[Federal Register Volume 75, Number 198 (Thursday, October 14, 2010)]
[Rules and Regulations]
[Pages 63080-63085]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-25325]


=======================================================================
-----------------------------------------------------------------------

COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 44

RIN 3038-AD24


Interim Final Rule for Reporting Pre-Enactment Swap Transactions

AGENCY: Commodity Futures Trading Commission.

ACTION: Interim final rule; request for public comment.

-----------------------------------------------------------------------

SUMMARY: The Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') is publishing for comment an interim final rule to implement 
new statutory provisions introduced by Title VII of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (``Dodd-Frank Act''). Section 
729 of the Dodd-Frank Act requires the CFTC to adopt, within 90 days of 
enactment of the Dodd-Frank Act, an interim final rule for the 
reporting of swap transactions entered into before July 21, 2010 whose 
terms had not expired as of that date (``pre-enactment unexpired 
swaps''). Pursuant to this mandate, the CFTC is today adopting an 
interim final rule requiring specified counterparties to pre-enactment 
unexpired swap transactions to report certain information related to 
such transactions to a registered swap data repository (``SDR'') \1\ or 
to the Commission by the compliance date to be established in reporting 
rules required under Section2(h)(5) of the CEA, or within 60 days after 
an SDR becomes registered under Section 21 of the CEA, whichever occurs 
first. An interpretive note to the rule advises that counterparties 
that may be required to report to an SDR or the CFTC will need to 
preserve information pertaining to the terms of such swaps.
---------------------------------------------------------------------------

    \1\ The term ``swap data repository'' is defined in Section 
1a(48) of the Commodity Exchange Act (``CEA'' or the ``Act'') to 
mean ``any person that collects and maintains information or records 
with respect to transactions or positions in, or the terms and 
conditions of, swaps entered into by third parties for the purpose 
of providing a centralized recordkeeping facility for swaps.''

DATES: This interim final rule is effective October 14, 2010. Comments

[[Page 63081]]

on all aspects of the interim final rule must be received on or before 
---------------------------------------------------------------------------
November 15, 2010.

ADDRESSES: Comments may be submitted by any of the following methods:
    <bullet> Agency Web Site: Follow the instructions for submitting 
comments at http://www.federalregister.gov/agencies/commodity-futures-trading-commission.
    <bullet> E-mail: <a href="/cdn-cgi/l/email-protection#304055434751404255405f424470535644531e575f46"><span class="__cf_email__" data-cfemail="0e7e6b7d796f7e7c6b7e617c7a4e6d687a6d20696178">[email protected]</span></a>.
    <bullet> Mail: Address to David A. Stawick, Secretary, Commodity 
Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, 
NW., Washington, DC 20581.
    All comments must be submitted in English, or if not, accompanied 
by an English translation. Comments will be posted as received to 
http://www.cftc.gov. You should submit only information that you wish 
to make available publicly. If you wish the Commission to consider 
information that is exempt from disclosure under the Freedom of 
Information Act, a petition for confidential treatment of the exempt 
information may be submitted according to the established procedures in 
CFTC Regulation 145.9.\2\
---------------------------------------------------------------------------

    \2\ 17 CFR 145.9.
---------------------------------------------------------------------------

    The Commission reserves the right, but shall have no obligation, to 
review, pre-screen, filter, redact, refuse or remove any or all of your 
submission from www.cftc.gov that it may deem to be inappropriate for 
publication, such as obscene language. All submissions that have been 
redacted or removed that contain comments on the merits of the 
rulemaking will be retained in the public comment file and will be 
considered as required under the Administrative Procedure Act and other 
applicable laws, and may be accessible under the Freedom of Information 
Act.

FOR FURTHER INFORMATION CONTACT: Susan Nathan, Senior Special Counsel, 
Division of Market Oversight, Commodity Futures Trading Commission, 
Washington, DC 20581, at (202) 418.5133.

