Document ID: SEC-2015-0485-0001
Agency: sec
Document Type: Proposed Rule
Title: Reporting and Dissemination of Security-Based Swap Information
Posted Date: 2015-03-19T04:00Z

[Federal Register Volume 80, Number 53 (Thursday, March 19, 2015)]
[Proposed Rules]
[Pages 14739-14804]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-03125]

[[Page 14739]]

Vol. 80

Thursday,

No. 53

March 19, 2015

Part IV

Securities and Exchange Commission

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17 CFR Part 242

Regulation SBSR--Reporting and Dissemination of Security-Based Swap 
Information; Proposed Rule

  Federal Register / Vol. 80 , No. 53 / Thursday, March 19, 2015 / 
Proposed Rules  

[[Page 14740]]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 242

[Release No. 34-74245; File No. S7-03-15]
RIN 3235-AL71

Regulation SBSR--Reporting and Dissemination of Security-Based 
Swap Information

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule; guidance.

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SUMMARY: The Securities and Exchange Commission (``SEC'' or 
``Commission'') is proposing certain new rules and rule amendments to 
Regulation SBSR--Reporting and Dissemination of Security-Based Swap 
Information (``Regulation SBSR''). Specifically, proposed Rule 
901(a)(1) of Regulation SBSR would require a platform (i.e., a national 
securities exchange or security-based swap execution facility (``SB 
SEF'') that is registered with the Commission or exempt from 
registration) to report to a registered security-based swap data 
repository (``registered SDR'') a security-based swap executed on such 
platform that will be submitted to clearing. Proposed Rule 901(a)(2)(i) 
of Regulation SBSR would require a registered clearing agency to report 
to a registered SDR any security-based swap to which it is a 
counterparty. The Commission also is proposing certain conforming 
changes to other provisions of Regulation SBSR in light the proposed 
amendments to Rule 901(a), and a new rule that would prohibit 
registered SDRs from charging fees for or imposing usage restrictions 
on the users of the security-based swap transaction data that they are 
required to publicly disseminate. In addition, the Commission is 
explaining the application of Regulation SBSR to prime brokerage 
transactions and proposing guidance for the reporting and public 
dissemination of allocations of cleared security-based swaps. Finally, 
the Commission is proposing a new compliance schedule for the portions 
of Regulation SBSR for which the Commission has not specified a 
compliance date.

DATES: Comments should be received on or before May 4, 2015.

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/proposed.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number S7-03-15 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 to Secretary, Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number S7-03-15. This file number 
should be included on the subject line if email 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/proposed.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 10:00 a.m. and 
3:00 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.
    Studies, memoranda, or other substantive items may be added by the 
Commission or staff to the comment file during this rulemaking. A 
notification of the inclusion in the comment file of any such materials 
will be made available on the SEC's Web site. To ensure direct 
electronic receipt of such notifications, sign up through the ``Stay 
Connected'' option at www.sec.gov to receive notifications by email.

FOR FURTHER INFORMATION CONTACT: Michael Gaw, Assistant Director, at 
(202) 551-5602; Yvonne Fraticelli, Special Counsel, at (202) 551-5654; 
George Gilbert, Special Counsel, at (202) 551-5677; David Michehl, 
Special Counsel, at (202) 551-5627; Geoffrey Pemble, Special Counsel, 
at (202) 551-5628; all of the Division of Trading and Markets, 
Securities and Exchange Commission, 100 F Street NE., Washington, DC 
20549-7010.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Introduction
II. Reporting by Registered Clearing Agencies and Platforms--
Proposed Amendments to Rule 901(a) and Conforming Changes
    A. Clearing Process for Security-Based Swaps
    B. Summary of the Proposed Amendments to Rule 901(a) and 
Conforming Changes
    1. Proposed Rule 901(a)(1)--Reporting by Platforms
    2. Proposed Reporting Obligations of Registered Clearing 
Agencies
    C. Discussion of Comments and Further Explanation of the 
Proposal
    1. Reporting Clearing Transactions
    a. Requirements for Reporting of Clearing Transactions to a 
Registered SDR
    b. Determining the Reporting Side for Clearing Transactions
    c. Choice of Registered SDR for Clearing Transactions
    d. Reporting Whether an Alpha Transaction is Accepted for 
Clearing
    2. Reporting by a Platform
    3. Additional Amendments to Account for Platforms and Registered 
Clearing Agencies Incurring Duties to Report
    4. Examples
    D. Request for Comment
III. Reporting and Public Dissemination of Security-Based Swaps 
Involving Allocation
    A. Examples
    1. Off-Platform Cleared Transaction
    a. Reporting the Bunched Order Alpha
    b. Reporting the Security-Based Swaps Resulting From Allocation
    2. Cleared Platform Transaction
    a. Reporting the Bunched Order Alpha
    b. Reporting the Security-Based Swaps Resulting From Allocation
    B. Request for Comment
IV. Reporting and Public Dissemination of Prime Brokerage 
Transactions
    A. Application of Regulation SBSR as Adopted to Prime Brokerage 
Transactions
    1. Regulatory Reporting Duties
    2. Public Dissemination of Prime Brokerage Transactions
    B. Example of the Application of the Adopted Rules
    C. Request for Comment
V. Additional Proposed Amendments
    A. Amendments to Rule 905(a)
    B. Amendments to Rules 906(b) and 907(a)(6)
    C. Extending the Applicability of Rule 906(c)
    D. Rule 908(b)--Limitations on Counterparty Reporting 
Obligations
    E. Request for Comment
VI. Proposed Rule Prohibiting a Registered SDR from Charging Fees 
for or Imposing Usage Restrictions on Publicly Disseminated Data
    A. Background
    B. Request for Comment
VII. Proposed Compliance Schedule for Regulation SBSR
    A. Initial Proposal
    1. Rule 910
    2. Rule 911
    B. New Proposed Compliance Schedule for Regulation SBSR
    1. Proposed Compliance Date 1
    2. Proposed Compliance Date 2
    3. Effect of Registration of Additional SDRs
    4. Proposed Changes to Certain Exemptions Related to the 
Proposed Compliance Schedule
    C. Discussion of Comments Received in Response to the Initial 
Proposal
    D. Request for Comment

