Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Rules and Regulations 64643 

5This finding also satisfies the requirements of 5 

U.S.C. 808(2) (if a Federal agency finds that notice 

and public comment are ‘‘impracticable, 

unnecessary or contrary to the public interest,’’ a 

rule ‘‘shall take effect at such time as the Federal 

agency promulgating the rule determines’’), 

allowing the withdrawal to become effective 

notwithstanding the requirement of 5 U.S.C. 801. 

No analysis is required under the Regulatory 

Flexibility Act. See 5 U.S.C. 601(2) (for purposes of 

Regulatory Flexibility Act analysis, the term ‘‘rule’’ 

means any rule for which the agency publishes a 

general notice of proposed rulemaking). 

6See 5 U.S.C. 553(d). 

1All references to the Exchange Act contained in 

this release refer to the Securities Exchange Act of 

1934, as amended by the Dodd-Frank Act. 

opportunity for comment. Because of 

the Court order vacating rule 151A, the 

Commission’s action to withdraw the 

rule is ministerial in nature. 

Accordingly, the Commission for good 

cause finds that a notice and comment 

period is unnecessary.5

The Administrative Procedure Act 

also generally requires that an agency 

publish an adopted rule in the Federal 

Register 30 days before it becomes 

effective.6 This requirement, however, 

does not apply if the agency finds good 

cause for making this action to 

withdraw rule 151A effective sooner. 

For the reason discussed above, the 

Commission finds that there is good 

cause to make withdrawal of the rule 

effective immediately. 

The Commission considers the costs 

and benefits of its rules and regulations. 

As discussed above, rule 151A was 

vacated by the Court and the action the 

Commission takes today merely 

implements the Court’s decision. Our 

action to withdraw the rule is 

ministerial and therefore will have no 

separate economic effect. 

Conclusion 

Therefore, for the reasons set out in 

the preamble, 17 CFR 230.151A (rule 

151A), published at 74 FR 3175 (January 

16, 2009) and effective on January 12, 

2011, is withdrawn. 

By the Commission. 

Dated: October 14, 2010. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–26347 Filed 10–19–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Part 240 

[Release No. 34–63094; File No. S7–28–10] 

RIN 3235–AK73 

Reporting of Security-Based Swap 

Transaction Data 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Interim final temporary rule; 

request for comments. 

SUMMARY: Section 766 of Title VII of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act (‘‘Dodd-Frank 

Act’’) requires the Securities and 

Exchange Commission (‘‘Commission’’) 

to adopt an interim final rule for the 

reporting of security-based swaps 

entered into before July 21, 2010, the 

terms of which had not expired as of 

that date (‘‘pre-enactment security-based 

swap transactions’’), within 90 days of 

the enactment of the Dodd-Frank Act. 

Pursuant to this requirement, the 

Commission today is adopting an 

interim final temporary rule that 

requires specified counterparties to preenactment security-based swap 

transactions to report certain 

information relating to pre-enactment 

security-based swaps to a registered 

security-based swap data repository or 

to the Commission by the compliance 

date established in the security-based 

swap reporting rules required under 

Sections 3C(e) and 13A(a) of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’),1 or within 60 days 

after a registered security-based swap 

data repository commences operations 

to receive and maintain data concerning 

such security-based swaps, whichever 

occurs first and report information 

relating to pre-enactment security-based 

swaps to the Commission upon request. 

The Commission also is issuing an 

Interpretive Note to the rule that states 

that counterparties that may be required 

to report to the Commission will need 

to preserve information pertaining to the 

terms of these pre-enactment securitybased swaps. 

DATES: Effective Date: § 240.13Aa–2T is 

effective October 20, 2010 and will 

remain in effect until January 12, 2012. 

If the Commission publishes permanent 

recordkeeping and reporting rules for 

security-based transactions before 

January 12, 2012, that rule will 

terminate the effectiveness of 

§ 240.13Aa–2T. 

Comment Date: Comments on the 

interim final temporary rule should be 

received on or before December 20, 

2010. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/final.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number S7–28–10 on the subject line; 

or 

• Use the Federal eRulemaking Portal 

(http://www.regulations.gov). Follow the 

instructions for submitting comments. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number S7–28–10. This file number 

should be included on the subject line 

if e-mail is used. To help us process and 

review your comments more efficiently, 

please use only one method. The 

Commission will post all comments on 

the Commission’s Internet Web site 

(http://www.sec.gov/rules/interim-finaltemp.shtml). Comments are also 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549 on official 

business days between the hours of 10 

a.m. and 3 p.m. All comments received 

will be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. 

FOR FURTHER INFORMATION CONTACT: 

David Michehl, Senior Special Counsel, 

at (202) 551–5627, Sarah Albertson, 

Special Counsel, at (202) 551–5647, 

Natasha Cowen, Special Counsel, at 

(202) 551–5652, Yvonne Fraticelli, 

Special Counsel, at (202) 551–5654, 

Geoffrey Pemble, Special Counsel, at 

(202) 551–5628, Brian Trackman, 

Special Counsel, at (202) 551–5616, Mia 

Zur, Special Counsel, at (202) 551–5638, 

Kathleen Gray, Attorney, at (202) 551– 

5305, Division of Trading and Markets, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–7010. 

SUPPLEMENTARY INFORMATION: The 

Commission is adopting Rule 13Aa–2T 

under the Exchange Act as an interim 

final temporary rule. We are soliciting 

comments on all aspects of this interim 

final temporary rule. We will carefully 

consider the comments that we receive 

and will address them, if applicable, in 

connection with the permanent 

reporting rules the Commission is 

required to adopt under the Dodd-Frank 

Act. 


emcdonald on DSK2BSOYB1PROD with RULES
64644 Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Rules and Regulations 

2The Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Pub. L. 11–203, H.R. 

4173). 

3 7 U.S.C. 1a. Section 721(b) of the Dodd-Frank 

Act amends Section 1(a) of the Commodity 

Exchange Act to add paragraph (47) defining swap, 

subject to enumerated exceptions, as any 

agreement, contract, or transaction: (i) That is a put, 

call, cap, floor, collar, or similar option of any kind 

that is for the purchase or sale, or based on the 

value, of 1 or more interest or other rates, 

currencies, commodities, securities, instruments of 

indebtedness, indices, quantitative measures, or 

other financial or economic interests or property of 

any kind; (ii) that provides for any purchase, sale, 

payment, or delivery (other than a dividend on an 

equity security) that is dependent on the 

occurrence, nonoccurrence, or the extent of the 

occurrence of an event or contingency associated 

with a potential financial, economic, or commercial 

consequence; (iii) that provides on an executory 

basis for the exchange, on a fixed or contingent 

basis, of 1 or more payments based on the value or 

level of 1 or more interest or other rates, currencies, 

commodities, securities, instruments of 

indebtedness, indices, quantitative measures, or 

other financial or economic interests or property of 

any kind, or any interest therein or based on the 

value thereof, and that transfers, as between the 

parties to the transaction, in whole or in part, the 

financial risk associated with a future change in any 

such value or level without also conveying a 

current or future direct or indirect ownership 

interest in an asset (including any enterprise or 

investment pool) or liability that incorporates the 

financial risk so transferred, including any 

agreement, contract, or transaction commonly 

known as (I) an interest rate swap; (II) a rate floor; 

(III) a rate cap; (IV) a rate collar; (V) a cross-currency 

rate swap; (VI) a basis swap; (VII) a currency swap; 

(VIII) a foreign exchange swap; (IX) a total return 

swap; (X) an equity index swap; (XI) an equity 

swap; (XII) a debt index swap; (XIII) a debt swap; 

(XIV) a credit spread; (XV) a credit default swap; 

(XVI) a credit swap; (XVII) a weather swap; (XVIII) 

an energy swap; (XIX) a metal swap; (XX) an 

agricultural swap; (XXI) an emissions swap; and 

(XXII) a commodity swap; (iv) that is an agreement, 

contract, or transaction that is, or in the future 

becomes commonly known to the trade as a swap; 

(v) including any security-based swap agreement 

which meets the definition of ‘swap agreement’ as 

defined in section 206A of the Gramm-Leach-Bliley 

Act (15 U.S.C. 78c note) of which a material term 

is based on the price, yield, value, or volatility of 

any security or any group or index of securities, or 

any interest therein; or (vi) that is any combination 

or permutation of, or option on, any agreement, 

contract, or transaction described in any of clauses 

(i) through (v). 

4See 15 U.S.C. 78c(a)(68). 

5 15 U.S.C. 78c(a). 

6Security-based swap dealer is defined in Section 

3(a)(71)(A) of the Exchange Act, 15 U.S.C. 

78c(a)(71)(A), to mean any person who: (i) Holds 

themself out as a dealer in security-based swaps; (ii) 

makes a market in security-based swaps; (iii) 

regularly enters into security-based swaps with 

counterparties as an ordinary course of business for 

its own account; or (iv) engages in any activity 

causing it to be commonly known in the trade as 

a dealer or market maker in security-based swaps. 

The term security-based swap dealer does not 

include a person that enters into security-based 

swaps for such person’s own account, either 

individually or in a fiduciary capacity, but not as 

a part of regular business. 15 U.S.C. 78c(a)(71)(C). 

In addition, the Commission shall exempt from 

designation as a security-based swap dealer an 

entity that engages in a de minimis quantity of 

security-based swap dealing in connection with 

transactions with or on behalf of its customers. 15 

U.S.C. 78c(a)(71)(D). 

7Major security-based swap participant is defined 

in Section 3(a)(67)(A) of the Exchange Act, 15 

U.S.C. 78c(a)(67)(A), as any person: (i) Who is not 

a security-based swap dealer; and (ii)(I) who 

maintains a substantial position in security-based 

swaps for any of the major security-based swap 

categories, as such categories are determined by the 

Commission, excluding both positions held for 

hedging or mitigating commercial risk and positions 

maintained by any employee benefit plan (or any 

contract held by such a plan) as defined in 

paragraphs (3) and (32) of section 3 of the Employee 

Retirement Income Security Act of 1974 (29 U.S.C. 

1002) for the primary purpose of hedging or 

mitigating any risk directly associated with the 

operation of the plan; (II) whose outstanding 

security-based swaps create substantial 

counterparty exposure that could have serious 

adverse effects on the financial stability of the 

United States banking system or financial markets; 

or (III) that is a financial entity that (aa) is highly 

leveraged relative to the amount of capital such 

entity holds and that is not subject to capital 

requirements established by an appropriate Federal 

banking regulator; and (bb) maintains a substantial 

position in outstanding security-based swaps in any 

major security-based swap category, as such 

categories are determined by the Commission. For 

purposes of subparagraph (A), the Commission 

shall define, by rule or regulation, the term 

‘substantial position’ at the threshold that the 

Commission determines to be prudent for the 

effective monitoring, management, and oversight of 

entities that are systemically important or can 

significantly impact the financial system of the 

United States. 15 U.S.C. 78c(a)(67)(B). 

