Document ID: SEC-2021-0696-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: DTCC Data Repository (U.S.), LLC
Posted Date: 2021-05-12T04:00Z

[Federal Register Volume 86, Number 90 (Wednesday, May 12, 2021)]
[Notices]
[Pages 26115-26124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-10065]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91798; File No. SBSDR-2020-01]

Security-Based Swap Data Repositories; DTCC Data Repository 
(U.S.), LLC; Order Approving Application for Registration as a 
Security-Based Swap Data Repository

May 7, 2021.

I. Introduction

    On December 22, 2020, DTCC Data Repository (U.S.), LLC (``DDR'') 
filed with the Securities and Exchange Commission (``Commission'') an 
application (the ``DDR Application'') on Form SDR to register as a 
security-based swap data repository (``SDR'') pursuant to Section 
13(n)(1) of the Securities Exchange Act of 1934 (``Exchange Act'') and 
17 CFR 240.13n-1 (``Rule 13n-1'') thereunder,\1\ and as a securities 
information processor (``SIP'') under Section 11A(b) of the Exchange 
Act.\2\ DDR intends to operate as a registered SDR for security-based 
swap (``SBS'') transactions in the equity, credit, and interest rate 
derivatives asset classes.\3\
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    \1\ 15 U.S.C. 78m(n)(1); 17 CFR 240.13n-1. A copy of DDR's 
application on Form SDR and non-confidential exhibits thereto are 
available for public viewing on the Commission's website. In 2016, 
DDR submitted a prior application for registration as an SDR. See 
Release No. 34-78216 (June 30, 2016), 81 FR 44379 (July 7, 2016); 
Release No. 34-81302 (Aug. 3, 2017), 82 FR 37276 (Aug. 9, 2017). DDR 
withdrew this prior application in 2018. See Letter from Chris 
Childs, Managing Director, DDR, Mar. 27, 2018, https://www.sec.gov/divisions/marketreg/sdr/dtcc-sdr-application-withdrawal-letter-032718.pdf.
    \2\ 15 U.S.C. 78k-1(b).
    \3\ DDR has included the interest rate asset class in its 
application based on feedback from potential users of its SDR 
services. The potential users have identified certain types of 
transactions that will be reported through DDR's infrastructure for 
interest rate derivatives as falling within the Exchange Act 
definition of an SBS transaction.
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    The Commission published notice of the DDR Application in the 
Federal Register for public comment on February 10, 2021,\4\ and the

[[Page 26116]]

Commission received in response two comment letters from the 
International Swaps and Derivatives Association, Inc. (``ISDA'').\5\ 
While generally supportive of the DDR Application, ISDA Letter II 
includes three requests related to regulatory reporting and public 
dissemination, which are addressed in Part III.G. As discussed in Parts 
III and IV below, the Commission has carefully reviewed the DDR 
Application and the comments received. This order grants DDR's 
application to register as an SDR in the asset classes noted above, and 
as a SIP.
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    \4\ Release No. 34-91071 (Feb. 5, 2021), 86 FR 8977 (Feb. 10, 
2021) (``DDR Notice'').
    \5\ Letters from Eleanor Hsu, Director, Data and Reporting, 
ISDA, dated Feb. 26, 2021 (``ISDA Letter I'') and Apr. 9, 2021 
(``ISDA Letter II''). ISDA Letter I did not address the substance of 
the DDR Application; ISDA Letter II provided comments that are 
discussed below.
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II. Background

A. SDR Registration, Duties, and Core Principles

    Section 13(n) of the Exchange Act makes it unlawful for any person, 
unless registered with the Commission, directly or indirectly, to make 
use of the mails or any means or instrumentality of interstate commerce 
to perform the functions of an SDR.\6\ To be registered and maintain 
registration, an SDR must comply with certain requirements and core 
principles described in Section 13(n), as well as any requirements that 
the Commission may impose by rule or regulation.\7\ In 2015, the 
Commission adopted 17 CFR 240.13n-1 to 13n-12 under the Exchange Act to 
establish Form SDR, the procedures for registration as an SDR, and the 
duties and core principles applicable to an SDR (``SDR Rules'').\8\ The 
Commission provided a temporary exemption from compliance with the SDR 
Rules and also extended exemptions from the provisions of the Dodd-
Frank Act set forth in a Commission order providing temporary 
exemptions and other temporary relief from compliance with certain 
provisions of the Exchange Act concerning security-based swaps, and 
these temporary exemptions expired in 2017.\9\
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    \6\ 15 U.S.C. 78m(n).
    \7\ Id.
    \8\ See Release No. 34-74246 (Feb. 11, 2015), 80 FR 14438, 14438 
(Mar. 19, 2015) (``SDR Adopting Release''). In 2016, the Commission 
subsequently amended 17 CFR 240.13n-4 to address third-party 
regulatory access to SBS data obtained by an SDR. See Release No. 
34-78716 (Aug. 29, 2016), 81 FR 60585 (Sep. 2, 2016).
    \9\ See Release No. 34-80359 (Mar. 31, 2017), 82 FR 16867 (Apr. 
6, 2017).
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    The Commission also has adopted 17 CFR 242.900 to 909 under the 
Exchange Act (collectively, ``Regulation SBSR''), which governs 
regulatory reporting and public dissemination of security-based swap 
transactions.\10\ Among other things, Regulation SBSR requires each 
registered SDR to register with the Commission as a SIP,\11\ and the 
Form SDR constitutes an application for registration as a SIP, as well 
as an SDR.\12\
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    \10\ Release No. 34-74244 (Feb. 11, 2015), 80 FR 14563 (Mar. 19, 
2015); Release No. 34-78321 (July 14, 2016), 81 FR 53546 (Aug. 12, 
2016) (``Regulation SBSR Adopting Release''). Regulation SBSR and 
the SDR Rules are referred to collectively as the ``SBS Reporting 
Rules.''
    \11\ See 17 CFR 242.909.
    \12\ See Form SDR, Instruction 2.
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    In 2019, the Commission stated that implementation of the SBS 
Reporting Rules can and should be done in a manner that carries out the 
fundamental policy goals of the SBS Reporting Rules while minimizing 
burdens as much as practicable.\13\ Noting ongoing concerns among 
market participants about incurring unnecessary burdens and the 
Commission's efforts to promote harmonization between the SBS Reporting 
Rules and swap reporting rules, the Commission took the position that, 
for four years following Regulation SBSR's Compliance Date 1 in each 
asset class,\14\ certain actions with respect to the SBS Reporting 
Rules would not provide a basis for a Commission enforcement 
action.\15\ The no-action statement's relevance to DDR's application 
for registration as an SDR and SIP is discussed further below.
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    \13\ Release No. 34-87780 (Dec. 18, 2019), 85 FR 6270, 6347 
(Feb. 4, 2020) (``ANE Adopting Release'').
    \14\ See id. Under Regulation SBSR, the first compliance date 
(``Compliance Date 1'') for affected persons with respect to an SBS 
asset class is the first Monday that is the later of: (i) Six months 
after the date on which the first SDR that can accept transaction 
reports in that asset class registers with the Commission; or (ii) 
one month after the compliance date for registration of SBS dealers 
and major SBS participants (``SBS entities''). Id. at 6346. The 
compliance date for registration of SBS entities is October 6, 2021. 
See id. at 6270, 6345.
    \15\ See id. The specific rule provisions of the SBS Reporting 
Rules affected by the no-action statement are discussed in Part 
II.B.
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B. Standard for Registration

