[Federal Register Volume 81, Number 30 (Tuesday, February 16, 2016)]
[Notices]
[Pages 7762-7765]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-03064]


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COMMODITY FUTURES TRADING COMMISSION


Order Authorizing the National Futures Association as a 
Commission Designee for Direct Electronic Access to Data in Swap Data 
Repositories

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice and order.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'') is 
issuing an order (``Order'') authorizing the National Futures 
Association (``NFA'') as a Commission designee to receive direct 
electronic access to data maintained in swap data repositories 
(``SDRs'') registered with the Commission. The Commission is authorized 
to designate persons to receive direct electronic access to SDR data 
pursuant to Section 21(c)(4)(A) of the Commodity Exchange Act 
(``CEA''). NFA is registered with the Commission as a registered 
futures association (``RFA'') pursuant to Section 17 of the CEA. Direct 
access to SDR data will facilitate NFA's performance of functions 
delegated to NFA by the Commission, as well as the performance of other 
duties authorized by the CEA and the Commission. As a condition to 
authorizing NFA as a Commission designee, NFA is required to keep all 
non-public information received through direct electronic access to SDR 
data confidential and to refer any request for such data to the 
Commission for handling.

DATES: Effective date: February 16, 2016.

FOR FURTHER INFORMATION CONTACT: Eileen T. Flaherty, Director, 202-418-
5326, <a href="/cdn-cgi/l/email-protection#4e2b28222f262b3c3a370e2d283a2d60292138"><span class="__cf_email__" data-cfemail="c9acafa5a8a1acbbbdb089aaafbdaae7aea6bf">[email protected]</span></a>, or Frank Fisanich, Chief Counsel, 202-418-
5949, <a href="/cdn-cgi/l/email-protection#badcdcd3c9dbd4d3d9d2fad9dcced994ddd5cc"><span class="__cf_email__" data-cfemail="fc9a9a958f9d92959f94bc9f9a889fd29b938a">[email protected]</span></a>, Division of Swap Dealer and Intermediary 
Oversight, Commodity Futures Trading Commission, Three Lafayette 
Centre, 1155 21st Street NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Authority and Background

    Title VII of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act \1\ amended the CEA \2\ to establish a comprehensive new 
regulatory framework for swaps. Amendments to the CEA included the 
addition of provisions requiring the retention, and the reporting to 
Commission-registered SDRs, of data regarding swap transactions in 
order to enhance transparency, promote standardization, and reduce 
systemic risk. Such amendments also included certain core principles 
governing the operations of SDRs. Pursuant to these newly added 
provisions, the Commission adopted certain SDR registration 
requirements and provisions implementing core principles in part 49 of 
its regulations,\3\ and adopted rules for the reporting of swap 
transaction data to registered SDRs in parts 45 and 46 of its 
regulations.\4\
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    \1\ Public Law 111-203, 124 Stat. 1376 (2010).
    \2\ 7 U.S.C. 1 et seq.
    \3\ See Swap Data Repositories: Registration Standards, Duties 
and Core Principles, 76 FR 54538 (Sept. 1, 2011).
    \4\ Swap Data Recordkeeping and Reporting Requirements, 77 FR 
2136 (Jan. 13, 2012).
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    Section 21(c) of the CEA sets forth the duties of a registered SDR. 
Among them is the duty to provide direct electronic access to the 
Commission (or any designee of the Commission).\5\ ``Direct electronic 
access'' is defined in Commission regulation 49.17(b)(3) as ``an 
electronic system, platform or framework that provides internet or web-
based access to real-time swap transaction data and also provides 
scheduled data transfers to the Commission's electronic systems.'' \6\ 
As used herein, ``direct electronic access to SDR data'' means ``an 
electronic system, platform, or framework that provides internet or 
web-based access to real-time swap transaction data and/or swap 
transaction data transfers.''
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    \5\ See Section 21(c)(4)(A) of the CEA, 7 U.S.C. 24a(c)(4)(A).
    \6\ 17 CFR 49.17(b)(3).
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    As the Commission stated in adopting the SDR registration 
requirements, direct electronic access by the Commission is a critical 
function and responsibility of an SDR because real-time access to swap 
data is necessary for adequate oversight and surveillance of the swaps 
market.\7\ The Commission implemented the access requirements for 
Commission designees under Section 21(c)(4)(A) of the CEA by adopting 
Commission regulation 49.17(c)(1).
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    \7\ See Swap Data Repositories: Registration Standards, Duties 
and Core Principles, 76 FR 54538, 54551-52 (Sept. 1, 2011).
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    Pursuant to Commission regulation 170.1, a basic purpose of an RFA 
is to regulate the practices of its members.\8\ In order to help NFA 
achieve this purpose and strengthen its regulatory oversight of its 
members, including registered swap dealers (``SDs'') and major swap 
participants (``MSPs''), NFA has requested direct electronic access to 
all SDRs.
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    \8\ 17 CFR 170.1.
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II. Use of SDR Data