8Security-based swap data repository is defined 

in Section 3(a)(75) of the Exchange Act, 15 U.S.C. 

78c(a)(75), as any person that collects and 

maintains information or records with respect to 

transactions or positions in, or the terms and 

conditions of, security-based swaps entered into by 

third parties for the purpose of providing a 

centralized recordkeeping facility for security-based 

swaps. 

9Security-based swap execution facility is 

defined in Section 3(a)(77) of the Exchange Act, 15 

U.S.C. 78c(a)(77), as a trading system or platform in 

which multiple participants have the ability to 

execute or trade security-based swaps by accepting 

bids and offers made by multiple participants in the 

facility or system, through any means of interstate 

commerce, including any trading facility, that (A) 

facilitates the execution of security-based swaps 

between persons; and (B) is not a national securities 

exchange. 

The new definitions in Section 3(a) parallel 

amendments to Section 1(a) of the Commodity 

Exchange Act pursuant to Section 721 of the Title 

VII Amendments. 

10See Securities Exchange Act Release No. 62717 

(August 13, 2010), 75 FR 51429 (August 20, 2010). 

11 15 U.S.C. 78m–1(a)(2)(A). 

12See id. 

13 15 U.S.C. 78m–1(a)(2)(B). 

14The Commission notes that Section 3C of the 

Exchange Act, added by Section 763(a) of the DoddFrank Act, also requires the Commission to adopt 

rules that provide for the reporting of data for 

security-based swaps entered into before the date of 

enactment of the Dodd-Frank Act to a registered 

security-based data repository or to the Commission 

no later than 180 days after the effective date of the 

Dodd-Frank Act (thus, by January 12, 2012). See 15 

U.S.C. 78c–3(e). Section 3C is not effective until 360 

days after enactment of the Dodd-Frank Act. The 

I. Introduction 

On July 21, 2010, the President signed 

into law the Dodd-Frank Act.2 An 

important element of the Dodd-Frank 

Act is Title VII, the Wall Street 

Transparency and Accountability Act of 

2010, which directly addresses 

regulation of over-the-counter 

derivatives (‘‘OTC derivatives’’). Title VII 

of the Dodd-Frank Act establishes a 

regulatory framework for OTC 

derivatives, and makes a number of 

statutory revisions to the Commodity 

Exchange Act and the Exchange Act 

(‘‘Title VII Amendments’’). The Title VII 

Amendments broadly categorize 

covered products as either swaps, 

regulated primarily by the Commodity 

Futures Trading Commission (‘‘CFTC’’), 

security-based swaps, regulated 

primarily by the Commission, or mixed 

swaps, jointly regulated by the 

Commission and the CFTC. 

Pursuant to Section 761 of the DoddFrank Act, new Section 3(a)(68) of the 

Exchange Act defines a security-based 

swap to include a swap, as defined in 

Section 1a of the Commodity Exchange 

Act,3 that is based on a narrow-based 

security index, or a single security or 

loan, or any interest therein or on the 

value thereof, or the occurrence or nonoccurrence of an event relating to an 

issuer of a security or the issuers of 

securities in a narrow-based index, 

provided that such event directly affects 

the financial statements, financial 

condition, or financial obligations of the 

issuer.4 Section 761 of the Dodd-Frank 

Act also adds new definitions in Section 

3(a) of the Exchange Act 5 for entities 

involved in the security-based swaps 

markets, including, among others, 

security-based swap dealer,6 major 

security-based swap participant,7

security-based swap data repository,8

and security-based swap execution 

facility.9 The Commission has issued an 

advance notice of proposed rulemaking 

seeking comment on the definitions of 

key terms relating to the regulation of 

swaps and security-based swaps.10

The Dodd-Frank Act requires, among 

other things, that security-based swaps 

be reported to a registered securitybased swap data repository or the 

Commission.11 In particular, the DoddFrank Act added Section 13A(a)(2)(A) of 

the Exchange Act, which requires that 

pre-enactment security-based swaps be 

reported to a registered security-based 

swap data repository or the Commission 

by a date that is 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.12 Section 13A(a)(2)(B) of 

the Exchange Act 13 requires the 

Commission to promulgate an interim 

final rule providing for the reporting of 

these pre-enactment security-based 

swaps within 90 days of the enactment 

of the Dodd-Frank Act.14 Consistent 


emcdonald on DSK2BSOYB1PROD with RULES
Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Rules and Regulations 64645 

Commission believes that its action today is 

consistent with both Section 13A and Section 3C 

of the Exchange Act. 

15See supra Section I. 

16The Title VII Amendments enable the 

Commission to further define certain terms jointly 

with the CFTC, in consultation with the Board of 

Governors of the Federal Reserve System. See 

Section 712(d) of the Dodd-Frank Act. 

17See Rule 13Aa–2T(b)(1). See infra Section II.B 

for a discussion of which counterparty has the 

reporting obligation. 

18The Commission notes that Section 3C(e) of the 

Exchange Act requires that security-based swaps 

entered into before the date of enactment shall be 

reported no later than 180 days after the effective 

date of the section, i.e., January 12, 2012. 

19See Rule 13Aa–2T(b)(1). The Commission notes 

that rulemaking regarding registered security-based 

swap repositories must be completed within 360 

days after the date of enactment of the Dodd-Frank 

Act. 

20See Rule 13Aa–2T(a)(4). 

21See infra Section II.B for a discussion of which 

counterparty has the reporting obligation. 

22See infra Section II.D for a discussion of the 

treatment of post-enactment security-based swaps. 

23 15 U.S.C. 78m–1(a)(3). 

24See id. 

with its responsibilities under Section 

13A(a)(2) of the Exchange Act, the 

Commission is today adopting Rule 

13Aa–2T, an interim final temporary 

rule governing reporting of preenactment security-based swaps. 

II. Interim Final Temporary Exchange 

Act Rule 13Aa–2T 

The Commission is adopting Rule 

13Aa–2T under the Exchange Act to 

specify the reporting requirements 

applicable to pre-enactment securitybased swaps. Rule 13Aa–2T requires 

specified counterparties to a preenactment security-based swap 

transaction to: (1) Report certain 

information relating to pre-enactment 

security-based swaps to a registered 

security-based swap data repository or 

to the Commission by the compliance 

date established in the security-based 

swap reporting rules required by 

Sections 3C(e) and 13A(a)(1) of the 

Exchange Act, or within 60 days after a 

registered security-based swap data 

repository commences operations to 

receive and maintain data concerning 

such security-based swaps, whichever 

occurs first; and (2) report information 

relating to pre-enactment security-based 

swaps to the Commission upon request 

during an interim period. In addition, 

the Commission is issuing an 

Interpretive Note to Rule 13Aa2–T that 

reflects what information the 

Commission believes reporting parties 

should retain in order to meet the 

reporting obligation contained in the 

rule. Specifically, the Commission 

believes that counterparties will need to 

preserve information pertaining to the 

terms of such pre-enactment securitybased swaps, to the extent and in such 

form as it currently exists. 

We have included several requests for 

comment in this release. We will 

carefully consider the comments that we 

receive and will address them, if 

applicable, in connection with the 

permanent reporting rules, which will 

be published for notice and comment. 

As explained above, the Dodd-Frank 

Act revises Section 3(a) of the Exchange 

Act to define key terms related to the 

new regulatory framework for securitybased swaps.15 Rule 13Aa–2T(a) 

incorporates the definitions of ‘‘major 

security-based swap participant,’’ 

‘‘security-based swap,’’ ‘‘security-based 

swap dealer,’’ and ‘‘security-based swap 

data repository’’ from the Dodd-Frank 

Act. The statutory language reserves to 

the Commission authority to further 

define these terms,16 which the 

Commission expects to do as rules are 

developed relating to the regulation of 

security-based swaps and in response to 

input from market participants. In 

addition, the Commission notes that 

rules governing the registration of 

security-based swap data repositories 

will be the subject of another 

Commission rulemaking. As a result, 

there currently are no registered 

security-based swap data repositories 

able to accept security-based swap data 

as required under the Dodd-Frank Act. 

A. Reporting Obligations 

Rule 13Aa–2T(b)(1) requires that a 

counterparty to a pre-enactment 

security-based swap transaction shall 

report, with respect to a pre-enactment 

security-based swap transaction, to a 

registered security-based swap data 

repository or to the Commission: (1) A 

copy of the transaction confirmation, in 

electronic form, if available, or in 

written form, if there is no electronic 

copy; and (2) the time, if available, the 

transaction was executed.17 Rule 13Aa– 

2T(b)(1) also establishes the compliance 

deadline for reporting pre-enactment 

security-based swap transactions. 

Pursuant to Rule 13Aa-2T(b)(1), a 

reporting party shall report the preenactment security-based swap 

transaction by the compliance date 

established in the reporting rules 

required under Sections 3C(e) and 

13A(a)(1) of the Exchange Act 18 or 

within 60 days after a registered 

security-based swap data repository 

commences operations to receive and 

maintain data concerning such securitybased swaps, whichever occurs first.19

The Commission believes it is 

appropriate to delay the reporting of 

such transaction information until the 

time detailed above because, until the 

registration rule is adopted and 

implemented, there will not be a 

registered security-based swap data 

repository able to accept security-based 

swap data as required under the DoddFrank Act. Rule 13Aa–2T(a)(4) defines a 

pre-enactment security-based swap 

transaction as a security-based swap 

that was entered into prior to, and that 

had not expired as of, July 21, 2010.20

In addition, pursuant to Rule 13Aa– 

2T(b)(2), a counterparty to a preenactment security-based swap 

transaction is required to report to the 

Commission upon request any 

information relating to these preenactment security-based swap 

transactions during the time that the 

interim final temporary rule is in 

effect.21 The information that the 

Commission would request to be 

reported may vary depending upon the 

needs of the Commission, and may 

include actual trade data as well as 

summary trade data. Such summary 

data may include a description of the 

types of a security-based swap dealer’s 

counterparties or types of reference 

entities, or the total number of preenactment security-based swap 

transactions entered into by the dealer 

and some measure of the frequency and 

duration of those contracts.22

The Commission anticipates that Rule 

13Aa–2T(b) will facilitate the 

Commission’s ability to understand and 

evaluate the current market for securitybased swaps, and may inform the 

Commission’s analysis of the other 

required rulemakings under the DoddFrank Act. In addition, information 

requested by the Commission may be 

used to facilitate other activities of the 

Commission, such as examinations. 