    As noted above, to be registered with the Commission as an SDR and 
maintain such registration, an SDR is required to comply with the 
requirements and core principles described in Section 13(n) of the 
Exchange Act, as well as with any requirement that the Commission may 
impose by rule or regulation.\16\ In addition, Rule 13n-1(c)(3) under 
the Exchange Act provides that the Commission shall grant the 
registration of an SDR if it finds that the SDR is so organized, and 
has the capacity, to be able to: (i) Assure the prompt, accurate, and 
reliable performance of its functions as an SDR; (ii) comply with any 
applicable provisions of the securities laws and the rules and 
regulations thereunder; and (iii) carry out its functions in a manner 
consistent with the purposes of Section 13(n) of the Exchange Act and 
the rules and regulations thereunder.\17\ The Commission shall deny the 
registration of an SDR if it does not make any such finding.\18\ 
Similarly, to be registered with the Commission as a SIP, the 
Commission must find that such applicant is so organized, and has the 
capacity, to be able to assure the prompt, accurate, and reliable 
performance of its functions as a SIP, comply with the provisions of 
the Exchange Act and the rules and regulations thereunder, carry out 
its functions in a manner consistent with the purposes of the Exchange 
Act, and, insofar as it is acting as an exclusive processor, operate 
fairly and efficiently.\19\
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    \16\ See 15 U.S.C. 78m(n)(3).
    \17\ 17 CFR 240.13n-1(c)(3).
    \18\ Id.
    \19\ See 15 U.S.C. 78k-1(b)(3).
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    In determining whether an applicant meets the criteria set forth in 
Rule 13n-1(c), the Commission will consider the information reflected 
by the applicant on its Form SDR, as well as any additional information 
obtained from the applicant. For example, Form SDR requires an 
applicant to provide a list of the asset classes for which the 
applicant is collecting and maintaining data or for which it proposes 
to collect and maintain data, a description of the functions that it 
performs or proposes to perform, general information regarding its 
business organization, and contact information.\20\ Obtaining this 
information and other information reflected on Form SDR and the 
exhibits thereto--including the applicant's overall business structure, 
financial condition, track record in providing access to its services 
and data, technological reliability, and policies and procedures to 
comply with its statutory and regulatory obligations--will enable the 
Commission to determine whether to grant or deny an application for 
registration.\21\ Furthermore, the information requested in Form SDR 
will enable the Commission to assess whether the applicant is so 
organized and has the capacity to comply and carry out its functions in 
a manner consistent with the federal securities laws and the rules

[[Page 26117]]

and regulations thereunder, including the SBS Reporting Rules.\22\
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    \20\ See SDR Adopting Release, supra note 8, at 14459.
    \21\ See id. at 14458.
    \22\ See id. at 14458-59.
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    Consistent with the Commission's no-action statement in the ANE 
Adopting Release,\23\ an entity wishing to register with the Commission 
as an SDR must still submit an application on Form SDR, but can address 
the rule provisions included in the no-action statement by discussing 
how the SDR complies with comparable Commodity Futures Trading 
Commission (``CFTC'') requirements.\24\ Accordingly, in such instances 
the Commission will not assess an SDR application for consistency or 
compliance with the rule provisions included in the Commission's no-
action statement. Specifically, the Commission identified the following 
provisions as not providing a basis for an enforcement action against a 
registered SDR for the duration of the relief provided in the 
Commission statement: Under Regulation SBSR, aspects of 17 CFR 
242.901(a), 901(c)(2) through (7), 901(d), 901(e), 902, 903(b), 906(a) 
and (b), and 907(a)(1), (a)(3), and (a)(4) through (6); under the SDR 
Rules, aspects of Section 13(n)(5)(B) of the Exchange Act and 17 CFR 
240.13n-4(b)(3) thereunder, and aspects of 17 CFR 240.13n-5(b)(1)(iii); 
and under Section 11A(b) of the Exchange Act, any provision pertaining 
to SIPs.\25\ Thus, an SDR applicant will not need to include materials 
in its application explaining how it would comply with the provisions 
noted above, and could instead rely on its discussion about how it 
complies with comparable CFTC requirements.\26\ The applicant may 
instead represent in its application that it: (i) Is registered with 
the CFTC as a swap data repository; (ii) is in compliance with 
applicable requirements under the swap reporting rules; (iii) satisfies 
the standard for Commission registration of an SDR under Rule 13n-1(c); 
and (iv) intends to rely on the no-action statement included in the ANE 
Adopting Release for the period set forth in the ANE Adopting Release 
with respect to any SBS asset class or classes for which it intends to 
accept transaction reports.\27\
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    \23\ See supra notes 13-15 and accompanying text.
    \24\ See supra note 15.
    \25\ The ANE Adopting Release provides additional discussion of 
the particular aspects of the affected rules that would not provide 
a basis for an enforcement action. See ANE Adopting Release, supra 
note 13, at 6347-48.
    \26\ Id. at 6348.
    \27\ Id. For example, an applicant need not describe in Exhibit 
S its functions as a SIP.
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III. Review of DDR's Application Under SBS Reporting Rules

    As noted above, DDR intends to operate as a registered SDR for the 
equity, credit, and interest rate derivatives asset classes.\28\ In its 
application, DDR represents that it is provisionally registered with 
the CFTC as a swap data repository, is in compliance with applicable 
requirements under the CFTC reporting rules applicable to a registered 
swap data repository, and intends to rely on the Commission's position 
outlined in the ANE Adopting Release for applicable reporting rules and 
SBSDR duties for the period set forth therein.\29\ Below is a review of 
the representations made in the application materials against the SBS 
Reporting Rules, taking into account DDR's reliance on the Commission's 
position outlined in the ANE Adopting Release.
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    \28\ See DDR Rulebook, Ex. HH, sec. 3.1; see also Disclosure 
Document, Ex. D6, sec. 1.
    \29\ See Form SDR, cover letter from Katherine Delp, General 
Manager, DTCC Data Repository (U.S.) LLC.
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A. Organization and Governance

1. Summary of DDR's Application
    DDR is a New York limited liability company and a wholly owned 
subsidiary of DTCC Deriv/SERV LLC (``Deriv/SERV''), which in turn is a 
wholly owned subsidiary of The Depository Trust & Clearing Corporation 
(``DTCC'').\30\ DDR is governed by a board of directors (``DDR 
Board'').\31\ The number of directors on the DDR Board is determined by 
Deriv/SERV as the sole LLC member of DDR.\32\ The DDR Board is composed 
of individuals selected from the following groups: Employees of DDR's 
users (either fees paying users or end users) with derivatives industry 
experience, buy-side representatives, independents, and members of 
senior management or the Board of DTCC.\33\ The Deriv/SERV Nominations 
Committee shall periodically review the composition of the DDR Board to 
assure that the level of representation of directors from users, 
management and non-users is appropriate for the interests of these 
constituencies in DDR.\34\
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    \30\ DDR Rulebook, Ex. HH, sec. 2.1.
    \31\ Id. at sec. 2.2. Defined terms taken from the DDR 
Application and used or summarized in this order are intended to 
have the same meaning as in DDR Application.
    \32\ Id.
    \33\ Id.
    \34\ Id.
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    In addition, the DDR Board is responsible for the appointment and 
removal of the chief compliance officer (``CCO'') and approval of CCO 
compensation, which is at the discretion of the Board and effected by a 
majority vote.\35\ The CCO is responsible for establishing and 
administering the compliance program that is designed to prevent 
violations of the obligations of a swap data repository under the Dodd-
Frank Act and other applicable regulations and is ultimately 
responsible for ensuring that DDR complies with the requirements of the 
Commodity Exchange Act, the Securities Exchange Act and other 
applicable laws and regulations.\36\ The CCO has oversight over all 
compliance functions and staff related to DDR's compliance program.\37\ 
The duties of the CCO include, but are not limited to, the following: 
(a) Oversee and review DDR's compliance with applicable law in 
jurisdictions where DDR is registered, designated, recognized or 
otherwise licensed; (b) in consultation with the DDR Board or the 
Senior Officer, resolve any conflicts of interests that may arise, 
including, but not limited to, conflicts between business 
considerations and compliance requirements, conflicts between business 
considerations and compliance requirements for fair and open access, 
and conflicts between the management and members of the DDR Board; (c) 
establish and administer written policies and procedures reasonably 
designed to prevent violation of law; (d) take reasonable steps to 
ensure compliance with applicable law relating to agreements, contracts 
or transactions and confidentiality agreements entered into with 
foreign or domestic regulators; (e) establish procedures for the 
remediation of non-compliance issues identified by the CCO through a 
compliance office review, look-back, internal or external audit 
finding, self-reported error, or validated complaint; (f) notify the 
DDR Board as soon as practicable upon becoming aware of a circumstance 
indicating that DDR, or an individual acting on its behalf, is in non-
compliance with the applicable laws of a jurisdiction in which it 
operates and either: (1) The non-compliance creates a risk to a user; 
(2) the non-compliance creates a risk of harm to the capital markets in 
which it operates; (3) the non-compliance is part of a pattern of non-
compliance; or (4) the non-compliance may have an impact on DDR's 
ability to carry on business as a trade repository in compliance with 
applicable law; (g) establish and follow appropriate procedures for the 
handling, management response, remediation, retesting and closing of 
noncompliance issues; (h) establish and administer a

