a corporate default triggers 

CDS payouts between counterparties. 

Information about the activity and 

exposures of security-based swap 

market participants could allow the 

Commission or other relevant 

authorities to take actions that reduce 

the likelihood of disruption to the 

smooth functioning of financial markets 

or to reduce the magnitude of such 

disruptions when they do occur.1355 If 

such disruptions also impair capital 

formation by reducing the ability or 

willingness of financial intermediaries 

or other market participants to borrow 

or lend, then market oversight that 

reduces financial instability may also 

facilitate capital formation. 

The opacity of the security-based 

swap market can contribute to 

uncertainty during periods of financial 

crisis. In the absence of information 

about the outstanding obligations 

between counterparties to securitybased swaps, financial market 

participants may face uncertainty over 

the extent to which large financial 

institutions are exposed to each other’s 

credit risk. This environment may create 

incentives for financial market 

participants to reduce risk exposures 

and seek safer assets (such as cash or 

Treasury securities), which could lead 

to a significant reduction in investment 

in capital goods.1356 Under a robust 

regime of regulatory reporting, the 

Commission and other relevant 

authorities will have greater means to 

identify the extent of the relevant 

exposures and the interrelatedness of 

risks in the security-based swap market, 

which could be particularly important 

in times of financial stress. Providing 

relevant authorities access to 

information about outstanding 

obligations that result from securitybased swap activity could allow these 

authorities to assist in the event of 

counterparty default. This knowledge 

could reduce market participants’ 

uncertainty in times of stress, if, for 

example, it suggests to them a more 

orderly wind-down of risk exposures of 

the defaulting counterparty. To the 

extent that reduced uncertainty results 

in more efficient risk-sharing it may 

reduce market participants’ demand for 

safe assets, as described above, and 

hence may improve the environment for 

capital formation. 

Regulatory reporting will also enable 

the Commission and other relevant 

authorities to improve their monitoring 

of market practices. This could have 

direct effects on competition in the 

security-based swap market. Absent 

regulation by the Commission and other 

relevant authorities, potential market 

participants may consider the potential 

costs of market abuse to be a barrier that 

discourages their entry into the securitybased swap market. The knowledge that 

the Commission and other relevant 

authorities are able to conduct 

surveillance on the basis of regulatory 

reporting may lower their barriers to 

entry since surveillance and the 

resulting increased probability of 

detection may deter potential market 

abuse in the security-based swap 

market. This could result in broader 

participation and improved efficiency, 

competition, and capital formation due 

to the availability of more risk-sharing 

opportunities between market 

participants. 

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14720 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1357See supra Section XXII(B)(1)(d) (discussing 

sources of security-based swap information and 

efficiency in the current security-based swap 

market). 

1358See, e.g., Bessembinder et al., supra note 

1259. 

1359A dead-weight loss means that the economy 

in aggregate is worse off. If market participants do 

not share risks efficiently as a result of their inferior 

bargaining position relative to dealers, then risks 

are not transferred to those market participants who 

are in the best position to bear them. A dead-weight 

loss results when the benefits that accrue to dealers 

as a result of their private information are less than 

the costs of inefficient risk sharing, or when dealers 

do not benefit at the equal expense of other market 

participants. 

1360See Edwards, et al., supra note 1223. 

3. Public Dissemination 

Regulation SBSR establishes a 

requirement for public dissemination of 

security-based swap transaction 

information. Currently, public access to 

security-based swap transaction 

information is limited to aggregate 

pricing and volume data made available 

by clearing agencies and DTCC–TIW, as 

well as infrequent reporting by large 

multilateral organizations. There is no 

comprehensive or widely available 

source of transaction-by-transaction 

pricing and volume information. 

The Commission believes that public 

availability of pricing and volume data 

for individual security-based swaps, as 

required by Title VII, should promote 

efficiency and competition by enabling 

information produced by activity in the 

security-based swap markets to be used 

as an input to myriad economic 

decisions, when currently limited 

transaction information is generally 

available only to large dealers who 

observe customer order flow.1357 Thus, 

smaller market participants, being able 

to view all security-based swap 

transactions disseminated by registered 

SDRs, can observe from recently 

executed prices whether there may be 

profitable opportunities to enter the 

market, thereby increasing competition. 

In addition, a firm may use information 

about the pricing of CDS written on its 

debt to decide on the appropriate 

opportunity cost of capital to apply to 

the cash flows of new investment 

projects, thereby promoting efficiency. 

Similarly, a lender may use information 

about credit risk embedded in the 

pricing of CDS written on a borrower’s 

existing debt to inform the lender’s 

decision of whether or not to extend 

additional financing, thereby also 

promoting efficiency. 

As discussed in Section XXII(C)(2)(a), 

public dissemination of security-based 

swap transactions also may promote 

better valuation of underlying and 

related assets by allowing for the 

inclusion of last-sale information into 

valuation models. Models without the 

input of last-sale information could be 

imprecise or be based on assumptions 

subject to the evaluator’s discretion 

without having last-sale information to 

help identify or correct flawed 

assumptions. As a result, otherwise 

identical market participants holding 

the same asset but using different 

valuation models might arrive at 

significantly different valuations. This 

could result in these market participants 

developing very different views of their 

risk exposures, resulting in inefficient 

economic decisions. The Commission 

anticipates that market observers will 

incorporate last-sale information that is 

publicly disseminated by registered 

SDRs into their valuation models for the 

same and related assets. Such last-sale 

information will assist them in 

developing and validating their pricing 

models and improve the accuracy of the 

valuations that they use for a variety of 

purposes, such as making new 

investment decisions or managing the 

risk of existing positions. Efficient 

allocation of capital relies on accurate 

valuation of asset prices. Overvaluation 

of assets could result in a misallocation 

of capital, as investors seek to purchase 

or hold an asset that cannot deliver the 

anticipated risk-adjusted return. By the 

same token, undervalued assets 

represent investment opportunities that 

might go unpursued, because investors 

do not realize that a more attractive riskadjusted return may be available. To the 

extent that post-trade transparency 

enables asset valuations to move closer 

to their fundamental values, capital 

should be more efficiently allocated. 

Information revealed through public 

dissemination of security-based swap 

transaction details takes on two key 

characteristics. First, use of a piece of 

information by one economic agent does 

not necessarily preclude use of the same 

information by another. Second, once 

information is made public under 

Regulation SBSR, it is, by definition, 

non-excludable. Dissemination cannot 

be limited only to those that have direct 

access to the information (such as 

dealers who observe significant order 

flow) or to larger market participants 

who are willing to pay for the 

information. These characteristics make 

it difficult for parties who report 

transaction data to capture the value 

that market participants and market 

observers may gain from receipt of 

publicly disseminated security-based 

swap data. As a result, public 

dissemination of security-based swap 

transaction information is prone to 

inefficient supply—for example, parties 

have an incentive to make incomplete 

reports of their activity. By establishing 

minimum requirements for what is 

reported and publicly disseminated, the 

Commission believes that Regulation 

SBSR will limit the degree of this 

inefficient supply. 

Public dissemination will also likely 

affect efficiency and competition within 

the security-based market. A primary 

economic effect of the final rules on 

public dissemination of transaction 

information is to reduce the degree of 

information asymmetry between market 

participants. Information asymmetries 

are currently endemic in the securitybased swap market. Large dealers can 

observe a significant amount of order 

flow provided by their customers and 

know the prices at which their various 

customers have traded with them. Other 

market participants, including the 

customers of large dealers, generally do 

not know the prices that other market 

participants have paid or would be 

willing to pay for particular securitybased swaps, what products are being 

transacted, or in what volumes. Large 

dealers collectively, who are able to 

observe their customers’ orders and 

executions, may be able use this 

information to adjust the prices that 

they quote to extract profits at the 

expense of their customers.1358

Customers, with very limited ability to 

obtain information about the prices or 

sizes of others’ transactions, are in an 

inferior bargaining position to the 

dealers that they face. To the extent that 

dealer private information counters the 

incentives for market participants to 

efficiently share risks using securitybased swaps, it represents a dead-weight 

loss and not a simple reallocation of 

gains from trade between dealers and 

their customers.1359 Post-trade 

transparency increases the bargaining 

power of customers because knowledge 

of last-sale prices in the same or similar 

instruments allows them to establish a 

baseline for negotiations with any 

dealer. 

Post-trade transparency in other 

financial markets has been shown to 

improve competition and efficiency by 

decreasing implicit transaction costs 

and improving the bargaining power of 

investors and other non-dealers. For 

example, a number of studies of the 

corporate bond market have found that 

post-trade transparency, resulting from 

the introduction of FINRA’s TRACE 

system, reduced implicit transaction 

costs.1360 Reduced implicit transaction 

costs could encourage market entry, 

particularly of smaller dealers and nondealers, and potentially increase risk 

sharing and price competition, thereby 

promoting efficiency. To the extent that 

the current security-based swap market 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14721 

1361 In the Regulation SBSR Proposing Release, 

the Commission requested comment on whether 

post-trade transparency would have a similar effect 

on the security-based swap market as it has in other 

securities markets—and if not, why not. See 75 FR 

75226. No commenters responded to the 

Commission’s request. 

1362A similar information asymmetry, but to a 

lesser and varying degree, exists between larger and 

smaller dealers, and it would also be reduced. 

1363See supra Section XXII(B)(2)(a) (discussing 

the benefits of improved valuation). 

1364See Edwards, et al., supra note 1223. 

1365The Commission notes there are also 

plausible cases in which Regulation SBSR might 

increase the efficiency of risk allocation while also 

reducing transaction volume. Market participants 

might determine, as a result of observing publicly 

disseminated price and volume data, that engaging 

in a security-based swap transaction is an 

inefficient means of managing financial or 

commercial risks. 

1366See supra Section XXII(C)(2). 

is similar to the corporate bond market 

prior to the introduction of TRACE, 

post-trade transparency could have 

similar effects in the security-based 

swap market.1361

Regulation SBSR will permit all 

market observers for the first time to see 

last-sale information of security-based 

swap transactions, thereby reducing the 

information asymmetry between dealers 

and non-dealers.1362 Non-dealers may 

be able to use publicly disseminated 

information to negotiate more favorable 

prices from dealers or to decline to enter 

into security-based swaps offered at 

unfavorable prices, thereby improving 

the efficiency of risk sharing in the 

security-based swap market. 

Additionally, public dissemination 

could assist dealers in deriving better 

quotations, as knowledge of the prices 

and volumes at which other market 

participants have executed transactions 

could serve as a valuable input for 

quotations in the same or similar 

instruments.1363 As a result, dealers will 

have a better sense of the market and 

may not need to build large margins into 

their quotations to compensate for 

uncertainty in providing quotations. 

Increased competition from new 

entrants and quotations that more 

accurately reflect fundamental value 

could lead to lower implicit transaction 

costs for security-based swaps, which 

will encourage efficient risk sharing and 

promote price efficiency.1364

The Commission recognizes, however, 

that the final rules will not eliminate 

entirely the informational advantage of 

large intermediaries. These market 

participants will still have the 

advantage of seeing order flows or 

inquiries that are not ultimately 

executed and disseminated. They also 

will be able to see their completed 

transactions against customers in real 

time, while market observers who 

consume the transaction data that is 

publicly disseminated by registered 

SDRs might not—during the interim 

phase of Regulation SBSR—learn of 

these transactions until up to 24 hours 

after they are executed. In addition, an 

executing intermediary may derive an 

informational advantage from knowing 

the identities of both its counterparties 

and other customers who submit orders 

or make inquiries about liquidity. 

The Commission also acknowledges 

that implementing post-trade 

transparency in the security-based swap 

market could cause some market 

participants to execute fewer securitybased swaps in the U.S. market or to 

exit the U.S. market completely and 

execute their transactions in foreign 

markets instead. To the extent that such 

events occur, these could be viewed as 

costs of the final rules that could have 

a detrimental impact on efficiency, 

competition, and capital formation. For 

example, certain market participants 

that are currently active in the market 

might not find it desirable for 

information about their security-based 

swaps to be publicly known. If market 

participants respond to the final rules 

by reducing their trading activity or 

exiting the market, or if the final rules 

raise barriers to entry, the result could 

be reduced competition between the 

remaining market participants. Besides 

reduced price competition, exit by 

certain participants from the market also 

could result in a less efficient allocation 

of credit risk. This could have 

implications for capital formation if 

market participants engage in 

precautionary savings and selfinsurance rather than hedging their risks 

by using capital resources offered by 

third parties through security-based 

swaps.1365

Public dissemination of securitybased swap transactions also may 

promote efficient valuation of various 

financial instruments. As a result of the 

final rules, all market participants and 

market observers will have the benefit of 

knowing how counterparties to a 

particular security-based swap valued 

the security-based swap at a specific 

moment in the recent past, and can 

incorporate this last-sale information 

into their own valuations for that 

security-based swap, as well as any 

related or underlying instrument.1366 To 

the extent that last-sale information 

results in valuations that are more 

informationally efficient, they may help 

improve financial stability by making 

risk management by financial 

institutions more efficient. This in turn 

could enhance the ability of market 

participants to accurately measure 

financial exposures to each of their 

counterparties. 

Public dissemination of securitybased swap transaction information 

could improve the efficiency of the 

security-based swap market through 

more efficient deployment of assets 

used as collateral for security-based 

swap transactions. Appropriate 

collateral allocation is dependent on 

accurate valuation of security-based 

swaps. As the value of a security-based 

swap changes, the likelihood of one 

party having to make a payout to the 

other party also changes, which could 

impact the amount of collateral that one 

counterparty owes to the other. Hence, 

misvaluation of a security-based swap 

contract could lead to inefficient 

allocation of collateral across 

counterparties. To the extent that public 

dissemination of security-based swap 

transactions will help enable better 

valuations, instances of 

overcollateralization or 

undercollateralization should decrease. 

Furthermore, the better investors can 

judge the performance of collective 

investment vehicles because of better 

valuations, the more efficiently they can 

allocate their investment capital among 

available funds. 

Post-trade transparency of securitybased swaps should promote more 

efficient valuation of securities on 

which security-based swaps are based. 

A clear example of this is the market for 

single-name CDS, where post-trade 

transparency may lead to better 

estimates of the creditworthiness of debt 

issuers. All other things being equal, 

CDS protection on a more creditworthy 

issuer costs less than CDS protection on 

a less creditworthy issuer. Furthermore, 

the cost of CDS protection on a single 

issuer may change over time, reflecting, 

in part, the financial position of the 

issuer. Mandatory post-trade 

transparency of CDS transactions will 

offer market participants and market 

observers the ability to dynamically 

assess the market’s view of the 

creditworthiness of the reference 

entities that underlie CDS contracts, 

thus promoting efficiency in the market 

for cash bonds. For example, public 

dissemination of transactions in CDS on 

reference entities that issue TRACEeligible debt securities will help 

reinforce the pricing signals derived 

from individual transactions in debt 

securities generated by TRACE. Market 

participants can arbitrage disparities in 

prices reflected in TRACE and as 

suggested in last-sale information of 

related CDS, helping create more overall 

efficiency in the market for credit. 

Similarly, public dissemination of 

transactions in single-name CDS should 

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1367See Bond, et al., note 1258, supra. 1368See supra Section XXII(C)(2)(c). 

1369See supra note 486. 

1370The Commission’s economic analysis of the 

effects of post-trade transparency on the securitybased swap market has included indirect evidence 

from the swap market and from the security-based 

swap market. See Analysis of Post-Trade 

Transparency; Hedging Analysis. 

reinforce the pricing signals derived 

from public dissemination of index CDS 

transactions. Post-trade transparency of 

security-based swap CDS under 

Regulation SBSR could indirectly bring 

greater transparency into the market for 

debt instruments (such as sovereign 

debt securities) that are not subject to 

mandatory public dissemination 

through TRACE or any other means. 

Finally, business owners and 

managers can use information gleaned 

from the publicly disseminated securitybased swap transaction data 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. 