B. Reporting Party 

Section 13A(a)(3) to the Exchange 

Act 23 specifies the party obligated to 

report a security-based swap—either a 

security-based swap dealer, a major 

security-based swap participant, or a 

counterparty to the swap. These 

provisions apply for purposes of 

reporting pursuant to the interim final 

temporary rule.24 Specifically, Section 

13A(a)(3) of the Exchange Act provides 

that with respect to a security-based 

swap in which 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 shall 

report the security-based swap; with 

respect to a security-based swap in 

which one counterparty is a securitybased swap dealer and the other 

counterparty is a major security-based 

swap participant, the security-based 


emcdonald on DSK2BSOYB1PROD with RULES
64646 Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Rules and Regulations 

25See id. 

26See Rule 13Aa–2T(c). 

27 15 U.S.C. 78m–1(a)(2). 

28Pre-enactment security-based swaps are those 

security-based swaps that were entered into before 

July 21, 2010, the terms of which had not expired 

as of that date. See Section 13A(a)(2)(A). 

29See Note to paragraphs (b)(1) and (2) of Rule 

13Aa–2T. 

30The Commission understands that time of 

execution is not a data element that is consistently 

captured with respect to security-based swap 

transactions. 

31On the effective date of the Dodd-Frank Act, 

security-based swaps will be securities and the 

execution of the transaction will be the sale for 

Federal securities law purposes. For an explanation 

of when a sale occurs under the Securities Act of 

1933 see Securities Act Release No. 8591 and 

Securities Exchange Act Release No. 52056 (July 19, 

2005), 70 FR 44722 (August 3, 2005), notes 391 and 

394. 

32 Dealers quote prices for entering into credit 

default swaps as a fixed number of basis points per 

annum they require to be paid (if they are quoting 

to sell protection) or that they are willing to pay (if 

they are quoting to buy protection). This number is 

variously referred to as the ‘‘running spread,’’ 

‘‘quoted spread’’ or ‘‘traded spread.’’ It will be higher 

to sell protection than to buy protection, allowing 

the dealer to earn a profit on offsetting transactions 

for the same reference entity—e.g., 510 basis points 

bid, 530 basis points asked. 

On execution, the running spread is converted, 

using a standard, publicly available, industryaccepted formula, into an upfront payment plus a 

standardized coupon—generally 100 basis points 

for investment grade reference entities, and 500 

basis points for high yield reference entities. This 

conversion does not affect the market value or 

economics of the transaction, and is done simply 

to make CDS more fungible, which makes them 

easier to clear, among other benefits. Because of this 

conversion, the running spread itself does not 

appear in the terms of the contract, but is replaced 

by its economic equivalent. 

swap dealer shall report the securitybased swap; and with respect to any 

other security-based swap, the 

counterparties to the security-based 

swap shall select a counterparty to 

report the security-based swap.25

Rule 13Aa–2T(c) incorporates these 

provisions. Specifically, Rule 13Aa– 

2T(c) provides that where only one 

counterparty to a security-based swap 

transaction is a security-based swap 

dealer or a major security-based swap 

participant, the security-based swap 

dealer or major security-based swap 

participant shall report the transaction; 

where one counterparty to a securitybased swap transaction is a securitybased swap dealer and the other 

counterparty is a major security-based 

swap participant, the security-based 

swap dealer shall report the transaction; 

and where neither counterparty to a 

security-based swap transaction is 

security-based swap dealer or a major 

security-based swap participant, the 

counterparties to the transaction shall 

select the counterparty who will report 

the transaction.26

C. Interpretive Note on Record Retention 

Pre-enactment security-based swaps 

that must be reported pursuant to 

Section 13A(a)(2) of the Exchange Act 27

and new interim final temporary Rule 

13Aa–2T thereunder have already 

occurred prior to enactment of the 

Dodd-Frank Act.28 Thus, to support the 

reporting requirements in Rule 13Aa– 

2T(b), a Note to paragraphs (b)(1) and 

(2) of Rule 13Aa–2T requires each 

counterparty to a pre-enactment 

security-based swap transaction that 

may be required to report such 

transaction to retain information and 

documents relating to the terms of the 

transaction.29 Specifically, the Note 

requires a counterparty to a preenactment security-based swap 

transaction that may be required to 

report such transaction to retain in its 

existing format all information and 

documents, if available, to the extent 

and in such form as they currently exist, 

relating to the terms of the securitybased 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; all 

information from which the price of the 

transaction was derived; whether the 

transaction was accepted for clearing by 

any clearing agency or derivatives 

clearing organization, and, if so, the 

identity of such clearing agency or 

derivatives clearing organization; any 

modification(s) to the terms of the 

transaction; and the final confirmation 

of the transaction. The Commission 

believes that it is necessary for a 

counterparty that may be required to 

report such transaction to retain all 

information relating to the terms of preenactment security-based swaps in 

order for that counterparty to be able to 

comply with the reporting requirements 

of Rule 13Aa–2T. The specific 

information identified in the Note, as 

outlined above, is designed to 

encompass material information about 

pre-enactment security-based swap 

transactions that may be the subject of 

a request by the Commission to report 

pursuant to Rule 13Aa–2T(b)(2), as well 

as the information required to be 

reported pursuant to Rule 13Aa– 

2T(b)(1). The Commission believes that 

the information identified above will 

provide the Commission with access to 

relevant information to help the 

Commission perform its oversight 

functions under the Federal securities 

laws. 

The time of execution of a securitybased swap transaction is the point at 

which the parties become irrevocably 

bound under applicable law.30 For 

example, in the context of securitybased swaps, an oral agreement over the 

phone will create an enforceable 

contract, and the time of execution will 

be when the parties to the telephone call 

agree to the material terms.31 The 

Commission also understands that the 

‘‘price’’ of a security-based swap may be 

expressed differently for different asset 

classes. 

The Commission envisions that 

documentation retained pursuant to the 

need to preserve all information from 

which the price of the transaction was 

derived should reflect all information 

necessary to determine the price 

including, among other things, the 

quoting convention (for example, 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, 

for CDS transactions,32 or the LIBORbased Floating Rate Payment, expressed 

as a floating rate plus a fixed number of 

basis points multiplied by the notional 

amount, for equity or loan total return 

swaps). 

The interpretation to retain 

information does not require any 

counterparty to a pre-enactment 

security-based swap transaction that 

may be required to report such 

transaction to create new records with 

respect to transactions that occurred in 

the past. By allowing such records to be 

retained in their existing format, the 

interpretation is designed to assure that 

important information relating to the 

terms of pre-enactment security-based 

swap transactions is preserved without 

unnecessary burden on the 

counterparties. Likewise, to the extent 

that any information required to be 

retained pursuant to the Note and 

reported pursuant to Rule 13Aa– 

2T(b)(1) or (b)(2) is not information that 

the counterparty already has prior to the 

effective date of this proposal, such as 

the time of execution, the Commission 

understands that such information 

could not be retained pursuant to the 

Note or reported pursuant to Rule 

13Aa–2T(b)(1) or (b)(2). 

D. Post-Enactment Security-Based 

Swaps 

As noted above, Rule 13Aa–2T 

applies solely to security-based swap 

transactions entered into before July 21, 

2010, the terms of which had not 

expired as of that date, and thus does 

not cover security-based swap 

transactions entered into on or after July 

21, 2010. The Dodd-Frank Act, however, 

also requires the Commission to adopt 

reporting rules covering such postenactment security-based swaps. 


emcdonald on DSK2BSOYB1PROD with RULES
Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Rules and Regulations 64647 

33See 15 U.S.C. 78c–3(e)(2). Section 3(C)(e)(1) 

also states that security-based swaps entered into 

before the date of the enactment of this section shall 

be reported to a registered security-based swap data 

repository or the Commission no later than 180 

days after the effective date of that section. 

34See 15 U.S.C. 78m–1(a)(1). 

35See Sections 763(a) and 766(a) of the DoddFrank Act. 

36See Rule 13Aa–2T(d). 37See 15 U.S.C. 78c–3(e). 

38Section 712(a)(2) of the Dodd-Frank Act. 

39Section 712(a)(7) of the Dodd-Frank Act. 

Specifically, Section 3C(e)(2) of the 

Exchange Act requires the reporting of 

security-based swaps entered into on or 

after such date of enactment to a 

registered security-based swap data 

repository or the Commission no later 

than the later of: (A) 90 days after such 

effective date; or (B) such other time 

after entering into the security-based 

swap as the Commission may prescribe 

by rule or regulation.33 In addition, 

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

requires that each security-based swap 

that is not accepted for clearing by any 

clearing agency or derivatives clearing 

organization shall be reported to: (A) A 

security-based swap data repository 

described in Section 13(n) of the 

Exchange Act; 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 

within such time period as the 

Commission may by rule or regulation 

prescribe.34 The Commission is directed 

to adopt rules under Sections 3C(e) and 

13A(a) within 360 days of the enactment 

of the Dodd-Frank Act.35 Parties to 

security-based swaps could be required 

under those rules, if adopted, to report 

information relating to such 

transactions. In that regard, 

counterparties could be expected to 

have access to similar information in 

order to report post-enactment securitybased swaps. 

E. Effective Date 

Rule 13Aa–2T will be effective as of 

October 20, 2010 and will remain in 

effect until the operative date of the 

permanent recordkeeping and reporting 

rules for security-based swap 

transactions to be adopted by the 

Commission or January 12, 2012, 

whichever occurs first.36 The 

Commission believes it is appropriate to 

make the rule effective upon publication 

in the Federal Register since the rule 

applies to information parties to preenactment security-based swaps would 

already have in their possession. In 

addition, this would provide the 

Commission the ability to request 

information on such pre-enactment 

security-based swaps immediately. 

Further, the Commission believes the 

proposed sunset date is appropriate 

because it will allow the rule to remain 

in effect until a permanent rule relating 

to the reporting of pre-enactment 

security-based swaps has become 

effective and operative, or until the date 

by which Section 3C of the Exchange 

Act requires security-based swaps 

entered into before the date of 

enactment of the Dodd-Frank Act to be 

reported to a registered security-based 

data repository or the Commission.37

III. Request for Comment 

We are requesting comments from all 

members of the public. We will 

carefully consider the comments that we 

receive. We seek comment generally on 

all aspects of the interim final 

temporary rule. In addition, we seek 

comment on the following: 

1. Should the Commission clarify or 

modify any of the definitions included 

in Rule 13Aa–2T? If so, which 

definitions and what specific 

modifications are appropriate or 

necessary? 