SUPPLEMENTARY INFORMATION: The Commission is adopting Part 44 to its 
Regulations under the Commodity Exchange Act as an interim final rule 
and is soliciting comment on all aspects of the rule. The Commission 
will carefully consider all comments received and will address them, 
where applicable, in connection with the permanent reporting rules 
required to be adopted by the Dodd-Frank Act.

I. Background

    On July 21, 2010, President Obama signed into law the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act'').\3\ 
Title VII of the Dodd-Frank Act \4\ amended the Commodity Exchange Act 
(``CEA'') \5\ to establish a comprehensive new regulatory framework for 
swaps and security-based swaps. The legislation was enacted to reduce 
risk, increase transparency, and promote market integrity within the 
financial system by, among other things: (1) Providing for the 
registration and comprehensive regulation of swap dealers and major 
swap participants; (2) imposing clearing and trade execution 
requirements on standardized derivative products; (3) creating robust 
recordkeeping and real-time reporting regimes; and (4) enhancing the 
Commission's rulemaking and enforcement authorities with respect to, 
among others, all registered entities and intermediaries subject to the 
Commission's oversight.
---------------------------------------------------------------------------

    \3\ See Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Public Law 111-203, 124 Stat. 1376 (2010), hereinafter cited as 
``Dodd-Frank Act.'' The text of the Dodd-Frank Act may be accessed 
at http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm.
    \4\ Pursuant to Section 701 of the Dodd-Frank Act, Title VII may 
be cited as the ``Wall Street Transparency and Accountability Act of 
2010.''
    \5\ 7 U.S.C. 1 et seq.
---------------------------------------------------------------------------

    Among other things, the Dodd-Frank Act requires that swaps be 
reported to a registered SDR or to the Commission if there is no 
registered SDR that would accept the swap. Section 723 of the Dodd-
Frank Act adds Section 2(h)(5) to the CEA to require that pre-enactment 
swaps be reported to a registered SDR or to the Commission no later 
than 180 days after the effective date of that subsection.\6\ By its 
terms, the effectiveness of this rule is governed by the effective date 
of the Dodd-Frank Act--July 16, 2011. Section 729 of the Dodd-Frank Act 
establishes, in new Section 4r of the CEA, reporting requirements that 
will remain in effect until the effective date of the permanent 
reporting rules to be adopted by the Commission pursuant to Section 
2(h)(5) of the CEA.
---------------------------------------------------------------------------

    \6\ ``(5) Reporting Transition Rules.--Rules adopted by the 
Commission under this section shall provide for the reporting of 
data, as follows:
    (A) Swaps entered into on or before the date of the enactment of 
this subsection shall be reported to a registered swap data 
repository or the Commission no later than 180 days after the 
effective date of this subsection.
    (B) Swaps entered into on or after such date of enactment shall 
be reported to a registered swap data Repository or the Commission 
no later than the later or--
    (i) 90 days after such effective date; or such other time after 
entering into the swap as the Commission may prescribe by rule or 
regulation.
---------------------------------------------------------------------------

    Section 4r(a)(1) of the CEA, as amended, provides generally that 
each swap that is not accepted for clearing by any derivatives clearing 
organization (``DCO'') must be reported to a swap data repository 
(``SDR'') registered in accordance with new Section 21 of the CEA \7\ 
or, where there is no SDR that would accept the swap, to the Commission 
within the time period prescribed by the Commission. Section 4r(a)(2) 
specifies that each swap entered into before the date of enactment of 
the Dodd-Frank Act, the terms of which had not expired by the date of 
enactment of that Act, must be reported to a registered SDR or to the 
Commission, and directs the Commission to promulgate, within 90 days of 
enactment of the Dodd-Frank Act, an interim final rule providing for 
the reporting of such swaps. Section 4r(a)(2)(A) directs that such 
swaps be reported by a date not later than (i) 30 days after issuance 
of the interim final rule; or (ii) such other period as the Commission 
determines to be appropriate.
---------------------------------------------------------------------------