Transparent security-based swap 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.1367

4. Implementation of Regulatory 

Reporting and Public Dissemination 

a. Role of Registered SDRs 

In adopting Regulation SBSR, the 

Commission has attempted to design the 

duties of registered SDRs to promote 

efficiency of the reporting and public 

dissemination requirements and thereby 

minimize any adverse impacts on 

competition and capital formation. At 

the same time, the Commission 

acknowledges that, to the extent that the 

final rules place regulatory obligations 

on registered SDRs, these obligations 

may constitute a barrier to entry that, at 

the margin, reduces competition 

between registered SDRs. Regulation 

SBSR requires a registered SDR to 

publicly disseminate specified 

information about reported securitybased swap transactions immediately 

upon receipt. The Commission believes 

that this requirement will help promote 

an efficient allocation of public 

dissemination responsibilities for a 

number of reasons. First, registered 

SDRs—because of their role in the 

regulatory reporting function—already 

possess all of the information necessary 

to carry out public dissemination and 

would not have to collect additional 

information from other parties. Second, 

placing the duty to publicly disseminate 

on registered SDRs eliminates the need 

for the development of other 

infrastructure and mechanisms for 

public dissemination of security-base 

swap transaction information in 

addition to the infrastructure that is 

required to support regulatory 

reporting.1368 Third, users of publicly 

disseminated security-based swap data 

will be required to consolidate 

transaction data from only a small 

number of registered SDRs, rather than 

a potentially larger number of 

dissemination agents that might exist 

under an alternative regime. Under 

Rules 907(a)(1) and 907(a)(2), registered 

SDRs have the flexibility to determine 

the precise means through which they 

will accept reports of security-based 

swap transaction data. This degree of 

flexibility has implications for the 

efficiency of data collection. Registered 

SDRs could choose to innovate and 

adopt new reporting formats that could 

lower costs to market participants while 

maintaining the required level of 

information and data integrity. 

Moreover, in an effort to attract 

business, registered SDRs could decide 

to accept data from market participants 

in a wide variety of formats, taking on 

additional data management and 

systems burdens. Indeed, such an 

outcome could represent an efficient 

allocation of the costs of data 

management, in which a handful of 

registered SDRs invest in technologies 

to transform data rather than 

approximately 300 reporting sides 

making similar changes to their systems 

in an effort to provide identical reports 

to each SDR. The Commission 

acknowledges, however, that the same 

features that support a market structure 

that yields only a handful of registered 

SDRs could temper the incentives of 

these registered SDRs to compete on 

reporting efficiency. For example, 

registered SDRs could decide to accept 

data from customers in only one specific 

format. The Commission further 

anticipates efficiency gains if data 

elements necessary to understand a 

trade evolve over time as new securitybased swap contracts are developed. 

Additionally, this approach may 

support competition among securitybased swap counterparties by 

maintaining low barriers to entry with 

respect to reporting obligations under 

Regulation SBSR. 

Further, the final rules do not 

presume a market structure for 

registered SDRs. On one hand, this 

means that market participants, the 

Commission, and other relevant 

authorities cannot rely on efficiency 

gains from receiving security-based 

swap transaction data from a single, 

consolidated source, but must instead 

consolidate fragmented data from 

multiple SDRs. On the other hand, a 

monopoly in the market for SDR 

services could preclude innovations that 

may lead to higher quality outputs or 

lower costs for reporting parties, SDR 

participants more generally, the 

Commission, and other relevant 

authorities. 

b. Interim Phase of Reporting 

Requirements and Block Rules 

As discussed above in Section VII, the 

Commission is adopting rules for 

regulatory reporting and public 

dissemination of security-based swaps 

that are intended only as the interim 

phase of implementation of these Title 

VII requirements. At a later date, the 

Commission anticipates seeking 

additional comment on potential block 

thresholds and associated block rules 

(such as the time delay for 

disseminating block trades and the time 

period for the mandatory reporting and 

public dissemination of non-block 

trades). 

Immediately implementing a 

complete regime that includes block 

trade thresholds and final reporting 

timeframes could improve efficiency, 

competition, and capital formation by 

increasing price transparency in the 

security-based swap market sooner. 

Several commenters, however, argued 

that requiring post-trade transparency 

for security-based swaps with 

incorrectly designed block trade 

thresholds could significantly damage 

the market,1369 and the Commission is 

concerned that disruptions to the 

market that could result from 

establishing block trading rules without 

the benefit of comprehensive data 

analysis could cause certain market 

participants to limit their security-based 

swap activity or to withdraw from the 

market entirely. This in turn could lead 

to reduced competition, higher prices, 

and inefficient allocations of risk and 

capital. 

Currently, there are no data that can 

be used to directly assess the impact of 

mandated post-trade transparency of 

security-based swap transactions on 

market behavior, because there is no 

widely available post-trade data to 

which the security-based swap market 

can react.1370 The Commission 

anticipates that the initial phase of 

Regulation SBSR will yield at least some 

useful data about how much time 

market participants believe they need to 

hedge transactions and how other 

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1371For example, assume that a person becomes 

a participant of a registered SDR and obtains UICs 

for its trading desks and individual traders from 

that SDR. Later, that person becomes a participant 

at a second registered SDR. The second SDR could 

issue its own set of UICs for this person’s trading 

desks and individual traders, or it could recognize 

and permit use of the same UICs that had been 

assigned by the first registered SDR. 

1372See Bloomberg Letter at 2 (stating that it 

would be possible to develop a public domain 

symbology for security-based swap reference 

entities that relied on products in the public 

domain to ‘‘provide an unchanging, unique, global 

and inexpensive identifier’’). 

1373As discussed in Section XXII(B)(1), supra, the 

data in DTCC–TIW are self-reported and the vast 

majority of trades involves at least one dealer as a 

counterparty. Further, both transaction 

counterparties submit records for confirmation, 

covering all likely registrants. 

1374See Cross-Border Proposing Release, 78 FR 

31194. 

1375See supra Section XXII(C) (discussing the 

costs that reporting sides are likely to incur). 

market participants react when they see 

transactions of different sizes with 

different delays after the time of 

execution. The phased approach is 

designed to introduce mandatory posttrade transparency in the security-based 

swap market while allowing the 

Commission sufficient time to gather 

and analyze data regarding potential 

block thresholds and dissemination 

delays. 

The Commission acknowledges that 

allowing up to 24 hours for reporting a 

security-based swap means that market 

participants not involved in that 

particular transaction, and other market 

observers, will not have access to 

information about the transactions for 

up to 24 hours after the initial 

execution, depending upon the specific 

time when the transaction is reported. 

This delay could impact the 

development of more vigorous price 

competition in the security-based swap 

market because market participants who 

are involved in transactions would have 

access to potentially market-moving 

information up to 24 hours before those 

who are not. The Commission believes, 

however, that allowing up to 24 hours 

for transactions to be reported and 

publicly disseminated still represents a 

significant improvement over the status 

quo, where market participants report 

transactions to data repositories only on 

a voluntary basis and information about 

transaction is not publicly 

disseminated. 

c. Use of UICs and Rule 903 

Regulation SBSR requires the use of 

several UICs in the reporting of securitybased swap transactions. Use of UICs 

improves efficiency of data intake by 

registered SDRs and data analysis by 

relevant authorities and other users of 

data, as the reported security-based 

swap transaction information can be 

readily aggregated by UIC along several 

dimensions (e.g., product ID, trading 

desk ID, or trader ID). The efficiency 

gain in aggregation applies primarily at 

the SDR level in cases where the SDR 

uses its own UICs that are not otherwise 

applied at other SDRs (assuming that no 

IRSS exists to provide such UICs). To 

the extent that multiple SDRs were to 

use the same UICs—because they use 

UICs provided by an IRSS, such as the 

GLEIS, or because SDRs agree to 

recognize UICs assigned by another 

SDR1371—the efficiency gain would 

extend to aggregation across SDRs, 

although this is not required under 

Regulation SBSR. The efficiency gains 

described in this section may be limited 

to regulatory reporting and only extend 

to public dissemination to the extent 

that the relevant information is being 

publicly disseminated. Additionally, 

minimizing the operational risks arising 

from inconsistent identification of 

persons, units of persons, products, or 

transactions by counterparties and 

market infrastructure providers would 

enhance efficiency. 

Under Rule 903(b), as adopted, a 

registered SDR may permit information 

to be reported to it, and may publicly 

disseminate information, using codes in 

place of certain data elements only if the 

information necessary to interpret such 

codes is widely available to users of the 

information on a non-fee basis. If 

information to understand embedded 

codes is not widely available on a nonfee basis, information asymmetries 

would likely continue to exist between 

large market participants who pay for 

the codes and other market participants. 

Rents paid for the use of codes could 

decrease transparency and increase 

barriers to entry to the security-based 

swap market, because the cost of 

necessary licenses may reduce the 

incentives for smaller potential market 

participants to enter the market. 

Preventing this barrier to entry from 

forming should help promote 

competition by facilitating the entry of 

new market participants. 

One commenter suggested that 

alternatives could be developed to the 

status quo of using fee-based codes in 

security-based swap market data.1372

The Commission welcomes the 

development of such alternatives, and 

believes that Rule 903(b), as adopted, 

may encourage such development. 

d. Rules Assigning the Duty To Report 

Rule 901(a) assigns the reporting 

obligation for security-based swaps 

other than clearing transactions and 

platform-executed transactions that are 

submitted to clearing. The reporting 

hierarchy in Rule 901(a) is designed to 

increase efficiency for market 

participants, as well as the Commission 

and other relevant authorities, by 

locating the duty to report with 

counterparties who are most likely to 

have the resources and who are best 

able to support the reporting function. 

Furthermore, Rule 901(a) seeks to 

increase efficiency by leveraging 

existing infrastructure to support 

security-based swap reporting, where 

practicable. 

The Commission anticipates that the 

majority of security-based swaps 

covered by Rule 901(a), as adopted, will 

include a registered security-based swap 

dealer or registered major security-based 

swap participant on at least one side. 

Many of the entities that are likely to 

register as security-based swap dealers 

or major security-based swap 

participants already have committed 

time and resources building the 

infrastructure to support reporting 

security-based swaps and some 

reporting to DTCC–TIW is occurring on 

a voluntary basis.1373 Moreover, many 

such entities currently report swaps 

pursuant to the CFTC’s swap data 

reporting rules. Rule 901(a) is designed, 

as much as practicable, to allow these 

market participants to use these existing 

reporting capabilities and to minimize 

the chance that a market participant 

with limited involvement in the 

security-based swaps market might 

incur the duty to report. This approach 

could lead to lower barriers to entry into 

the market compared to the approach 

contemplated in the SBSR Proposing 

Release.1374 Also, by reducing 

infrastructure costs imposed on smaller 

market participants, this approach also 

could promote competition by reducing 

the likelihood that these smaller 

entrants without existing reporting 

capabilities would be required to incur 

fixed costs necessary to develop 

reporting capabilities. Finally, to the 

extent that non-registered persons are 

not required to devote resources to 

support transaction reporting—because 

reporting is carried out instead by 

registered security-based swap dealers 

and registered major security-based 

swap participants who, due to 

economies of scale and the presence of 

existing reporting capabilities, are likely 

to face relatively lower costs of 

reporting—such resources could be put 

to more efficient uses.1375

The Commission recognizes that this 

approach puts smaller market 

participants on the same rung of the 

hierarchy with entities that likely meet 

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14724 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1376See 17 CFR 45.8 (providing a hierarchy for 

regulatory reporting of swaps); 17 CFR 43.3(a). 

1377See DTCC VI at 8–9; DTCC VIII; MarkitSERV 

III at 4–5. 

the definition of ‘‘security-based swap 

dealer’’ and will have to register with 

the Commission as such in the future. 

In theory, this could force these smaller 

market participants into a negotiation 

with the ‘‘likely dealers,’’ because Rule 

901(a)(2)(ii)(E)(1) requires both sides to 

select the reporting side. The 

Commission believes that this outcome 

will be unlikely in practice. The 

Commission understands that voluntary 

reporting practices in the security-based 

swap market are broadly consistent with 

the principle behind the reporting 

hierarchy in Rule 901(a)(2)(ii): That the 

more sophisticated market participant 

should report the transaction. Moreover, 

market participants who are active in 

the security-based swap market are 

likely also to be active in the swap 

market, where CFTC rules have 

established a reporting hierarchy that 

assigns the heaviest reporting duties to 

swap dealers and major swap 

participants.1376 Because practices have 

already been established for larger 

market participants to assume reporting 

duties, it is likely that these practices 

will be applied in the security-based 

swap market even before the 

Commission adopts registration rules for 

security-based swap dealers and major 

security-based swap participants. 

One of the general principles 

underlying Rule 901(a) is that, if a 

person has the duty to report 

information under Regulation SBSR, it 

should also have the ability to choose 

the registered SDR to which it reports. 

The Commission believes that this 

approach will promote efficiency and 

competition, because it enables each 

person with a duty to report a securitybased swap to connect and report 

transactions to the registered SDR (or 

SDRs) that offer it the highest quality 

services and/or the lowest fees to the 

extent that there is more than one SDR. 

Two commenters believed that the 

Commission could promote competition 

by allowing a counterparty to a securitybased swap—typically a security-based 

swap dealer—to choose the registered 

SDR that receives information reported 

under Regulation SBSR.1377 The 

Commission agrees with the views of 

the commenters that allowing a 

counterparty to choose the registered 

SDR that received information reported 

under Regulation SBSR could promote 

competition. Rule 901(a), as adopted, 

reflects this approach by allowing the 

person with the duty to report to choose 

the registered SDR to which it reports. 

Finally, the Commission believes that, 

if Rule 901(a) affects capital formation at 

all, it would be in only a limited and 

indirect way. The Commission does not 

see—and no commenter has presented 

any evidence to suggest—that the 

economic considerations of how, where, 

and by whom security-based swap 

transactions will be reported to 

registered SDRs will have any direct 

bearing on how, how often, and at what 

prices market participants might be 

willing to transact. As mentioned above, 

by placing the reporting duty on the 

person with the most direct access to 

required information, Rule 901(a) is 

designed to minimize reporting 

burdens, which could facilitate a more 

efficient allocation of capital by 

reducing expenditures on security-based 

swap reporting infrastructure. 

e. Embargo Rule 

Rule 902(d), the Embargo Rule, 

prohibits the release of security-based 

swap transaction information to persons 

(other than a counterparty or post-trade 

processor) until that information has 

been transmitted to a registered SDR. 

The Embargo Rule is designed to 

promote competition among market 

participants in the security-based swap 

market by prohibiting persons who 

obtain knowledge of a security-based 

swap transaction shortly after execution 

from providing information about that 

transaction to third parties before that 

information is provided to a registered 

SDR so that it can be publicly 

disseminated. In the absence of the 

Embargo Rule, selected third parties 

who are told about executions could 

obtain an informational advantage 

relative to other market participants, 

reducing the ability of these other 

market participants to compete in the 

market. The potential benefits of 

Regulation SBSR with respect to 

competition would suffer in the absence 

of the Embargo Rule, because market 

participants who gain earlier access to 

information could maintain a high 

degree of information asymmetry in the 

market. 

Rule 902(d), as adopted, includes a 

carve-out for post-trade processors, such 

as entities involved in comparing or 

clearing transactions. This carve-out is 

designed to promote efficiency in the 

processing of security-based swap 

transactions by recognizing that the 

policy goals of the Embargo Rule are not 

served by impeding the ability of 

security-based swap counterparties to 

obtain post-trade processing services. 

Post-trade processors must obtain 

information about a transaction to carry 

out their functions, even if the 

transaction has not yet been reported to 

a registered SDR. In the absence of the 

carve-out, efficiency could be harmed if 

post-trade processors were barred from 

obtaining information about the 

transaction until it had been publicly 

disseminated by a registered SDR. 

Without this carve-out, Regulation SBSR 

could cause the services and functions 

provided by post-trade processors to be 

delayed. This could result in a 

disruption of current market practices, 

where post-trade processors provide a 

variety of services to security-based 

swap counterparties, and thus a 

reduction in security-based swap market 

efficiency. 

5. Impact of Cross-Border Aspects of 

Regulation SBSR 

a. General Considerations 

The security-based swap market is 

global in nature, and dealers and other 

market participants are highly 

interconnected within this global 

market. This interconnectedness 

provides a myriad of paths for liquidity 

and risk to move throughout the 

financial system and makes it difficult, 

in many cases, to precisely identify the 

impact of a particular entity’s activity 

on financial stability or liquidity. As a 

corollary to this, it is difficult to isolate 

risk and liquidity problems to one 

geographical segment of the market. 