2. The Commission seeks public 

comment on what specific information 

is necessary to derive the ‘‘price’’ of a 

security-based swap transaction. In 

other words, what specific information 

is needed for a third party to value the 

transaction? How do these data 

elements vary depending on the type or 

class of security-based swap? Do current 

quoting conventions across classes and 

types of securities-based swaps provide 

sufficient information from which to 

derive transaction prices? 

3. Is there an industry standard format 

for information and records regarding 

security-based swaps? Are there 

different standard formats depending on 

the type or class of security-based swap? 

Please answer with specificity. 

4. Rule 13Aa–2T(c) details which 

counterparty to a security-based swap 

transaction has the reporting obligation. 

In cases where counterparties must 

select which counterparty will report 

the transaction, is additional 

Commission guidance necessary or 

desirable? Is there a mechanism to 

allocate the reporting obligation that the 

Commission should implement in such 

cases? 

5. The Note to paragraphs (b)(1) and 

(2) of Rule 13Aa–2T provides that 

counterparties shall retain, in their 

existing format, all information and 

documents relating to the terms of a preenactment security-based swap 

transaction, including but not limited to 

certain specified data elements. What 

documents and data typically are kept 

by security-based swap market 

participants to memorialize their 

transactions? What documents and data 

typically are kept to memorialize posttrade events such as novations, 

assignments, terminations and other 

events? In what format? How long are 

such records currently maintained by 

market participants? How often do 

market participants record the time of 

execution of a security-based swap? 

6. The Commission requests comment 

on its interpretation of the types of 

documents and data needed to be 

retained in order to satisfy reporting 

required by the Note to paragraphs (b)(1) 

and (2) of Rule 13Aa–2T. What 

additional information, if any, should be 

retained and what burdens or costs 

would the retention of such information 

entail? What information and 

documents, if any, are not needed to be 

retained while still providing for an 

understanding of the material terms of 

a security-based swap? 

7. What are the technological or 

administrative burdens of maintaining 

the information specified in the Note to 

paragraphs (b)(1) and (2) of Rule 13Aa– 

2T? 

8. The Commission requests comment 

on the information that is required to be 

reported pursuant to Rule 13Aa– 

2T(b)(1). What additional information, if 

any, should be reported? 

9. Rule 13Aa–2T is a temporary rule 

and is set to expire no later than January 

12, 2012. Should we remove the 

expiration provision of the rule and 

make the rule permanent? Should we 

extend the expiration date of the rule? 

If so, for how long? Should we allow the 

rule to expire? 

Title VII of the Dodd-Frank Act 

requires that the Commission consult 

and coordinate to the extent possible 

with the CFTC for the purposes of 

assuring regulatory consistency and 

comparability, to the extent possible,38

and states that in adopting rules, the 

CFTC and Commission shall treat 

functionally or economically similar 

products or entities in a similar 

manner.39

The CFTC has adopted rules related to 

the reporting of swaps entered into 

before July 21, 2010, the terms of which 

had not expired as of that date (‘‘preenactment swaps’’) as required under 

Section 729 of the Dodd-Frank Act. 

Understanding that the Commission and 

the CFTC regulate different products 

and markets, and as such, appropriately 

may be proposing alternative regulatory 

requirements, we request comments on 

the impact of any differences between 

the Commission and CFTC approaches 

to the regulation of pre-enactment 

security-based swaps and pre-enactment 


emcdonald on DSK2BSOYB1PROD with RULES
64648 Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Rules and Regulations 

40See 5 U.S.C. 553(b). 41 Id. 42See 5 U.S.C. 553(d). 43 Id. 44This finding also satisfies the requirements of 

5 U.S.C. 808(2), allowing the rules 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.’’). 

45 15 U.S.C. 78m–1(a)(2)(B). 

46 44 U.S.C. 3501 et seq. 

47See Rule 13Aa–2T(b)(1). 

48 Id. 

49See Rule 13Aa–2T(b)(2). 

50See Note to paragraphs (b)(1) and (2) of Rule 

13Aa–2T. 

51 Id. 

52For example, the information collected could 

provide the Commission with insight as to the size 

(in notional value), number of transactions, and 

number and type of participants of the securitybased swap market. 

swaps. Specifically, do the regulatory 

approaches under the Commission’s 

proposed rulemaking pursuant to 

Section 766 of the Dodd-Frank Act and 

the CFTC’s proposed rulemaking 

pursuant to Section 729 of the DoddFrank Act result in duplicative or 

inconsistent efforts on the part of market 

participants subject to both regulatory 

regimes or result in gaps between those 

regimes? If so, in what ways do 

commenters believe that such 

duplication, inconsistencies, or gaps 

should be minimized? Do commenters 

believe the approaches proposed by the 

Commission and the CFTC to regulate 

pre-enactment security-based swaps and 

pre-enactment swaps are comparable? If 

not, why? Do commenters believe there 

are approaches that would make the 

regulation of pre-enactment securitybased swaps and pre-enactment swaps 

more comparable? If so,what? Do 

commenters believe that it would be 

appropriate for us to adopt an approach 

proposed by the CFTC that differs from 

our proposal? If so, which one? We 

request commenters to provide data, to 

the extent possible, supporting any such 

suggested approaches. 

IV. Other Matters 

The Administrative Procedure Act 

generally requires an agency to publish 

notice of a proposed rulemaking in the 

Federal Register.40 This requirement 

does not apply, however, if the agency 

‘‘for good cause finds * * * that notice 

and public procedure are impracticable, 

unnecessary, or contrary to the public 

interest.’’ 41 Further, the Administrative 

Procedure Act also generally requires 

that an agency publish an adopted rule 

in the Federal Register 30 days before 

it becomes effective.42 This 

requirement, however, does not apply if 

the agency finds good cause for making 

the rule effective sooner.43 The 

Commission, for good cause, finds that 

notice and solicitation of comment 

before the effective date of Rule 13Aa– 

2T is impracticable, unnecessary, or 

contrary to the public interest.44 Section 

766 of the Dodd-Frank Act amended the 

Exchange Act to add a new Section 13A. 

Section 13A(a)(2)(B) requires the 

Commission to adopt, within 90 days of 

enactment of the Dodd-Frank Act, an 

interim final rule providing for the 

reporting of each security-based swap 

entered into before the date of 

enactment of the Dodd-Frank Act the 

terms of which were not expired as of 

that date.45 The Commission is adopting 

Rule 13Aa–2T to fulfill this 

requirement. 

V. Paperwork Reduction Act 

Certain provisions of Rule 13Aa–2T 

contain ‘‘collection of information 

requirements’’ within the meaning of the 

Paperwork Reduction Act of 1995 

(‘‘PRA’’).46 The Commission has 

submitted the information to the Office 

of Management and Budget (‘‘OMB’’) for 

review in accordance with 44 U.S.C. 

3507 and 5 CFR 1320.11. An agency 

may not conduct or sponsor, and a 

person is not required to respond to, a 

collection of information unless it 

displays a currently valid control 

number. The title of this collection is 

‘‘Rule 13Aa–2T—Reporting of PreEnactment Security-Based Swap 

Transactions.’’ We are applying for a 

new OMB Control Number for this 

collection in accordance with 44 U.S.C. 

3507(j) and 5 CFR 1320.13. 

1. Summary of Collection of Information 

As required under Section 13A of the 

Exchange Act, as provided by Section 

766 of the Dodd-Frank Act, the 

Commission is adopting new Rule 

13Aa–2T governing the reporting 

requirements applicable to securitybased swap transactions entered into 

before July 21, 2010, the terms of which 

have not expired as of that date, i.e., preenactment security-based swap 

transactions. Rule 13Aa–2T, by its 

terms, mandates three separate data 

collections for entities covered by the 

rule. The Commission believes that new 

Rule 13Aa–2T will impact more than 10 

entities and thus meets the definition of 

a collection of information under the 

PRA. 

First, pursuant to Rule 13Aa–2T(b)(1), 

pre-enactment security-based swap 

transactions must be reported to a 

registered security-based swap data 

repository or the Commission by the 

compliance date established in the 

reporting rules required under Sections 

3C(e) and 13A(a)(1) of the Exchange Act, 

or within 60 days after a registered 

security-based swap data repository 

commences operations to receive and 

maintain data concerning such securitybased swaps, whichever occurs first.47

The rule specifies that the transaction 

report shall include a copy of the 

transaction confirmation, in electronic 

form, if available, or in written form, if 

there is no electronic copy, and the 

time, if available, the transaction was 

executed.48

Second, Rule 13Aa–2T(b)(2) requires 

reporting to the Commission upon 

request of any information relating to 

pre-enactment security-based swaptransactions.49 Finally, the Note to 

paragraphs (b)(1) and (2) of Rule 13Aa– 

2T requires each counterparty to a preenactment security-based swap 

transaction that may be required to 

report such transaction to retain, in its 

existing format, all information and 

documents, if available, to the extent 

and in such form as they currently exist, 

relating to the terms of pre-enactment 

security-based swap transactions.50 The 

rule specifies that such information 

shall include, without limitation: Any 

information needed to identify and 

value the transaction; the time, if 

available, of execution of the 

transaction; all information from which 

the price of the transaction was derived; 

whether the transaction was accepted 

for clearing by any clearing agency or 

derivatives clearing organization, and, if 

so, the identity of such clearing agency 

or derivatives clearing organization; any 

modification(s) to the terms of the 

transaction; and the final confirmation 

of the transaction.51

2. Proposed Use of Information 

The rule makes information available 

to the Commission that can provide 

insight into the size and operation of the 

OTC derivatives market.52 The 

information will provide a starting 

benchmark against which to assess the 

development of the security-based swap 

market over time. The information 

collected pursuant to Rule 13Aa–2T also 

will provide the Commission 

information to assist with its analysis of 

the permanent reporting and other rules 

required by the Dodd-Frank Act. 

Information related to pre-enactment 

security-based swap transactions may 

also be used by the Commission to 

assess activities and risks in the 

security-based swap markets or 

securities markets more generally. 

Requiring such information be reported 


emcdonald on DSK2BSOYB1PROD with RULES
Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Rules and Regulations 64649 

53See 15 U.S.C. 78c(a)(68) and (71). 