    NFA is the only futures association registered with the Commission 
pursuant to Section 17 of the CEA and

[[Page 7763]]

the Commission, as detailed below, has over decades delegated many 
Commission functions to NFA.\9\ Pursuant to Section 8a(10) of the 
CEA,\10\ the Commission may authorize any person--including an RFA--to 
perform any of the registration functions under the CEA. Further, 
pursuant to Section 17(o) of the CEA,\11\ the Commission may require an 
RFA to perform registration functions under the CEA with respect to its 
members. The Commission has previously authorized NFA to perform the 
full range of registration functions with regard to applicants for 
Commission registration and Commission registrants, including 
registration of SDs and MSPs.\12\ Additionally, pursuant to Sections 
4p, 8a, and 17 of the CEA, the Commission issued Commission regulation 
170.16 requiring each registered SD and MSP to become and remain a 
member of an RFA. As the only RFA, all registered SDs and MSPs are 
members of NFA.
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    \9\ 7 U.S.C. 21.
    \10\ 7 U.S.C. 12a(10).
    \11\ 7 U.S.C. 21(o).
    \12\ See e.g., Performance of Registration Functions by National 
Futures Association, 49 FR 39593 (Oct. 9, 1984); 50 FR 34885 (Aug. 
28, 1985); 51 FR 34490 (Sept. 29, 1986); Performance of Registration 
Processing Functions by National Futures Association With Respect to 
Floor Traders and Floor Brokers, 58 FR 19657 (Apr. 15, 1993); 
Performance of Certain Functions by National Futures Association 
With Respect to Non-U.S. Firms and Non-U.S. Markets, 62 FR 47792 
(Sept. 11, 1997); Performance of Certain Functions by National 
Futures Association with Respect to Commodity Pool Operators and 
Commodity Trading Advisors, 62 FR 52088 (Oct. 6, 1997); Performance 
of Registration Functions by National Futures Association With 
Respect to Swap Dealers and Major Swap Participants 77 FR 2708 (Jan. 
19, 2012).
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    Other Commission functions delegated to NFA include: Reviewing 
disclosure documents and providing the Commission with related 
summaries and periodic reports; \13\ and acting as the Commission's 
official custodian of records.\14\ The Commission has found that NFA 
exercises its delegated authority with proficiency.\15\
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    \13\ See 62 FR 52088 (Oct. 6, 1997); 64 FR 29273 (June 1, 1999).
    \14\ See, e.g., 49 FR 39593 (Oct. 9, 1984) (regarding the 
registration records of future commission merchants, commodity pool 
operators, and commodity trading advisors); 66 FR 43227 (Aug. 17, 
2001) (regarding notice registration filings as futures commission 
merchants or introducing brokers); 67 FR 77470 (Dec. 18, 2002) 
(regarding commodity pool operator annual financial reports required 
by regulation 4.22 and 4.7(b)(3)); 75 FR 55310 (Sep. 10, 2010) 
(regarding the registration records of retail foreign exchange 
dealers); and 77 FR 2708 (Jan. 19, 2012) (regarding registration 
records of swap dealers and major swap participants).
    \15\ See, e.g., 67 FR 77470 (Dec. 18, 2002).
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    In addition to performing functions delegated by the Commission, 
Section 17(p)(2) of the CEA requires an RFA to establish minimum 
capital, segregation, and other financial requirements applicable to 
its members for which such requirements are imposed by the Commission 
and implement a program to audit and enforce compliance with such 
requirements, except that such requirements may not be less stringent 
than those imposed on such firms by the CEA or by Commission 
regulation.\16\
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    \16\ 7 U.S.C. 21(p)(2).