Further, as we noted in Section 

XXII(B)(1), security-based swap market 

participants in one jurisdiction can 

conduct activity through branches or 

subsidiaries located in another. These 

features of the market form the basis of 

the Commission’s analysis of the effects 

of rule 908 on competition, efficiency 

and capital formation. 

b. Regulatory Reporting and Public 

Dissemination 

Rule 908(a) generally applies 

regulatory reporting and public 

dissemination requirements depending 

on the characteristics of the 

counterparties involved in a transaction. 

The regulatory reporting requirement 

allows the Commission and other 

relevant authorities the ability to 

monitor risk and conduct market 

surveillance. Because the security-based 

swap market represents a conduit 

through which financial risks from 

foreign markets can manifest themselves 

in the United States, the Commission 

believes that it is appropriate to focus 

on those transactions that are likely to 

serve as routes for risk transmission to 

the United States, either because a 

direct or indirect counterparty is a U.S. 

person, is registered with the 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14725 

1378The effects of public dissemination are 

discussed more generally in Section XXII(C)(2); the 

economic effects of Rule 908 that relate to 

efficiency, competition, and capital formation are 

examined in Section XXII(D)(4)(i). 

1379See Edwards, et al., supra note 1223. 

(presenting a model implying, and finding 

empirical evidence in TRACE data for, what the 

authors term a ‘‘liquidity externality,’’ i.e., 

improved market quality in certain securities that 

were not yet TRACE-eligible, when related 

securities had become subject to TRACE post-trade 

transparency). 

1380See supra Section XXII(C)(2)(a) (discussing 

the benefits of improved valuation). 

1381See, e.g., Arnoud W.A. Boot, Silva Dezelan, 

and Todd T. Milbourn, ‘‘Regulatory Distortions in 

a Competitive Financial Services Industry,’’ Journal 

of Financial Services Research, Vol. 17, No. 1 (2000) 

(showing that, in a simple industrial organization 

model of bank lending, a change in the cost of 

capital resulting from regulation results in a greater 

loss of profits when regulated banks face 

competition from non-regulated banks than when 

regulations apply equally to all competitors); Victor 

Fleischer, ‘‘Regulatory Arbitrage,’’ 89 Texas Law 

Review 227 (March 4, 2010) (discussing how, when 

certain firms are able to choose their regulatory 

structure, regulatory burdens are shifted onto those 

entities that cannot engage in regulatory arbitrage). 

Commission as a security-based swap 

dealer or major security-based swap 

participant, or if the transaction is 

submitted to a clearing agency having 

its principal place of business within 

the United States. A regulatory reporting 

requirement that did not include within 

its scope such transactions would 

provide the Commission with such an 

incomplete view of transaction activity 

with potential to undermine the 

stability of U.S. financial markets that it 

would likely undermine the beneficial 

effects of a regulatory requirement on 

efficiency, competition and capital 

formation. 

Under Regulation SBSR, as adopted, 

many of the provisions of Regulation 

SBSR will apply to a cross-border 

security-based swap if one of the direct 

counterparties, even if a non-U.S. 

person, is guaranteed by a U.S. person. 

For example, Rule 908(a)(1)(i) requires 

regulatory reporting of a security-based 

swap if there is a direct or indirect 

counterparty that is a U.S. person on 

either or both sides of the transaction. 

Because guarantees extended by U.S. 

persons on transactions executed abroad 

can nevertheless import risk into the 

United States, regulatory reporting of 

security-based swaps should extend to 

any security-based swap transaction 

having an indirect counterparty (i.e., a 

guarantor) that is a U.S. person. This 

will improve the Commission’s ability 

to monitor risks posed by activity 

guaranteed by U.S. persons and, as a 

result, reduce any adverse impacts on 

efficiency, competition, and capital 

formation that might arise without this 

ability or that might arise from attempts 

by certain market participants to shift 

activity into guaranteed foreign 

subsidiaries in order to evade 

Regulation SBSR. 

Under the approach taken in this 

release, market participants could avoid 

regulatory reporting and public 

dissemination requirements by shifting 

activity into unguaranteed foreign 

subsidiaries, assuming there was no 

other basis for Regulation SBSR to 

apply, such as the direct counterparty 

being a U.S. person. Thus, the 

Commission’s action in distinguishing 

between guaranteed and unguaranteed 

foreign subsidiaries of U.S. parent 

entities could affect how these parent 

entities allocate capital across the 

organization. For example, a U.S. parent 

could separately capitalize a foreign 

subsidiary to engage in transactions 

with non-U.S. persons. If the U.S. parent 

takes such action solely as a response to 

Title VII regulation, it is unlikely that 

such a move would improve the 

efficiency with which the parent 

allocates its capital. 

The primary economic effects of 

public dissemination of transaction 

information are related to improving 

market transparency. Rule 908(a) 

defines a scope of transactions subject to 

this requirement in the cross-border 

context that considers the benefits of 

public dissemination, including effects 

on efficiency, competition, and capital 

formation. The scope defined by Rule 

908(a) also considers the potential costs 

that market participants could incur if 

counterparties restructure their 

operations so that their activity falls 

outside of the scope of Regulation SBSR 

and continues in a more opaque market. 

Such a response could result in lessened 

competition in the security-based swap 

market within the United States, less 

efficient risk-sharing and pricing, and 

impaired capital formation. 

The public dissemination 

requirements under Regulation SBSR 

could affect the behavior of foreign 

market participants in ways that reduce 

market access for U.S. persons. For 

example, some non-U.S. persons might 

seek to minimize their contact with U.S. 

persons in an effort to avoid having 

their transactions publicly 

disseminated. Moreover, to the extent 

that the Commission’s rules treat the 

foreign business of U.S. persons and 

non-U.S. persons differently from their 

respective U.S. business, market 

participants could perceive an incentive 

to restructure their business to separate 

their foreign and U.S. operations. 

Programmatic benefits of this scope, 

beyond those already noted as benefits 

of regulatory reporting, are related to the 

ability of market observers to condition 

their beliefs about the security-based 

swap market on realized transaction 

prices.1378 Post-trade transparency in 

the U.S. security-based swap market 

could have spillover benefits in foreign 

markets, even if those foreign markets 

impose no (or only limited) post-trade 

transparency requirements.1379 Posttrade transparency provided by 

Regulation SBSR will make transaction 

data available to any market observer in 

the world. These data will also allow 

global market observers to use securitybased swap prices as an input for 

valuation models and trading decisions 

for the same or related instruments, 

thereby improving the efficiency of 

these processes.1380

Relevant authorities in other 

jurisdictions are currently engaged in 

implementing their own regulatory 

reforms of the OTC derivatives markets 

that could apply to participants in those 

foreign markets. Regulatory differences 

among jurisdictions in the global 

security-based swap markets could 

create incentives for business 

restructuring. To the extent that such 

restructuring results from regulatory 

incentives rather than economic 

fundamentals, efficiency in the real 

economy could be reduced. Conflicting 

regulations or unnecessary duplication 

of regulation also might lead to 

fragmented markets.1381

Even if the substance of statutory and 

regulatory efforts across jurisdictions is 

comparable, different jurisdictions may 

impose new regulatory requirements on 

different timelines. To the extent that 

these timelines or the underlying 

requirements differ, market participants 

might have the opportunity to take 

advantage of these differences by 

making strategic choices, at least in the 

short term, with respect to their 

transaction counterparties and business 

models. For example, at a larger scale, 

firms may choose whether to participate 

in or withdraw from the U.S. securitybased swap market. As a result of exits, 

registered security-based swap dealers 

that are U.S. persons might have less 

access to foreign markets, unless they 

were to restructure their business to 

conduct foreign transactions through 

unguaranteed foreign subsidiaries 

whose transactions with non-U.S. 

persons would not be subject to the 

regulatory reporting and public 

dissemination under Regulation SBSR. 

These potential restructurings could 

impact competition in the U.S. market. 

On one hand, the ability to restructure 

one’s business rather than exit the U.S. 

market entirely to avoid application of 

Title VII to an entity’s non-U.S. 

operations could reduce the number of 

entities that exit the market, thus 

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14726 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1382By the same token, regulatory reporting and 

public dissemination in the U.S. security-based 

swap market could have spillover benefits in 

foreign markets that trade the same or similar 

instruments as the U.S. market, even if those foreign 

markets impose no (or only limited) requirements. 

See supra note 1259. 1383See supra note 917. 

mitigating the negative effects on 

competition described above. On the 

other hand, non-registered U.S. persons 

may find that the only non-U.S. person 

registered security-based swap dealers 

that are willing to deal with them are 

those whose security-based swap 

business is sufficiently large to afford 

the compliance costs associated with 

regulatory reporting and public 

dissemination requirements. To the 

extent that smaller dealers have an 

incentive to exit the market, the overall 

level of competition in the market could 

decline. 

The Commission is mindful that, in 

the near term and until full 

implementation of comparable 

requirements for regulatory reporting 

and public dissemination of securitybased swaps in other jurisdictions, the 

rules may generate incentives for market 

participants to restructure and reduce 

contact with U.S. market participants. 

As a result, for example, U.S. market 

participants seeking to hedge risk could 

face higher prices for hedging or fewer 

opportunities to hedge at all, which 

could impede capital formation. 

Another result could be inefficiency in 

risk allocation, because those market 

participants who are best placed to take 

on risks shared through security-based 

swap activity might be discouraged from 

doing so because of perceived necessity 

to avoid regulatory reporting and public 

dissemination requirements under Title 

VII. Furthermore, U.S. market 

participants that are able to restructure 

their business across national 

boundaries to avoid regulation are likely 

to be the largest financial institutions 

that can bear the greatest risks. The 

remaining firms will likely be smaller 

and have less capital with which to offer 

liquidity to the market. 

Restructuring of business lines to take 

advantage of low-transparency regimes 

also would impede transparency, as 

fewer transactions would be subject to 

public dissemination under Regulation 

SBSR. Market participants who had 

relocated abroad would still be able to 

free-ride on price formation generated 

by the public dissemination of others’ 

transactions in the same or similar 

instruments while not contributing any 

transactions of their own. The value of 

regulatory reporting and public 

dissemination in the U.S. market would 

be reduced to the extent that liquidity 

migrates to jurisdictions that are lesstransparent.1382

c. Substituted Compliance 

Rule 908(c) provides that the Title VII 

requirements relating to regulatory 

reporting and public dissemination of 

security-based swaps may be satisfied 

by compliance with the rules of a 

foreign jurisdiction if the Commission 

issues an order determining that the 

jurisdiction has requirements that 

comparable to those of Regulation 

SBSR. Rule 908(c) is designed to 

promote efficiency, competition, and 

capital formation in the security-based 

swap market, to the extent practical, 

given the state of regulatory reform of 

the OTC derivatives market being 

applied by specific foreign jurisdictions. 

The Commission believes a regulatory 

regime that allows for substituted 

compliance under comparable foreign 

rules promotes efficiency by reducing 

the need for certain market participants 

to double report security-based swaps 

(i.e., once to a foreign trade repository 

or foreign regulatory authority and again 

to a registered SDR). Substituted 

compliance also has the potential to 

improve market and price efficiency by 

reducing or even eliminating instances 

of the same transaction being publicly 

disseminated under two separate 

systems. The Commission assumes that 

market observers will obtain and utilize 

last-sale information about securitybased swaps from any available sources 

around the globe. Without substituted 

compliance, a security-based swap that 

met the jurisdictional requirements of 

Rule 908(a)(2) of Regulation SBSR as 

well as the public dissemination rules of 

a foreign jurisdiction would be publicly 

disseminated in both jurisdictions. It 

might be difficult or impossible for 

market observers to understand that the 

two trade reports represent the same 

transaction, which would thus distort 

their view of the market. If the 

Commission were to issue a substituted 

compliance order with respect to that 

jurisdiction, market observers would see 

only a single report (emanating from the 

foreign jurisdiction) of that transaction. 

While the rules governing substituted 

compliance are not designed to promote 

efficiency at the regulatory level, they 

are designed at least to minimize 

detractions from regulatory efficiency. 

Under substituted compliance, certain 

cross-border transactions that otherwise 

would be reported to an SEC-registered 

SDR would instead be reported to a 

foreign trade repository or foreign 

regulatory authority. Final Rule 908(c) 

requires, among other things, direct 

electronic access to the foreign securitybased swap data in order to make a 

substituted compliance determination. 

However, there could be some 

difficulties in normalizing and 

aggregating the data from SEC-registered 

SDRs with the data from the foreign 

trade repositories or foreign regulatory 

authorities. 

Overall, the Commission believes 

that, on balance, there will be certain 

positive impacts on efficiency from 

allowing substituted compliance. The 

principle behind this approach is that 

the Commission would grant substituted 

compliance with respect to regulatory 

reporting and public dissemination of 

security-based swaps in another 

jurisdiction only if the requirements of 

that jurisdiction are comparable to 

otherwise applicable requirements in 

Regulation SBSR. If a foreign 

jurisdiction does not have a comparable 

regime for regulatory reporting and 

public dissemination of security-based 

swaps, allowing the possibility of 

substituted compliance could, on 

balance, erode any impacts of 

Regulation SBSR on efficiency, to the 

extent that the foreign jurisdiction’s 

regulatory outcomes for regulatory 

reporting and public dissemination 

differ from those under Regulation 

SBSR. This result could be viewed as 

privately efficient by market 

participants who might otherwise 

restructure their activities to avoid 

public dissemination. However, the 

result also would be that many 

transactions with significant 

connections to the U.S. market would 

remain opaque, thus reducing 

opportunities for greater price 

competition and price discovery. 

Moreover, granting substituted 

compliance in such cases could provide 

incentives for foreign jurisdictions to 

impose lower regulatory standards for 

security-based swaps than those 

mandated by Title VII. Under the rules, 

as adopted, the Commission may not 

grant substituted compliance unless the 

foreign jurisdiction’s rules are 

comparable to otherwise applicable 

requirements. 

Under Rule 908(c), the Commission 

could make a determination of 

comparability for regulatory reporting 

and public dissemination either 

separately or together. A few 

commenters argued that the 

Commission should separate them, 

which would, for example, permit 

substituted compliance for regulatory 

reporting for a foreign jurisdiction, but 

not for public dissemination.1383 The 

Commission agrees with the 

commenter’s suggestions and has 

determined to take such an approach. 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14727 

1384See IIB Letter at 25. See also Rule 902(c). 

1385See supra Section XV(E)(6). 

1386The Commission derived its estimate from 

the following: [($360,000 (Rule 901 one-time costs 

on registered SDRs)) + ($20,000,000 (Rule 902 onetime costs on registered SDRs)) + ($2,000,000 (Rule 

905 one-time costs on registered SDRs)) + ($330,000 

(Rule 906 one-time costs on registered SDRs)) + 

($41,000,000 (Rule 907 one-time costs on registered 

SDRs)) + ($3,190,000 (Rule 906 one-time costs on 

covered participants) + ($121,800,000 (Rule 901 

one-time costs on reporting sides) + ($720,200 (Rule 

903 one-time costs on SDR participants)) + 

($3,547,500 (Rule 905 one-time costs on reporting 

sides) + ($1,540,000 (Rule 908(c) one-time costs on 

requesting entities)] = $194,487,700, or 

approximately $194,500,000. 

1387The Commission derived its estimate from 

the following: [($455,000 (Rule 901 ongoing annual 

costs on registered SDRs)) + ($12,000,000 (Rule 902 

ongoing annual costs on registered SDRs)) + 

($45,000 (Rule 904 ongoing annual costs on 

registered SDRs)) + ($4,000,000 (Rule 905 ongoing 

annual costs on registered SDRs)) + ($300,000 (Rule 

906 ongoing annual costs on registered SDRs)) + 

($82,000,000 (Rule 907 ongoing annual costs on 

registered SDRs)) + ($1,870,000 (Rule 906 ongoing 

annual costs on covered participants)) + 

($95,700,000 (Rule 901 ongoing annual costs on 

reporting sides)) + ($2,352,000 (Rule 903 one-time 

costs on SDR participants)) + ($1,192,500 (Rule 905 

ongoing annual costs on reporting sides)) + 

($64,000,000 (Rule 905 ongoing annual costs on 

non-reporting sides)) + ($13,400,000 (Rule 906 

ongoing annual costs on all participants)) + 

($1,540,000 (Rule 908(c) costs of requests in the first 

year)] = $275,444,500 or approximately 

$275,500,000. 