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VIII. Economic Analysis
    A. Broad Economic Considerations
    1. Security-Based Swap Market Infrastructure
    2. Competition Among Security-Based swap Service Providers
    B. Baseline
    1. Current Security-Based Swap Market
    2. Clearing Activity in Single-Name Credit Default Swaps
    3. Execution Methods in the Security-Based Swap Market
    4. Current Market Structure for Security-Based Swap 
Infrastructure
    a. Exchanges and SB SEFs
    b. Clearing Agencies
    c. SDRs
    d. Vertical Integration of Security-Based Swap Market 
Infrastructure
    C. Programmatic Cost of Proposed Amendments to Regulation SBSR
    1. Proposed Amendments to Rule 901
    a. For Platforms and Registered Clearing Agencies--Rule 
901(a)(1) and Rule 901(a)(2)(i)
    b. For Platforms and Reporting Sides of Alphas--Rule 901(a)(3)
    c. Total Cost of Rule 901 Compliance for Platforms, Registered 
Clearing Agencies, and Reporting Sides
    2. Proposed Amendment to Rule 905(a)
    3. Proposed Amendments to Rule 906(c)
    D. Economic Effects and Effects on Efficiency, Competition, and 
Capital Formation
    1. Reporting of Clearing Transactions
    2. Reporting of Clearing Transactions Involving Allocation
    3. Alternative Approaches to Reporting Clearing Transactions
    a. Maintain Reporting Hierarchy as Adopted in Regulation SBSR
    b. Move Registered Clearing Agencies Within the Regulation SBSR 
Reporting Hierarchy
    c. Require the Reporting Side for an Alpha to also Report Beta 
and Gamma Transactions
    4. Reporting by Platforms
    5. Alternative Approaches to Reporting Platform-Executed 
Transactions
    6. Application of Regulation SBSR to Prime Brokerage 
Transactions
    7. Proposed Prohibition on Fees for Public Dissemination
    8. Proposed Compliance Schedule for Regulation SBSR
IX. Paperwork Reduction Act
    A. Definitions--Rule 900
    B. Reporting Obligations--Rule 901
    1. Rule 901--As Adopted
    2. Rule 901--Proposed Amendments
    a. Summary of Collection of Information
    b. Proposed Use of Information
    c. Respondents
    d. Total Initial and Annual Reporting and Recordkeeping Burdens
    i. Platforms and Registered Clearing Agencies
    ii. Platforms and Reporting Sides
    iii. Bunched Orders and Allocations
    iv. Prime Brokerage Transactions
    e. Recordkeeping Requirements
    f. Collection of Information is Mandatory
    g. Confidentiality of Responses to Collection of Information
    3. Rule 901--Aggregate Total PRA Burdens and Costs
    a. For Platforms
    b. For Registered Clearing Agencies
    c. For Reporting Sides
    d. For Registered SDRs
    C. Correction of Errors in Security-Based Swap Information--Rule 
905
    1. Rule 905--As Adopted
    2. Rule 905--Proposed Amendments
    a. Summary of Collection of Information
    b. Proposed Use of Information
    c. Respondents
    d. Total Initial and Annual Reporting and Recordkeeping Burdens
    e. Recordkeeping Requirements
    f. Collection of Information is Mandatory
    g. Confidentiality of Responses to Collection of Information
    3. Rule 905--Aggregate Total PRA Burdens and Costs
    a. For Platforms
    b. For Non-Reporting Sides
    c. For Registered SDRs
    D. Other Duties of Participants--Rule 906
    1. Rule 906--As Adopted
    2. Rule 906--Proposed Amendments
    a. Rule 906(b) --Proposed Amendments
    b. Rule 906(c)--Proposed Amendments
    i. Summary of Collection of Information
    ii. Proposed Use of Information
    iii. Respondents
    iv. Total Initial and Annual Reporting and Recordkeeping Burdens
    v. Recordkeeping Requirements
    vi. Collection of Information is Mandatory
    vii. Confidentiality of Responses to Collection of Information
    3. Rule 906--Aggregate Total PRA Burdens and Costs
    a. For Platforms and Registered Clearing Agencies
    b. For Registered SDRs
    c. For Participants
    E. Policies and Procedures of Registered SDRs--Rule 907
    1. Rule 907--As Adopted
    2. Rule 907--Proposed Amendments
    3. Rule 907--Aggregate Total PRA Burdens and Costs
    F. Cross-Border Matters--Rule 908
    1. Rule 908--As Adopted
    2. Rule 908--Proposed Amendments
    3. Rule 908--Aggregate Total PRA Burdens and Costs
    G. Request for Comments
X. Consideration of Impact on the Economy
XI. Regulatory Flexibility Act Certification
XII. Statutory Basis and Text of Proposed Rules