[[Page 26118]]

written code of ethics; and (i) prepare and sign an annual compliance 
report in accordance with applicable regulations and associated 
recordkeeping.\38\ In addition, the application provides that the CCO 
or a delegate thereof has the authority to investigate any potential 
rule violation and is responsible for enforcing sanctions related to 
violations and for following the procedures outlined for DDR system 
restrictions.\39\
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    \35\ Id. at sec. 2.3.
    \36\ Ex. P.
    \37\ Id.
    \38\ DDR Rulebook, Ex. HH, sec. 2.3.
    \39\ Id. at sec. 10.5.
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    The CCO, in consultation with the DDR Audit Committee, will resolve 
all conflicts of interest.\40\ Any conflict of interest not resolved by 
the DDR Audit Committee shall be escalated to the DDR Board for 
resolution.\41\ When resolving conflicts of interest involving DDR 
staff, the DDR CCO, DDR's senior officer, the audit committee, and the 
DDR Board consider all relevant facts and circumstances.\42\ With 
regard to director conflicts of interest, the application provides that 
a director conflict is present whenever the interests of DDR compete 
with the interests of a director or any party associated with a 
director.\43\ The application also provides that a director conflict is 
present whenever a director's corporate or personal interests could be 
reasonably viewed as affecting his or her objectivity or independence 
in fulfilling his or her duties.\44\ According to the application 
materials, DDR expects its directors to act ``on the side of caution'' 
and immediately bring to the attention of the DDR CCO and either the 
Board Chairman or DDR's legal counsel any matters involving conflicts 
of interest.\45\
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    \40\ Id. at sec. 11.1.
    \41\ Id.
    \42\ Id.
    \43\ Id. at sec. 11.2.
    \44\ Id.
    \45\ Id. at sec. 11.3.
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2. Discussion
    Section 13(n)(7)(B) of the Exchange Act and Rule 13n-4(c)(2) 
thereunder require an SDR to establish governance arrangements that are 
transparent to fulfill public interest requirements and to support the 
objectives of the Federal Government, owners, and participants.\46\ In 
addition, Rule 13n-4(c)(2) requires an SDR to (i) establish well-
defined governance arrangements that include a clear organizational 
structure with effective internal controls; (ii) establish governance 
arrangements that provide for fair representation of market 
participants; (iii) provide representatives of market participants, 
including end-users, with the opportunity to participate in the process 
for nominating directors and with the right to petition for alternative 
candidates; and (iv) establish, maintain, and enforce written policies 
and procedures reasonably designed to ensure that senior management and 
each member of the board or committee that has authority to act on 
behalf of the board possess requisite skills and expertise to fulfill 
their responsibilities in the management and governance of the SDR, 
have a clear understanding of their responsibilities, and exercise 
sound judgment about the SDR's affairs.\47\
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    \46\ 15 U.S.C 78m(n)(7)(B); 17 CFR 240.13n-4(c)(2).
    \47\ 17 CFR 240.13n-4(c)(2)(i)-(iv).
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    Furthermore, Rule 13n-4(b)(11) requires an SDR to designate an 
individual to serve as CCO, and Rule 13n-11(a) requires the SDR to 
identify on Form SDR the person so designated.\48\ Rule 13n-11(a) also 
requires that the compensation, appointment, and removal of the CCO 
shall require approval of a majority of the SDR's board of 
directors.\49\ Rule 13n-11(c) requires the CCO to: (i) Report directly 
to the board of directors or to the senior officer; (ii) review 
compliance with Section 13(n) of the Exchange Act and the rules 
thereunder; (iii) in consultation with the board or the senior officer, 
take reasonable steps to resolve any material conflicts of interest; 
(iv) be responsible for administering the policies and procedures 
required by Section 13(n) of the Exchange Act and the rules thereunder; 
(v) take reasonable steps to ensure compliance with the Exchange Act 
and the SDR Rules thereunder; (vi) establish procedures for the 
remediation of noncompliance; and (vii) establish and follow 
appropriate procedures for the handling, management response, 
remediation, retesting, and closing of noncompliance issues.\50\
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    \48\ 17 CFR 240.13n-4(b), 13n-11(a).
    \49\ 17 CFR 240.13n-11(a).
    \50\ 17 CFR 240.13n-11(c)(1)-(7).
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    Additionally, Section 13(n)(7)(C) of the Exchange Act requires an 
SDR to establish and enforce rules to minimize conflicts of interest in 
the decision-making process of the SDR and establish a process for 
resolving any such conflicts of interest.\51\ Rule 13n-4(c)(3) under 
the Exchange Act provides that an SDR must: (i) Establish, maintain, 
and enforce written policies and procedures reasonably designed to 
identify and mitigate potential and existing conflicts of interest in 
the SDR's decision-making process on an ongoing basis; (ii) with 
respect to the decision-making process for resolving any conflicts of 
interest, require the recusal of any person involved in such conflict 
from such decision-making; and (iii) establish, maintain, and enforce 
written policies and procedures regarding the SDR's non-commercial and/
or commercial use of the SBS transaction information that it 
receives.\52\
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    \51\ 15 U.S.C. 78m(n)(7)(C)(i), (ii).
    \52\ 17 CFR 240.13n-4(c)(3)(i)-(iii).
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    The Commission received no comments applicable to these 
requirements. As described above, the DDR Application includes 
provisions for the representation of market participants in the 
governance arrangements, as well as procedures providing an opportunity 
to participate in the process for nominating directors and the right to 
petition for alternative candidates. In addition, the DDR Application 
includes policies and procedures that set standards for the skills and 
expertise possessed by the DDR Board.
    More generally, the DDR Application sets forth an organizational 
structure that is clear and includes provisions for internal controls. 
The DDR Application includes provisions for a CCO that has been 
designated by the DDR Board and whose compensation, appointment, and 
removal is set by the DDR Board. In addition, the DDR Application 
includes policies and procedures that require the CCO to report to the 
senior officer and be responsible for maintaining compliance with 
applicable Commission rules, investigating any suspected violations 
thereof, and overseeing any necessary remediation. The DDR Application 
includes policies and procedures that identify and mitigate conflicts 
of interest, require the recusal from decision-making of members of the 
DDR Board when involved in a conflict, and delineate the commercial and 
non-commercial use of SBS transaction information received.

B. Access and Information Security

1. Summary of DDR's Application
    According to DDR, access to and usage of its SDR service will be 
available to all market participants that engage in SBS transactions, 
and DDR does not and will not bundle or tie its SDR services with any 
other services.\53\ The application provides that DDR's services would 
be available to all market participants on a fair, open, and equal 
basis.\54\ Further, DDR does not impose membership qualifications on 
users of its services beyond (i) requiring execution of membership 
documents, such as a user agreement, (ii) the ability to comply with 
the technical specifications published by DDR, and

[[Page 26119]]