1388The Commission derived its estimate from 

the following: [($360,000 (Rule 901 one-time costs 

on registered SDRs)) + ($20,000,000 (Rule 902 onetime costs on registered SDRs)) + ($2,000,000 (Rule 

905 one-time costs on registered SDRs)) + ($330,000 

(Rule 906 one-time costs on registered SDRs)) + 

($41,000,000 (Rule 907 one-time costs on registered 

SDRs))] = $63,690,000 or approximately 

$63,700,000. 

1389The Commission derived its estimate from 

the following: [($455,000 (Rule 901 ongoing annual 

costs on registered SDRs)) + ($1,000,000 (Rule 902 

ongoing annual costs on registered SDRs)) + 

($45,000 (Rule 904 ongoing annual costs on 

registered SDRs)) + ($4,000,000 (Rule 905 ongoing 

annual costs on registered SDRs)) + ($300,000 (Rule 

906 ongoing annual costs on registered SDRs)) + 

($82,000,000 (Rule 907 ongoing annual costs on 

registered SDRs))] = $98,800,000. 

1390 5 U.S.C. 603(a). 

1391Although 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 proposed rulemaking, are set forth 

in Rule 0–10 under the Exchange Act, 17 CFR 

240.0–10. See Securities Exchange Act Release No. 

18451 (January 28, 1982), 47 FR 5215 (February 4, 

1982) (File No. AS–305). 

1392 5 U.S.C. 605(b). 

1393See 17 CFR 240.0–10(a). 

1394 17 CFR 240.17a–5(d). 

1395See 17 CFR 240.0–10(c). 

1396See Regulation SBSR Proposing Release, 75 

FR 75282. 

1397See id. 

1398See id. at 75283. 

Permitting substituted compliance for 

regulatory reporting but not for public 

dissemination might be privately 

efficient for firms, who would be 

obligated to report transactions to a 

foreign jurisdiction for regulatory 

purposes, but would be obligated to 

only report to a registered SDR only 

those data elements necessary for public 

dissemination under Regulation SBSR. 

The Commission could, for instance, 

permit transactions to be reported into 

a foreign jurisdiction with no or only 

limited public dissemination 

requirements. 

One commenter correctly pointed out 

that there are a few classes of securitybased swap for which Regulation SBSR 

requires regulatory reporting but not 

public dissemination and argued, 

therefore, that the Commission should 

permit itself to grant substituted 

compliance for regulatory reporting only 

(and not public dissemination) for these 

classes.1384 The Commission agrees 

with the commenter and is adopting 

Rule 908(c) with certain revisions that 

will allow the Commission to issue a 

substituted compliance order with 

respect to regulatory reporting but not 

public dissemination in such cases.1385

This revision should increase the scope 

of transactions that may enjoy the 

efficiency benefits of substituted 

compliance discussed above. 

E. Aggregate Quantifiable Total Costs 

Based on the foregoing, the 

Commission estimates that Regulation 

SBSR will impose an initial one-time 

cost of approximately $194,500,000 on 

all entities.1386 The Commission 

estimates that Regulation SBSR will 

impose a total ongoing annual aggregate 

cost of approximately $275,500,000 for 

all entities.1387 With regard to registered 

SDRs, the Commission estimates that 

Regulation SBSR will impose an initial 

aggregate one-time cost of 

approximately $63,700,000,1388 and an 

ongoing aggregate annual cost of 

approximately $98,800,000.1389

XXIII. Regulatory Flexibility Act 

Certification 

The Regulatory Flexibility Act 

(‘‘RFA’’) requires federal agencies, in 

promulgating rules, to consider the 

impact of those rules on small entities. 

Section 603(a) of the Administrative 

Procedure Act,1390 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.’’ 1391

Section 605(b) of the RFA 1392 states that 

this requirement shall not apply to any 

proposed rule or proposed rule 

amendment which, if adopted, would 

not have a significant economic impact 

on a substantial number of small 

entities. 

In developing the final rules 

contained in Regulation SBSR, the 

Commission has considered their 

potential impact on small entities. For 

purposes of Commission rulemaking in 

connection with the RFA, a small entity 

includes: (1) When used with reference 

to an ‘‘issuer’’ or a ‘‘person,’’ other than 

an investment company, an ‘‘issuer’’ or 

‘‘person’’ that, on the last day of its most 

recent fiscal year, had total assets of $5 

million or less; 1393 or (2) a broker-dealer 

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 

Rule 17a–5(d) under the Exchange 

Act,1394 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 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 business or small 

organization.1395

The Regulation SBSR Proposing 

Release stated that, based on input from 

security-based swap market participants 

and its own information, the 

Commission preliminarily believed that 

the majority of security-based swap 

transactions have at least one 

counterparty that is either a securitybased swap dealer or major securitybased swap participant, and that these 

entities, whether registered brokerdealers or not, would exceed the 

thresholds defining ‘‘small entities’’ set 

out above.1396 Thus, the Commission 

noted that it preliminarily believed that 

neither of these types of entities would 

likely qualify as small entities for 

purposes of the RFA.1397 Moreover, in 

the Regulation SBSR Proposing Release, 

the Commission noted that, even in 

cases where one of the counterparties to 

a security-based swap was outside of the 

categories of security-based swap dealer 

or major security-based swap 

participant, the Commission 

preliminarily did not believe any such 

entities would be ‘‘small entities’’ as 

defined in Commission Rule 0–10.1398

In this regard, the Commission noted 

that feedback from industry participants 

and the Commission’s own information 

about the security-based swap market 

(including a survey conducted by the 

Office of the Comptroller of the 

Currency) indicated that only persons or 

entities with assets significantly in 

excess of $5 million participate in the 

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14728 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1399See id. 

1400See id. 

1401See id. 

1402See id. 

1403See id. 

1404See id. 

1405See id. 

1406See id. 

1407See id. See also Cross-Border Proposing 

Release, 78 FR 31205. 

security-based swap market.1399 As a 

result, the Commission stated its 

preliminarily belief that the vast 

majority of, if not all, security-based 

swap transactions are between large 

entities for purposes of the RFA.1400

Similarly, in the Regulation SBSR 

Proposing Release, the Commission 

stated its preliminarily belief that the 

entities likely to register as SDRs would 

not be small entities.1401 Based on input 

from security-based swap market 

participants and its own information, 

the Commission stated its preliminarily 

belief that most if not all the registered 

SDRs would be part of large business 

entities, and that all registered SDRs 

would have assets exceeding $5 million 

and total capital exceeding 

$500,000.1402 On this basis, the 

Commission preliminarily believed that 

the number of security-based swap 

transactions involving a small entity as 

that term is defined for purposes of the 

RFA would be de minimis and that no 

aspect of proposed Regulation SBSR 

would be likely to alter the type of 

counterparties presently engaging in 

security-based swap transactions.1403

Therefore, the Commission 

preliminarily did not believe that 

proposed Regulation SBSR would 

impact any small entities.1404

As a result, in the Regulation SBSR 

Proposing Release, the Commission 

certified that Regulation SBSR would 

not have a significant economic impact 

on a substantial number of small entities 

for purposes of the RFA and requested 

written comments regarding this 

certification.1405 Specifically, the 

Commission requested that commenters 

describe the nature of any impact on 

small entities, indicate whether they 

believe that participants and registered 

SDRs are unlikely to be small entities, 

and provide empirical data to support 

their responses.1406 The Commission 

did not receive any comments contrary 

to its conclusion. 

The Commission continues to believe 

that few if any security-based swap 

counterparties that would incur duties 

under Regulation SBSR, as adopted, are 

‘‘small entities’’ as defined in 

Commission Rule 0–10. Feedback from 

industry participants and the 

Commission’s own information about 

the security-based swap market indicate 

that only persons or entities with assets 

significantly in excess of $5 million 

participate in the security-based swap 

market.1407 The Commission continues 

to believe that the vast majority of, if not 

all, security-based swap transactions are 

between large entities for purposes of 

the RFA. 

Based on input from security-based 

swap market participants and its own 

information, the Commission continues 

to believe that registered SDRs would be 

part of large business entities, and that 

all registered SDRs would have assets 

exceeding $5 million and total capital 

exceeding $500,000. Therefore, the 

Commission continues to believe that 

none of the registered SDRs would be 

small entities. 

The Commission believes that the 

number of security-based swap 

transactions involving a small entity as 

that term is defined for purposes of the 

RFA would be de minimis. Moreover, 

the Commission does not believe that 

any aspect of Regulation SBSR would be 

likely to alter the type of counterparties 

presently engaging in security-based 

swap transactions. Therefore, the 

Commission does not believe that 

Regulation SBSR would impact any 

small entities. 

For the foregoing reasons, the 

Commission certifies that Regulation 

SBSR would not have a significant 

economic impact on a substantial 

number of small entities for purposes of 

the RFA. 

XXIV. Statutory Basis and Text of Final 

Rules 

Pursuant to the Exchange Act, 15 

U.S.C. 78a et seq., and particularly 

Sections 3C(e), 11A(b), 13(m)(1), 13A(a), 

23(a)(1), 30(c), and 36(a), 15 U.S.C. 78c– 

3(e), 78k–1(b), 78m(m)(1), 78m–1(a), 

78w(a)(1), 78dd(c), and 78mm(a) 

thereof, the Commission is adopting 

Rules 900, 901, 902, 903, 904, 905, 906, 

907, 908, and 909 under the Exchange 

Act. 

List of Subjects in 17 CFR Part 242 

Brokers, 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 242—REGULATIONS M, SHO, 

ATS, AC, NMS, AND SBSR AND 

CUSTOMER MARGIN REQUIREMENTS 

FOR SECURITY FUTURES 

■ 1. The authority citation for part 242 

continues to read as follows: 

Authority: 15 U.S.C. 77g, 77q(a), 77s(a), 

78b, 78c, 78g(c)(2), 78i(a), 78j, 78k–l(c), 78l, 

78m, 78n, 78o(b), 78o(c), 78o(g), 78q(a), 

78q(b), 78q(h), 78w(a), 78dd–1, 78mm, 80a– 

23, 80a–29, and 80a–37, unless otherwise 

noted. 

■ 2. The heading for part 242 is revised 

as set forth above. 

■ 3. Add §§ 242.900, 242.901, 242.902, 

242.903, 242.904, 242.905, 242.906, 

242.907, 242.908, and 242.909 under an 

undesignated center heading to read as 

follows: 

Regulation SBSR—Regulatory 

Reporting and Public Dissemination of 

Security-Based Swap Information 

Sec. 

242.900 Definitions 

242.901 Reporting obligations. 

242.902 Public dissemination of transaction 

reports. 

242.903 Coded information. 

242.904 Operating hours of registered 

security-based swap data repositories. 

242.905 Correction of errors in securitybased swap information. 

242.906 Other duties of participants. 

242.907 Policies and procedures of 

registered security-based swap data 

repositories. 

242.908 Cross-border matters. 

242.909 Registration of security-based swap 

data repository as a securities 

information processor. 

§ 242.900 Definitions. 

Terms used in §§ 242.900 through 

242.909 that appear in Section 3 of the 

Exchange Act (15 U.S.C. 78c) have the 

same meaning as in Section 3 of the 

Exchange Act and the rules or 

regulations thereunder. In addition, for 

purposes of Regulation SBSR 

(§§ 242.900 through 242.909), the 

following definitions shall apply: 

(a) Affiliate means any person that, 

directly or indirectly, controls, is 

controlled by, or is under common 

control with, a person. 

(b) Asset class means those securitybased swaps in a particular broad 

category, including, but not limited to, 

credit derivatives and equity 

derivatives. 

(c) [Reserved]. 

(d) Branch ID means the UIC assigned 

to a branch or other unincorporated 

office of a participant. 

(e) Broker ID means the UIC assigned 

to a person acting as a broker for a 

participant. 

(f) Business day means a day, based 

on U.S. Eastern Time, other than a 

Saturday, Sunday, or a U.S. federal 

holiday. 

(g) Clearing transaction means a 

security-based swap that has a 

registered clearing agency as a direct 

counterparty. 

(h) Control means, for purposes of 

§§ 242.900 through 242.909, the 

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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: 

(1) Is a director, general partner or 

officer exercising executive 

responsibility (or having similar status 

or functions); 

(2) 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 

(3) In the case of a partnership, has 

the right to receive, upon dissolution, or 

has contributed, 25 percent or more of 

the capital. 

(i) Counterparty means a person that 

is a direct counterparty or indirect 

counterparty of a security-based swap. 

(j) Counterparty ID means the UIC 

assigned to a counterparty to a securitybased swap. 

(k) Direct counterparty means a 

person that is a primary obligor on a 

security-based swap. 

(l) Direct electronic access has the 

same meaning as in § 240.13n–4(a)(5) of 

this chapter. 

(m) Exchange Act means the 

Securities Exchange Act of 1934 (15 

U.S.C. 78a et seq.), as amended. 

(n) Execution agent ID means the UIC 

assigned to any person other than a 

broker or trader that facilitates the 

execution of a security-based swap on 

behalf of a direct counterparty. 

(o) Foreign branch has the same 

meaning as in § 240.3a71–3(a)(1) of this 

chapter. 

(p) Indirect counterparty means a 

guarantor of a direct counterparty’s 

performance of any obligation under a 

security-based swap such that the direct 

counterparty on the other side can 

exercise rights of recourse against the 

indirect counterparty in connection 

with the security-based swap; for these 

purposes a direct counterparty has 

rights of recourse against a guarantor on 

the other side if the direct counterparty 

has a conditional or unconditional 

legally enforceable right, in whole or in 

part, to receive payments from, or 

otherwise collect from, the guarantor in 

connection with the security-based 

swap. 

(q) Life cycle event means, with 

respect to a security-based swap, any 

event that would result in a change in 

the information reported to a registered 

security-based swap data repository 

under § 242.901(c), (d), or (i), including: 

An assignment or novation of the 

security-based swap; a partial or full 

termination of the security-based swap; 

a change in the cash flows originally 

reported; for a security-based swap that 

is not a clearing transaction, any change 

to the title or date of any master 

agreement, collateral agreement, margin 

agreement, or any other agreement 

incorporated by reference into the 

security-based swap contract; or a 

corporate action affecting a security or 

securities on which the security-based 

swap is based (e.g., a merger, dividend, 

stock split, or bankruptcy). 

Notwithstanding the above, a life cycle 

event shall not include the scheduled 

expiration of the security-based swap, a 

previously described and anticipated 

interest rate adjustment (such as a 

quarterly interest rate adjustment), or 

other event that does not result in any 

change to the contractual terms of the 

security-based swap. 

(r) Non-mandatory report means any 

information provided to a registered 

security-based swap data repository by 

or on behalf of a counterparty other than 

as required by §§ 242.900 through 

242.909. 

(s) Non-U.S. person means a person 

that is not a U.S. person. 

(t) Parent means a legal person that 

controls a participant. 

(u) Participant, with respect to a 

registered security-based swap data 

repository, means a counterparty, that 

meets the criteria of § 242.908(b), of a 

security-based swap that is reported to 

that registered security-based swap data 

repository to satisfy an obligation under 

§ 242.901(a). 

(v) Platform means a national 

securities exchange or security-based 

swap execution facility that is registered 

or exempt from registration. 

(w) Platform ID means the UIC 

assigned to a platform on which a 

security-based swap is executed. 

(x) Post-trade processor means any 

person that provides affirmation, 

confirmation, matching, reporting, or 

clearing services for a security-based 

swap transaction. 

(y) Pre-enactment security-based 

swap means any security-based swap 

executed before July 21, 2010 (the date 

of enactment of the Dodd-Frank Act 

(Pub. L. 111–203, H.R. 4173)), the terms 

of which had not expired as of that date. 

(z) Price means the price of a securitybased swap transaction, expressed in 

terms of the commercial conventions 

used in that asset class. 

(aa) Product means a group of 

security-based swap contracts each 

having the same material economic 

terms except those relating to price and 

size. 

(bb) Product ID means the UIC 

assigned to a product. 

(cc) Publicly disseminate means to 

make available through the Internet or 

other electronic data feed that is widely 

accessible and in machine-readable 

electronic format. 

(dd) [Reserved]. 

(ee) Registered clearing agency means 

a person that is registered with the 

Commission as a clearing agency 

pursuant to section 17A of the Exchange 

Act (15 U.S.C. 78q–1) and any rules or 

regulations thereunder. 

(ff) Registered security-based swap 

data repository means a person that is 

registered with the Commission as a 

security-based swap data repository 

pursuant to section 13(n) of the 

Exchange Act (15 U.S.C. 78m(n)) and 

any rules or regulations thereunder. 