    \7\ Section 21, added by Section 728 of the Dodd-Frank Act, 
requires that SDRs directly or indirectly making use of the mails or 
any means or instrumentality of interstate commerce to perform the 
functions of an SDR be registered with the Commission, and 
establishes statutory duties applicable to registered SDRs.
---------------------------------------------------------------------------

    Consistent with this mandate, the Commission is adopting, in new 
Part 44 of the Commission's regulations, Rule 44.02 to (i) establish a 
reporting time frame for unexpired pre-enactment swaps that is no later 
than 60 days from the date the appropriate SDR is registered with the 
Commission or by the compliance date established in the swap reporting 
rules required by Section 2(h)(5) of the CEA, whichever comes first; 
and (ii) require that counterparties specified in Section 4r(a)(3) 
report information concerning pre-enactment unexpired swaps to the 
Commission on request during the interim period. Finally, the 
Commission is specifying in an interpretive note (``Note'') to Rule 
44.02(a) the information the Commission believes reporting entities 
should retain in order to comply with the reporting obligations in the 
rule.

II. The Interim Final Rule

A. Reconciling the Relevant Statutory Provisions

    Sections 723 and 729 of the Dodd-Frank Act establish requirements 
for the reporting of pre-enactment swaps to SDRs or to the Commission; 
each provides generally that swaps must be reported pursuant to such 
rules or regulations as the Commission prescribes. Section 729 provides 
that swaps entered into prior to the July 21, 2010 enactment date and 
outstanding on

[[Page 63082]]

that date (hereafter ``pre-enactment unexpired swaps'') must be 
reported to a registered SDR or the CFTC not later than 30 days after 
the CFTC issues an interim final rule \8\ or such other period 
determined by the CFTC. Section 723 similarly provides that the 
Commission must promulgate a rule that pre-enactment swaps must be 
reported to a registered SDR not later than 180 days after the 
effective date of the subsection.\9\ The inconsistencies between these 
two reporting provisions must be reconciled in order to eliminate 
uncertainty with respect to the actual reporting requirements for pre-
enactment swaps.
---------------------------------------------------------------------------

    \8\ The interim final rule must be promulgated within 90 days of 
enactment of the Dodd-Frank Act. See Section 4r(a)(2)(B).
    \9\ Section 774 of the Dodd-Frank Act describes the effective 
date as follows: ``unless otherwise provided,'' the provisions of 
Title VII shall take effect ``on the later of 360 days after the 
date of enactment'' or to the extent that a provision of Title VII 
requires a rulemaking, ``not less than 60 days after publication of 
the final rule or regulation implementing'' such provision of Title 
VII.
---------------------------------------------------------------------------

1. Section 729
    Section 4r(a)(1) of the CEA, added by section 729 of the Dodd-Frank 
Act, provides generally that each swap that is not accepted for 
clearing by any DCO must be reported to an SDR described in new Section 
21 of the CEA or, in the case where there is no SDR that would accept 
the swap,\10\ to the Commission within the time period prescribed by 
the Commission. Specifically, pre-enactment swaps must, pursuant to new 
CEA Section 4r(a)(2)(A), be reported to a registered SDR, or to the 
Commission if no SDR would accept the swap, by a date that is not later 
than 30 days after the issuance of the interim final rule prescribed in 
new Section 4r(a)(2)(B) \11\ or such other period as the Commission 
determines to be appropriate. Section 4r(a)(3) delineates the reporting 
obligations of the parties in specific circumstances.\12\
---------------------------------------------------------------------------

    \10\ The Commission believes that this circumstance might occur 
where no SDR has yet been approved or where no SDR has been approved 
for a particular asset class. In addition, it is conceivable that an 
SDR's system might not be equipped to accept a particular bespoke 
swap transaction.
    \11\ Section 4r(a)(2)(B) provides that ``[t]he Commission shall 
promulgate an interim final rule within 90 days of the date of 
enactment of this section providing for the reporting of each swap 
entered into before the date of enactment as referenced in 
subparagraph (A).'' See Section 729 of the Dodd-Frank Act.
    \12\ For swaps in which only one counterparty is a swap dealer 
or major swap participant, that swap dealer or major swap 
participant shall report the swap (Section 4r(3)(A)); where one 
counterparty is a swap dealer and the other is a major swap 
participant, the swap dealer shall report the swap (Section 
4r(3)(B)). With respect to any other swap not described in 
subsections (A) and (B), the counterparties to the swap shall select 
a counterparty to report the swap (Section 4r(a)(3)(C)).
---------------------------------------------------------------------------