(iii) compliance with applicable law, specifically those related to 
sanctions administered and enforced by the Office of Foreign Assets 
Control of the U.S. Department of the Treasury (``OFAC'').\55\
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    \53\ See DDR Rulebook, Ex. HH, at sec. 1.1.
    \54\ See id.
    \55\ See id.
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    To be granted access to the DDR system, receive trade information, 
confirm or verify transactions, submit messages, or receive reports, a 
market participant must be onboarded as a user.\56\ For those market 
participants that onboard, DDR will provide a mechanism for users to 
access the DDR system to confirm and verify transactions. Users are 
required to maintain at least two Super Access Coordinators 
(``SuperACs'') on the DDR System; SuperACs are responsible for: (1) 
Providing access to other individuals (referred to as ``ACs'') who are 
eligible to access the System and use the SDR Services on behalf of the 
user; and (2) removing access for any individuals who should no longer 
access the System on behalf of the user.\57\
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    \56\ See id.
    \57\ Id. at sec. 1.2.
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    To participate in the SDR services offered by DDR, each user will 
be required to enter into a user agreement; by entering into a user 
agreement each user agrees to be bound by the terms of the user 
agreement and DDR Operating Procedures, which incorporate terms of 
DDR's Rulebook.\58\ In addition, the DDR Rulebook provides that each 
user must comply with all reasonable requests by DDR for information, 
documentation, or data concerning such user and related to such user's 
use of the DDR system as DDR may deem necessary.\59\ The DDR Rulebook 
also states that DDR has the right to audit or inspect a user (and its 
facilities) with respect to its use of the DDR system, upon reasonable 
notice.\60\ Furthermore, the DDR Rulebook provides that users must 
cooperate with such audits or inspections and with other inquiries by 
DDR concerning their use of the DDR system.\61\
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    \58\ Id. at sec. 1.3.
    \59\ Id. at sec. 10.5.
    \60\ Id.
    \61\ Id.
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    The DDR Operating Procedures provide that each user agrees to 
defend and indemnify DDR from and against all reasonable losses, 
liabilities, damages, judgments, settlements, fines, costs, and 
expenses DDR may incur directly arising out of or directly relating to 
the acts or omissions of a user's participation or failure to 
participate (for itself or on behalf of others) in DDR's services or 
DDR's system, any unauthorized access to DDR's system through such 
user's interface with DDR's system, or any other matter directly 
relating to such user that is not the responsibility of DDR under the 
DDR Operating Procedures, except to the extent that such losses arise 
out of or relate to DDR's negligence or willful misconduct.\62\
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    \62\ Id., app. A, at sec. 9.
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    With respect to prohibiting or limiting a person's access to SDR 
services, the DDR Rulebook outlines the process required for DDR to 
decline an application to become a user of SDR services.\63\ For 
example, DDR may deny an applicant's access to the DDR system if 
required pursuant to applicable law (e.g., due to sanctions 
administered and enforced by OFAC or the Canadian Government's Office 
of the Superintendent of Financial Institutions).\64\ The DDR Rulebook 
provides that any such applicants would receive notice and an 
opportunity for a hearing in the event that DDR declines an 
application.\65\ The DDR Rulebook also provides that, if the denial of 
an application is reversed,\66\ such application will be accepted and 
the applicant granted access to the DDR system following completion of 
onboarding requirements.\67\
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    \63\ See DDR Rulebook, Ex. HH, sec. 10.2.
    \64\ See id.
    \65\ See id.
    \66\ The DDR Notice, supra note 4, inadvertently misstated a 
provision in the DDR Rulebook. Specifically, the DDR Rulebook does 
not include language that states denial of an application could be 
reversed ``either by the DDR Board or by the Commission pursuant to 
Section 11A(b) of the Exchange Act.'' As noted in Part II.B, the 
Commission has identified Section 11A(b) as not providing a basis 
for an enforcement action against a registered SDR for the duration 
of the relief provided in the Commission statement in the ANE 
Adopting Release. See supra note 25 and accompanying text.
    \67\ See DDR Rulebook, Ex. HH, sec. 10.2.
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    The DDR Rulebook also provides that DDR may temporarily deny access 
to or otherwise impose restrictions on the use of the DDR system on a 
user, or take such other actions as DDR deems reasonably necessary to 
protect its systems and other users, for (i) a violation of the DDR 
rules (including a failure to pay fees when due); (ii) any neglect or 
refusal by such user to comply with any direction DDR deems reasonably 
necessary to protect its systems and other users; or (iii) any error, 
delay, or other conduct that materially and adversely affects the 
operations of DDR (each a ``Subject Event'').\68\ Limits to the 
activities, functions, or operation of users may include, but are not 
limited to, restricting access to the DDR system or a user's ability to 
submit data via a non-approved source and assessing users with all 
costs incurred by DDR in connection with a ``Subject Event'' and apply 
any deterrent financial penalties that DDR may deem necessary.\69\ The 
DDR Rulebook provides that DDR is required to provide prompt notice to 
the designated regulators of any such action,\70\ as well as furnish 
the user with a concise written statement describing the Subject Event 
applicable to the user.\71\
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    \68\ See id. at sec. 10.4.1.
    \69\ See id.
    \70\ See id.
    \71\ See id. at sec. 10.4.2 (setting out DDR's procedures for 
restrictive proceedings, including the user's response to the 
Subject Event written statement, the user's opportunity for a 
hearing, and the user's right to apply for review to the DDR Board).
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    With respect to information security, the DDR Rulebook provides 
that DTCC has established a Technology Risk Management Team, whose role 
is to manage information security risk and ensure the availability, 
integrity, and confidentiality of the organization's information 
assets.\72\ DDR will be responsible for monitoring the performance of 
DTCC regarding implementation and maintenance of information security 
``within its infrastructure.'' \73\ The DDR Rulebook specifies that 
various policies have been developed to provide the framework for both 
physical security and information security are routinely refreshed.\74\ 
It also states that DDR's Technology Risk Management Team carries out a 
series of processes to endeavor to ensure that DDR is protected in a 
cost-effective and comprehensive manner, while still meeting the 
requirements of applicable regulations.\75\ This includes preventive 
controls such as firewalls, appropriate encryption technology, and 
authentication methods.\76\ Vulnerability scanning is used to identify 
high risks to be mitigated and managed and to measure conformance 
against the policies and standards.\77\
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    \72\ Id. at sec. 9.2.
    \73\ Id. at sec. 9.1.
    \74\ Id. at sec. 9.2.
    \75\ Id.
    \76\ Id.
    \77\ Id.
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    The DDR system is supported by DTCC and relies on the disaster 
recovery program maintained by DTCC.\78\ To enable DDR to provide 
timely resumption of critical services should there be any disruption 
to its business, DDR follows these key principles for business 
continuity and disaster recovery: (i) Achieve recovery of critical 
services within a four-hour window with faster recovery time in less 
extreme situations; (ii) disperse staff across geographically diverse 
operating

[[Page 26120]]

facilities; (iii) operate multiple back-up data centers linked by a 
highly resilient network technology; (iv) maintain emergency command 
and out-of-region operating control; (v) utilize new technology which 
provides high-volume, high-speed, asynchronous data transfer over 
distances of 1,000 miles or more; (vi) maintain processes that mitigate 
marketplace, operational and cyber-attack risks; (vii) test continuity 
plan readiness and connectivity on a regular basis ensuring that users 
and third-party vendors/service providers can connect to DDR's primary 
and back-up sites; (viii) communicate on an emergency basis with the 
market, users and government agency decision-makers; and (ix) evaluate, 
test, and utilize best business continuity and resiliency 
practices.\79\
---------------------------------------------------------------------------

    \78\ See id. at sec. 8.1.
    \79\ See id.
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2. Discussion
    Rule 13n-4(c)(1)(ii) under the Exchange Act requires an SDR to 
permit market participants to access specific services offered by the 
SDR separately.\80\ Rule 13n-4(c)(1)(iii) requires an SDR to establish, 
monitor on an ongoing basis, and enforce clearly stated objective 
criteria that would permit fair, open, and not unreasonably 
discriminatory access to services offered and data maintained by the 
SDR.\81\ Rule 13n-4(c)(1)(iv) requires an SDR to establish, maintain, 
and enforce written policies and procedures reasonably designed to 
review any prohibition or limitation of any person with respect to 
access to services offered, directly or indirectly, or data maintained 
by the SDR and to grant such person access to such services or data if 
such person has been discriminated against unfairly.\82\ In addition, 
Rule 13n-6 requires an SDR, with respect to those systems that support 
or are integrally related to the performance of its activities, to 
establish, maintain, and enforce written policies and procedures 
reasonably designed to ensure that its systems provide adequate levels 
of capacity, integrity, resiliency, availability, and security.\83\
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    \80\ 17 CFR 240.13n-4(c)(1)(ii).
    \81\ 17 CFR 240.13n-4(c)(1)(iii).
    \82\ 17 CFR 240.13n-4(c)(1)(iv).
    \83\ 17 CFR 240.13n-6.
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    The Commission received no comments applicable to these 
requirements. As described above, the DDR Application includes 
procedures for onboarding and maintaining ongoing access to users that 
are fair, open, reasonable and not unreasonably discriminatory. These 
procedures include user agreements that reflect clear and specific 
minimum standards for users to follow in seeking to access SBS data 
held at the SDR. The DDR Application also includes reasonable 
provisions for limiting, denying, and revoking access to SDR systems 
that include procedures for review and reconsideration of any 
determination related to limiting, denying, or revoking a user's 
access. The Commission believes that the procedures described above 
further help ensure that the access requirements are fair, open, and 
not unreasonably discriminatory. In addition, the DDR Application 
includes policies and procedures designed to ensure that the SDR's 
automated systems maintain adequate levels of capacity, integrity, 
resiliency, availability, and security that protect against loss of 
data, employ geographic diversity in their site selection, and account 
for service disruptions.