54The Commission expects to issue permanent 

rules regarding the retention and reporting of 

information about the terms of security-based swaps 

within the next year in compliance with the DoddFrank Act. Any PRA burden contained in those 

rules will be taken into account in those 

rulemakings. 

55See, e.g., http://www.dtcc.com/products/ 

derivserv/data_table_i.php (data as of July 23, 

2010). 

56The Commission’s estimate is based on internal 

analysis of available security-based swap market 

data. The Commission is seeking comment about 

the overall size of the security-based swap market, 

and as discussed in this release, believes that Rule 

13Aa–2T will, among other things, provide insight 

about the number of pre-enactment security-based 

swaps and the overall size of the security-based 

swap market. 

57This figure is based on discussions with 

various market participants. It is based on the 

following: [((Sr. Programmer at 2 hours) + (Sr. 

Systems Analyst at 4 hours) + (Compliance Manager 

at 5 hours) + (Compliance Clerk at 20 hours) + 

(Director of Compliance at 2 hours) + (Compliance 

Attorney at 5 hours)) × (1,000 reporting entities)] = 

38,000 burden hours, which is 38 hours per 

reporting entity. As noted, the Commission 

preliminarily believes that, given the current nature 

of the records to be retained, information on 

security-based swap transactions is currently being 

retained by market participants in the ordinary 

course of business, and as a practical matter should 

not result in any significant new burdens. Because 

the Commission expects to adopt permanent 

reporting rules within one year, the Commission 

does not believe that Rule 13Aa–2T will generate 

any ongoing burdens beyond the first 12 months. 

Accordingly, our estimates do not distinguish 

initial and ongoing burdens. 

58This estimate is based on discussions of 

Commission staff with various market participants, 

Continued 

also should facilitate general market 

oversight. 

3. Respondents 

Rule 13Aa–2T requires reporting of all 

security-based swaps entered into prior 

to July 21, 2010, the terms of which 

have not expired as of that date. The 

rule thus will cover security-based swap 

dealers, major security-based swap 

participants, each defined in Section 

3(a) of the Exchange Act, and other 

counterparties when there is no 

security-based swap dealer or major 

security-based swap participant 

involved in the pre-enactment securitybased swap transaction.53

The Commission does not know the 

exact number of security-based swap 

market participants. Based on the 

information currently available to the 

Commission, there are roughly 1,000 

entities regularly engaged in the CDS 

marketplace, consisting primarily of 

banks, hedge funds, and asset managers. 

The Commission believes that most of 

these same entities would likely also 

participate in other security-based swap 

markets and that few, if any, other 

entities engage in security-based swaps 

that are not CDSs. Accordingly, the 

Commission preliminarily believes that 

it is reasonable to use the figure of 1,000 

potential respondents covered by Rule 

13Aa–2T for purposes of estimating 

collection of information burdens under 

the PRA. 

The Commission seeks comment on 

what entities may be subject to Rule 

13Aa–2T, whether specific classes of 

entities may be impacted, how many 

entities may be impacted, and whether 

any such entity or class of entities may 

be impacted differently than others 

under the rule. The Commission seeks 

comment on the accuracy of its 

estimates as to the number of 

participants in the security-based swap 

market that will be required to report 

information pursuant to Rule 13Aa–2T. 

4. Total Initial and Annual Reporting 

and Recordkeeping Burdens 

As described above, pursuant to Rule 

13Aa–2T(b)(1), pre-enactment securitybased swap transactions must be 

reported to a registered security-based 

swap data repository or the Commission 

by the compliance date established in 

the reporting rules required under 

Sections 3C(e) and 13A(a)(1) of the 

Exchange Act, or within 60 days after a 

registered security-based swap data 

repository commences operations to 

receive and maintain data concerning 

such security-based swaps, whichever 

occurs first. Additionally, Rule 13Aa– 

2T(b)(2) requires reporting to the 

Commission upon request of any 

information relating to pre-enactment 

security-based swap-transactions. 

Finally, the Note to paragraphs (b)(1) 

and (2) of Rule 13Aa–2T requires each 

counterparty to a pre-enactment 

security-based swap transaction that 

may be required to report such 

transaction to retain, in its existing 

format, all information and documents, 

if available, to the extent and in such 

form as they currently exist, relating to 

the terms of pre-enactment securitybased swap transactions. 

Although a new obligation, the 

Commission does not believe that Rule 

13Aa–2T will require covered entities to 

materially change their current practices 

or operations with respect to 

recordkeeping for pre-enactment 

security-based swap transactions. The 

Commission believes that any 

counterparty to a pre-enactment 

security-based swap transaction that 

may be required to report such 

transaction, as part of its regular 

business operations, would already 

maintain records of any such 

transactions, and that such records 

likely include the minimum information 

set out in the Note to paragraphs (b)(1) 

and (2) of Rule 13Aa–2T. Nonetheless, 

our interpretation that counterparties 

must retain information relating to the 

terms of pre-enactment security-based 

swaps in order to be able to satisfy their 

reporting obligation is a new burden. 

Entities subject to the rule may have to 

implement new document retention and 

reporting policies.54

Based on publicly available 

information and consultation with 

industry sources, the Commission 

estimates there were approximately 2 

million CDS contracts outstanding on 

the date of enactment.55 The 

Commission believes that CDS 

transactions represent the majority of 

security-based swap transactions. The 

Commission preliminarily estimates 

that CDS transactions represent 

approximately 85 percent of all securitybased swap transactions open on the 

date of enactment of the Dodd-Frank 

Act.56 Accordingly, the total number of 

security-based swap transactions subject 

to Rule 13Aa–2T would be 

approximately 2,400,000. 

The Commission preliminarily 

estimates that the requirement to retain 

information and documents pursuant to 

the Note to paragraphs (b)(1) and (2) of 

Rule 13Aa–2T would impose a burden 

on each respondent of approximately 38 

burden hours for an aggregate burden of 

approximately 38,000 hours, which 

includes an estimate of the number of 

potential burden hours required to 

amend internal procedures, reprogram 

systems, and implement compliance 

processes to ensure that pre-enactment 

security-based swap transaction data is 

preserved.57

Rule 13Aa–2T(b)(1) requires reporting 

entities to report pre-enactment 

security-based swap transactions to a 

registered security-based swap data 

repository or the Commission by the 

compliance date established in the 

reporting rules required under Sections 

3C(e) and 13A(a)(1) of the Exchange Act, 

or within 60 days after a registered 

security-based swap data repository 

commences operations to receive and 

maintain data concerning such securitybased swaps, whichever occurs first. 

Reporting entities may have initial costs 

to establish connectivity with and report 

the pre-enactment security-based swaps 

to a registered security-based swap data 

repository or the Commission. The 

Commission preliminarily estimates 

that the cost to establish connectivity to 

a security-based swap data repository to 

facilitate the reporting required by Rule 

13Aa–2T(b)(1) would impose a burden 

on each respondent of approximately 

$25,000, for an aggregate burden of 

approximately $25,000,000.58 In 


emcdonald on DSK2BSOYB1PROD with RULES
64650 Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Rules and Regulations 

as well as the Commission’s experience regarding 

connectivity between securities market participants, 

including alternative trading systems and selfregulatory organizations for data reporting 

purposes. The Commission derived the total 

estimated expense from the following: ($25,000 

relating to hardware- and software-related 

expenses) × (1,000 reporting entities) = $25,000,000. 

It is the Commission’s understanding that many 

reporting entities already have established linkages 

to entities that may register as security-based swap 

data repositories, which may impact the out-ofpocket costs associated with Rule 13Aa–2T(b)(1). 

59This figure is based on discussions of 

Commission staff with various market participants, 

as well as the Commissions experience regarding 

connectivity between securities market participants, 

including alternative trading systems and selfregulatory organizations for data reporting 

purposes. The Commission derived the total 

estimated one-time burden from the following: 

[(2,400,000 estimated total pre-enactment 

securities-based swap transactions) × (75 percent 

automated, electronic reporting) × (0.1 hours/ 

transaction)] + [2,400,000 estimated total preenactment securities-based swap transactions) × (25 

percent manual, electronic reporting) × 

(Compliance Clerk 0.5 hours/transaction)] = 

480,000 burden hours, which is 480 burden hours 

per respondent. Because the Commission expects to 

adopt permanent reporting rules within one year, 

the Commission does not believe that Rule 13Aa– 

2T will generate any ongoing burdens beyond the 

first 12 months. Accordingly, our estimates do not 

distinguish initial and ongoing burdens. 

60The Commission preliminarily believes it 

would not request reports from every reporting 

entity. However, for purposes of estimating the 

burden, the Commission is assuming it would 

request one report from each reporting entity. 

61This figure is based on discussions with 

various market participants. It is based on the 

following: [(Compliance Manager at 5 hours) + 

(Compliance Attorney at 5 hours) + (Programmer 

Analyst at 1 hour) + (Compliance Clerk at 15 hours) 

+ (Director of Compliance at 3 hours) + (Sr. 

Database Administrator at 5 hours)] × (1,000 

reporting entities) = 34,000 burden hours, which is 

34 hours per reporting entity. 

62The Commission notes that a respondent may 

well be subject to additional record retention 

burdens for pre-enactment security-based swaps 

pursuant to rules to be adopted by the Commission 

pursuant to Section 3C(e) of the Exchange Act. 

63See 5 U.S.C. 552(b)(4). 

64See 5 U.S.C. 552(b)(8). 

65See H.R. Rep. No. 111–517, at 865 (2010). See, 

e.g., 156 Cong. Rec. S5878 (July 15, 2010) and 156 

Cong. Rec. S5882 (July 15, 2010). 