2. Section 723
    Section 723 of the Dodd-Frank Act adds to the CEA new Section 
2(h)(5), which similarly requires that the Commission adopt a reporting 
transition rule for swaps entered into before the date of enactment of 
that subsection. Section 2(h)(5) provides that such swaps shall be 
reported to a registered SDR or to the Commission no later than 180 
days after the effective date of that subsection--or approximately 540 
days after the date of enactment.
3. Legislative Intent
    In a July 15, 2010 floor statement, Senator Lincoln addressed the 
inconsistencies between Sections 2(h)(5) and 4r(a)(2)(A) and emphasized 
that the provisions of these two sections ``should be interpreted as 
complementary to one another to assure consistency between them. This 
is particularly true with respect to issues such as the effective dates 
of these reporting requirements * * *.'' \13\
---------------------------------------------------------------------------

    \13\ Lincoln, ``Wall Street Transparency and Accountability,'' 
Congressional Record (July 15, 2010) at S5923.
---------------------------------------------------------------------------

B. Scope and Coverage of the Interim Final Rule

    As noted, new Section 2(h)(5) does not contain the same qualifying 
language found in Section 4r(a)(2)(A), which limits the swaps that must 
be reported to pre-enactment swaps whose terms have not expired as of 
the date of enactment. In the Commission's view, failure to limit the 
term ``pre-enactment swaps'' to ``pre-enactment unexpired swaps'' would 
require reporting of every swap that has ever been entered into.\14\ 
There are obvious practical and operational difficulties in an 
interpretation that imposes reporting requirements on expired swaps: 
counterparties may not have kept thorough, complete--or indeed any--
records of such transactions. Moreover, the argument can be made that a 
swap whose terms have expired is no longer a swap as defined in the 
Dodd-Frank Act. For these reasons, the Commission believes that the 
trades described in Section 2(h)(5) should be viewed as consistent with 
those described in Section 4r(a)(2); that is, limited to those pre-
enactment trades whose terms had not expired at the time of enactment--
i.e., July 21, 2010.
---------------------------------------------------------------------------

    \14\ Financial historians believe that the first swap 
transaction was executed between the World Bank and IBM Corporation 
in 1981. See Paul C. Harding, Mastering the ISDA Master Agreements 
(1992 and 2002) (FT Prentice Hall, 3d Ed. 2010) at 9. As noted in 
the text accompanying this footnote, the operational difficulties in 
requiring reporting of all swaps executed since 1981 could be 
substantial, and the cost in terms of technology and human capital 
resources would far outweigh any potential benefits for swaps that 
have expired.
---------------------------------------------------------------------------

1. Reporting Obligations
    Rule 44.02(a) requires that the designated counterparty to a pre-
enactment unexpired swap transaction \15\ submit, with respect to such 
transaction, the following information to a registered SDR or to the 
Commission: (i) A copy of the transaction confirmation in electronic 
form, if available, or in written form if there is no electronic copy; 
and (ii) if available, the time the transaction was executed. In 
addition, Rule 44.02(b) provides that a counterparty to a pre-enactment 
unexpired swap transaction must report to the Commission on request any 
information relating to such transaction during the time that this 
interim final rule is in effect. The Commission expects that such 
information would vary depending upon the needs of the Commission and 
may include actual as well as summary trade data. Such summary data may 
include a description of a swap dealer's counterparties or the total 
number of pre-enactment swap transactions entered into by the dealer 
and some measure of the frequency and duration of those contracts. The 
Commission believes that this requirement will facilitate its ability 
to understand and evaluate the current market for swaps and may inform 
its analysis of other required rulemakings under the Dodd-Frank Act.
---------------------------------------------------------------------------