C. Acceptance and Use of SBS Data

1. Summary of DDR's Application
    The DDR Application will provide market participants with the 
ability to submit data for over-the-counter (``OTC'') derivatives for 
credit, equity, rate, foreign exchange and other commodity asset 
classes.\84\ DDR may reject a transaction record submitted due to the 
submission failing to meet DDR validations, including but not limited 
to the submission failing to be in a format that can be ingested by 
DDR, failing to meet jurisdictional requirements or failing to provide 
required data elements.\85\ A rejected submission is deemed not to have 
been submitted at all with respect to reporting to the jurisdiction for 
which it was rejected (it is possible that one transaction record is 
submitted to comply with reporting obligations in more than one 
jurisdiction and accepted in one while rejected in another).\86\ Upon 
submission, the DDR system will perform validation checks to ensure 
that each submitted record is complete and accurate, in accordance 
DDR's message ingestion requirements.\87\ This process is completed 
through validation and consistency checks.\88\ If the record fails 
these validation or consistency checks, the record will be rejected, 
and such rejection status will be communicated to the user(s) to 
correct and re-submit.\89\ According to DDR, its SDR service offers an 
end-to-end straight through process. DDR states that, from the receipt 
of data, processing and maintenance of data, and dissemination of data, 
processes are automated and do not require manual intervention, and 
this straight through processing model is a key mitigant to 
modification or invalidation of any data.\90\
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    \84\ DDR Rulebook, Ex. HH, sec. 3.1; see also Disclosure 
Document, Ex. D6, sec. 1. Although the DDR Application concerns 
registration with the Commission as an SDR for credit, equity, and 
interest rate derivatives, as noted above, DDR is also provisionally 
registered with the CFTC as a swap data repository.
    \85\ DDR Rulebook, Ex. HH, sec. 1.3.
    \86\ Id.
    \87\ Id. at sec. 10.1.1.
    \88\ Id.
    \89\ Id.
    \90\ Ex. EE.
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    DDR's Operating Procedures provides that DDR and each user agrees 
that each will treat as confidential (both during and after the 
termination of a user's access to DDR's system) all confidential 
information (defined as: (i) With respect to DDR, transaction data 
specified in records received by DDR and any data, reports, summaries 
or payment amounts which may be produced as a result of processing such 
transaction data, and (ii) with respect to any user, the technical 
specifications of DDR's system (to the extent not publicly disclosed by 
DDR; but confidential information does not include data distributed to 
the public in accordance will applicable law).\91\
---------------------------------------------------------------------------

    \91\ DDR Rulebook, Ex. HH, app. A, sec. 8; see also Disclosure 
Document, Ex. D6, sec. 5 (DDR's privacy and confidentiality policies 
and procedures).
---------------------------------------------------------------------------

2. Discussion
    Rule 13n-5(b)(1)(i) under the Exchange Act requires an SDR to 
establish, maintain, and enforce written policies and procedures 
reasonably designed for the reporting of complete and accurate 
transaction data to the SDR and to accept all transaction data that is 
reported in accordance with such policies and procedures.\92\ 
Additionally, Rule 13n-5(b)(1)(ii) requires that if an SDR accepts any 
SBS transaction in a particular asset class, the SDR must accept all 
SBS transactions in that asset class that are reported to it in 
accordance with its policies and procedures.\93\ In addition, Rule 13n-
5(b)(3) requires an SDR to establish, maintain, and enforce written 
policies and procedures reasonably designed to ensure that the 
transaction data and positions that it maintains are complete and 
accurate.\94\ Rule 13n-5(b)(5) requires an SDR to establish, maintain, 
and enforce written policies and procedures reasonably designed to 
prevent any provision in a valid SBS transaction from being invalidated 
or modified through the procedures or operations of the SDR.\95\ Rule 
13n-

[[Page 26121]]

5(b)(6) requires an SDR to establish procedures and provide facilities 
reasonably designed to effectively resolve disputes over the accuracy 
of the transaction data and positions that are recorded in the SDR.\96\
---------------------------------------------------------------------------

    \92\ 17 CFR 240.13n-5(b)(1)(i).
    \93\ 17 CFR 240.13n-5(b)(1)(ii).
    \94\ 17 CFR 240.13n-5(b)(3).
    \95\ 17 CFR 240.13n-5(b)(5).
    \96\ 17 CFR 240.13n-5(b)(6).
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    Furthermore, Section 13(n)(5)(F) of the Exchange Act and Rule 13n-
4(b)(8) thereunder each require an SDR to maintain the privacy of any 
and all SBS transaction information that the SDR receives.\97\ In 
addition, Rule 13n-9(b)(1) requires an SDR to establish, maintain, and 
enforce written policies and procedures reasonably designed to protect 
the privacy of any and all SBS transaction information that the SDR 
receives and that include policies and procedures to protect the 
privacy of any and all SBS transaction information that the SDR shares 
with affiliates and non-affiliated third parties.\98\ Rule 13n-9(b)(2) 
also requires an SDR to establish, and maintain safeguards, policies, 
and procedures reasonably designed to prevent the misappropriation or 
misuse, directly or indirectly, of any confidential information 
received by the SDR, material non-public information, or intellectual 
property, such as trading strategies or portfolio positions, by: (i) 
Limiting access to such information and intellectual property; (ii) 
having standards for trading by persons associated with the SDR for 
their personal benefit or the benefit of others; and (iii) having 
adequate oversight to ensure compliance with these safeguards, 
policies, and procedures.\99\
---------------------------------------------------------------------------

    \97\ See 15 U.S.C. 78m(n)(5)(F); 17 CFR 240.13n-4(b)(8), 
240.13n-9.
    \98\ 17 CFR 240.13n-9.
    \99\ See 17 CFR 240.13n-9(b)(2).
---------------------------------------------------------------------------

    The Commission received no comments applicable to these 
requirements. As described above, the DDR Application includes policies 
and procedures designed to protect transaction data and its systems by 
restricting access to users, who are obligated to comport with DDR's 
rules in a manner that facilitates DDR's compliance with its 
obligations under Commission rules. The Commission views this approach 
as reasonable. Access to DDR's systems to view trade data or verify 
information should be conditioned such that DDR retains the ability to 
protect the data, its systems, and its users. The Commission notes that 
DDR retains the responsibility, among other things, to ensure that its 
policies and procedures are reasonably designed to: (i) Ensure trade 
data reported to it is complete and accurate, as required under Rule 
13n-5(b)(1); (ii) ensure that its systems provide adequate levels of 
capacity, integrity, resiliency, availability and security, as required 
under Rule 13n-6; and (iii) ensure that it protects the privacy and 
confidentiality of transaction information, as required under Rule 13n-
9(b). Additionally, the DDR Application includes procedures designed to 
ensure that any valid provisions of trade information are not modified 
or invalidated, and these procedures include controls that are 
regularly audited and processing systems designed to prevent 
unauthorized changes to SBS information. The Commission also believes 
that DDR provides procedures and facilities reasonably designed to 
effectively resolve disputes over the accuracy of the transaction data 
and positions that are recorded in the SDR.
    Furthermore, the DDR Application contains policies and procedures 
regarding both data security and the privacy of SBS data, the latter of 
which includes in each case procedures limiting access to SBS data to 
employees with either direct or support responsibilities related to 
systems that maintain the data, and that limit the use of such data in 
all cases to the performance of job responsibilities. The Commission 
believes that such policies and procedures also establish a standard 
for the trading practices of personnel that prevents the use of the 
data for personal benefit or the benefit of others. In addition, DDR 
has policies and procedures that, when taken together with policies and 
procedures regarding the duties of the CCO,\100\ are reasonably 
designed to protect the privacy of SBS transaction information, 
including information shared with affiliates and third parties, through 
adequate oversight to ensure compliance with the policies and 
procedures described above.
---------------------------------------------------------------------------