I. Introduction

    Section 13A(a)(1) of the Exchange Act \1\ provides that each 
security-based swap that is not accepted for clearing by any clearing 
agency or derivatives clearing organization shall be subject to 
regulatory reporting. Section 13(m)(1)(G) of the Exchange Act \2\ 
provides that each security-based swap (whether cleared or uncleared) 
shall be reported to a registered SDR, and Section 13(m)(1)(C) of the 
Exchange Act \3\ generally provides that transaction, volume, and 
pricing data of security-based swaps shall be publically disseminated 
in real time, except in the case of block trades.\4\
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    \1\ 15 U.S.C. 78m-1(a)(1). All references in this release to the 
Exchange Act refer to the Securities Exchange Act of 1934.
    \2\ 15 U.S.C. 78m(m)(1)(G).
    \3\ 15 U.S.C. 78m(m)(1)(C).
    \4\ Section 13(m)(1)(E) of the Exchange Act, 15 U.S.C. 
78m(m)(1)(E), provides that, with respect to cleared security-based 
swaps, the rule promulgated by the Commission related to public 
dissemination shall contain provisions, among others, that ``specify 
the criteria for determining what constitutes a large notional 
security-based swap transaction (block trade) for particular markets 
and contracts'' and ``specify the appropriate time delay for 
reporting large notional security-based swap transactions (block 
trades) to the public.''
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    In a separate release, the Commission is adopting Regulation 
SBSR,\5\ which contains several rules relating to regulatory reporting 
and public dissemination of security-based swap transactions. The 
Commission initially proposed Regulation SBSR in November 2010.\6\ In 
May 2013, the Commission re-proposed the entirety of Regulation SBSR as 
part of the Cross-Border Proposing Release, which proposed rules and 
interpretations regarding the application of Title VII of the Dodd-
Frank Act to cross-border security-based swap activities.\7\ In this 
release, the Commission is proposing certain new rules of Regulation 
SBSR as well as amendments to, and guidance regarding Regulation SBSR, 
as adopted. The Commission also is proposing a compliance schedule for 
Regulation SBSR. The Commission seeks comment on all of the rules, rule 
amendments, and guidance proposed in this release.\8\
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    \5\ Securities Exchange Act Release No. 74244 (February 11, 
2015) (no Federal Register publication yet) (``Regulation SBSR 
Adopting Release'').
    \6\ See Securities Exchange Act Release No. 63346 (November 19, 
2010), 75 FR 75207 (December 2, 2010) (``Regulation SBSR Proposing 
Release'').
    \7\ See Securities Exchange Act Release No. 69490 (May 1, 2013), 
78 FR 30967 (May 23, 2013) (``Cross-Border Proposing Release'').
    \8\ With these proposed rules, rule amendments, and guidance, 
the Commission is not re-opening comment on the rules adopted in 
Regulation SBSR Adopting Release. The Commission received 86 
comments that were specifically directed to the comment file (File 
No. S7-34-10) for the Regulation SBSR Proposing Release, of which 38 
were comments submitted in response to the re-opening of the comment 
period. Of the comments directed to the comment file (File No. S7-
02-13) for the Cross-Border Proposing Release, six referenced 
Regulation SBSR specifically, while many others addressed cross-
border issues generally, without specifically referring to 
Regulation SBSR. As discussed in the Regulation SBSR Adopting 
Release, the Commission also has considered other comments that are 
relevant to regulatory reporting and/or public dissemination of 
security-based swaps that were submitted in other contexts. The 
comments discussed in this release are listed in the Appendix. For 
ease of reference, this release identifies commenters using the same 
naming convention as the Regulation SBSR Adopting Release, although 
it does not discuss all of the comment letters included in the 
Regulation SBSR Adopting Release. For example, this release refers 
to a letter identified as ``ISDA IV,'' but does not discuss ISDA I, 
ISDA II, or ISDA III because those letters are not relevant to the 
current release.