    \15\ The reporting obligations of specified counterparties are 
delineated in Section 4r(a)(3) of the CEA, as amended.
---------------------------------------------------------------------------

2. Reporting Party
    Section 4r(a)(3) of the CEA specifies the party obligated to report 
a swap transaction: either a swap dealer, a major swap participant, or 
a counterparty to the transactions. These provisions apply to reporting 
under the interim final rule. Specifically, Section 4r(a)(3) provides, 
with respect to a swap in which only one counterparty is a swap dealer 
or major swap participant, it is that entity's responsibility to report 
the swap. With respect to a swap in which one counterparty is a swap 
dealer and the other counterparty is a major swap participant, the swap 
dealer must report the swap; with respect to any other swap, the 
counterparties shall select one of them to report the swap. Rule 
44.02(b) incorporates these provisions.

[[Page 63083]]

3. Effective Date for Reporting Pre-Enactment Unexpired Swaps
    New CEA Section 4r(a)(2)(C) establishes that the reporting 
provisions of section 4r are effective immediately upon enactment of 
the Dodd-Frank Act, despite the fact that at this time (i) there are no 
registered SDRs to immediately accept the swap data; (ii) the 
Commission is not prepared to accept swap data; and (iii) the 
Commission has not adopted rules governing either the registration of 
swap dealers or major swap participants or the reporting and 
maintenance of such data and is not required to do so until 360 days 
after enactment of the Dodd-Frank Act.\16\ In these circumstances, 
Section 4r should be read to require that the reporting obligation 
became effective on enactment of the Dodd-Frank Act and that 
counterparties who are subject to this obligation should, as of the 
date of enactment, retain all data relating to pre-enactment unexpired 
swaps until such time as reporting can be effected--e.g., when swap 
dealers and major swap participants, as well as the appropriate SDRs, 
have been registered, or when permanent regulations are enacted 
pursuant to Section 2(h)(5) of the CEA, whichever occurs first.
---------------------------------------------------------------------------

    \16\ Section 2(h)(5) does not specify an effective date. In 
these circumstances, the ``default'' effective date would be 360 
days after enactment of the Dodd-Frank Act or 60 days after 
publication of a final rule or regulation. Adoption of the effective 
date prescribed in Section 2(h)(5) permits the implementation of 
Section 4r and achieves Senator Lincoln's goal of assuring 
consistency between the two legislative provisions embodied in 
Sections 4r and 2(h)(5).
---------------------------------------------------------------------------

4. Record Retention
    The pre-enactment swap transactions that must be reported pursuant 
to Section 4r of the CEA, as amended, and the new interim final rule 
(Part 44 of the Commission's Regulations) occurred prior to enactment 
of the Dodd-Frank Act. Accordingly, implicit in the reporting 
requirements established by Section 4r and Rule 44 is the obligation of 
each counterparty to such transactions to retain information and 
documents relating to the terms of the transaction. Rule 44.02 includes 
a Note to paragraphs (a)(1) and (2) advising counterparties to a pre-
enactment unexpired swap that may be required to report such 
transaction to retain in its existing format all information and 
documents, to the extent and in such form as they presently exist, 
relating to the terms of the transaction. This information includes, 
but is not limited to: (i) Any information necessary to identify and 
value the transaction; (ii) the date and time of execution of the 
transaction; (iii) information relevant to the price of the 
transaction; (iv) whether the transaction was accepted for clearing by 
any clearing agency or derivatives clearing organization, and if so the 
identity of such agency or organization; (v) any modification(s) to the 
terms of the transaction; and (vi) the final confirmation of the 
transaction. The Commission believes that counterparties that may be 
required to report such transactions should retain such information in 
order to comply with the reporting requirements of Rule 44.02. The 
information identified above and in the Note is designed to encompass 
material information about pre-enactment unexpired swap transactions 
that may be the subject of a request by the Commission to report 
pursuant to the interim final rule, as well as rules subsequently 
adopted pursuant to new Section 2(h)(5) of the CEA, and that will 
assist the Commission in performing its oversight functions under the 
CEA.
    The Note does not require any counterparty to a pre-enactment 
unexpired swap to create or retain new records with respect to 
transactions that occurred in the past. Permitting records to be 
retained in their existing format is designed to ensure that important 
information relating to the terms of pre-enactment unexpired swaps is 
preserved with minimal burden on the counterparties. Similarly, the 
Commission understands that information that the counterparty does not 
have prior to the effective date of the interim final rule cannot be 
reported.