    \100\ See supra Part III.A (describing policies and procedures 
regarding the CCO and conflicts of interest).
---------------------------------------------------------------------------

D. Fees

1. Summary of DDR's Application
    The DDR Application includes DDR's fee schedules.\101\ There are 
two types of fees, Position Maintenance Fees and Account Management 
Fees.\102\ DDR charges a monthly ``Position Maintenance Fee,'' based on 
the number of positions open at any time during the applicable month 
and which decreases as the number of open positions increases on a 
tiered basis.\103\ Position count includes positions even if terminated 
or exited prior to the month end.\104\ Platforms, as that term is 
defined by Commission rules,\105\ are not charged position maintenance 
fees.\106\ For a position where a clearing agency (``Clearer'') is a 
counterparty, the Clearer shall be responsible for the Position 
Maintenance Fee, less a 75% reduction.\107\ For all other positions, 
the Reporting Side, as that term is defined by Commission rules,\108\ 
will be responsible for Position Maintenance Fees.\109\ For entities 
grouped as a single account with subaccounts (``Grouped Accounts''), 
positions will be aggregated for purposes of determining position count 
threshold and to determine the applicable tiered Position Maintenance 
Fees.\110\
---------------------------------------------------------------------------

    \101\ See Ex. M. Additionally, DDR provides a fee schedule for 
DDR Users on its website at http://www.dtcc.com/derivatives-services/global-trade-repository/gtr-us.
    \102\ See Ex. M.
    \103\ The Position Maintenance Fees only apply for a position 
count of five hundred or more open positions during any month. See 
id. For examples of the calculation of the Position Maintenance Fee, 
see Annex A to Exhibit M of the application.
    \104\ See Ex. M.
    \105\ See 17 CFR 242.900(v) (defining ``platform'' as a national 
securities exchange or security-based swap execution facility that 
is registered or exempt from registration).
    \106\ See Ex. M.
    \107\ See id.
    \108\ See 17 CFR 242.900(gg) (defining ``reporting side'' as the 
side of a security-based swap identified by Rule 901(a)(2) as having 
the duty to report the transaction).
    \109\ See Ex. M.
    \110\ See id.
---------------------------------------------------------------------------

    In addition to the Position Maintenance Fee, the application 
indicates that DDR will charge an annual ``Account Management Fee,'' 
currently set at $1,200.00, that will apply to all accounts and will be 
prorated in the year the account is opened.\111\ Accounts may be set up 
on an individual entity basis or, in certain instances, as Grouped 
Accounts, such as a corporate family \112\ that chooses to structure 
its account as a single account with subaccounts for affiliates or an 
asset manager that chooses to structure its account as a single account 
with subaccounts for its managed funds. Grouped Accounts will be 
charged one Account Management Fee.\113\
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    \111\ See id.
    \112\ DDR organizes its users into families (each, a ``Family'') 
as directed by the users (through User Agreements or in such other 
manner as designated by DDR from time to time) that desire to be so 
organized. See DDR Rulebook, Ex. HH, app. A, sec. 2.
    \113\ See Ex. M.
---------------------------------------------------------------------------

    DDR's fee policy further provides that users will have the option 
to elect to enter into a long-term commitment for a period ending 
December 31, 2024 (``Long Term Commitment''), which would reduce the 
applicable Position Maintenance Fee and Account

[[Page 26122]]

Management Fee by ten percent, exclusive of tax, for the duration of 
the Long-Term Commitment.\114\ If the Long Term Commitment is 
terminated prior to the end of the applicable Long Term Commitment 
period, DDR explains that the non-Clearer User will be subject to an 
early termination fee equal to: (a) The difference between the total 
amount of fees due after application of the Long Term Commitment 
incentive and the total amount of fees that would have been due during 
the applicable portion of the Long Term Commitment period had no 
incentive been provided (``Total Incentive Provided''); plus (b) the 
greater of five percent of the Total Incentive Provided or 
$500.00.\115\
---------------------------------------------------------------------------

    \114\ See id.
    \115\ See id.
---------------------------------------------------------------------------

2. Discussion
    Section 13(n)(7)(A) of the Exchange Act prohibits an SDR (unless 
necessary or appropriate to achieve the purposes of the Exchange Act) 
from: (i) Adopting any rule or taking any action that results in any 
unreasonable restraint of trade; or (ii) imposing any material anti-
competitive burden on the trading, clearing, or reporting of 
transactions.\116\ Rule 13n-4(c)(1)(i) under the Exchange Act also 
requires an SDR to ensure that any dues, fees, or other charges that it 
imposes, and any discounts or rebates that it offers, are fair and 
reasonable and not unreasonably discriminatory.\117\ It also requires 
that such dues, fees, other charges, discounts, or rebates be applied 
consistently across all similarly situated users of the SDR's 
services.\118\ In discussing the fee provisions of the SDR Rules, the 
Commission stated that it would take a flexible approach in evaluating 
the fairness and reasonableness of an SDR's fees and charges on a case-
by-case basis, recognizing that there may be instances in which an SDR 
could charge different users different prices for the same or similar 
services.\119\
---------------------------------------------------------------------------

    \116\ 15 U.S.C. 78m(n)(7)(A).
    \117\ 17 CFR 240.13n-3(c)(1)(i).
    \118\ Id.
    \119\ See SDR Adopting Release, supra note 8, at 14479. In 
making this statement, however, the Commission also noted that 
charging different users different prices for the same or similar 
services cannot be unreasonably discriminatory.
---------------------------------------------------------------------------

    The Commission received no comments applicable to these 
requirements. As described above, the DDR Application describes fees 
that include a fixed component and a variable component that increases 
with the usage of SDR services. The Commission notes that such a fee 
structure is generally in line with the economics of recordkeeping 
services for security-based swaps, which involve a fixed cost 
investment and marginal costs of operation.\120\ The fixed component of 
DDR's fees would be consistent with the applicant recovering the fixed 
costs investment associated with setting up and maintaining a user 
account, while the variable component would be consistent with the 
applicant recovering marginal costs of operation, i.e., costs that 
increase with the provision of SDR services to the user.
---------------------------------------------------------------------------

    \120\ See generally Regulation SBSR Adopting Release, supra note 
10, at 53551 (stating that the provision of recordkeeping services 
for security-based swaps involves a predominantly fixed cost 
investment with low marginal costs of operation).
---------------------------------------------------------------------------

    With regard to DDR's fee schedule, which imposes an annual Account 
Management Fee of $1,200 and a Positions Maintenance Fee that varies as 
a function of the number of open positions each month, the fees are 
identical to those charged to customers reporting swap transactions in 
credit, equity, and interest rate products pursuant to CFTC reporting 
rules and, as such, appear consistent with the Commission's own 
requirements.\121\ Specifically, the Commission believes it is 
reasonable for DDR to establish similar fees across its CFTC and 
Commission reporting requirements where its obligations require similar 
levels of services and infrastructure. The Commission believes that the 
DDR Application sets fees at levels that are fair and reasonable and 
not unreasonably discriminatory.
---------------------------------------------------------------------------

    \121\ See DDR Fee Schedule--CFTC Reporting, Oct. 1, 2016, http:/
/www.dtcc.com/~/media/Files/Downloads/Data-and-Repository-Services/
GTR/US-DDR/DDR_Fees.pdf.
---------------------------------------------------------------------------

E. Recordkeeping

1. Summary of DDR's Application
    The DDR Rulebook provides that DDR will maintain all information as 
required by applicable law as well as maintain swap and security-based 
swap data throughout the existence of the swap and security-based swap 
and for fifteen years following termination of the swap or security-
based swap or as otherwise required by applicable regulations.\122\ The 
records will be readily accessible throughout the life of a swap or 
security-based swap and for five years following its termination and 
shall be in an electronic format that is non-rewriteable and non-
erasable.\123\ For the remainder of the retention period, the swap or 
security-based swap record will be retrievable within three business 
days.\124\ In the event DDR ceases doing business or ceases to be a 
registered or designated trade repository it shall continue, for a 
period of not less than five years or upon transfer to the Designated 
Regulator or its designee or another registered or designated trade 
repository for that jurisdiction, to preserve, maintain, and make 
accessible to each Designated Regulator or its designee, the records 
and data required by Applicable Regulation in accordance with DDR's 
Wind-Down Policies and Procedures document.\125\
---------------------------------------------------------------------------