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[[Page 14742]]

II. Reporting by Registered Clearing Agencies and Platforms--Proposed 
Amendments to Rule 901(a) and Conforming Changes

    Section 13(m)(1)(F) of the Exchange Act \9\ provides that parties 
to a security-based swap (including agents of parties to a security-
based swap) shall be responsible for reporting security-based swap 
transaction information to the appropriate registered entity in a 
timely manner as may be prescribed by the Commission. Section 
13(m)(1)(G) of the Exchange Act \10\ provides that each security-based 
swap (whether cleared or uncleared) shall be reported to a registered 
SDR. Section 13A(a)(3) of the Exchange Act \11\ specifies the party 
obligated to report a security-based swap that is not accepted for 
clearing by any clearing agency or derivatives clearing organization. 
Consistent with these statutory provisions, Rule 901(a) of Regulation 
SBSR, as adopted, assigns the duty to report ``covered transactions,'' 
which include all security-based swaps except: (1) Clearing 
transactions; \12\ (2) security-based swaps that are executed on a 
platform and that will be submitted to clearing; (3) transactions where 
there is no U.S. person, registered security-based swap dealer, or 
registered major security-based swap participant on either side; and 
(4) transactions where there is no registered security-based swap 
dealer or registered major security-based swap participant on either 
side and there is a U.S. person on only one side. This release proposes 
to assign the duty to report security-based swaps in categories (1) and 
(2) above. The Commission anticipates seeking additional public comment 
in the future on the reporting obligations for security-based swaps in 
categories (3) and (4) above.
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    \9\ 15 U.S.C. 78m(m)(1)(F).
    \10\ 15 U.S.C. 78m(m)(1)(G).
    \11\ 15 U.S.C. 78m-1(a)(3).
    \12\ Rule 900(g), as adopted, defines ``clearing transaction'' 
as ``a security-based swap that has a registered clearing agency as 
a direct counterparty.'' This definition describes security-based 
swaps that arise when a registered clearing agency accepts a 
security-based swap for clearing as well as security-based swaps 
that arise as part of a clearing agency's internal processes, such 
as security-based swaps used to establish prices for cleared 
products and security-based swaps that result from netting other 
clearing transactions of the same product in the same account into 
an open position. See Regulation SBSR Adopting Release, Section 
V(B)(2).
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    Rule 901(a), as proposed and re-proposed, would have used a 
hierarchy to assign reporting obligations for all security-based 
swaps--including those in the four non-covered categories noted above--
without regard to whether a particular security-based swap was cleared 
or uncleared. In the Regulation SBSR Proposing Release, the Commission 
expressed a preliminary view that cleared and uncleared security-based 
swaps should be subject to the same reporting hierarchy.\13\ In 
addition, Rule 901(a), as proposed and as re-proposed, did not 
differentiate between security-based swaps that are executed on a 
platform and other security-based swaps. The Commission preliminarily 
believed that security-based swap dealers and major security-based swap 
participants generally should be responsible for reporting security-
based swap transactions of all types, because they would be more likely 
than other persons to have appropriate systems in place to facilitate 
reporting.\14\
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    \13\ See 75 FR 75211.
    \14\ See id.
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    The Commission requested comment on a range of issues related to 
Rule 901(a), as proposed and as re-proposed. In particular, the 
Commission sought comment on whether platforms or clearing agencies 
should be required to report security-based swaps.\15\ The Commission 
also asked whether counterparties to a security-based swap executed 
anonymously on a platform and subsequently cleared would have the 
information necessary to know which counterparty would incur the 
reporting obligation under Rule 901(a).\16\ The comments that the 
Commission received in response are discussed below.
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    \15\ See id. at 75212.
    \16\ See id.
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    In light of comments received and upon additional consideration of 
the issues, the Commission is proposing two amendments to Rule 901(a) 
of Regulation SBSR. First, the Commission is proposing a new 
subparagraph (1) of Rule 901(a), which would provide that, if a 
security-based swap is executed on a platform and will be submitted to 
clearing, the platform on which the transaction was executed shall have 
the duty to report the transaction to a registered SDR. Second, the 
Commission is proposing a new subparagraph (2)(i) of Rule 901(a), which 
would assign the reporting duty for a clearing transaction to the 
registered clearing agency that is a counterparty to the security-based 
swap. In connection with these proposed rules, the Commission also is 
proposing several conforming rule amendments to Regulation SBSR. The 
Commission describes each of these proposed rules and rule amendments 
in more detail below, following a description of the process for 
central clearing of security-based swap transactions.