III. Related Matters

A. Administrative Procedure Act

    The Administrative Procedure Act \17\ (``APA'') generally requires 
an agency to publish notice of a proposed rulemaking in the Federal 
Register.\18\ This requirement does not apply, however, when the agency 
``for good cause finds * * * that notice and public procedure are 
impracticable, unnecessary, or contrary to the public interest.'' \19\ 
Moreover, while the APA requires generally that an agency publish an 
adopted rule in the Federal Register 30 days before it becomes 
effective, this requirement does not apply if the agency finds good 
cause to make the rule effective sooner.\20\ Section 729 of the Dodd-
Frank Act amended the CEA to add new Section 4r, which in turn requires 
the Commission to adopt, within 90 days of enactment of the Dodd-Frank 
Act, an interim final rule providing for the reporting of swaps entered 
into before the date of enactment of the Dodd-Frank Act the terms of 
which were not expired as of that date. The Commission is adopting Part 
44 to its Regulations in response to this mandate. In these 
circumstances, the Commission, for good cause, fines that notice and 
solicitation is impracticable, unnecessary or contrary to the public 
interest. This finding also satisfies the requirements of 5 U.S.C. 
808(2), permitting the rule to become effective notwithstanding the 
requirement of 5 U.S.C. 801 (if a federal agency finds that notice and 
public comment are ``impractical, unnecessary or contrary to the public 
interest,'' a rule ``shall take effect at such time as the federal 
agency promulgating the rule determines.'').
---------------------------------------------------------------------------

    \17\ 5 U.S.C. 553.
    \18\ 5 U.S.C. 553(b).
    \19\ Id.
    \20\ 5 U.S.C. 553(d).
---------------------------------------------------------------------------

B. Paperwork Reduction Act

1. Reporting Requirements
    The Commission has determined that these proposed orders will not 
impose on swap counterparties any new reporting requirements that would 
be collections of information requiring the approval of the Office of 
Management and Budget under the Paperwork Reduction Act.\21\ The 
reporting requirements associated with Section 723 of the Dodd-Frank 
Act will be adopted by the Commission, at which time the Commission 
will issue a notice and request comments on the reporting requirements 
and seek OMB approval as provided by 5 CFR 1320.8 and 1320.11.
---------------------------------------------------------------------------

    \21\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

2. Recordkeeping Requirements
    Proposed Commission Regulation 44.02 imposes a recordkeeping 
requirement on swap counterparties that is considered to be a 
collection of information within the meaning of the Paperwork Reduction 
Act (``PRA'').\22\ The Commission therefore is required to submit to 
the Office of Management and Budget (OMB) an information collection 
request for review and approval in accordance with 44 U.S.C. 3507(d) 
and 5 CFR 1320.8 an d1320.11. The Commission will, by separate action, 
publish in the Federal Register a notice and request for comments on 
the paperwork burden associated with these recordkeeping requirements 
in accordance with 5 CFR 1320.8. If approved, this new collection of 
information will be mandatory.
---------------------------------------------------------------------------