    \122\ DDR Rulebook, Ex. HH, sec. 1.4.1.
    \123\ Id.
    \124\ Id.
    \125\ Id.
---------------------------------------------------------------------------

2. Discussion
    Rule 13n-5(b)(4) of the Exchange Act requires an SDR to maintain 
transaction data and related identifying information for not less than 
five years after the SBS expires and historical positions for not less 
than five years in a place and format that is readily accessible and 
usable to the Commission and other persons with authority to access or 
view such information and in an electronic format that is non-
rewriteable and non-erasable.\126\ Rule 13n-7 requires an SDR to make 
and keep current books and records relating to its business for at 
least five years, and for the first two years, keep such records in a 
place that is immediately available to representatives of the 
Commission for inspection and examination.\127\ In addition, Rule 13n-
5(b)(8) requires an SDR to make and keep current a plan to ensure that 
the transaction data and positions that are recorded in the SDR 
continue to be maintained in accordance with Rule 13n-5(b)(7),\128\ 
including procedures for transferring the transaction data and 
positions to the Commission or its designee.\129\
---------------------------------------------------------------------------

    \126\ 17 CFR 240.13n-5(b)(4).
    \127\ 17 CFR 240.13n-7.
    \128\ Rule 13n-5(b)(7) states that, if an SDR ceases doing 
business or ceases to be registered pursuant to Section 13(n) of the 
Exchange Act, the SDR must continue to preserve, maintain, and make 
accessible the transaction data and historical positions required to 
be collected, maintained, and preserved by this section in the 
manner required by the Exchange Act and the rules and regulations 
thereunder and for the remainder of the period required by this 
section. 17 CFR 240.13n-5(b)(7).
    \129\ 17 CFR 240.13n-8.
---------------------------------------------------------------------------

    The Commission received no comments applicable to these 
requirements. As described above, the DDR Application provides for the 
recordkeeping of SBS transaction data for at least five years following 
the termination of the transaction,\130\ and will be readily accessible 
throughout the life of a security-based swap in an electronic format 
that is non-rewriteable and non-erasable.\131\ In addition, DDR 
provides for the transferring of

[[Page 26123]]

transaction data and positions to the Commission via reports designed 
to provide visibility into positions and the status of submitted trades 
and also provides for direct electronic access to data reported to DDR 
in satisfaction of the Commission's regulatory requirements both for 
the Commission and, where such access is permitted by applicable law 
and any relevant Memorandum of Understanding or other arrangement, the 
Commission's designee.
---------------------------------------------------------------------------

    \130\ See DDR Rulebook, Ex. HH, sec. 1.4.1.
    \131\ See id.
---------------------------------------------------------------------------

F. Disclosure

1. Summary of DDR's Application
    DDR publishes a disclosure document to provide a summary of 
information regarding its service offerings and the SBS data it 
maintains.\132\ Specifically, the disclosure document sets forth a 
description of the following: (i) A description of access to services 
offered and swap data maintained; (ii) criteria for those seeking to 
connect to or link with its SDR; (iii) criteria for those seeking to 
connect to or link with DDR systems; (iv) policies and procedures with 
respect to DDR systems safeguards; (v) policies and procedures related 
to privacy and confidentiality; (vi) policies and procedures regarding 
its non-commercial and commercial use of transaction data; \133\ (vii) 
procedures for dispute resolution; (viii) fees, rates, dues and other 
charges; and (ix) governance arrangements.\134\
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    \132\ See Disclosure Document, Ex. D6.
    \133\ See also DDR Rulebook, Ex. HH, sec. 6.3 (``As part of the 
SDR Services, DDR receives and collects swap and security-based swap 
data in the ordinary course of its business from various Market 
Participants and registered entities for the purpose of maintaining 
a centralized recordkeeping facility for swaps and security-based 
swaps. The collection and maintenance of this data is designed to 
enhance the transparency, promote standardization and reduce 
systemic risk by making this data available to regulators and the 
public pursuant to Applicable Law. Therefore, access to data 
maintained by DDR to Market Participants is generally prohibited, 
except to either counterparty to that particular swap or security-
based swap, such counterparty's authorized third party service 
providers or other parties specifically authorized by the User or 
counterparty pursuant to Rule 1.3 or 6.4, or to other regulators or 
entities in accordance with Rule 6.5 below. DDR shall not, as a 
condition of the reporting of swap or security-based swap 
transaction data, require a Reporting Party to consent to the use of 
reported data for commercial or business purposes. DDR shall not 
make commercial use of real-time swap data prior to its public 
dissemination.'').
    \134\ See id.
---------------------------------------------------------------------------

2. Discussion
    Rule 13n-10 under the Exchange Act requires that, before accepting 
any SBS data from a market participant or upon a market participant's 
request, an SDR shall furnish to the market participant a disclosure 
document that contains certain written information, which must 
reasonably enable the market participant to identify and evaluate 
accurately the risks and costs associated with using the SDR's 
services.\135\ This written information must contain the following: (i) 
The SDR's criteria for providing others with access to the services 
offered and data it maintains; (ii) its criteria for those seeking to 
connect to or link with the SDR; (iii) a description of its policies 
and procedures regarding its safeguarding of data and operational 
reliability, as described in Rule 13n-6; (iv) a description of its 
policies and procedures reasonably designed to protect the privacy of 
SBS transaction information that it receives, as described in Rule 13n-
9(b)(1); (v) a description of its policies and procedures regarding its 
noncommercial and commercial use of SBS transaction information that it 
receives, as described in Rule 13n-5(b)(6); (vi) a description of its 
dispute resolution procedures, as described in Rule 13n-5(b)(6); (vii) 
a description of all the SDR's services, including any ancillary 
services; and (viii) the SDR's updated schedule of any dues; unbundled 
prices, rates or other fees for all of its services, including 
ancillary services; any discounts or rebates offered; and the criteria 
to benefit from such discounts or rebates; and (ix) a description of 
its governance arrangements.\136\
---------------------------------------------------------------------------

    \135\ 17 CFR 240.13n-10.
    \136\ See id.
---------------------------------------------------------------------------

    The Commission received no comments applicable to these 
requirements. As described throughout this order, the DDR Application 
includes extensive discussion of DDR's policies and procedures with 
respect to access,\137\ the use of SBS transaction information,\138\ 
service offerings, including ancillary services,\139\ and governance 
arrangements.\140\ The Commission believes that the DDR Disclosure 
Document presents a reasonably comprehensive view of the applicant's 
overall service offering, from which a potential user could identify 
and evaluate accurately the risks and costs associated with using the 
SDR's services.\141\ In addition, regarding the requirement to furnish 
the document to market participants, the Commission understands that 
DDR publishes similar disclosure documents on its website,\142\ and 
anticipates the same for the DDR Disclosure Document relevant to this 
application.
---------------------------------------------------------------------------

    \137\ See supra Part III.B (describing policies and procedures 
with respect to access and information security).
    \138\ See supra Part III.C (describing policies and procedures 
with respect to acceptance and use of SBS data).
    \139\ See supra Part III.D (describing policies and procedures 
with respect to fees).
    \140\ See supra Part III.A (describing policies and procedures 
with respect to governance arrangements, the duties of the CCO, and 
conflicts of interest).
    \141\ See DDR Disclosure Document, Ex. D6.
    \142\ See, e.g., https://www.dtcc.com/-/media/Files/Downloads/Data-and-Repository-Services/GTR/US-DDR/DDR_Disclosure.pdf https://www.dtcc.com/-/media/Files/Downloads/Data-and-Repository-Services/GTR/US-DDR/DDR_Disclosure.pdf (publishing a disclosure document 
pursuant to CFTC requirements).
---------------------------------------------------------------------------