66With respect to CDS, for example, the 

Government Accountability Office found that 

‘‘comprehensive and consistent data on the overall 

market have not been readily available,’’ that 

‘‘authoritative information about the actual size of 

the CDS market is generally not available,’’ and that 

regulators currently are unable ‘‘to monitor 

activities across the market.’’ Government 

Accountability Office, ‘‘Systemic Risk: Regulatory 

Oversight and Recent Initiatives to Address Risk 

Posed by Credit Default Swaps,’’ GAO–09–397T 

(March 2009), at 2, 5, 27. See Robert E. Litan, ‘‘The 

Derivatives Dealers’ Club and Derivatives Market 

addition, the Commission preliminarily 

estimates that complying with Rule 

13Aa–2T(b)(1) would impose a burden 

on each respondent of approximately 

480 hours, for an aggregate burden of 

approximately 480,000 burden hours.59

Rule 13Aa–2T(b)(2) requires reporting 

entities to report to the Commission 

upon request any information relating to 

pre-enactment security-based swap 

transactions. Because the Note to 

paragraphs (b)(1) and (2) of Rule 13Aa– 

2T(d) requires reporting entities to 

retain their documents and information 

relating to the terms of pre-enactment 

security-based swap transactions, the 

Commission preliminarily believes that 

responding to a Commission request for 

such information should not impose a 

significant additional burden on 

reporting entities. A reporting entity 

would need to review the request and 

gather responsive transaction data and 

documents. Assuming the Commission 

requested one report from each 

reporting entity,60 the Commission 

preliminarily estimates that responding 

to Commission requests for information 

and documents pursuant to Rule 13Aa– 

2T(b)(2) would impose a burden on each 

respondent of approximately 34 hours, 

for an aggregate burden of 

approximately 34,000 burden hours.61

The Commission seeks comment on 

the recordkeeping and reporting 

collection of information burdens 

associated with Rule 13Aa–2T. In 

particular, what burdens, if any, will 

respondents incur with respect to 

system design, programming, expanding 

systems capacity, and establishing 

compliance programs to comply with 

Rule 13Aa–2T? Will there be different or 

additional burdens associated with the 

collection of information under Rule 

13Aa–2T that a covered entity does not 

currently undertake in the ordinary 

course of business that we have not 

identified? 

5. Retention Period of Recordkeeping 

Requirements 

A covered entity will be required by 

Rule 13Aa–2T to retain records and 

information only until such information 

has been reported to a registered 

security-based swap data repository or 

the Commission.62 Rule 13Aa–2T(b)(1) 

provides that the reporting shall occur 

by the compliance date established in 

the reporting rules required under 

Sections 3C(e) and 13A(a)(1) of the 

Exchange Act, or within 60 days after a 

registered security-based swap data 

repository commences operations to 

receive and maintain data concerning 

such security-based swaps, whichever 

occurs first. 

6. Collection of Information Is 

Mandatory 

Any collection of information 

pursuant to Rule 13Aa–2T will be a 

mandatory collection of information to 

permit the Commission to collect 

accurate information about securitybased swap transactions entered into 

prior to, and not expired as of, the date 

of enactment of the Dodd-Frank Act. 

7. Responses to Collection of 

Information May Not Be Confidential 

Other than information for which a 

reporting entity requests confidential 

treatment and that may be withheld 

from the public in accordance with the 

provisions of 5 U.S.C. 522 (The Freedom 

of Information Act (‘‘FOIA’’)), the 

collection of information pursuant to 

Rule 13Aa–2T will not be kept 

confidential and will be publicly 

available. Among other things, FOIA 

recognizes the confidentiality of 

commercial information under two 

exemptions. First, FOIA Exemption 4 

provides an exemption for ‘‘trade secrets 

and commercial or financial information 

obtained from a person and privileged 

or confidential.’’ 63 Second, FOIA 

Exemption 8 provides an exemption for 

matters that are ‘‘contained in or related 

to examination, operating, or condition 

reports prepared by, on behalf of, or for 

the use of an agency responsible for the 

regulation or supervision of financial 

institutions.’’ 64 The Commission will 

carefully consider any requests for 

confidential treatment under either of 

these exemptions or under other 

exemptions contained in 5 U.S.C. 522. 

8. Request for Comment 

Pursuant to 44 U.S.C. 3505(c)(2)(B), 

the Commission solicits comment to: 

1. Evaluate whether the proposed 

collection of information is necessary 

for the performance of the functions of 

the agency, including whether the 

information shall have practical utility; 

2. Evaluate the accuracy of the 

agency’s estimate of the burden of the 

proposed collection of information; 

3. Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

4. Minimize the burden of collection 

of information on those who are to 

respond, including through the use of 

automated collection techniques or 

other forms of information technology. 

VI. Cost-Benefit Analysis 

Earlier this year, Congress passed the 

Dodd-Frank Act. The far-reaching 

legislation was a response to the recent 

financial crisis. Among other things, it 

is designed to strengthen oversight, 

improve consumer protections, and 

reduce systemic risks throughout the 

financial system.65 Title VII of the 

Dodd-Frank Act specifically addresses 

the OTC derivatives markets, including 

the market for security-based swaps. 

The swap markets have been described 

as being opaque.66 Transaction-level 


emcdonald on DSK2BSOYB1PROD with RULES
Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Rules and Regulations 64651 

Reform,’’ Brookings Institution (April 7, 2010) at 

15–20. See also Michael Mackenzie, June 25, 2010, 

Era of an opaque swaps market ends, Fin. Times, 

June 25, 2010. 

67The BIS semi-annual report on the swap 

markets summarizes developments in the OTC 

derivatives markets during the relevant period. The 

report breaks down trading volumes and other 

statistics for various classes of derivatives, 

including credit default swaps, interest rate and 

foreign exchange derivatives, and equity and 

commodity derivatives. The report covers 

derivatives trading within the G10 countries. The 

most recent report, available at http://www.bis.org/ 

statistics/derstats.htm, covers the period through 

the last quarter of 2009. 

68See, e.g., 156 Cong. Rec. S5879 (July 15, 2010) 

and 156 Cong. Rec. H5252 (June 30, 2010). 

69See Section 719 of the Dodd-Frank Act. 

70Michael, Goldstein, Edith Hotchkiss and Erik 

Sirri, Transparency and Liquidity: A Controlled 

Experiment on Corporate Bonds, Review of 

Financial Standards (2007); Amy Edwards, 

Lawrence Harris and Michael Piwowar, Corporate 

Bond Market Transaction Costs and Transparency, 

J. of Fin. (2007). 71See supra Section V. 

data is not publicly available. A major 

source of information is the semi-annual 

survey conducted by the Bank of 

International Settlements (‘‘BIS’’) on the 

volume of swaps transaction by major 

categories of swaps.67 One of the 

purposes of the Dodd-Frank Act is to 

improve the transparency of the OTC 

derivatives market.68

Title VII requires the Commission to 

undertake a large number of 

rulemakings to implement the 

regulatory framework for security-based 

swaps that is set forth in the DoddFrank Act, including the reporting of 

security-based swap transactions. The 

interim final temporary rule being 

issued today is the first step in that 

process and is designed to provide for 

reporting of pre-enactment securitybased swaps in the framework set up by 

the Dodd-Frank Act. The rule will 

provide the Commission the ability to 

obtain data on pre-enactment securitybased swaps. Rule 13Aa–2T also will 

provide for the preservation of data on 

pre-enactment security-based swaps 

until the Commission issues permanent 

recordkeeping and reporting rules for all 

security-based swaps. By making 

records available to the Commission, 

Rule 13Aa–2T will enable the 

Commission to begin its review of the 

size and scope of the security-based 

swap marketplace. Today’s action is 

designed to ultimately lead to a more 

robust, transparent environment for the 

market for security-based swaps. 

The Commission is sensitive to the 

costs and benefits associated with Rule 

13Aa–2T. The Commission requests 

comment on the costs and benefits 

associated with the rule, and its costbenefit analysis, including identification 

and assessments of any costs and 

benefits not discussed in this analysis. 

The Commission also seeks comments 

on the accuracy of any of the benefits 

identified and also welcomes comments 

on the accuracy of any of the cost 

estimates. Finally, the Commission 

encourages commenters to identify, 

discuss, analyze, and supply relevant 

data, information, or statistics regarding 

any such costs or benefits. 

A. Benefits 

Rule 13Aa–2T, which is being 

adopted as required by the Dodd-Frank 

Act, will provide a means for the 

Commission to gain a better 

understanding of the security-based 

swap markets, including the size and 

scope of that market, by making 

available transaction data on preenactment security-based swaps. In 

addition, having such data available 

should help Commission staff to analyze 

the security-based swap market as a 

whole and identify risks. In this way, 

Rule 13Aa–2T will support the 

Commission’s supervisory function over 

the security-based swap markets as 

required by Congress in the Dodd-Frank 

Act. Further, the rule should make 

available information to the 

Commission that could inform its 

decision-making with respect to the 

rules that it is required to implement 

under the Dodd-Frank Act. Rule 13Aa– 

2T also could facilitate the reports the 

Commission is required to provide to 

Congress on security-based swaps and 

the security-based swaps marketplace.69

Further, Rule 13Aa–2T will require 

market participants to inventory their 

positions in swaps to determine what 

information needs to be retained and 

reported. Potentially, this may 

encourage management review of 

internal procedures and controls by 

those market participants. 

The Commission’s rules on reporting 

pre-enactment security-based swap 

transaction data also may have benefits 

to the OTC derivatives market. For 

example, the introduction of the Trade 

Reporting and Compliance Engine 

(TRACE) system helped substantially 

increase the transparency of, and 

decrease transaction costs in, the bond 

market.70 This interim final temporary 

rule represents a first step toward a 

more transparent market for securitybased swaps. Market participants also 

will be able to begin planning how 

security-based swap data can be 

maintained, consolidated, and reported 

in anticipation of permanent rules to be 

issued by the Commission pursuant to 

the requirements set forth in the DoddFrank Act. The initial experience in the 

context of Rule 13Aa–2T may help 

market participants and the Commission 

assess alternatives for permanent 

security-based swap transaction 

reporting requirements. 

B. Costs 

The Note to paragraphs (b)(1) and (2) 

of Rule 13Aa–2T requires the retention 

of records relating to security-based 

swap transactions entered into before 

July 21, 2010, the terms of which had 

not expired as of that date. Although 

there are recordkeeping costs associated 

with the retention of existing preenactment security-based swap 

transaction information, the 

Commission preliminarily does not 

believe that they will be significant. The 

information that is required to be 

reported pursuant to Rule 13Aa– 

2T(b)(1)(i)—a copy of the transaction 

confirmation—should be information 

that respondents already keep in their 

normal course of business. In addition, 

that information can be reported in the 

form in which it is kept, either 

electronic or written form. Further, 

respondents must report the time of 

execution pursuant to Rule 13Aa– 

2T(b)(1)(ii) only to the extent that the 

information is available. 

The Commission preliminarily 

estimates that the interim final 

temporary rule could affect more than 

1,000 market participants and cover 

approximately 2.4 million securitybased swap transactions, although 

identification of the exact number of 

respondents and covered transactions is 

impossible to determine at this time.71

As stated above, however, the 

Commission preliminarily believes that 

information about open security-based 

swap transactions should already be 

maintained by covered entities as part of 

their day-to-day operations. Further, the 

rule does not require market 

participants to modify the data that they 

have for retention purposes. Rule 13Aa– 

2T requires only that parties retain 

records of the terms of the transactions 

in the form and to the extent that they 

already exist; parties are not required 

retroactively to supplement or otherwise 

alter transaction information. 