    \22\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

C. Cost-Benefit Analysis

    Section 15 of the CEA requires the Commission to consider the costs 
and

[[Page 63084]]

benefits of its action before issuing a new regulation or order under 
the Act. By its terms, Section 15(a) does not require the Commission to 
quantify the costs and benefits of its action or to determine whether 
the benefits of the action outweigh its costs. Rather, Section 15(a) 
requires the Commission simply to ``consider the costs and benefits'' 
of the subject rule or order. Section 15(a) further specifies that the 
costs and benefits of Commission regulations shall be evaluated in 
light of five broad areas of market and public concern: (1) Protection 
of market participants and the public; (2) efficiency, competitiveness, 
and financial integrity of the market for listed derivatives; (3) price 
discovery; (4) sound risk management practices; and (5) other public 
interest considerations. The Commission may, in its discretion, give 
greater weight to any one of the five enumerated areas of concern and 
may, in its discretion, determine that notwithstanding its costs, a 
particular regulation is necessary or appropriate to protect the public 
interest or to effectuate any of the provisions or to accomplish any of 
the purposes of the CEA.
    Title VII of the Dodd-Frank Act requires the Commission to 
undertake a number of rulemakings to implement the regulatory framework 
for swaps set forth in that Act, including the reporting of swap 
transactions. This interim final rule implements the Dodd-Frank Act by 
establishing reporting requirements for pre-enactment unexpired swaps 
as required by Section 729 of that Act and serving as notice to 
reporting entities of a present obligation to retain data related to 
such swaps for reporting at a future date. The rule will enable the 
Commission to obtain data on pre-enactment swaps and will also provide 
for the preservation of data on such swaps until the Commission issues 
permanent recordkeeping and reporting rules for all swaps. By making 
available transaction data on pre-enactment swaps, this action will 
enable the Commission to gain a better understanding of the swap 
market--including the size and scope of that market; this understanding 
will ultimately lead to a more robust and transparent environment for 
the market for swaps. Further, the Commission expects this rule to make 
available information that could inform the Commission's decision-
making with respect to the rules it is required to implement under the 
Dodd-Frank Act.
    The Note to Rule 44.02(a)(1) and (2) addresses the retention of 
records relating to swaps entered into before July 21, 2010, the terms 
of which had not expired as of that date. Although there are 
recordkeeping costs associated with retention of existing swap 
transaction information, the Commission does not believe those costs 
will be significant. The rule does not require market participants to 
modify the data they have for retention purposes, and the information 
that is required to be reported should be information that is already 
kept by swap counterparties in their normal course of business, and it 
may be reported in the format in which it is kept. Moreover, 
counterparties must report the time of execution only to the extent 
such information is available.
    The permanent reporting rules that the Commission is required to 
adopt under new CEA Section 2(h)(5) also will apply to pre-enactment 
swaps. Accordingly, in adopting this interim final rule, the Commission 
has sought to limit the burden on market participants by not imposing 
substantial or potentially conflicting reporting requirements.

D. The Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq., 
requires Federal agencies, in promulgating rules, to consider the 
impact of those rules on small entities. The term ``rule'' under the 
RFA is defined as ``any rule for which the agency publishes a general 
notice of proposed rulemaking pursuant to Section 553(B) of this title, 
or any other law * * *.'' \23\ However, a general notice of proposed 
rulemaking under Section 553(b) does not apply ``when the agency for 
good cause finds (and incorporates the finding and a brief statement of 
reasons therefor in the rules [issued] that notice and public procedure 
thereon are impracticable, unnecessary or contrary to the public 
interest.'' \24\ Congress in Section 4r(a)(2)(B) of the CEA directs the 
Commission to promulgate an interim final rule within 90 days of 
enactment of the Dodd-Frank Act to require the reporting of unexpired 
pre-enactment swaps. The Commission believes that the RFA does not 
apply to this interim final rule because ``good cause'' under 5 U.S.C. 
553(b) has been established by specific order of Congress in the Dodd-
Frank Act.
---------------------------------------------------------------------------

    \23\ 5 U.S.C. 601(2).
    \24\ 5 U.S.C. 553(b).
---------------------------------------------------------------------------

List of Subjects in 17 CFR Part 44

    Swap markets, Counterparties, Reporting and recordkeeping 
requirements.