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    Pursuant to such requirement, where the Commission has imposed 
minimum financial requirements for its registrants, NFA has established 
minimum financial requirements for such registrants that are members of 
NFA that are no less stringent than those imposed by Commission 
regulations.\17\ All NFA rules and rule amendments are submitted to the 
Commission for review and approval, as required by Section 17(j) of the 
CEA.
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    \17\ NFA's financial requirements for its members are contained 
in the NFA Manual, available on its Web site: http://www.nfa.futures.org/nfamanual/NFAManualTOC.aspx?Section=7. With 
respect to minimum financial requirements for SDs and MSPs, the 
Commission has proposed capital rules. See Capital Requirements of 
Swap Dealers and Major Swap Participants, 76 FR 27802 (May 12, 
2011). In addition, the Commission has recently promulgated margin 
requirements for SDs and MSPs. See Margin Requirements for Uncleared 
Swaps for Swap Dealers and Major Swap Participants, 81 FR 636 (Jan. 
6, 2016). NFA will in due course establish minimum financial 
requirements for its SD and MSP members that are no less stringent 
than the capital and margin requirements for SDs and MSPs imposed by 
the Commission.
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    In order for NFA to adequately implement a program to audit and 
enforce compliance as required under Section 17(p)(2) of the CEA, to 
regulate the practices of its members pursuant to Commission regulation 
170.1, and to carry out the functions delegated to it by the 
Commission, the Commission has determined that it is necessary for NFA 
to obtain SDR data. This information, together with adequate financial 
reporting by its members, will better enable NFA to monitor compliance 
with its minimum financial and other requirements.
    In requesting access to SDR data, NFA has stated that, as a front-
line regulator of SDs and MSPs, it may be necessary in certain 
situations (e.g., investigations) for NFA to obtain data directly from 
an independent source, such as an SDR, as opposed to relying solely on 
data submitted by member firms. Furthermore, NFA has stated that if it 
had access to firm level transaction data on a regular (e.g., monthly 
or quarterly) basis, then this information would be a significant 
addition to NFA's SD/MSP risk profiling system. The Commission concurs 
with NFA's conclusion that it is far more efficient and timely for NFA 
to collect swap transaction data from a few consolidated sources, i.e., 
the SDRs, than for NFA to make constant requests either through the 
Commission or separately to over 100 SDs and MSPs.
    Finally, at the request of the Commission, NFA has represented its 
willingness to develop, at the direction of the Commission, reports 
generated from analyses of the SDR data NFA receives pursuant to this 
Order that the Commission or its staff may find necessary or desirable 
from time to time in order to carry out its legal and statutory 
responsibilities under the CEA and Commission regulations.
    The Commission believes that NFA's direct electronic access to SDR 
data will permit the Commission to carry out its legal and statutory 
responsibilities under the CEA, retaining its ultimate decision-making 
authority, while also freeing up Commission resources to be directed to 
other parts of its regulatory mandate. NFA may not use the SDR data 
obtained under the authority provided in this Order for any purpose 
other than to facilitate NFA's performance of functions delegated to 
NFA by the Commission and the performance of NFA's functions as an RFA.