The Commission recognizes that the 

permanent reporting rules that it is 

required to adopt under Section 3C(e) of 

the Exchange Act also will apply to preenactment security-based swaps. 

Therefore, in adopting Rule 13Aa–2T, 

the Commission sought to limit the 

burden on potential respondents by not 

imposing substantial and potentially 

conflicting affirmative reporting 

requirements that would require 

respondents to make system and other 

changes that may be different from the 


emcdonald on DSK2BSOYB1PROD with RULES
64652 Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Rules and Regulations 

72The Commission believes that it is practical to 

require this reporting after rules for registration of 

security-based data repositories are in place, to 

allow the choice of reporting to an entity that has 

experience receiving this type of information. The 

Commission will have access to the data it 

determines is most useful for understanding and 

analyzing the market for security-based swaps as it 

develops final reporting and other rules required 

under the Dodd-Frank Act by being able to require 

information to be reported upon request to the 

Commission under Rule 13Aa–2T(b)(2). 

73This figure is based on discussions with 

various market participants. The Commission 

derived the total estimated initial annualized 

expense from the following: ((Sr. Programmer (2 

hours) at $292 per hour + (Sr. Systems Analyst (4 

hours) at $244 per hour) + (Compliance Manager (5 

hours) at $258 per hour) + (Compliance Clerk (20 

hours) at $63 per hour) + (Director of Compliance 

(2 hours) at $388 per hour) + (Compliance Attorney 

(5 hours) at $270 per hour)) × (1000 reporting 

entities) = $6,236,000, which is $6,236 per reporting 

entity. Hourly figures cited in this release are from 

SIFMA’s Management & Professional Earnings in 

the Securities Industry 2008 and SIFMA’s Office 

Salaries in the Securities Industry 2008, modified 

by Commission staff to account for an 1800-hour 

work-year and multiplied by 5.35 or 2.93, as 

appropriate, to account for bonuses, firm size, 

employee benefits, and overhead. Because the 

Commission expects to adopt permanent reporting 

rules within one year, the Commission does not 

believe that Rule 13Aa–2T will generate any 

ongoing costs beyond the first 12 months. 

Accordingly, our estimates do not distinguish 

initial and ongoing costs. 

74This figure is based on discussions of 

Commission staff with various market participants, 

as well as the Commission’s experience regarding 

connectivity between securities market participants, 

including alternative trading systems and selfregulatory organizations for data reporting 

purposes. The Commission derived the total 

estimated one-time burdens from the following: 

[($25,000/reporting entity to establish connectivity) 

× (1000 reporting entities)] + [2,400,000 estimated 

total pre-enactment securities-based swap 

transactions) × (25 percent manual, electronic 

reporting) × (Compliance Clerk (0.5 hours/ 

transaction) at $63 per hour)] = $43,900,000, which 

is $43,900 per reporting entity. This estimate is 

intended to include the costs of system 

development that will facilitate reporting the 

majority (estimated 75 percent) of security-based 

swap transactions. Because the Commission expects 

to adopt permanent reporting rules within one year, 

the Commission does not believe that Rule 13Aa– 

2T will generate any ongoing costs beyond the first 

12 months. Accordingly, our estimates do not 

distinguish initial and ongoing costs. 

75This figure is based on the following: 

[((Compliance Manager (5 hours) at $258 per hour) 

+ (Compliance Attorney (5 hours) at $271 per hour) 

+ (Programmer Analyst (1 hour) at $193) + 

(Compliance Clerk (15 hours) at $63 per hour) + 

(Director of Compliance (3 hours) at $388 per hour) 

+ (Sr. Database Administrator (5 hours) at $281 per 

hour)) x (1 Commission request per reporting entity) 

x (1000 reporting entities)] = $6,352,000, which is 

$6,352 per reporting entity. Hourly figures are from 

SIFMA’s Management & Professional Earnings in 

the Securities Industry 2008 and SIFMA’s Office 

Salaries in the Securities Industry 2008, modified 

by Commission staff to account for an 1800-hour 

work-year and multiplied by 5.35 or 2.93, as 

appropriate, to account for bonuses, firm size, 

employee benefits, and overhead. 

76 15 U.S.C. 78c(f). 

77 15 U.S.C. 78w(a)(2). 

78See supra Section II.B for a discussion of which 

counterparty has the reporting obligation. 

79This information will include, but is not 

limited to: Any information needed to identify and 

value the transaction; the date and time of 

execution of the transaction; all information from 

which the price of the transaction was derived; 

whether the transaction was accepted for clearing 

by any clearing agency or derivatives clearing 

organization and, if so, the identity of such clearing 

agency or derivatives clearing organization; any 

modification(s) to the terms of the transaction; and 

the final confirmation of the transaction. 

changes they will need to make 

pursuant to the permanent reporting 

rules.72

The Commission preliminarily 

estimates that amending internal 

procedures, reprogramming systems, 

and implementing compliance 

processes to ensure that pre-enactment 

security-based swap transaction data is 

preserved pursuant to the Note to 

paragraphs (b)(1) and (2) of Rule 13Aa– 

2T could result in a cost to each 

respondent of approximately $6,236 and 

an aggregate cost of approximately 

$6,236,000.73 The Commission 

preliminarily does not believe that there 

will be additional costs attributable to 

the record retention requirements of 

Rule 13Aa–2T beyond the initial cost of 

ensuring that such records are 

maintained. 

The Commission preliminarily 

estimates that the requirement to report 

the transaction confirmation and time, if 

available, of execution pursuant to Rule 

13Aa–2T(b)(1) could result in a cost to 

each reporting entity of approximately 

$43,900 and an aggregate cost of 

approximately $43,900,000.74 This cost 

figure includes two main components. 

These are, first, an estimate of the cost 

to establish connectivity to a securitybased swap data repository; and second, 

an estimate of the cost to complete the 

reporting process. 

As stated above, the Commission 

estimates that it may make one request 

from each reporting entity pursuant to 

Rule 13Aa–2T(b)(2). The Commission 

preliminarily estimates that responding 

to Commission requests for information 

and documents could result in a cost to 

each reporting entity of approximately 

$6,352 and an aggregate cost of 

approximately $6,352,000.75

C. Request for Comment 

The Commission requests comment 

on the costs and benefits of Rule 13Aa– 

2T discussed above, as well as any costs 

and benefits not already described that 

could result. The Commission also 

requests data to quantify any potential 

costs or benefits. 

• How can the Commission 

accurately estimate the costs and 

benefits? 

• What are the costs currently borne 

by entities covered by this rule with 

respect to the retention of records on 

security-based swap transactions? 

• How many entities will be affected 

by the rule? How many transactions will 

be subject to the rule? 

• Are there additional costs involved 

in complying with the rule that have not 

been identified? What are the types, and 

amounts, of the costs? 

• Are there additional benefits from 

the rule that have not been identified? 

VII. Consideration of Burden on 

Competition and Promotion of 

Efficiency, Competition and Capital 

Formation 

Section 3(f) of the Exchange Act 76

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, to consider whether the action 

would promote efficiency, competition, 

and capital formation. In addition, 

Section 23(a)(2) of the Exchange Act 77

requires the Commission, when making 

rules under 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. 

As discussed above, Rule 13Aa–2T 

will require counterparties to a preenactment security-based swap 

transaction to report: (1) To a registered 

security-based swap data repository or 

the Commission by the compliance date 

established in the reporting rules 

required under Sections 3C(e) and 

13A(a)(1) of the Exchange Act, or within 

60 days after a registered security-based 

swap data repository commences 

operations to receive and maintain data 

concerning such security-based swaps, 

whichever occurs first, a copy of the 

transaction confirmation, in electronic 

form, if available, or in written form, if 

there is no electronic copy, and the 

time, if available, the transaction was 

executed; and (2) to the Commission 

upon request any information relating to 

the security-based swap transactions.78

In addition, pursuant to the Note to 

paragraphs (b)(1) and (2) of Rule 

13Aa–2T, any counterparty to a preenactment security-based swap 

transaction shall retain, in its existing 

format, all information and documents, 

if available, to the extent and in such 

form as they currently exist, relating to 

the terms of a pre-enactment securitybased swap transaction.79

Although the Commission is required 

to promulgate rules governing the 


emcdonald on DSK2BSOYB1PROD with RULES
Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Rules and Regulations 64653 

reporting of pre-enactment securitybased swap transactions, the 

Commission believes that by requiring 

the reporting of information about preenactment security-based swap 

transactions, this rule is an important 

first step in providing increased 

transparency to the market for securitybased swaps, both to the participants or 

potential participants in the market and 

to regulators charged with overseeing a 

segment of the market that was 

previously not regulated. This increased 

transparency ultimately should provide 

the opportunity for increased 

competition among market participants 

and thus contribute to a more efficient 

market. This added visibility also 

should aid the Commission in carrying 

out its regulatory responsibilities by 

providing information that can be used 

to better understand and analyze the 

market. Further, a well-regulated 

security-based swap market may 

increase the confidence of market 

participants in the soundness of the 

market, potentially drawing additional 

participants into the market, increasing 

efficiency. The Commission also notes 

that all similarly situated respondents 

will be subject to the same requirements 

under the rule, and thus no participant 

should be at an unfair competitive 

advantage compared to others. 

The Commission requests comment 

on all aspects of this analysis and, in 

particular, on whether Rule 13Aa–2T 

will place a burden on competition, as 

well as the effect of the proposal on 

efficiency, competition, and capital 

formation. Commenters are requested to 

provide empirical data and other factual 

support for their views, if possible. 

VIII. Regulatory Flexibility 

Certification 

The Commission hereby certifies that 

pursuant to 5 U.S.C. 605(b) that the 

interim final temporary rules contained 

in this release will not have a significant 

economic impact on a substantial 

number of small entities. The interim 

final temporary rules apply only to 

counterparties that may engage in 

security-based swap transactions. Prior 

to the effective date of the Dodd-Frank 

Act, only an eligible contract participant 

(as defined in Section 1(a)(12) of the 

Commodity Exchange Act) may enter 

into security-based swap transactions. 

For this reason, the interim final 

temporary rule should not have a 

significant economic impact on a 

substantial number of small entities. 

IX. Statutory Basis and Text of 

Amendments 

The Commission is adopting Rule 

13Aa–2T pursuant to Section13A of the 

Exchange Act, as amended. 