(gg) Reporting side means the side of 

a security-based swap identified by 

§ 242.901(a)(2). 

(hh) Side means a direct counterparty 

and any guarantor of that direct 

counterparty’s performance who meets 

the definition of indirect counterparty 

in connection with the security-based 

swap. 

(ii) Time of execution means the point 

at which the counterparties to a 

security-based swap become irrevocably 

bound under applicable law. 

(jj) Trader ID means the UIC assigned 

to a natural person who executes one or 

more security-based swaps on behalf of 

a direct counterparty. 

(kk) Trading desk means, with respect 

to a counterparty, the smallest discrete 

unit of organization of the participant 

that purchases or sells security-based 

swaps for the account of the participant 

or an affiliate thereof. 

(ll) Trading desk ID means the UIC 

assigned to the trading desk of a 

participant. 

(mm) Transaction ID means the UIC 

assigned to a specific security-based 

swap transaction. 

(nn) Transitional security-based swap 

means a security-based swap executed 

on or after July 21, 2010, and before the 

first date on which trade-by-trade 

reporting of security-based swaps in that 

asset class to a registered security-based 

swap data repository is required 

pursuant to §§ 242.900 through 242.909. 

(oo) Ultimate parent means a legal 

person that controls a participant and 

that itself has no parent. 

(pp) Ultimate parent ID means the 

UIC assigned to an ultimate parent of a 

participant. 

(qq) Unique Identification Code or 

UIC means a unique identification code 

assigned to a person, unit of a person, 

product, or transaction. 

(rr) United States has the same 

meaning as in § 240.3a71–3(a)(5) of this 

chapter. 

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(ss) U.S. person has the same meaning 

as in § 240.3a71–3(a)(4) of this chapter. 

§ 242.901 Reporting obligations. 

(a) Assigning reporting duties. A 

security-based swap, including a 

security-based swap that results from 

the allocation, termination, novation, or 

assignment of another security-based 

swap, shall be reported as follows: 

(1) [Reserved]. 

(2) All other security-based swaps. For 

all security-based swaps other than 

platform-executed security-based swaps 

that will be submitted to clearing, the 

reporting side shall provide the 

information required by §§ 242.900 

through 242.909 to a registered securitybased swap data repository. The 

reporting side shall be determined as 

follows: 

(i) [Reserved]. 

(ii) Security-based swaps other than 

clearing transactions. (A) If both sides of 

the security-based swap include a 

registered security-based swap dealer, 

the sides shall select the reporting side. 

(B) If only one side of the securitybased swap includes a registered 

security-based swap dealer, that side 

shall be the reporting side. 

(C) If both sides of the security-based 

swap include a registered major 

security-based swap participant, the 

sides shall select the reporting side. 

(D) If one side of the security-based 

swap includes a registered major 

security-based swap participant and the 

other side includes neither a registered 

security-based swap dealer nor a 

registered major security-based swap 

participant, the side including the 

registered major security-based swap 

participant shall be the reporting side. 

(E) If neither side of the securitybased swap includes a registered 

security-based swap dealer or registered 

major security-based swap participant: 

(1) If both sides include a U.S. person, 

the sides shall select the reporting side. 

(2) [Reserved]. 

(b) Alternate recipient of securitybased swap information. If there is no 

registered security-based swap data 

repository that will accept the report 

required by § 242.901(a), the person 

required to make such report shall 

instead provide the required 

information to the Commission. 

(c) Primary trade information. The 

reporting side shall report the following 

information within the timeframe 

specified in paragraph (j) of this section: 

(1) The product ID, if available. If the 

security-based swap has no product ID, 

or if the product ID does not include the 

following information, the reporting 

side shall report: 

(i) Information that identifies the 

security-based swap, including the asset 

class of the security-based swap and the 

specific underlying reference asset(s), 

reference issuer(s), or reference index; 

(ii) The effective date; 

(iii) The scheduled termination date; 

(iv) The terms of any standardized 

fixed or floating rate payments, and the 

frequency of any such payments; and 

(v) If the security-based swap is 

customized to the extent that the 

information provided in paragraphs 

(c)(1)(i) through (iv) of this section does 

not provide all of the material 

information necessary to identify such 

customized security-based swap or does 

not contain the data elements necessary 

to calculate the price, a flag to that 

effect; 

(2) The date and time, to the second, 

of execution, expressed using 

Coordinated Universal Time (UTC); 

(3) The price, including the currency 

in which the price is expressed and the 

amount(s) and currenc(ies) of any upfront payments; 

(4) The notional amount(s) and the 

currenc(ies) in which the notional 

amount(s) is expressed; 

(5) If both sides of the security-based 

swap include a registered security-based 

swap dealer, an indication to that effect; 

(6) Whether the direct counterparties 

intend that the security-based swap will 

be submitted to clearing; and 

(7) If applicable, any flags pertaining 

to the transaction that are specified in 

the policies and procedures of the 

registered security-based swap data 

repository to which the transaction will 

be reported. 

(d) Secondary trade information. In 

addition to the information required 

under paragraph (c) of this section, for 

each security-based swap for which it is 

the reporting side, the reporting side 

shall report the following information 

within the timeframe specified in 

paragraph (j) of this section: 

(1) The counterparty ID or the 

execution agent ID of each counterparty, 

as applicable; 

(2) As applicable, the branch ID, 

broker ID, execution agent ID, trader ID, 

and trading desk ID of the direct 

counterparty on the reporting side; 

(3) To the extent not provided 

pursuant to paragraph (c)(1) of this 

section, the terms of any fixed or 

floating rate payments, or otherwise 

customized or non-standard payment 

streams, including the frequency and 

contingencies of any such payments; 

(4) For a security-based swap that is 

not a clearing transaction, the title and 

date of any master agreement, collateral 

agreement, margin agreement, or any 

other agreement incorporated by 

reference into the security-based swap 

contract; 

(5) To the extent not provided 

pursuant to paragraph (c) of this section 

or other provisions of this paragraph (d), 

any additional data elements included 

in the agreement between the 

counterparties that are necessary for a 

person to determine the market value of 

the transaction; 

(6) If applicable, and to the extent not 

provided pursuant to paragraph (c) of 

this section, the name of the clearing 

agency to which the security-based 

swap will be submitted for clearing; 

(7) If the direct counterparties do not 

intend to submit the security-based 

swap to clearing, whether they have 

invoked the exception in Section 3C(g) 

of the Exchange Act (15 U.S.C. 78c– 

3(g)); 

(8) To the extent not provided 

pursuant to the other provisions of this 

paragraph (d), if the direct 

counterparties do not submit the 

security-based swap to clearing, a 

description of the settlement terms, 

including whether the security-based 

swap is cash-settled or physically 

settled, and the method for determining 

the settlement value; and 

(9) The platform ID, if applicable. 

(10) If the security-based swap arises 

from the allocation, termination, 

novation, or assignment of one or more 

existing security-based swaps, the 

transaction ID of the allocated, 

terminated, assigned, or novated 

security-based swap(s), except in the 

case of a clearing transaction that results 

from the netting or compression of other 

clearing transactions. 

(e) Reporting of life cycle events. (1)(i) 

Generally. A life cycle event, and any 

adjustment due to a life cycle event, that 

results in a change to information 

previously reported pursuant to 

paragraph (c), (d), or (i) of this section 

shall be reported by the reporting side, 

except that the reporting side shall not 

report whether or not a security-based 

swap has been accepted for clearing. 

(ii) [Reserved] 

(2) All reports of life cycle events and 

adjustments due to life cycle events 

shall, within the timeframe specified in 

paragraph (j) of this section, be reported 

to the entity to which the original 

security-based swap transaction was 

reported and shall include the 

transaction ID of the original 

transaction. 

(f) Time stamping incoming 

information. A registered security-based 

swap data repository shall time stamp, 

to the second, its receipt of any 

information submitted to it pursuant to 

paragraph (c), (d), (e), or (i) of this 

section. 

(g) Assigning transaction ID. A 

registered security-based swap data 

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repository shall assign a transaction ID 

to each security-based swap, or establish 

or endorse a methodology for 

transaction IDs to be assigned by third 

parties. 

(h) Format of reported information. A 

reporting side shall electronically 

transmit the information required under 

this section in a format required by the 

registered security-based swap data 

repository to which it reports. 

(i) Reporting of pre-enactment and 

transitional security-based swaps. With 

respect to any pre-enactment securitybased swap or transitional securitybased swap in a particular asset class, 

and to the extent that information about 

such transaction is available, the 

reporting side shall report all of the 

information required by paragraphs (c) 

and (d) of this section to a registered 

security-based swap data repository that 

accepts security-based swaps in that 

asset class and indicate whether the 

security-based swap was open as of the 

date of such report. 

(j) Interim timeframe for reporting. 

The reporting timeframe for paragraphs 

(c) and (d) of this section shall be 24 

hours after the time of execution (or 

acceptance for clearing in the case of a 

security-based swap that is subject to 

regulatory reporting and public 

dissemination solely by operation of 

§ 242.908(a)(1)(ii)), or, if 24 hours after 

the time of execution or acceptance, as 

applicable, would fall on a day that is 

not a business day, by the same time on 

the next day that is a business day. The 

reporting timeframe for paragraph (e) of 

this section shall be 24 hours after the 

occurrence of the life cycle event or the 

adjustment due to the life cycle event. 

Appendix to 17 CFR 242.901 Reports 

Regarding the Establishment of Block 

Thresholds and Reporting Delays for 

Regulatory Reporting of Security-Based 

Swap Transaction Data 

This appendix sets forth guidelines 

applicable to reports that the Commission 

has directed its staff to make in connection 

with the determination of block thresholds 

and reporting delays for security-based swap 

transaction data. The Commission intends to 

use these reports to inform its specification 

of the criteria for determining what 

constitutes a large notional security-based 

swap transaction (block trade) for particular 

markets and contracts; and the appropriate 

time delay for reporting large notional 

security-based swap transactions (block 

trades) to the public in order to implement 

regulatory requirements under Section 13 of 

the Act (15 U.S.C. 78m). In producing these 

reports, the staff shall consider securitybased swap data collected by the 

Commission pursuant to other Title VII rules, 

as well as any other applicable information 

as the staff may determine to be appropriate 

for its analysis. 

(a) Report topics. As appropriate, based on 

the availability of data and information, the 

reports should address the following topics 

for each asset class: 

(1) Price impact. In connection with the 

Commission’s obligation to specify criteria 

for determining what constitutes a block 

trade and the appropriate reporting delay for 

block trades, the report generally should 

assess the effect of notional amount and 

observed reporting delay on price impact of 

trades in the security-based swap market. 

(2) Hedging. In connection with the 

Commission’s obligation to specify criteria 

for determining what constitutes a block 

trade and the appropriate reporting delay for 

block trades, the report generally should 

consider potential relationships between 

observed reporting delays and the incidence 

and cost of hedging large trades in the 

security-based swap market, and whether 

these relationships differ for interdealer 

trades and dealer to customer trades. 

(3) Price efficiency. In connection with the 

Commission’s obligation to specify criteria 

for determining what constitutes a block 

trade and the appropriate reporting delay for 

block trades, the report generally should 

assess the relationship between reporting 

delays and the speed with which transaction 

information is impounded into market prices, 

estimating this relationship for trades of 

different notional amounts. 

(4) Other topics. Any other analysis of 

security-based swap data and information, 

such as security-based swap market liquidity 

and price volatility, that the Commission or 

the staff deem relevant to the specification of: 

(i) The criteria for determining what 

constitutes a large notional security-based 

swap transaction (block trade) for particular 

markets and contracts; and 

(ii) The appropriate time delay for 

reporting large notional security-based swap 

transactions (block trades). 

(b) Timing of reports. Each report shall be 

complete no later than two years following 

the initiation of public dissemination of 

security-based swap transaction data by the 

first registered SDR in that asset class. 

(c) Public comment on the report. 

Following completion of the report, the 

report shall be published in the Federal 

Register for public comment. 

§ 242.902 Public dissemination of 

transaction reports. 

(a) General. Except as provided in 

paragraph (c) of this section, a registered 

security-based swap data repository 

shall publicly disseminate a transaction 

report of a security-based swap, or a life 

cycle event or adjustment due to a life 

cycle event, immediately upon receipt 

of information about the security-based 

swap, or upon re-opening following a 

period when the registered securitybased swap data repository was closed. 

The transaction report shall consist of 

all the information reported pursuant to 

§ 242.901(c), plus any condition flags 

contemplated by the registered securitybased swap data repository’s policies 

and procedures that are required by 

§ 242.907. 

(b) [Reserved]. 

(c) Non-disseminated information. A 

registered security-based swap data 

repository shall not disseminate: 

(1) The identity of any counterparty to 

a security-based swap; 

(2) With respect to a security-based 

swap that is not cleared at a registered 

clearing agency and that is reported to 

the registered security-based swap data 

repository, any information disclosing 

the business transactions and market 

positions of any person; 

(3) Any information regarding a 

security-based swap reported pursuant 

to § 242.901(i); 

(4) Any non-mandatory report; 

(5) Any information regarding a 

security-based swap that is required to 

be reported pursuant to §§ 242.901 and 

242.908(a)(1) but is not required to be 

publicly disseminated pursuant to 

§ 242.908(a)(2); 

(6) Any information regarding a 

clearing transaction that arises from the 

acceptance of a security-based swap for 

clearing by a registered clearing agency 

or that results from netting other 

clearing transactions; or 

(7) Any information regarding the 

allocation of a security-based swap. 

(d) Temporary restriction on other 

market data sources. No person shall 

make available to one or more persons 

(other than a counterparty or a posttrade processor) transaction information 

relating to a security-based swap before 

the primary trade information about the 

security-based swap is sent to a 

registered security-based swap data 

repository. 

§ 242.903 Coded information. 

(a) If an internationally recognized 

standards-setting system that imposes 

fees and usage restrictions on persons 

that obtain UICs for their own usage that 

are fair and reasonable and not 

unreasonably discriminatory and that 

meets the criteria of paragraph (b) of this 

section is recognized by the 

Commission and has assigned a UIC to 

a person, unit of a person, or product (or 

has endorsed a methodology for 

assigning transaction IDs), the registered 

security-based swap data repository 

shall employ that UIC (or methodology 

for assigning transaction IDs). If no such 

system has been recognized by the 

Commission, or a recognized system has 

not assigned a UIC to a particular 

person, unit of a person, or product (or 

has not endorsed a methodology for 

assigning transaction IDs), the registered 

security-based swap data repository 

shall assign a UIC to that person, unit 

of person, or product using its own 

methodology (or endorse a methodology 

for assigning transaction IDs). If the 

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14732 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

Commission has recognized such a 

system that assigns UICs to persons, 

each participant of a registered securitybased swap data repository shall obtain 

a UIC from or through that system for 

identifying itself, and each participant 

that acts as a guarantor of a direct 

counterparty’s performance of any 

obligation under a security-based swap 

that is subject to § 242.908(a) shall, if 

the direct counterparty has not already 

done so, obtain a UIC for identifying the 

direct counterparty from or through that 

system, if that system permits thirdparty registration without a requirement 

to obtain prior permission of the direct 

counterparty. 

(b) A registered security-based swap 

data repository may permit information 

to be reported pursuant to § 242.901, 

and may publicly disseminate that 

information pursuant to § 242.902, using 

codes in place of certain data elements, 

provided that the information necessary 

to interpret such codes is widely 

available to users of the information on 

a non-fee basis. 

§ 242.904 Operating hours of registered 

security-based swap data repositories. 

A registered security-based swap data 

repository shall have systems in place to 

continuously receive and disseminate 

information regarding security-based 

swaps pursuant to §§ 242.900 through 

242.909, subject to the following 

exceptions: 

(a) A registered security-based swap 

data repository may establish normal 

closing hours during periods when, in 

its estimation, the U.S. market and 

major foreign markets are inactive. A 

registered security-based swap data 

repository shall provide reasonable 

advance notice to participants and to 

the public of its normal closing hours. 

(b) A registered security-based swap 

data repository may declare, on an ad 

hoc basis, special closing hours to 

perform system maintenance that 

cannot wait until normal closing hours. 

A registered security-based swap data 

repository shall, to the extent reasonably 

possible under the circumstances, avoid 

scheduling special closing hours during 

periods when, in its estimation, the U.S. 

market and major foreign markets are 

most active; and provide reasonable 

advance notice of its special closing 

hours to participants and to the public. 