III. Confidentiality of SDR Data

    As a condition to receiving direct electronic access to SDR data as 
a Commission designee, NFA must keep all non-public information 
received through such access confidential.
    The SDR data contains information that is protected from disclosure 
by the Commission by Section 8 of the CEA.\18\ Pursuant to Section 8 of 
the CEA, the Commission is prohibited, except as specifically 
authorized by the CEA, from publishing data and information that would 
separately disclose the business transactions or market positions of 
any person and trade secrets or names of customers, subject to certain 
exceptions that permit disclosure to: (i) Either House of Congress, 
acting within the scope of its jurisdiction; (ii) a department, central 
bank and ministries, or agency of the Government of the United States, 
acting within the scope of its jurisdiction; (iii) a department, 
central bank and ministries, or agency of any State or any political 
subdivision thereof, acting within the scope of its jurisdiction; and 
(iv) any foreign futures authority, or any department, central bank and 
ministries, or agency of any foreign government or any political

[[Page 7764]]

subdivision thereof, acting within the scope of its jurisdiction.\19\
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    \18\ 7 U.S.C. 12.
    \19\ See Section 8(e) of the CEA; 7 U.S.C. 12(e).
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    With respect to NFA's obligations regarding public disclosure of 
information it maintains as an official records custodian of the 
Commission,\20\ the Commission notes that NFA Compliance Rule 4-1 
defines such information as ``CFTC records'' and subsection (c) of such 
rule states that:
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    \20\ See supra note 14 for orders by which the Commission 
determined to authorize NFA to maintain and serve as the official 
custodian of the Commission's registration records with respect to 
various Commission registrants.

    Requests for access to CFTC records, or portions thereof, not 
subject to disclosure as public or publicly available under 
paragraph (b)(1) of this Rule \21\ shall be referred or transmitted 
to the Commission for response; except that, NFA will disclose such 
records or portion thereof:
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    \21\ NFA Compliance Rule 4-1(b)(1) states: ``If any member of 
the public requests access to CFTC records, or portions thereof, and 
the requested record, or portion, is ``public'' or ``publicly 
available'' under CFTC Regulations 1.10(g) or 145.0, then NFA will 
release that record or portion to the requester.''
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    (1) otherwise with the authorization of the Assistant Secretary 
of the Commission for FOI, Privacy, and Sunshine Act Compliance or 
his or her designee, or the General Counsel of the Commission or his 
or her designee, in accordance with CFTC Regulations 145.7(b), (h) 
and (i); the Freedom of Information Act, 5 U.S.C. 552; and the 
Privacy Act, 5 U.S.C. 552a; and
    (2) to any individual or firm, or person acting on behalf of the 
individual or firm, who seeks access to his, her or its CFTC 
records: Provided, however, that NFA receives proper verification of 
the identity and authority of the party requesting the records.

    In order to ensure compliance with the Commission's obligations 
under Section 8 of the CEA, NFA has represented and confirmed to the 
Commission that all SDR data obtained by NFA through the direct 
electronic access authorized by this Order will be subject to more 
stringent obligations regarding public disclosure than are ``CFTC 
records'' under NFA Compliance Rule 4-1. Thus, the Commission is 
conditioning this Order on NFA's representation that it will not 
publicly disclose any information obtained by NFA through the direct 
electronic access to SDR data authorized by this Order. This Order is 
further conditioned on NFA's undertaking that any request for such SDR 
data received by NFA will be referred to the Commission for response 
directly by the Commission. Notwithstanding the foregoing, this Order 
provides that NFA may disclose the SDR data of a firm to such firm upon 
request, subject to NFA receiving proper verification of the identity 
and authority of the person making the request on behalf of such firm.
    With respect to disclosing to a firm such firm's own SDR data, the 
Commission notes that Commission regulation 49.17(f)(2) prohibits an 
SDR from disclosing to one counterparty the identity or the legal 
entity identifier (as such term is used in part 45 of the Commission's 
regulations) of the other counterparty to a swap, or the other 
counterparty's clearing member for the swap, if the swap is executed 
anonymously on a swap execution facility or a designated contract 
market and cleared in accordance with Commission regulations in 1.74, 
23.610, and 37.12(b)(7). NFA has represented and confirmed that in 
disclosing to a firm such firm's own SDR data, such data will not 
include any information that an SDR would be prohibited from disclosing 
pursuant to Commission regulation 49.17(f)(2).