G. Regulatory Reporting and Public Dissemination

    As a registered SDR, DDR would carry out an important role in the 
regulatory reporting and public dissemination of SBS transactions. As 
noted above, DDR stated that it intends to rely on the no-action 
statement included in the ANE Adopting Release for the period set forth 
in the ANE Adopting Release with respect to SBS asset classes. 
Therefore, DDR was not required to include materials in its application 
explaining how it would comply with the provisions of the SBS Reporting 
Rules noted in the no-action statement.\143\ Instead, DDR may rely on 
its discussion about how it complies with comparable CFTC requirements 
pertaining to regulatory reporting and public dissemination of swap 
transactions.
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    \143\ However, the DDR Application includes provisions 
explaining how DDR would require users to identify SBS, as required 
by Rule 901(c)(1) of Regulation SBSR. See Ex. HH2, sec. 4.4 
(regarding Unique Product Identifiers). The DDR Application also 
includes a provision explaining how DDR would comply with a 
condition to the no-action statement included in the ANE Adopting 
Release. See Ex. GG2, sec. 15.2.3.2 (providing, in the case of a 
credit security-based swap, for dissemination of a capped notional 
size of $5 million if the true notional size of the transaction is 
$5 million or greater).
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    In the no-action statement, the Commission stated that an applicant 
``will not need to include materials in its application explaining how 
it would comply with the provisions [specifically noted as not 
providing a basis for a Commission enforcement action during the 
pendency of the statement].'' \144\ The applicant ``could instead rely 
on its discussion about how it complies with comparable CFTC 
requirements.'' \145\ In its application, DDR provided exhibits that 
adapted its policies and procedures for regulatory reporting and public 
dissemination of swaps for use in the SBS market. The Commission 
believes that, with respect to its role in the regulatory reporting and 
public dissemination of SBS transactions, DDR has satisfied the 
approach described by the Commission in the no-action

[[Page 26124]]

statement regarding the information and representations sufficient to 
support its approval for registration as an SDR and SIP.\146\
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    \144\ ANE Adopting Release, supra note 13, at 6348.
    \145\ Id.
    \146\ Because DDR has elected to rely on the no-action 
statement, see supra note 29, the Commission has not evaluated the 
DDR Application against any provisions of Regulation SBSR 
specifically noted as not providing a basis for a Commission 
enforcement action during the pendency of the statement.
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    ISDA Letter II included three requests with respect to the DDR 
Application. First, ISDA stated that the DDR Rulebook should ``discuss 
`Counterparty 2' identifiers that will be permitted under the new 
[CFTC] swap data reporting rules.'' \147\ To the extent that this 
suggestion involves changes to DDR's systems, policies, and procedures 
for complying with future CFTC requirements, they are not part of DDR's 
existing systems, policies, and procedures and thus are not germane to 
the application being considered by the Commission. However, the 
Commission expects that DDR will, in the future, explain to its 
participants how changes made to the systems, policies, and procedures 
for complying with CFTC swap data reporting requirements will impact 
the reporting of security-based swap transactions.
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    \147\ ISDA Letter II at 3. The comment refers to revisions to 
Parts 43 and 45 adopted by the CFTC in September 2020, which include 
requirements for reporting new data elements as well as changes to 
how existing data elements should be reported. See Part 43 
revisions, available at: www.cftc.gov/sites/default/files/2020/11/2020-21568a.pdf; Part 45 revisions, available at: www.cftc.gov/sites/default/files/2020/11/2020-21569a.pdf.
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    Second, ISDA expressed support for the approach to unique trade 
identifiers in the DDR Rulebook, but for clarity requested adding 
appropriate references to the Unique Swap Identifier (``USI'') required 
by CFTC rules.\148\ The no-action statement in the ANE Adopting Release 
does not impose any obligations on DDR to utilize a particular 
vocabulary when referring to data elements that will be utilized for 
both SEC and CFTC transaction reporting, so this request does not 
affect the Commission's evaluation of the DDR Application against the 
relevant statutory standards for registration as an SDR and as a SIP.
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    \148\ See ISDA Letter II at 3.
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    Third, ISDA notes that, although the specifications in the DDR 
Rulebook ``technically align'' with the SEC requirement that an SDR 
publicly disseminate immediately upon receipt, SDRs are also built to 
delay public dissemination under CFTC requirements. ISDA suggests that 
complying with the SEC requirement would require SDRs to incur the cost 
of adding functionality to disseminate immediately under Regulation 
SBSR, and ISDA therefore requests that the SEC align its requirement 
with the CFTC requirement.\149\ To the extent ISDA is requesting that 
the Commission modify the no-action statement in response to ISDA's 
comment, the Commission declines to do so. Furthermore, because this 
comment pertains to a Commission position and not to the DDR 
Application, it does not affect the Commission's review of the DDR 
Application under the relevant statutory standards for registration as 
an SDR and as a SIP.\150\
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    \149\ See id. at 5.
    \150\ Under the CFTC's reporting rules, an SDR must publicly 
disseminate swap transaction and pricing data as soon as 
technologically practicable after such data is received, unless such 
swap transaction and pricing data is subject to a time delay 
described in Sec.  43.5, in which case the swap transaction and 
pricing data shall be publicly disseminated in the manner described 
in Sec.  43.5. See 17 CFR 43.3(b)(1). In addition, Appendix C to 
Part 43 provides clarification of the time delays for public 
dissemination set forth in Sec.  43.5. An SDR subject to the CFTC's 
Part 43 rules must disseminate transaction and pricing data with a 
time delay if the transaction falls within Sec.  43.5, and must 
disseminate transaction and pricing data ``as soon as 
technologically practicable'' if it does not. The Commission's no-
action statement recognized that security-based swap transactions do 
not fall within Sec.  43.5 or Appendix C of Part 43. See ANE 
Adopting Release, supra note 13, at 6347. Accordingly, an SDR, when 
utilizing CFTC rather than SEC protocols for dissemination of a 
security-based swap transaction, would not impose the time delay 
required for a swap transaction that falls within Sec.  43.5. 
Nevertheless, to offer some accommodation for certain large-sized 
security-based swaps based on a single credit instrument or a 
narrow-based index of credit instruments, the Commission established 
a size cap of ``$5MM+'' for any transaction having a true notional 
size of $5 million or greater. As explained in the Commission's no-
action statement, this cap is also applied by the Financial Industry 
Regulatory Authority when disseminating transaction reports of 
economically similar cash debt securities. See id. at 6347, n.768.
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IV. Evaluation of DDR's Application and Commission Findings

    Consistent with the standard for registration previously described 
in Part II.B,\151\ the Commission has considered whether DDR is so 
organized, and has the capacity, to be able to assure the prompt, 
accurate, and reliable performance of its functions as an SDR, comply 
with any applicable provisions of the securities laws and the rules and 
regulations thereunder, and carry out its functions in a manner 
consistent with the purposes of Section 13(n) of the Exchange Act and 
the rules and regulations thereunder. The Commission finds that DDR 
meets these criteria for registration as an SDR for the reasons 
described throughout this order.
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    \151\ See supra notes 16-18 and accompanying text.
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    To evaluate DDR's application to register as a SIP, and consistent 
with the standard for registration previously described in Part 
II.B,\152\ the Commission has considered whether DDR is so organized, 
and has the capacity, to be able to assure the prompt, accurate, and 
reliable performance of its functions as a SIP, comply with the 
provisions of the Exchange Act and the rules and regulations 
thereunder, carry out its functions in a manner consistent with the 
purposes of the Exchange Act, and, insofar as it is acting as an 
exclusive processor, operate fairly and efficiently. The Commission 
finds that DDR meets these criteria for registration as a SIP for the 
reasons described throughout this order.
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    \152\ See supra note 19 and accompanying text.
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V. Conclusion

    For the reasons discussed above, the Commission finds that DDR 
meets the applicable requirements for registration as an SDR, including 
those standards set forth in Section 13(n) of the Exchange Act and 
Commission rules and regulations thereunder, and the applicable 
requirements for registration as a SIP under Section 11A(b) of the 
Exchange Act.
    It is hereby ordered that the application for registration as a 
security-based swap data repository and a securities information 
processor filed by DTCC Data Repository (U.S.), LLC (File No. SBSDR-
2020-01) pursuant to Sections 13(n) and 11A(b) of the Exchange Act be, 
and hereby is, approved.

    By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-10065 Filed 5-11-21; 8:45 am]
BILLING CODE 8011-01-P