(c) During normal closing hours, and 

to the extent reasonably practicable 

during special closing hours, a 

registered security-based swap data 

repository shall have the capability to 

receive and hold in queue information 

regarding security-based swaps that has 

been reported pursuant to §§ 242.900 

through 242.909. 

(d) When a registered security-based 

swap data repository re-opens following 

normal closing hours or special closing 

hours, it shall disseminate transaction 

reports of security-based swaps held in 

queue, in accordance with the 

requirements of § 242.902. 

(e) If a registered security-based swap 

data repository could not receive and 

hold in queue transaction information 

that was required to be reported 

pursuant to §§ 242.900 through 242.909, 

it must immediately upon re-opening 

send a message to all participants that 

it has resumed normal operations. 

Thereafter, any participant that had an 

obligation to report information to the 

registered security-based swap data 

repository pursuant to §§ 242.900 

through 242.909, but could not do so 

because of the registered security-based 

swap data repository’s inability to 

receive and hold in queue data, must 

promptly report the information to the 

registered security-based swap data 

repository. 

§ 242.905 Correction of errors in securitybased swap information. 

(a) Duty to correct. Any counterparty 

to a security-based swap that discovers 

an error in information previously 

reported pursuant to §§ 242.900 through 

242.909 shall correct such error in 

accordance with the following 

procedures: 

(1) If a side that was not the reporting 

side for a security-based swap 

transaction discovers an error in the 

information reported with respect to 

such security-based swap, the 

counterparty shall promptly notify the 

reporting side of the error; and 

(2) If the reporting side discovers an 

error in the information reported with 

respect to a security-based swap, or 

receives notification from its 

counterparty of an error, the reporting 

side shall promptly submit to the entity 

to which the security-based swap was 

originally reported an amended report 

pertaining to the original transaction 

report. If the reporting side reported the 

initial transaction to a registered 

security-based swap data repository, the 

reporting side shall submit an amended 

report to the registered security-based 

swap data repository in a manner 

consistent with the policies and 

procedures contemplated by 

§ 242.907(a)(3). 

(b) Duty of security-based swap data 

repository to correct. A registered 

security-based swap data repository 

shall: 

(1) Upon discovery of an error or 

receipt of a notice of an error, verify the 

accuracy of the terms of the securitybased swap and, following such 

verification, promptly correct the 

erroneous information regarding such 

security-based swap contained in its 

system; and 

(2) If such erroneous information 

relates to a security-based swap that the 

registered security-based swap data 

repository previously disseminated and 

falls into any of the categories of 

information enumerated in § 242.901(c), 

publicly disseminate a corrected 

transaction report of the security-based 

swap promptly following verification of 

the trade by the counterparties to the 

security-based swap, with an indication 

that the report relates to a previously 

disseminated transaction. 

§ 242.906 Other duties of participants. 

(a) Identifying missing UIC 

information. A registered security-based 

swap data repository shall identify any 

security-based swap reported to it for 

which the registered security-based 

swap data repository does not have the 

counterparty ID and (if applicable) the 

broker ID, branch ID, execution agent 

ID, trading desk ID, and trader ID of 

each direct counterparty. Once a day, 

the registered security-based swap data 

repository shall send a report to each 

participant of the registered securitybased swap data repository or, if 

applicable, an execution agent, 

identifying, for each security-based 

swap to which that participant is a 

counterparty, the security-based swap(s) 

for which the registered security-based 

swap data repository lacks counterparty 

ID and (if applicable) broker ID, branch 

ID, execution agent ID, desk ID, and 

trader ID. A participant of a registered 

security-based swap data repository that 

receives such a report shall provide the 

missing information with respect to its 

side of each security-based swap 

referenced in the report to the registered 

security-based swap data repository 

within 24 hours. 

(b) Duty to provide ultimate parent 

and affiliate information. Each 

participant of a registered security-based 

swap data repository shall provide to 

the registered security-based swap data 

repository information sufficient to 

identify its ultimate parent(s) and any 

affiliate(s) of the participant that also are 

participants of the registered securitybased swap data repository, using 

ultimate parent IDs and counterparty 

IDs. Any such participant shall 

promptly notify the registered securitybased swap data repository of any 

changes to that information. 

(c) Policies and procedures of 

registered security-based swap dealers 

and registered major security-based 

swap participants. Each participant of a 

registered security-based swap data 

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repository that is a registered securitybased swap dealer or registered major 

security-based swap participant shall 

establish, maintain, and enforce written 

policies and procedures that are 

reasonably designed to ensure that it 

complies with any obligations to report 

information to a registered securitybased swap data repository in a manner 

consistent with §§ 242.900 through 

242.909. Each such participant shall 

review and update its policies and 

procedures at least annually. 

§ 242.907 Policies and procedures of 

registered security-based swap data 

repositories. 

(a) General policies and procedures. 

With respect to the receipt, reporting, 

and dissemination of data pursuant to 

§§ 242.900 through 242.909, a registered 

security-based swap data repository 

shall establish and maintain written 

policies and procedures: 

(1) That enumerate the specific data 

elements of a security-based swap that 

must be reported, which shall include, 

at a minimum, the data elements 

specified in § 242.901(c) and (d); 

(2) 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; 

(3) For specifying procedures for 

reporting life cycle events and 

corrections to previously submitted 

information, making corresponding 

updates or corrections to transaction 

records, and applying an appropriate 

flag to the transaction report to indicate 

that the report is an error correction 

required to be disseminated by 

§ 242.905(b)(2), or is a life cycle event, 

or any adjustment due to a life cycle 

event, required to be disseminated by 

§ 242.902(a); 

(4) For: 

(i) Identifying characteristic(s) of a 

security-based swap, or circumstances 

associated with the execution or 

reporting of the security-based swap, 

that could, in the fair and reasonable 

estimation of the registered securitybased swap data repository, cause a 

person without knowledge of these 

characteristic(s) or circumstance(s), to 

receive a distorted view of the market; 

(ii) Establishing flags to denote such 

characteristic(s) or circumstance(s); 

(iii) Directing participants that report 

security-based swaps to apply such 

flags, as appropriate, in their reports to 

the registered security-based swap data 

repository; and 

(iv) Applying such flags: 

(A) To disseminated reports to help to 

prevent a distorted view of the market; 

or 

(B) In the case of a transaction 

referenced in § 242.902(c), to suppress 

the report from public dissemination 

entirely, as appropriate; 

(5) For assigning UICs in a manner 

consistent with § 242.903; and 

(6) For periodically obtaining from 

each participant information that 

identifies the participant’s ultimate 

parent(s) and any participant(s) with 

which the participant is affiliated, using 

ultimate parent IDs and counterparty 

IDs. 

(b) [Reserved]. 

(c) Public availability of policies and 

procedures. A registered security-based 

swap data repository shall make the 

policies and procedures required by 

§§ 242.900 through 242.909 publicly 

available on its Web site. 

(d) Updating of policies and 

procedures. A registered security-based 

swap data repository shall review, and 

update as necessary, the policies and 

procedures required by §§ 242.900 

through 242.909 at least annually. Such 

policies and procedures shall indicate 

the date on which they were last 

reviewed. 

(e) A registered security-based swap 

data repository shall provide to the 

Commission, upon request, information 

or reports related to the timeliness, 

accuracy, and completeness of data 

reported to it pursuant to §§ 242.900 

through 242.909 and the registered 

security-based swap data repository’s 

policies and procedures thereunder. 

§ 242.908 Cross-border matters. 

(a) Application of Regulation SBSR to 

cross-border transactions. (1) A 

security-based swap shall be subject to 

regulatory reporting and public 

dissemination if: 

(i) There is a direct or indirect 

counterparty that is a U.S. person on 

either or both sides of the transaction; 

or 

(ii) The security-based swap is 

accepted for clearing by a clearing 

agency having its principal place of 

business in the United States. 

(2) A security-based swap that is not 

included within paragraph (a)(1) of this 

section shall be subject to regulatory 

reporting but not public dissemination 

if there is a direct or indirect 

counterparty on either or both sides of 

the transaction that is a registered 

security-based swap dealer or a 

registered major security-based swap 

participant. 

(b) Limitation on obligations. 

Notwithstanding any other provision of 

§§ 242.900 through 242.909, a person 

shall not incur any obligation under 

§§ 242.900 through 242.909 unless it is: 

(1) A U.S. person; or 

(2) A registered security-based swap 

dealer or registered major security-based 

swap participant. 

(c) Substituted compliance—(1) 

General. Compliance with the 

regulatory reporting and public 

dissemination requirements in sections 

13(m) and 13A of the Act (15 U.S.C. 

78m(m) and 78m–1), and the rules and 

regulations thereunder, may be satisfied 

by compliance with the rules of a 

foreign jurisdiction that is the subject of 

a Commission order described in 

paragraph (c)(2) of this section, 

provided that at least one of the direct 

counterparties to the security-based 

swap is either a non-U.S. person or a 

foreign branch. 

(2) Procedure. (i) The Commission 

may, conditionally or unconditionally, 

by order, make a substituted compliance 

determination regarding regulatory 

reporting and public dissemination of 

security-based swaps with respect to a 

foreign jurisdiction if that jurisdiction’s 

requirements for the regulatory 

reporting and public dissemination of 

security-based swaps are comparable to 

otherwise applicable requirements. The 

Commission may, conditionally or 

unconditionally, by order, make a 

substituted compliance determination 

regarding regulatory reporting of 

security-based swaps that are subject to 

§ 242.908(a)(2) with respect to a foreign 

jurisdiction if that jurisdiction’s 

requirements for the regulatory 

reporting of security-based swaps are 

comparable to otherwise applicable 

requirements. 

(ii) A party that potentially would 

comply with requirements under 

§§ 242.900 through 242.909 pursuant to 

a substituted compliance order or any 

foreign financial regulatory authority or 

authorities supervising such a person’s 

security-based swap activities may file 

an application, pursuant to the 

procedures set forth in § 240.0–13 of 

this chapter, requesting that the 

Commission make a substituted 

compliance determination regarding 

regulatory reporting and public 

dissemination with respect to a foreign 

jurisdiction the rules of which also 

would require reporting and public 

dissemination of those security-based 

swaps. 

(iii) In making such a substituted 

compliance determination, the 

Commission shall take into account 

such factors as the Commission 

determines are appropriate, such as the 

scope and objectives of the relevant 

foreign regulatory requirements, as well 

as the effectiveness of the supervisory 

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14734 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

compliance program administered, and 

the enforcement authority exercised, by 

the foreign financial regulatory 

authority to support oversight of its 

regulatory reporting and public 

dissemination system for security-based 

swaps. The Commission shall not make 

such a substituted compliance 

determination unless it finds that: 

(A) The data elements that are 

required to be reported pursuant to the 

rules of the foreign jurisdiction are 

comparable to those required to be 

reported pursuant to § 242.901; 

(B) The rules of the foreign 

jurisdiction require the security-based 

swap to be reported and publicly 

disseminated in a manner and a 

timeframe comparable to those required 

by §§ 242.900 through 242.909 (or, in 

the case of transactions that are subject 

to § 242.908(a)(2) but not to 

§ 242.908(a)(1), the rules of the foreign 

jurisdiction require the security-based 

swap to be reported in a manner and a 

timeframe comparable to those required 

by §§ 242.900 through 242.909); 

(C) The Commission has direct 

electronic access to the security-based 

swap data held by a trade repository or 

foreign regulatory authority to which 

security-based swaps are reported 

pursuant to the rules of that foreign 

jurisdiction; and 

(D) Any trade repository or foreign 

regulatory authority in the foreign 

jurisdiction that receives and maintains 

required transaction reports of securitybased swaps pursuant to the laws of that 

foreign jurisdiction is subject to 

requirements regarding data collection 

and maintenance; systems capacity, 

integrity, resiliency, availability, and 

security; and recordkeeping that are 

comparable to the requirements 

imposed on security-based swap data 

repositories by the Commission’s rules 

and regulations. 

(iv) Before issuing a substituted 

compliance order pursuant to this 

section, the Commission shall have 

entered into memoranda of 

understanding and/or other 

arrangements with the relevant foreign 

financial regulatory authority or 

authorities under such foreign financial 

regulatory system addressing 

supervisory and enforcement 

cooperation and other matters arising 

under the substituted compliance 

determination. 

(v) The Commission may, on its own 

initiative, modify or withdraw such 

order at any time, after appropriate 

notice and opportunity for comment. 

§ 242.909 Registration of security-based 

swap data repository as a securities 

information processor. 

A registered security-based swap data 

repository shall also register with the 

Commission as a securities information 

processor on Form SDR (§ 249.1500 of 

this chapter). 

By the Commission. 

Dated: February 11, 2015. 

Brent J. Fields, 

Secretary. 

Note: The following appendix will not 

appear in the Code of Federal Regulations: 

Appendix 

Reopening of Comment Periods for Certain 

Rulemaking Releases and Policy Statement 

Applicable to Security-Based Swaps 

Proposed Pursuant to the Securities 

Exchange Act of 1934 and the Dodd-Frank 

Wall Street Reform and Consumer 

Protection Action 

[Release No. 34–69491; File No. S7–34–10] 

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

s73410.shtml 

• Email message from Larry E. Thompson, 

Managing Director and General Counsel, 

Depository Trust & Clearing Corporation 

(‘‘DTCC’’), to Stephen Luparello, SEC, 

dated December 10, 2014 (‘‘DTCC X’’). 

• Letter from Marisol Collazo, Chief 

Executive Officer, DTCC Data Repository 

US LLC, to Elizabeth M. Murphy, 

Secretary, SEC, dated November 14, 2014 

(‘‘DTCC IX’’). 

• Letter from Angie Karna, Managing 

Director, Legal, Nomura Global Financial 

Products, Inc., to Brent J. Fields, Secretary, 

SEC, dated September 10, 2014 (‘‘NGFP 

Letter’’) 

• Letter from Carl Levin, Chairman, U.S. 

Senate Permanent Subcommittee on 

Investigations, to Kevin M. O’Neill, Deputy 

Secretary, SEC, dated July 3, 2014 (‘‘Levin 

Letter’’). 

• Email message from Christopher Young, 

Director, U.S. Public Policy, ISDA, to 

Thomas Eady, SEC, dated March 27, 2014 

(‘‘ISDA III’’). 

• Email message from Marisol Collazo, Chief 

Executive Officer, DTCC Data Repository 

US LLC, to Thomas Eady and Michael J. 

Gaw, SEC, dated March 24, 2014 (with 

attached letters submitted to the CFTC 

regarding CME Rule 1001) (‘‘DTCC VIII’’). 

• Email message from Marisol Collazo, Chief 

Executive Officer, DTCC Data Repository 

US LLC, to Thomas Eady, SEC, dated 

March 21, 2014 (with attached message 

submitted to the CFTC (‘‘DTCC VII’’). 

• Letter from Kim Taylor, President, 

Clearing, CME Group, and Kara L. Dutta, 

General Counsel, ICE Trade Vault (‘‘ICE’’), 

LLC, to Elizabeth M. Murphy, Secretary, 

Commission, dated November 19, 2013 

(‘‘CME/ICE Letter’’). 

• Letter from Kara L. Dutta, General Counsel, 

ICE Trade Vault, LLC, to Elizabeth M. 

Murphy, Secretary, Commission, dated 

September 23, 2013 (‘‘ICE Letter’’). 

• Letter from Matti Leppa ̈la ̈, Secretary 

General/CEO, PensionsEurope, to Elizabeth 

M. Murphy, Secretary, Commission, dated 

September 3, 2013 (‘‘PensionsEurope 

Letter’’). 

• Letter from Americans for Financial 

Reform, to Elizabeth Murphy, Secretary, 

Commission, dated August 22, 2013 (‘‘AFR 

Letter’’). 

• Letter from Anne-Marie Leroy, Senior Vice 

President and Group General Counsel, 

World Bank, and Fady Zeidan, Acting 

Deputy/General Counsel, International 

Finance Corporation, to Elizabeth M. 

Murphy, Secretary, Commission, dated 

August 21, 2013 (‘‘World Bank Letter’’). 

• Letter from Futures and Options 

Association, dated August 21, 2013 (‘‘FOA 

Letter’’). 