A. Clearing Process for Security-Based Swaps

    As discussed in Section V of the Regulation SBSR Adopting Release, 
two models of clearing--an agency model and a principal model--are 
currently used in the swap markets. In the agency model, which 
predominates in the U.S. swap market, a swap that is accepted for 
clearing--often referred to in the industry as an ``alpha''--is 
terminated and replaced with two new swaps, known as ``beta'' and 
``gamma.'' The Commission understands that, under the agency model, one 
of the direct counterparties to the alpha becomes a direct counterparty 
to the beta, and the other direct counterparty to the alpha becomes a 
direct counterparty to the gamma. The clearing agency would be a direct 
counterparty to each of the beta and the gamma.\17\ This release uses 
the terms ``alpha,'' ``beta,'' and ``gamma'' in the same way that they 
are used in the agency model of clearing in the U.S. swap market.\18\ 
The Commission notes

[[Page 14743]]

that, under Regulation SBSR, an alpha is not a ``clearing 
transaction,'' even though it is submitted for clearing, because it 
does not have a registered clearing agency as a direct 
counterparty.\19\
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    \17\ If both direct counterparties to the alpha are clearing 
members, the direct counterparties would submit the transaction to 
the clearing agency directly and the resulting beta would be between 
the clearing agency and one clearing member, and the gamma would be 
between the clearing agency and the other clearing member. The 
Commission understands, however, that, if the direct counterparties 
to the alpha are a clearing member and a non-clearing member (a 
``customer''), the customer's side of the trade would be submitted 
for clearing by a clearing member acting on behalf of the customer. 
When the clearing agency accepts the alpha for clearing, one of the 
resulting swaps--in this case, assume the beta--would be between the 
clearing agency and the customer, with the customer's clearing 
member acting as guarantor for the customer's trade. The other 
resulting swap--the gamma--would be between the clearing agency and 
the clearing member that was a direct counterparty to the alpha. 
See, e.g., Byungkwon Lim and Aaron J. Levy, ``Contractual Framework 
for Cleared Derivatives: The Master Netting Agreement Between a 
Clearing Customer Bank and a Central Counterparty,'' 10 Pratt's J. 
of Bankr. Law 509, 515-517 (LexisNexis A.S. Pratt) (describing the 
clearing model for swaps in the United States).
    \18\ In the principal model of clearing, which the Commission 
understands is used in certain foreign swap markets, a customer is 
not a direct counterparty of the clearing agency. Under this model, 
a clearing member would clear a swap for a customer by entering into 
a back-to-back swap with the clearing agency: The clearing member 
would become a direct counterparty to a swap with the customer, and 
then would become a counterparty to an offsetting swap with the 
clearing agency. In this circumstance, unlike in the agency model of 
clearing, the swap between the direct counterparties might not 
terminate upon acceptance for clearing. The Commission notes that 
one commenter recommended that Regulation SBSR should clarify the 
applicable reporting requirements under each of the agency and 
principal clearing models. See ISDA IV at 6. Although this release 
focuses on the agency model of clearing, which predominates in the 
United States, the Commission is requesting comment regarding the 
application of the principal model.
    \19\ This release does not address the application of Section 5 
of the Securities Act of 1933, 15 U.S.C. 77a et seq. (``Securities 
Act''), to security-based swap transactions that are intended to be 
submitted to clearing (e.g., alphas, in the agency model of 
clearing). Rule 239 under the Securities Act, 17 CFR 230.239, 
provides an exemption for certain security-based swap transactions 
involving an eligible clearing agency from all provisions of the 
Securities Act, other than the Section 17(a) anti-fraud provisions. 
This exemption does not apply to security-based swap transactions 
not involving an eligible clearing agency, including a transaction 
that is intended to be submitted to clearing, regardless of whether 
the security-based swaps subsequently are cleared by an eligible 
clearing agency. See Exemptions for Security-Based Swaps Issued By 
Certain Clearing Agencies, Securities Act Release No. 33-9308 (March 
30, 2012), 77 FR 20536 (April 5, 2012).
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B. Summary of the Proposed Amendments to Rule 901(a) and Conforming 
Changes