List of Subjects in 17 CFR Part 240 

Reporting and recordkeeping 

requirements, Securities. 

■ In accordance with the foregoing, the 

Securities and Exchange Commission is 

amending Title 17, chapter II of the 

Code of Federal Regulations as follows: 

PART 240—GENERAL RULES AND 

REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 1. The authority citation for Part 240 

is amended by adding authorities for 

§ 240.13Aa–2T to read as follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 

77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 

77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, 

78j–1, 78k, 78k–1, 78l, 78m, 78n, 78o, 78p, 

78q, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 80a– 

20, 80a–23, 80a–29, 80a–37, 80b–3, 80b–4, 

80b–11, and 7201 et seq.; and 18 U.S.C. 1350, 

unless otherwise noted. 

* * * * * 

Section 240.13Aa–2T is also issued 

under sec. 943, Public Law 111–203, 

124 Stat. 1376. 

* * * * * 

■ 2. Section 240.13Aa–2T is added to 

read as follows: 

§ 240.13Aa–2T Interim rule for reporting 

pre-enactment security-based swap 

transactions. 

(a) Definitions. For purposes of this 

rule, the following definitions shall 

apply: 

(1) Clearing agency shall have the 

same meaning as set forth in Section 

3(a)(23) of the Exchange Act; 

(2) Exchange Act shall mean the 

Securities Exchange Act of 1934, as 

amended; 

(3) Major security-based swap 

participant shall have the meaning 

provided in Section 3(a)(67) of the 

Exchange Act and any rules or 

regulations thereunder; 

(4) Pre-enactment security-based 

swap transaction shall mean a securitybased swap that was entered into prior 

to, and that had not expired as of, July 

21, 2010; 

(5) Security-based swap shall have the 

meaning provided in Section 3(a)(68) of 

the Exchange Act and any rules or 

regulations thereunder; 

(6) Security-based swap dealer shall 

have the meaning provided in Section 

3(a)(71) of the Exchange Act and any 

rules or regulations thereunder; and 

(7) Security-based swap data 

repository shall have the meaning 

provided in Section 3(a)(75) of the 

Exchange Act and any rules or 

regulations thereunder. 

(b) Reporting of pre-enactment 

security-based swap transactions. A 

counterparty to a pre-enactment 

security-based swap transaction as 

provided in paragraph (c) of this section 

shall: 

(1) Report to a registered securitybased swap data repository or the 

Commission by the compliance date 

established in the reporting rules 

required under Sections 3C(e) and 13 

A(a)(1) of the Exchange Act, or within 

60 days after a registered security-based 

swap data repository commences 

operations to receive and maintain data 

concerning such security-based swap, 

whichever occurs first, the following 

information with respect to the preenactment security-based 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, the 

transaction was executed; and 

(2) Report to the Commission, in a 

form and manner as prescribed by the 

Commission, upon request any 

information relating to the securitybased swap transaction. 

Note to paragraphs (b)(1) and (2): In 

order to comply with the above 

reporting requirements, each 

counterparty to a pre-enactment 

security-based swap transaction that 

may be required to report such 

transaction shall retain, in its existing 

format, all information and documents, 

if available, to the extent and in such 

form as they currently exist, relating to 

the terms of a pre-enactment securitybased 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; all 

information from which the price of the 

transaction was derived; whether the 

transaction was accepted for clearing by 

any clearing agency or derivatives 

clearing organization and, if so, the 

identity of such clearing agency or 

derivatives clearing organization; any 

modification(s) to the terms of the 

transaction; and the final confirmation 

of the transaction. 

(c) Reporting party. The 

counterparties to a pre-enactment 

security-based swap transaction shall 

report the information required under 

paragraph (b) of this section as follows: 

(1) Where only one counterparty to a 

pre-enactment security-based swap 

transaction is a security-based swap 

dealer or a major security-based swap 


emcdonald on DSK2BSOYB1PROD with RULES
64654 Federal Register / Vol. 75, No. 202 / Wednesday, October 20, 2010 / Rules and Regulations 

participant, the security-based swap 

dealer or major security-based swap 

participant shall report the transaction; 

(2) Where one counterparty to a preenactment security-based swap 

transaction is a security-based swap 

dealer and the other counterparty is a 

major security-based swap participant, 

the security-based swap dealer shall 

report the transaction; and 

(3) Where neither counterparty to a 

pre-enactment security-based swap 

transaction is security-based swap 

dealer or a major security-based swap 

participant, the counterparties to the 

transaction shall select the counterparty 

who will report the transaction. 

(d) Effective Date. This section shall 

be effective beginning October 20, 2010 

until January 12, 2012. If the 

Commission publishes permanent 

recordkeeping and reporting rules for 

security-based transactions before 

January 12, 2012, that rule will 

terminate the effectiveness of this 

section. 

Dated: October 13, 2010. 

By the Commission. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–26217 Filed 10–19–10; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

U.S. Customs and Border Protection 

DEPARTMENT OF THE TREASURY 

19 CFR Part 12 

[CBP Dec. 10–32] 

RIN 1515–AD70 

Extension of Import Restrictions 

Imposed on Certain Categories of 

Archaeological Material From the PreHispanic Cultures of the Republic of 

Nicaragua 

AGENCY: Customs and Border Protection, 

Department of Homeland Security; 

Department of the Treasury. 

ACTION: Final rule. 

SUMMARY: This document amends 

Customs and Border Protection (CBP) 

regulations to reflect the extension of 

import restrictions on certain categories 

of archaeological material from the PreHispanic cultures of the Republic of 

Nicaragua. The restrictions, which were 

originally imposed by Treasury Decision 

(T.D.) 00–75 and extended by CBP 

Decision (Dec.) 05–33, are due to expire 

on October 20, 2010. The Assistant 

Secretary for Educational and Cultural 

Affairs, United States Department of 

State, has determined that factors 

continue to warrant the imposition of 

import restrictions. Accordingly, these 

import restrictions will remain in effect 

for an additional 5 years, and the CBP 

regulations are being amended to reflect 

this extension until October 20, 2015. 

These restrictions are being extended 

pursuant to determinations of the 

United States Department of State made 

under the terms of the Convention on 

Cultural Property Implementation Act 

that implemented the United Nations 

Educational, Scientific and Cultural 

Organization (UNESCO) Convention on 

the Means of Prohibiting and Preventing 

the Illicit Import, Export and Transfer of 

Ownership of Cultural Property. T.D. 

00–75 contains the Designated List of 

archaeological material representing 

Pre-Hispanic cultures of Nicaragua to 

which the restrictions apply. 

DATES: Effective Date: October 20, 2010. 

FOR FURTHER INFORMATION CONTACT: For 

legal aspects, Charles Steuart, Chief, 

Intellectual Property Rights and 

Restricted Merchandise Branch, 

Regulations and Rulings, Office of 

International Trade, (202) 325–0020. For 

operational aspects, Michael Craig, 

Chief, Interagency Requirements 

Branch, Trade Policy and Programs, 

Office of International Trade, (202) 863– 

6558. 

SUPPLEMENTARY INFORMATION: 

Background 

Pursuant to the provisions of the 1970 

United Nations Educational, Scientific 

and Cultural Organization (UNESCO) 

Convention, implemented by the 

Convention on Cultural Property 

Implementation Act (Pub. L. 97–446, 19 

U.S.C. 2601 et seq.), the United States 

entered into a bilateral agreement with 

the Republic of Nicaragua concerning 

the imposition of import restrictions on 

certain categories of archaeological 

material from the Pre-Hispanic cultures 

of the Republic of Nicaragua on June 16, 

1999, and following completion by the 

Government of Nicaragua of all internal 

legal requirements, the agreement 

entered into force on October 20, 2000. 

On October 26, 2000, the former U.S. 

Customs Service (now U.S. Customs and 

Border Protection (CBP)), published 

T.D. 00–75 in the Federal Register (65 

FR 64140), which amended 19 CFR 

12.104g(a) to reflect the imposition of 

these restrictions and included a list 

designating the types of articles covered 

by the restrictions. 

Import restrictions listed in 19 CFR 

12.104g(a) are ‘‘effective for no more 

than five years beginning on the date on 

which the agreement enters into force 

with respect to the United States. This 

period can be extended for additional 

periods not to exceed five years if it is 

determined that the factors which 

justified the initial agreement still 

pertain and no cause for suspension of 

the agreement exists’’ (19 CFR 

12.104g(a)). On October 20, 2005, CBP 

published CBP Dec. 05–33 in the 

Federal Register (70 FR 61031) which 

amended 19 CFR 12.104g(a) to reflect 

the extension for an additional period of 

5 years. 

On February 23, 2010, the Department 

of State received a request by the 

Government of the Republic of 

Nicaragua to extend the Agreement, and 

after the Department of State proposed 

to extend the Agreement and reviewed 

the findings and recommendations of 

the Cultural Property Advisory 

Committee, the Assistant Secretary for 

Educational and Cultural Affairs, United 

States Department of State, determined 

that the cultural heritage of Nicaragua 

continues to be in jeopardy from pillage 

of Pre-Hispanic archaeological resources 

and made the necessary determinations 

to extend the import restrictions for an 

additional five years. Diplomatic notes 

have been exchanged on October 15, 

2010, reflecting the extension of those 

restrictions for an additional five year 

period. Accordingly, CBP is amending 

19 CFR 12.104g(a) to reflect this 

extension of the import restrictions. 

The Designated List of Pre-Hispanic 

Archaeological Material from Nicaragua 

covered by these import restrictions is 

set forth in T.D. 00–75. The Designated 

List and accompanying image database 

may also be found at the following 

Internet Web site address: http:// 

exchanges.state.gov/heritage/culprop/ 

nifact.html. 

The restrictions on the importation of 

these archaeological materials from the 

Republic of Nicaragua are to continue in 

effect until October 20, 2015. 

Importation of such material continues 

to be restricted unless the conditions set 

forth in 19 U.S.C. 2606 and 19 CFR 

12.104c are met. 

Inapplicability of Notice and Delayed 

Effective Date 

This amendment involves a foreign 

affairs function of the United States and 

is, therefore, being made without notice 

or public procedure (5 U.S.C. 553(a)(1)). 

In addition, CBP has determined that 

such notice or public procedure would 

be impracticable and contrary to the 

public interest because the action being 

taken is essential to avoid interruption 

of the application of the existing import 

restrictions (5 U.S.C. 553(b)(B)). For the 


emcdonald on DSK2BSOYB1PROD with RULES