• Letter from Kenneth E. Bentsen, Jr., 

President, Securities Industry and 

Financial Markets Association (‘‘SIFMA’’); 

Walt Lukken, President & Chief Executive 

Officer, Futures Industry Association 

(‘‘FIA’’); and Richard M. Whiting, 

Executive Director and General Counsel, 

The Financial Services Roundtable 

(‘‘Roundtable’’), to Elizabeth M. Murphy, 

Secretary, Commission, dated August 21, 

2013 (‘‘SIFMA/FIA/Roundtable Letter’’). 

• Letter from Per Sjo ̈berg, Chief Executive 

Officer, and Christoffer Mohammar, 

General Counsel, TriOptima AB, to 

Elizabeth M. Murphy, Secretary, 

Commission, dated August 21, 2013 

(‘‘TriOptima Letter’’). 

• Letter from Larry E. Thompson, General 

Counsel, DTCC, to Elizabeth M. Murphy, 

Secretary, SEC, dated August 21, 2013 

(‘‘DTCC VI’’). 

• Letter from Jeff Gooch, Head of Processing, 

Markit, Chair and CEO, MarkitSERV, to 

Elizabeth M. Murphy, Secretary, 

Commission, dated August 21, 2013 

(‘‘MarkitSERV IV’’). 

• Letter from Coalition for Derivatives EndUsers, to Elizabeth M. Murphy, Secretary, 

Commission, dated August 21, 2013 

(‘‘CDEU Letter’’). 

• Letter from Kathleen Cronin, Senior 

Managing Director, General Counsel, CME 

Group Inc., to Elizabeth M. Murphy, 

Secretary, Commission, dated August 21, 

2013 (‘‘CME II’’). 

• Letter from Sarah A. Miller, Chief 

Executive Officer, Institute of International 

Bankers (‘‘IIB’’), to Elizabeth M. Murphy, 

Secretary, Commission, dated August 21, 

2013 (‘‘IIB Letter’’). 

• Letter from Sullivan & Cromwell LLP, to 

Elizabeth M. Murphy, Secretary, 

Commission, dated August 21, 2013 

(‘‘Sullivan Letter’’). 

• Letter from S<ren Elbech, Treasurer, and 

Jorge Alers, General Counsel, lnterAmerican Development Bank, to Elizabeth 

M. Murphy, Secretary, Commission, dated 

August 21, 2013 (‘‘IDB Letter’’). 

• Letter from Karrie McMillan, General 

Counsel, Investment Company Institute 

(‘‘ICI’’) and Dan Waters, Managing Director, 

ICI Global, to Elizabeth M. Murphy, 

Secretary, Commission, dated August 21, 

2013 (‘‘ICI II’’). 

• Letter from Dennis M. Kelleher, President 

and CEO, Stephen W. Hall, Securities 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14735 

Specialist, and Katelynn 0. Bradley, 

Attorney, Better Markets, Inc., to Elizabeth 

M. Murphy, Secretary, Commission, dated 

August 21, 2013 (‘‘Better Markets IV’’). 

• Letter from Monique S. Botkin, Associate 

General Counsel, Investment Adviser 

Association, to Elizabeth M. Murphy, 

Secretary, Commission, dated August 21, 

2013 (‘‘IAA Letter’’). 

• Letter from Patrick Pearson, European 

Commission, dated August 21, 2013 

(‘‘Pearson Letter’’). 

• Letter from Lutz-Christian Funke, Senior 

Vice President, and Frank Czichowski, 

Senior Vice President and Treasurer, KfW, 

to Elizabeth M. Murphy, Secretary, 

Commission, dated August 21, 2013 (‘‘KfW 

Letter’’). 

• Letter from Koichi lshikura, Executive 

Chief of Operations for International 

Headquarters, Japan Securities Dealers 

Association, to Elizabeth M. Murphy, 

Secretary, Commission, dated August 21, 

2013 (‘‘JSDA Letter’’). 

• Letter from Bruce E. Stern, Chairman, 

Association of Financial Guaranty Insurers, 

to Elizabeth M. Murphy, Secretary, 

Commission, dated August 20, 2013 

(‘‘AFGI Letter’’). 

• Letter from Ernst-Albrecht Brockhaus, 

Member of the Management Board, and 

Nico Zachert, Authorized Signatory, Legal/ 

Compliance, FMS Wertmanagement, to 

Elizabeth M. Murphy, Secretary, 

Commission, dated August 2013 (‘‘FMS 

Letter’’). 

• Letter from Stuart J. Kaswell, Executive 

Vice President & Managing Director, 

General Counsel, Managed Funds 

Association (‘‘MFA’’), and Adam Jacobs, 

Director, Head of Markets Regulation, 

Alternative Investment Management 

Association, to Elizabeth M. Murphy, 

Secretary, Commission, dated August 19, 

2013 (‘‘MFA/AIMA Letter’’). 

• Letter from Jonathan B. Kindred and 

Shigesuke Kashiwagi, Co-chairs, Japan 

Financial Markets Council, to Elizabeth M. 

Murphy, Secretary, Commission, dated 

August 15, 2013 (‘‘JFMC Letter’’). 

• Letter from Kevin Nixon, Managing 

Director, Institute of International Finance, 

to Elizabeth M. Murphy, Secretary, 

Commission, dated August 8, 2013 (‘‘IIF 

Letter’’). 

• Letter from Larry E. Thompson, General 

Counsel, DTCC, to Elizabeth M. Murphy, 

Secretary, SEC, dated July 22, 2013 (‘‘DTCC 

V’’). 

• Letter from Dennis Kelleher, President & 

CEO, and Stephen W. Hall, Securities 

Specialist, Better Markets, Inc., to Elizabeth 

M. Murphy, Secretary, Commission, dated 

July 22, 2013 (‘‘Better Markets III’’). 

• Letter from Chris Barnard, to Commission, 

dated July 15, 2013 (‘‘Barnard II’’). 

• Letter from Gregory Ugwi, Strategist, 

ThinkNum.com, dated June 15, 2013 

(‘‘ThinkNum Letter’’). 

• Letter from FSR, FIA, IIB, International 

Swaps and Derivatives Association 

(‘‘ISDA’’), ICI, and SIFMA, to Elizabeth M. 

Murphy, Secretary, Commission, dated 

May 21, 2013 (‘‘Six Associations Letter’’). 

Comments on Proposed Rule: Regulation 

SBSR—Reporting and Dissemination of 

Security-Based Swap Information 

[Release No. 34–63346; File No. S7–34–10] 

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

s73410.shtml 

• Letter from Thomas G. McCabe, Chief 

Operating Officer, OneChicago, to 

Elizabeth M. Murphy, Secretary, 

Commission, dated March 1, 2013 

(‘‘OneChicago II’’). 

• Letter from Elizabeth K. King, Head of 

Regulatory Affairs, GETCO, to Elizabeth M. 

Murphy, Secretary, Commission, dated 

March 21, 2012 (‘‘GETCO Letter’’). 

Letter from Michael Hisler, Co-Founder, 

Swaps & Derivatives Market Association 

(‘‘SDMA’’), to Elizabeth M. Murphy, 

Secretary, Commission, dated October 19, 

2011 (‘‘SDMA II’’). 

• Letter from the ABA Securities 

Association, American Council of Life 

Insurers, FSR, FIA, IIB, ISDA, and SIFMA 

to David A. Stawick, Secretary, CFTC; 

Jennifer J. Johnson, Secretary, Federal 

Reserve Board; Robert E. Feldman, 

Executive Secretary, FDIC; Gary K. Van 

Meter, Director, Office of Regulatory 

Policy, Farm Credit Administration; 

Elizabeth M. Murphy, Secretary, 

Commission; Office of the Comptroller of 

the Currency; and Alfred M. Pollard, 

General Counsel, Federal Housing Finance 

Agency, dated September 8, 2011 

(‘‘Multiple Associations Letter’’). 

• Letter from Scott Pintoff, General Counsel, 

GFI Group, Inc. (‘‘GFI’’), to Elizabeth M. 

Murphy, Secretary, Commission, dated 

July 12, 2011 (‘‘GFI Letter). 

• Letter from Larry E. Thompson, General 

Counsel, the Depository Trust & Clearing 

Corporation (‘‘DTCC’’), to the Honorable 

Mary L. Schapiro, Chairman, Commission, 

and the Honorable Gary Gensler, 

Chairman, CFTC, dated June 3, 2011 

(‘‘DTCC IV’’). 

• Letter from Stephen Merkel, Chairman, 

Wholesale Markets Brokers’ Association 

Americas (‘‘WMBAA’’), to the Honorable 

Mary L. Schapiro, Chairman, Commission, 

and the Honorable Gary Gensler, 

Chairman, CFTC, dated June 3, 2011 

(‘‘WMBAA III’’). [NOTE: This comment 

letter is in fact dated ‘‘June 3, 2010,’’ but 

the Commission deems the true date to be 

June 3, 2011. The comment letter 

references proposed Regulation SBSR, 

which the Commission issued in 

November 2010, and thus the comment 

could not have been submitted in June 

2010.] 

• Letter from John R. Gidman, Association of 

Institutional Investors, to David A. 

Stawick, Secretary, CFTC, and Elizabeth M. 

Murphy, Secretary, Commission, dated 

June 2, 2011 (‘‘Institutional Investors 

Letter’’). [Note: This comment letter is in 

fact dated ‘‘June 2, 2010,’’ but the 

Commission deems the true date to be June 

2, 2011. The comment letter references 

proposed Regulation SBSR, which the 

Commission issued in November 2010, and 

thus the comment could not have been 

submitted in June 2010.] 

• Letter from Chris Koppenheffer, SDMA, to 

David A. Stawick, Secretary, CFTC, and 

Elizabeth M. Murphy, Secretary, 

Commission, dated June 1, 2011 (‘‘SDMA 

I’’). 

• Letter from Richard M. Whiting, Executive 

Director and General Counsel, FSR, to 

David A. Stawick, Secretary, CFTC, and 

Elizabeth M. Murphy, Secretary, 

Commission, dated May 12, 2011 

(‘‘Roundtable Letter’’). 

• Letter from Davis Polk & Wardwell LLP on 

behalf of The Bank of Tokyo-Mitsubishi 

UFJ. Ltd., Mizuho Corporate Bank, Ltd., 

and Sumitomo Mitsui Banking 

Corporation, to David A. Stawick, 

Secretary, CFTC, Elizabeth M. Murphy, 

Secretary, Commission, and Jennifer L. 

Johnson, Secretary, Federal Reserve Board, 

dated May 6, 2011 (‘‘Japanese Banks 

Letter’’). 

• Letter from Richard H. Baker, President 

and Chief Executive Officer, MFA, to the 

Honorable Mary L. Schapiro, Chairman, 

Commission, dated March 24, 2011 (‘‘MFA 

II’’), and attached ‘‘MFA Recommended 

Timeline for Adoption and Implementation 

of Final Rules Pursuant to Title VII of the 

Dodd-Frank Act’’ (‘‘MFA Recommended 

Timeline’’). 

• Letter from Davis Polk & Wardwell LLP on 

behalf of Barclays Bank PLC, PNP Paribas 

S.A., Credit Suisse AG, Deutsche Bank AG, 

HSBS, Nomura Securities International, 

Inc., Rabobank Nederland, Royal Bank of 

Canada, The Royal Bank of Scotland 

Group, PLC, Socie ́te ́ Ge ́ne ́rale, The 

Toronto-Dominion Bank, and UBS AG, to 

David A. Stawick, Secretary, CFTC, 

Elizabeth M. Murphy, Secretary, 

Commission, and Jennifer L. Johnson, 

Secretary, Federal Reserve Board, dated 

February 17, 2011 (‘‘Davis Polk II’’). 

• Letter from Robert Carpenter, President 

and Chief Executive Officer, GS1 U.S., 

Miguel A. Lopera, Chief Executive Officer, 

GS1 Global, and Allan D. Grody, President, 

Financial Inter Group, to Elizabeth 

Murphy, Secretary, Commission, dated 

February 14, 2011 (‘‘GS1 Letter’’) and ‘‘GS1 

& Financial InterGroup Response to 

Securities & Exchange Commission’’ (‘‘GS1 

Proposal’’). 

• Letter from Edward J. Rosen, Cleary 

Gottlieb Steen & Hamilton LLP, on behalf 

of Bank of America Merrill Lynch, BNP 

Paribas, Citi, Credit Agricole Corporate and 

Investment Bank, Credit Suisse Securities 

(USA), Deutsche Bank AG, Morgan 

Stanley, Nomura Securities International, 

Inc., PNC Bank, Socie ́te ́ General, UBS 

Securities LLC, and Wells Fargo & 

Company, to Elizabeth M. Murphy, 

Secretary, Commission, and David A. 

Stawick, Secretary, CFTC, dated February 

14, 2011 (‘‘Cleary II’’). 

• Letter from Charles Llewellyn, Regional 

Legal Counsel—Americas, Society for 

Worldwide Interbank Financial 

Telecommunication SCRL (‘‘SWIFT’’), to 

the Commission, dated February 14, 2011 

(‘‘SWIFT Letter’’). 

• Letter from Patrick Durkin, Managing 

Director, Barclays Capital Inc. (‘‘Barclays’’), 

to Elizabeth M. Murphy, Secretary, 

Commission, dated February 11, 2010 

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14736 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

(‘‘Barclays Letter’’). [Note: This comment 

letter is in fact dated ‘‘February 11, 2010,’’ 

but the Commission deems the true date to 

be February 11, 2011. The comment letter 

references proposed Regulation SBSR, 

which the Commission issued in 

November 2010, and thus the comment 

could not have been submitted in February 

2010.] 

• Letter from Daniel G. Viola, Partner, Sadis 

& Goldberg LLP, to the CFTC and the 

Commission, dated February 7, 2011 

(‘‘Viola Letter’’). 

• Letter from Andrew Downes, Managing 

Director, UBS Investment Bank, and James 

B. Fuqua, Managing Director, UBS 

Securities LLC, to Elizabeth M. Murphy, 

Secretary, Commission, dated February 7, 

2011 (‘‘UBS Letter’’). 

• Letter from Cravath, Swaine & Moore, LLP, 

to Elizabeth M. Murphy, Secretary, 

Commission, dated February 6, 2011 

(‘‘Cravath Letter’’). 

• Letter from Richard G. Ketchum, Chairman 

and Chief Executive Officer, Financial 

Industry Regulatory Authority (‘‘FINRA’’), 

to Elizabeth M. Murphy, Secretary, 

Commission, dated January 27, 2011 

(‘‘FINRA Letter’’). 

• Letter from David G. Downey, Chief 

Executive Officer, OneChicago, LLC, to 

Elizabeth M. Murphy, Secretary, 

Commission, dated January 26, 2011 

(‘‘OneChicago I’’). 

• Letter from Dennis M. Kelleher, President 

and Chief Executive Officer, Stephen W. 

Hall, Securities Specialist, and Wallace C. 

Turbeville, Derivatives Specialist, Better 

Markets, Inc. (‘‘Better Markets’’), to 

Elizabeth M. Murphy, Secretary, 

Commission, dated January 24, 2011 

(‘‘Better Markets II’’). 

• Letter from Kevin Gould, President, Markit 

North America, Inc., to Elizabeth M. 

Murphy, Secretary, Commission, dated 

January 24, 2011 (‘‘Markit I’’). 

• Letter from Jeff Gooch, Chief Executive 

Officer, MarkitSERV LLC, to Elizabeth M. 

Murphy, Secretary, Commission, dated 

January 24, 2011 (‘‘MarkitSERV I’’). 

• Letter from Naphtali M. Hamlet, dated 

January 22, 2011 (‘‘Hamlet Letter’’). 

• Letter from Dennis M. Kelleher, President 

and Chief Executive Officer, Wallace C. 

Turbeville, Derivatives Specialist, and 

Stephen W. Hall, Better Markets, to 

Elizabeth M. Murphy, Secretary, 

Commission, dated January 18, 2011 

(‘‘Better Markets I’’). 

• Letter from Craig S. Donohue, Chief 

Executive Officer, CME Group, Inc., to 

Elizabeth M. Murphy, Secretary, 

Commission, dated January 18, 2011 

(‘‘CME I’’). 

• Letter from Larry E. Thompson, General 

Counsel, DTCC, dated January 18, 2011 

(‘‘DTCC II’’). 

• Letter from Beckwith B. Miller, Chief 

Executive Officer, Ethics Metrics LLC, to 

Elizabeth M. Murphy, Secretary, 

Commission, dated January 18, 2011 

(‘‘Ethics Metrics Letter’’). 