    In a separate release, the Commission is adopting Regulation SBSR 
under the Exchange Act. In light of comments received in response to 
both the Regulation SBSR Proposing Release and the Cross-Border 
Proposing Release (which re-proposed Regulation SBSR in its entirety), 
the Commission in this release is proposing to amend Rule 901(a) of 
Regulation SBSR to assign reporting duties for: (1) Platform-executed 
security-based swaps that will be submitted to clearing; and (2) 
clearing transactions.
1. Proposed Rule 901(a)(1)--Reporting by Platforms
    The Commission is proposing a new subparagraph (1) of Rule 901(a), 
which would require a platform to report to a registered SDR any 
security-based swap that is executed on that platform and that will be 
submitted to clearing (i.e., any alpha executed on the platform).\20\ 
As the person with the duty to report the transaction, the platform 
would be able to select the registered SDR to which it reports.\21\
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    \20\ If the execution occurs otherwise than on a platform, or if 
the security-based swap is executed on a platform but will not be 
submitted to clearing, the reporting hierarchy in Rule 
901(a)(2)(ii), as adopted, will apply to the transaction.
    \21\ This is consistent with the Commission's guidance in 
Section V(B) of the Regulation SBSR Adopting Release that, for 
transactions subject to Rule 901(a)(2)(ii), the reporting side may 
choose the registered SDR to which it makes the report required by 
Rule 901: ``The reporting side may select the registered SDR to 
which it makes the required report. However, with respect to any 
particular transaction, all information required to be reported by 
Rule 901(a)(2)(ii), as adopted, must be reported to the same 
registered SDR.''
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2. Proposed Reporting Obligations of Registered Clearing Agencies
    The Commission is proposing a new subparagraph (2)(i) of Rule 
901(a), which would designate a registered clearing agency as the 
reporting side for all clearing transactions to which it is a 
counterparty. In its capacity as the reporting side, the registered 
clearing agency would be permitted to select the registered SDR to 
which it reports a clearing transaction.
    The Commission also is proposing certain rules to address reporting 
requirements for life cycle events arising from the clearing process. 
Subparagraph (i) of Rule 901(e)(1), as adopted, provides that the 
reporting side for a security-based swap must generally report a life 
cycle event of that swap, ``except that the reporting side shall not 
report whether or not a security-based swap has been accepted for 
clearing.'' The Commission is proposing a new subparagraph (ii) of Rule 
901(e)(1), which would require a registered clearing agency to report 
whether or not it has accepted an alpha security-based swap for 
clearing.\22\
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    \22\ If the alpha security-based swap is not required to be 
reported to a registered SDR--which could occur if Rule 901(a) does 
not assign a reporting obligation for the transaction or if the 
person assigned under Rule 901(a) is not enumerated in Rule 908(b)--
the registered clearing agency would have no duty to report whether 
or not it has accepted the alpha for clearing.
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    Rule 901(e)(2), as adopted, requires a life cycle event to be 
reported ``to the entity to which the original security-based swap 
transaction will be or has been reported.'' Thus, proposed Rule 
901(e)(1)(ii) would require a registered clearing agency to report to 
the registered SDR that received or will receive the transaction report 
of the alpha (the ``alpha SDR'') whether or not it has accepted the 
alpha for clearing. As discussed in Section II(C)(3), infra, the 
Commission is proposing that this obligation to report whether or not 
it has accepted the alpha for clearing would cause the registered 
clearing agency to become a participant of the alpha SDR.
    If the registered clearing agency does not know the identity of the 
alpha SDR, the registered clearing agency would be unable to report to 
the alpha SDR whether or not it accepted the alpha transaction for 
clearing, as would be required by proposed Rule 901(e)(1)(ii). 
Therefore, the Commission is proposing a new subparagraph (3) of Rule 
901(a), which would require a platform or reporting side for a 
security-based swap that has been submitted to clearing to promptly 
provide the relevant registered clearing agency with the identity of 
the alpha SDR and the transaction ID of the alpha transaction that has 
been submitted to clearing.

C. Discussion of Comments and Further Explanation of the Proposal

    The Commission requested and received comment on a wide range of 
issues related to Rules 901(a) and 901(e), as initially proposed in the 
Regulation SBSR Proposing Release and as re-proposed in the Cross-
Border Proposing Release. For example, in the Regulation SBSR Proposing 
Release, the Commission asked commenters about the types of entities 
that should have the duty to report security-based swaps and the 
practicability of the proposed reporting hierarchy in certain cases 
where the counterparties might not know each other's identities.\23\
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    \23\ See 75 FR 75212.
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1. Reporting Clearing Transactions
    Six commenters addressed the Commission's proposal to treat cleared 
security-based swaps the same as uncleared security-based swaps for 
purposes of assigning reporting obligations under Rule 901(a). Two 
commenters generally supported the Commission's proposal, noting that 
it would allow security-based swap counterparties, rather than clearing 
agencies, to choose the registered SDR that receives data about their 
security-based swaps.\24\ However, three other commenters objected to 
the proposal on statutory or operational grounds.\25\ One commenter 
argued that Title VII's security-based swap reporting provisions and 
Regulation SBSR should not extend to clearing transactions.\26\ Two 
commenters stated that the reporting hierarchy in Regulation SBSR is 
appropriate for OTC bilateral markets, but that it should not be 
applied to cleared transactions because the clearing model 
substantially differs from OTC bilateral markets.\27\ These commenters 
argued that, in the alternative, if the Commission requires clearing 
transactions to be reported to a registered SDR, the clearing agency 
that