0
In consideration of the foregoing, and pursuant to the authority in the 
Commodity Exchange Act, as amended, and in particular Section 4r (a)(2) 
of the Act, the Commission hereby proposes to amend Chapter I of Title 
17 of the Code of Federal Regulation by adding a new Part 44 as 
follows:

PART 44--INTERIM FINAL RULE FOR PRE-ENACTMENT SWAP TRANSACTIONS

Sec.
44.00 Definition of terms used in Part 44 of this chapter.
44.01 Effective date.
44.02 Reporting pre-enactment swaps to a swap data repository or the 
Commission.

    Authority: 7 U.S.C. 2(h)(5), 4r, and 12a(5), as amended by Title 
VII of the Wall Street Reform and Consumer Protection Act (Dodd-
Frank Act of 2010), Pub. L. 111-203, 124 Stat. 1376 (2010).


Sec.  44.00  Definition of terms used in Part 44 of this chapter.

    (a) Major swap participant shall have the meaning provided in 
Section 1a(33) of the Commodity Exchange Act, as amended, and any rules 
or regulations thereunder.
    (b) Pre-enactment unexpired swap means any swap entered into prior 
to the enactment of the Dodd-Frank Act of 2010 (July 21, 2010) the 
terms of which had not expired as of the date of enactment of that Act;
    (c) Reporting entity, when used in this Part, means any 
counterparty referenced or identified in Section 4r(a)(3)(A)-(C) of the 
Commodity Exchange Act, as amended;
    (d) Swap Data Repository shall have the meaning provided in Section 
1a(48) of the Commodity Exchange Act, as amended, and any rules or 
regulations thereunder;
    (e) Swap Dealer shall have the meaning provided in Section 1(a)(49) 
of the Commodity Exchange Act, as amended, and any rules or regulations 
thereunder;


Sec.  44.01  Effective date.

    The provisions of this Part are effective immediately on 
publication in the Federal Register.


Sec.  44.02  Reporting pre-enactment swaps to a swap data repository or 
the Commission.

    (a) A counterparty to a pre-enactment unexpired swap transaction 
shall:
    (1) Report to a registered swap data repository or the Commission 
by the compliance date established in the reporting rules required 
under Section 2(h)(5) of the Commodity Exchange Act, or within 60 days 
after a swap data repository becomes registered with the Commission and 
commences operations to receive and maintain data related to such swap, 
whichever occurs first, the

[[Page 63085]]

following information with respect to the swap transaction:
    (i) A copy of the transaction confirmation, in electronic form if 
available, or in written form if there is no electronic copy; and
    (ii) The time, if available, that the transaction was executed; and
    (2) Report to the Commission on request, in a form and manner 
prescribed by the Commission, any information relating to the swap 
transaction.
    Note to Paragraphs (a)(1) and (a)(2). In order to comply with the 
reporting requirements contained in paragraph (a)(1) and (a)(2) of this 
section, each counterparty to a pre-enactment unexpired swap 
transaction that may be required to report such transaction should 
retain, in its existing format, all information and documents, to the 
extent and in such form as they presently exist, relating to the terms 
of a swap transaction, including but not limited to any information 
necessary to identify and value the transaction; the date and time of 
execution of the transaction; information relevant to the price of the 
transaction; whether the transaction was accepted for clearing and, if 
so, the identity of such clearing organization; any modification(s) to 
the terms of the transaction; and the final confirmation of the 
transaction.
    (b) Reporting party. The counterparties to a swap transaction shall 
report the information required under paragraph (a) of this section as 
follows:
    (1) Where only one counterparty to a swap transaction is a swap 
dealer or a major swap participant, the swap dealer or major swap 
participant shall report the transaction;
    (2) Where one counterparty to a swap transaction is a swap dealer 
and the other counterparty is a major swap participant, the swap dealer 
shall report the transaction; and
    (3) Where neither counterparty to a swap transaction is a swap 
dealer or a major swap participant, the counterparties to the 
transaction shall select the counterparty who will report the 
transaction.

    By the Commission.

    Dated: October 1, 2010.
David A. Stawick,
Secretary.
[FR Doc. 2010-25325 Filed 10-13-10; 8:45 am]
BILLING CODE 6351-01-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>