• Letter from Karrie McMillan, General 

Counsel, ICI, to Elizabeth M. Murphy, 

Secretary, Commission, dated January 18, 

2011 (‘‘ICI I’’). 

• Letter from Robert Pickel, Executive Vice 

Chairman, ISDA, and Kenneth E. Bentsen, 

Jr., Executive Vice President, Public Policy 

and Advocacy, SIFMA, to Elizabeth M. 

Murphy, Secretary, Commission, dated 

January 18, 2011 (‘‘ISDA/SIFMA I’’), and 

accompanying study, ‘‘Block trade 

reporting for over-the-counter derivatives 

markets’’ (‘‘ISDA/SIFMA Block Trade 

Study’’). 

• Letter from Roger Liddell, Chief Executive, 

LCH.Clearnet Group Limited, to Elizabeth 

M. Murphy, Secretary, Commission, dated 

January 18, 2011 (‘‘LCH.Clearnet Letter’’). 

• Letter from Stuart J. Kaswell, Executive 

Vice President, Managing Director, and 

General Counsel, Managed Funds 

Association, to Elizabeth M. Murphy, 

Secretary, Commission, dated January 18, 

2011 (‘‘MFA I’’). 

• Letter from Timothy W. Cameron, 

Managing Director, Asset Management 

Group, SIFMA, to Elizabeth M. Murphy, 

Secretary, Commission, dated January 18, 

2011 (‘‘SIFMA I’’). 

• Letter from Lee H. Olesky, Chief Executive 

Officer, and Douglas L. Friedman, General 

Counsel, Tradeweb Markets LLC, to 

Elizabeth M. Murphy, Secretary, 

Commission, dated January 18, 2011 

(‘‘Tradeweb Letter’’). 

• Letter from Gus Sauter, Managing Director 

and Chief Investment Officer, and John 

Hollyer, Principal and Head of Risk 

Management and Strategy Analysis, 

Vanguard, to Elizabeth M. Murphy, 

Secretary, Commission, dated January 18, 

2011 (‘‘Vanguard Letter’’). 

• Letter from Julian Harding, Chairman, 

WMBAA, to Elizabeth M. Murphy, 

Secretary, Commission, dated January 18, 

2011 (‘‘WMBAA II’’). 

• Letter from R. Martin Chavez, Managing 

Director, Goldman, Sachs & Co., David A. 

Stawick, Secretary, CFTC, and Elizabeth M. 

Murphy, Secretary, Commission, dated 

January 18, 2011 (‘‘Goldman Sachs 

Letter’’). 

• Letter from R. Glenn Hubbard, Co-Chair, 

John L. Thornton, Co-Chair, and Hal S. 

Scott, Director, Committee on Capital 

Markets Regulation, David A. Stawick, 

Secretary, CFTC, and Elizabeth M. 

Murphy, Secretary, Commission, dated 

January 18, 2011 (‘‘CCMR I’’). 

• Letter from Adam Litke, Bloomberg L.P., to 

Elizabeth M. Murphy, Secretary, 

Commission, dated January 14, 2011 

(‘‘Bloomberg Letter’’). 

• Letter from Laurel Leitner, Senior Analyst, 

Council of Institutional Investors, to 

Elizabeth M. Murphy, Secretary, 

Commission, dated January 13, 2011 (‘‘CII 

Letter’’). 

• Letter from Jeremy Barnum, Managing 

Director, and Don Thompson, Managing 

Director and Associate General Counsel, 

J.P. Morgan, David A. Stawick, Secretary, 

CFTC, and Elizabeth M. Murphy, 

Secretary, Commission, dated January 12, 

2011 (‘‘J.P. Morgan Letter’’). 

• Letter from Davis Polk & Wardwell LLP on 

behalf of Barclays Bank PLC, PNP Paribas 

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

Canada, The Royal Bank of Scotland 

Group, PLC, Socie ́te ́ Ge ́ne ́rale, UBS AG, to 

David A. Stawick, Secretary, CFTC, 

Elizabeth M. Murphy, Secretary, 

Commission, and Jennifer L. Johnson, 

Secretary, Federal Reserve Board, dated 

January 11, 2011 (‘‘Davis Polk I’’). 

• Letter from Suzanne H. Shatto, dated 

January 1, 2011 (‘‘Shatto Letter’’). 

• Letter from Spencer Bachus, Ranking 

Member, Committee on Financial Services, 

and Frank Lucas, Ranking Member, 

Committee on Agriculture, U.S. House of 

Representatives, to The Honorable Timothy 

Geithner, Secretary, Department of 

Treasury, the Honorable Gary Gensler, 

Chairman, CFTC, the Honorable Mary 

Schapiro, Chairman, Commission, and the 

Honorable Ben Bernanke, Chairman, 

Federal Reserve, dated December 16, 2010 

(‘‘Bachus/Lucas Letter’’). 

• Letter from Chris Barnard, dated December 

3, 2010 (‘‘Barnard I’’). 

• Letter from Laura J. Schisgall, Managing 

Director and Senior Counsel, Socie ́te ́

Ge ́ne ́rale, to Ananda Radhakrishnan, 

Director, Division of Clearing and 

Intermediary Oversight, CFTC, John M. 

Ramsay, Deputy Director, Division of 

Trading and Markets, SEC, Mark E. Van 

Der Weide, Senior Associate Director, 

Federal Reserve Board, dated November 

23, 2010 (‘‘Socie ́te ́ Ge ́ne ́rale Letter’’). 

• Letter from Julian Harding, WMBAA, 

David A. Stawick, Secretary, CFTC, and 

Elizabeth M. Murphy, Secretary, 

Commission, dated November 19, 2010 

(‘‘WMBAA I’’). 

Comments on 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 

[Release No. 34–67177; File No. S7–05–12[ 

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

s70512.shtml 

• Letter from Kenneth E. Bentsen, Jr., 

Executive Vice President, Public Policy 

and Advocacy, SIFMA, to Elizabeth M. 

Murphy, Secretary, Commission, dated 

August 13, 2012 (‘‘SIFMA II’’). 

Comments on Cross-Border Security-Based 

Swap Activities; Re-Proposal of Regulation 

SBSR and Certain Rules and Forms Relating 

to the Registration of Security-Based Swap 

Dealers and Major Security-Based Swap 

Participants 

[Release No. 34–69490; File No. S7–02–13] 

http://www.sec.gov/comments/s7-02-13/

s70213.shtml 

• Letter from Karel Engelen, Senior Director, 

Head of Data, Reporting & FpML, ISDA, to 

Elizabeth M. Murphy, Secretary, 

Commission, dated November 14, 2014 

(‘‘ISDA IV’’). 

• Letter from Catherine T. Dixon, Chair, 

Federal Regulation of Securities 

Committee, American Bar Association, to 

Elizabeth M. Murphy, Secretary, 

Commission, dated October 2, 2013 (‘‘ABA 

Letter’’). 

• Letter from Adam C. Cooper, Senior 

Managing Director and Chief Legal Officer, 

mstockstill on DSK4VPTVN1PROD with RULES3

Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14737 

Citadel LLC, to Elizabeth M. Murphy, 

Secretary, Commission, dated August 21, 

2013 (‘‘Citadel Letter’’). 

• Letter from R. Glenn Hubbard, John L. 

Thornton, Co-Chairs, and Hal S. Scott, 

Director, Committee on Capital Markets 

Regulation, to Elizabeth M. Murphy, 

Secretary, Commission, and Gary Barnett, 

Director, CFTC, dated August 17, 2013 

(‘‘CCMR II’’). 

• Letter from Robert Pickel, ISDA, to 

Elizabeth M. Murphy, Secretary, 

Commission, dated August 14, 2013 

(‘‘ISDA II’’). 

• Letter from Masaaki Tanaka, Deputy 

President, Mitsubishi UFJ Financial Group, 

Inc., to Elizabeth M. Murphy, Secretary, 

Commission, dated August 8, 2013 

(‘‘Mitsubishi Letter’’). 

Comments on Acceptance of Public 

Submissions for a Study on International 

Swap Regulation Mandated by Section 

719(c) of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act 

[Release No. 34–64926; File No. 4–635] 

http://www.sec.gov/comments/4-635/4- 

635.shtml 

• Letter from Jirˇı ́ Kro ́l, Director of 

Government and Regulatory Affairs, 

Alternative Investment Management 

Association Limited to David A. Stawick, 

Secretary, CFTC, and Elizabeth M. 

Murphy, Secretary, Commission, dated 

September 26, 2011 (‘‘AIMA Letter’’). 

Comments on Product Definitions Contained 

in Title VII of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

[Release No. 33–9204; File No. S7–16–11] 

http://www.sec.gov/comments/s7-16-11/

s71611.shtml 

• Letter from Jacques Mirante-Pe ́re ́, Chief 

Financial Officer, and Jan De Bel, General 

Counsel, Council of Europe Development 

Bank, dated July 22, 2011 (‘‘CEB Letter’’). 

• Letter from A. Querejeta, Secretary General 

and General Counsel, and B. de Mazie`res, 

Director General, European Investment 

Bank, to David A Stawick, Secretary, 

CFTC, and Elizabeth M. Murphy, 

Secretary, SEC, dated July 22, 2011 (‘‘EIB 

Letter’’). 

• Letter from Gu ̈nter Pleines, Head of 

Banking Department, and Diego Devos, 

General Counsel, Bank for International 

Settlements, to David A Stawick, Secretary, 

CFTC, and Elizabeth M. Murphy, 

Secretary, SEC, dated July 20, 2011 (‘‘BIS 

Letter’’). 

Real-Time Reporting: Title VII Provisions of 

the Dodd-Frank Wall Street Reform and 

Consumer Protection Act 

http://www.sec.gov/comments/df-title-vii/

real-time-reporting/real-time-reporting.shtml 

• Letter from FIA, the Financial Services 

Forum (‘‘FSF’’), ISDA, and SIFMA to David 

A Stawick, Secretary, CFTC, and Elizabeth 

M. Murphy, Secretary, SEC, dated May 4, 

2011 (‘‘FIA/FSF/ISDA/SIFMA Letter’’). 

• Letter from Edward J. Rosen, Cleary 

Gottlieb Steen & Hamilton LLP on behalf 

of Bank of America Merrill Lynch, Barclays 

Capital, BNP Paribas, Citi, Credit Agricole 

Corporate and Investment Bank, Credit 

Suisse Securities (USA), Deutsche Bank 

AG, HSBC, Morgan Stanley, Nomura 

Securities International, Inc., PNC Bank, 

National Association, UBS Securities LLC, 

and Wells Fargo & Company, to David A 

Stawick, Secretary, CFTC, and Elizabeth M. 

Murphy, Secretary, SEC, dated October 25, 

2010 (‘‘Cleary I’’). 

• Letter from James W. Toffey, Chief 

Executive Officer, Benchmark Solutions, to 

David A Stawick, Secretary, CFTC, and 

Elizabeth M. Murphy, Secretary, SEC, 

dated October 1, 2010 (‘‘Benchmark 

Letter’’). 

Comments on Reporting of Security-Based 

Swap Transaction Data 

[Release No. 34–63094; File No. s7–28–10] 

http://www.sec.gov/comments/s7-28-10/

s72810.shtml 

• Letter from Larry E. Thompson, General 

Counsel, DTCC, to Elizabeth M. Murphy, 

Secretary, Commission, dated December 

20, 2010 (‘‘DTCC I’’). 

• Letter from Robert Pickel, Executive Vice 

Chairman, ISDA, to Elizabeth Murphy, 

Secretary, Commission, dated December 

10, 2010 (‘‘ISDA I’’). 

• Letter from Ernest C. Goodrich, Jr., 

Managing Director—Legal Department, 

Deutsche Bank AG, and Marcel Riffaud, 

Managing Director, Legal Department, 

Deutsche Bank AG, to David A. Stawick, 

Secretary, CFTC, and to Elizabeth M. 

Murphy, Secretary, Commission, dated 

November 5, 2010 (‘‘Deutsche Bank 

Letter’’). 

Comments on Proposed Rule: Registration 

and Regulation of Security-Based Swap 

Execution Facilities 

[Release No. 34–63825; File No. S7–06–11] 

http://www.sec.gov/comments/s70611/

s70611.shtml 

• Letter from the American Benefits Council 

to Elizabeth M. Murphy, Secretary, 

Commission, dated April 8, 2011 (‘‘ABC 

Letter’’). 

• Letter from Joanne Medero, Richard Prager, 

and Supurna VedBrat, BlackRock, Inc., to 

Elizabeth M. Murphy, Secretary, 

Commission, dated April 4, 2011 

(‘‘BlackRock Letter’’). 

• Letter from Kevin Gould, President, Markit 

North America, Inc., to Elizabeth Murphy, 

Secretary, Commission, dated April 4, 2011 

(‘‘Markit II’’). 

• Letter from Robert Pickel, Executive Vice 

Chairman, ISDA, and Kenneth E. Bentsen, 

Jr. Executive Vice President, Public Policy 

and Advocacy, SIFMA, to Elizabeth M. 

Murphy, Secretary, Commission, dated 

April 4, 2011 (‘‘ISDA/SIFMA II’’). 

• Letter from Jeff Gooch, Chief Executive 

Officer, MarkitSERV, to Elizabeth Murphy, 

Secretary, Commission, dated April 4, 2011 

(‘‘MarkitSERV II’’). 

• Letter from Nancy C. Gardner, Executive 

Vice President and General Counsel, 

Markets Division, Thomson Reuters, to 

Elizabeth M. Murphy, Secretary, 

Commission, dated April 4, 2011 

(‘‘Thomson Reuters Letter’’). 

• Letter from Stuart J. Kaswell, Executive 

Vice President and Managing Director, 

General Counsel, MFA, to Elizabeth M. 

Murphy, Secretary, Commission, dated 

April 4, 2011 (‘‘MFA III’’). 

• Letter from Nicholas J. Stephan, Chief 

Executive Officer, Phoenix Partners Group 

LP to Elizabeth M. Murphy, Secretary, 

Commission, dated April 4, 2011 

(‘‘Phoenix Letter’’). 

Comments on Proposed Rule: Security-Based 

Swap Data Repository Registration, Duties, 

and Core Principles 

[Release No. 34–63347; File No. S7–35–10] 

http://www.sec.gov/comments/s73510/

s73510.shtml 

• Letter from Larry E. Thompson, General 

Counsel, DTCC, to Elizabeth M. Murphy, 

Secretary, Commission, dated January 24, 

2011 (‘‘DTCC III’’). 

Comments on Joint Public Roundtable on 

International Issues Relating to the 

Implementation of Title VII of the DoddFrank Wall Street Reform and Consumer 

Protection Act 

[Release No. 34–64939; File No. 4–636] 

http://www.sec.gov/comments/4-636/4- 

636.shtml 

• Letter from Edward J. Rosen, Cleary 

Gottlieb Steen & Hamilton LLP, on behalf 

of Bank of America Merrill Lynch, Barclays 

Capital, BNP Paribas, Citi, Cree ́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, UBS Securities LLC, to David A. 

Stawick, Secretary, CFTC; Elizabeth M. 

Murphy, Secretary, SEC; Jennifer J. 

Johnson, Secretary, Board of Governors of 

the Federal Reserve Board (‘‘Federal 

Reserve Board’’); Office of the Comptroller 

of the Currency; Robert E. Feldman, 

Executive Secretary, Federal Deposit 

Insurance Corporation (‘‘FDIC’’); Alfred M. 

Pollard, General Counsel, Federal Housing 

Finance Agency; and Gary K. Van Meter, 

Director, Office of Regulatory Policy, Farm 

Credit Administration, dated September 

20, 2011 (‘‘Cleary III’’). 

• Letter from Kevin Gould, President, Markit 

North America, Inc., to David A. Stawick, 

Secretary, CFTC, and Elizabeth M. 

Murphy, Secretary, Commission, dated 

September 19, 2011 (‘‘Markit III’’). 

• Letter from Jeff Gooch, Chief Executive 

Officer, MarkitSERV, to David A. Stawick, 

Secretary, CFTC, and Elizabeth M. 

Murphy, Secretary, Commission, dated 

September 19, 2011 (‘‘MarkitSERV III’’). 

[FR Doc. 2015–03124 Filed 3–18–15; 8:45 am] 

BILLING CODE 8011–01–P 

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