[[Page 14744]]

clears the alpha should have the duty to report the associated clearing 
transactions to a registered SDR of its choice.\28\ Another commenter 
expressed the view that a clearing agency is best-positioned to report 
cleared security-based swaps.\29\
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    \24\ See DTCC VI at 8-9; MarkitSERV III at 3-5.
    \25\ See CME/ICE Letter at 2-4; ICE Letter at 2-5; CME II at 4; 
ISDA IV at 5-6.
    \26\ See CME II at 5 (stating that ``a choice by the Commission 
to require that data on cleared SBS be reported to a third-party SDR 
would impose substantial costs on market participants which greatly 
outweigh the benefits (if any). . . . The Commission already has 
access to this data via the clearing agency.'')
    \27\ See ICE Letter at 2; CME/ICE Letter at 2.
    \28\ See CME II at 4-5; CME/ICE Letter at 2-4; ICE Letter at 2-
3.
    \29\ ISDA IV at 5 (stating further that . . .''[I]f the 
Commission assigns responsibility to clearing agencies for the 
reporting of cleared [security-based swaps], the clearing agency 
should be the sole party responsible for reporting all the trade 
data for cleared swaps.'') See also ICE Letter at 2-3 (stating that 
``The Clearing Agency is best positioned to have the sole 
responsibility to report . . . required swap data, including 
valuation data'').
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a. Requirements for Reporting of Clearing Transactions to a Registered 
SDR
    Two commenters argued that the Exchange Act does not require data 
on clearing transactions to be reported to a registered SDR for 
regulatory reporting purposes.\30\ They noted that Section 13A(a)(1) of 
the Exchange Act \31\ provides that ``[e]ach security-based swap that 
is not accepted for clearing by any clearing agency or derivatives 
clearing organization shall be reported'' to a registered SDR or the 
Commission. In the view of these commenters, Section 13A(a)(1) is 
intended to ensure that the Commission has access to data for uncleared 
security-based swaps. Section 13A(a)(1) does not, according to these 
commenters, apply to clearing transactions, because complete data for 
these security-based swaps already would be collected, maintained, and 
made available to the Commission by the relevant clearing agency.\32\ 
Accordingly, these commenters contend that ``any system that would 
require a Clearing Agency to make duplicative reports to an outside 
third party regarding [security-based swaps] it clears would be costly 
and unnecessary.'' \33\
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    \30\ See CME/ICE Letter at 4; CME II at 4.
    \31\ 15 U.S.C. 78m-1(a)(1).
    \32\ See CME/ICE Letter at 2, 4; CME II at 4.
    \33\ CME/ICE Letter at 4.
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    The Commission does not agree with the commenters' reading of the 
Exchange Act. While Section 13A(a) of the Exchange Act requires all 
uncleared security-based swaps to be reported to a registered SDR and 
specifies who must report an uncleared security-based swap, it does not 
address whether cleared security-based swaps must be reported to a 
registered SDR. However, Section 13(m)(1)(G) of the Exchange Act \34\ 
provides that ``[e]ach security-based swap (whether cleared or 
uncleared) shall be reported to a registered security-based swap data 
repository.'' This section explicitly requires reporting of each 
security-based swap to a registered SDR, including a security-based 
swap that is a clearing transaction, because all security-based swaps 
necessarily are either cleared or uncleared.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78m(m)(1)(G).
---------------------------------------------------------------------------