IV. Conclusion and Order

    For the reasons discussed above, and pursuant to its authority 
under Section 21(c)(4)(A) of the CEA, the Commission has determined 
that NFA's access to SDR data will assist the Commission to carry out 
its legal and statutory responsibilities under the CEA and its 
regulations. Thus, the Commission has determined to, and hereby does, 
authorize NFA as a designee of the Commission for purposes of receiving 
direct electronic access to SDR data, subject to the terms and 
conditions specified below. Accordingly, subject to such terms and 
conditions, SDRs registered with the Commission must provide NFA with 
direct electronic access to such data as the Commission's designee in 
accordance with Commission regulation 49.17(c)(1).
    These determinations are based on NFA's representations and 
demonstration of its willingness and ability to accept the SDR data 
authorized by this Order for auditing and enforcing compliance with NFA 
member requirements, and to safeguard from public disclosure any 
information contained in such SDR data.
    Accordingly, NFA's direct electronic access to SDR data is 
specifically conditioned on NFA (1) safeguarding from public disclosure 
any information contained in such SDR data (other than pursuant to the 
limited exception specified below); (2) referring any request for such 
data received by NFA to the Commission for response directly by the 
Commission; (3) in no event disclosing any information regarding the 
identity of a counterparty to a swap, or such counterparty's clearing 
member for such swap, that an SDR would be prohibited from disclosing 
pursuant to Commission regulation 49.17(f)(2); and (4) accessing and 
using the SDR data obtained pursuant to the authority provided by this 
Order solely to facilitate NFA's performance of functions delegated to 
NFA by the Commission and NFA's performance of its functions as an RFA.
    Notwithstanding such conditions, upon request of a firm, NFA may 
disclose SDR data of that firm to such firm (other than information an 
SDR would be prohibited from disclosing pursuant to Commission 
regulation 49.17(f)(2)), subject to NFA receiving proper verification 
of the identity and authority of the person making the request on 
behalf of such firm.
    Further, the Commission hereby delegates to the Director of the 
Division of Swap Dealer and Intermediary Oversight the authority to: 
(1) Limit or otherwise condition NFA's direct electronic access to 
certain SDR data that such Director may determine in writing is 
unnecessary to facilitate NFA's performance of functions delegated to 
NFA by the Commission and the performance of NFA's functions as an RFA; 
and (2) direct Commission staff to review, examine, or audit NFA's 
access and use of the SDR data as such Director may determine is 
necessary to ensure NFA's compliance with the conditions of this Order. 
Nothing herein shall be deemed to prohibit the Commission, at its 
election, from exercising the authority delegated in this paragraph.
    This Order does not authorize NFA to render ``no-action'' 
positions, exemptions, or interpretations with respect to applicable 
disclosure, reporting, recordkeeping, and registration requirements.
    The Commission retains the authority to condition further, modify, 
suspend, terminate, or otherwise restrict any of the terms of the Order 
provided herein, in its discretion, including the kind of SDR data 
accessible through direct electronic access. Nothing in this order 
shall prevent the Commission from exercising its authority to receive 
direct electronic access to SDR data or its authority to authorize any 
other person to be a designee of the Commission to receive such access. 
Nothing in this order, or in Section 8a(10) or 17(o) of the CEA, shall 
affect the Commission's authority to review the performance by NFA of 
its oversight of its members, to adopt and enforce regulations 
applicable to SDs and MSPs as Commission registrants, and to conduct 
on-site examinations of the operations

[[Page 7765]]

and activities of SDs and MSPs as Commission registrants.

    Issued in Washington, DC, on February 10, 2016, by the 
Commission.
Christopher J. Kirkpatrick,
Secretary of the Commission.

Appendix to Order Authorizing the National Futures Association as a 
Commission Designee for Direct Electronic Access to Data in Swap Data 
Repositories--Commission Voting Summary

    On this matter, Chairman Massad and Commissioners Bowen and 
Giancarlo voted in the affirmative. No Commissioner voted in the 
negative.

[FR Doc. 2016-03064 Filed 2-12-16; 8:45 am]
 BILLING CODE 6351-01-P


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