    Furthermore, the Commission preliminarily believes that having data 
for all security-based swaps reported to registered SDRs will provide 
the Commission and other relevant authorities with the most efficient 
access to security-based swap information.\35\ If data for clearing 
transactions were not reported to registered SDRs, the Commission would 
have to obtain transaction information from multiple types of 
registered entities--i.e., registered clearing agencies as well as 
registered SDRs--to obtain a complete picture of the security-based 
swap market. Obtaining transaction data separately from additional 
types of registrants would exacerbate concerns about fragmentation of 
the data that could be reduced by requiring all security-based swap 
transactions to be reported to registered SDRs. For example, registered 
clearing agencies might store, maintain, and furnish data to the 
Commission in a format different from the data provided by registered 
SDRs, which would force the Commission to expend greater resources 
harmonizing the data sets.
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    \35\ Section 13(n)(5)(G) of the Exchange Act, 15 U.S.C. 
78m(n)(5)(G), provides specified authorities other than the 
Commission with access to security-based swap data held by SDRs, but 
does not grant similar access to security-based swap data held by 
registered clearing agencies. If the Commission relied exclusively 
on registered clearing agencies to store data for clearing 
transactions, the ability of other relevant authorities to access 
the information could be impaired.
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b. Determining the Reporting Side for Clearing Transactions
    Two commenters supported the Commission's original proposal to 
assign reporting obligations for all security-based swaps, including 
clearing transactions, through the reporting hierarchy in all 
circumstances.\36\ One of these commenters expressed the view that 
counterparty choice would ``ensure that a party to the transaction 
(instead of a platform or clearinghouse) can chose [sic] the most 
efficient manner of performing its reporting across all of the regions 
and asset classes that it is active in.'' \37\ This commenter further 
stated that permitting a platform or clearing agency to report 
security-based swaps would impose costs on market participants by 
obligating them to establish connectivity to multiple trade 
repositories.\38\
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    \36\ See DTCC VI at 8-9; DTCC VIII (recommending that the 
Commission should not assign reporting obligations to clearing 
agencies because Regulation SBSR, as proposed and re-proposed, would 
not have required reporting by clearing agencies); MarkitSERV III at 
4.
    \37\ MarkitSERV III at 4.
    \38\ See id.
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    Three other commenters objected to this aspect of Regulation SBSR, 
as proposed and re-proposed. Two of these commenters argued that, if 
clearing transactions are subject to Regulation SBSR, they should be 
reported by the clearing agency that clears the alpha: ``In contrast to 
uncleared [security-based swaps], the Clearing Agency is the sole party 
who holds the complete and accurate record of transactions and 
positions for cleared [security-based swaps] and in fact is the only 
entity capable of providing accurate and useful positional information 
on cleared [security-based swaps] for systemic risk monitoring 
purposes.'' \39\ The other commenter stated that the clearing agency is 
best positioned to report cleared security-based swaps timely and 
accurately as an extension of the clearing process, and that the 
clearing agency should be the sole party responsible for reporting all 
the trade data for cleared swaps, including valuation data.\40\
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    \39\ CME/ICE Letter at 3-4.
    \40\ ISDA IV at 5. The Commission notes that Regulation SBSR as 
adopted does not require the reporting of the market value of a 
security-based swap. See Regulation SBSR Adopting Release, Section 
II(B)(3)(e) and Section II(B)(3)(k).
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    After careful consideration of the comments, the Commission now 
preliminarily believes that a registered clearing agency should have 
the duty to report any clearing transaction to which it is a 
counterparty. The Commission believes that, because the registered 
clearing agency creates the clearing transactions to which it is a 
counterparty, the registered clearing agency is in the best position to 
provide complete and accurate information for the clearing transactions 
resulting from the security-based swaps that it clears.\41\
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    \41\ One commenter urged the Commission to be clear which party 
is responsible for reporting a clearing transaction in the event 
that reporting commences before security-based swap clearing 
agencies are required to register with the Commission or in the 
event that a security-based swap is cleared through a clearing 
agency that is not required to register, exempted from registration, 
or granted relief. See ISDA IV at 6. This commenter further 
recommended that the reporting requirement for a clearing agency 
should apply equally to clearing agencies required to register and 
those that may be exempted from the requirement but which clear 
security-based swaps subject to reporting. See id. The Commission 
believes that the proposed rules are clear as to which side would 
have the responsibility for reporting a clearing transaction. The 
Commission notes that proposed Rule 901(a)(2)(i) would impose the 
duty to report clearing transactions on registered clearing 
agencies. It is possible that a non-U.S. person could register with 
the Commission as a clearing agency under Section 17A of the 
Exchange Act, 15 U.S.C. 78q-1. The Commission generally believes 
that, if a person registers with the Commission as a clearing 
agency, it should assume the same obligations as all other persons 
that register as clearing agencies. Proposed Rule 901(a)(2)(i) would 
not apply to unregistered clearing agencies (i.e., persons that act 
as clearing agencies outside the United States that are not required 
to, and choose not to, register with the Commission). If in the 
future the Commission contemplates a process for exempting clearing 
agencies from registration or considers an application for relief 
from clearing agency registration requirements, the Commission could 
at that time consider the issue of whether to extend the duty to 
report clearing transactions to an exempt clearing agency.

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[[Page 14745]]

    The Commission understands that certain registered clearing 
agencies that offer central clearing in swaps currently report their 
clearing transactions to swap data repositories that are provisionally 
registered with the CFTC. These registered clearing agencies have 
adopted rules stating that they will comply with the CFTC's swap data 
reporting rules by reporting beta and gamma swaps to a swap data 
repository that is an affiliate or business unit of the registered 
clearing agency. These current swap market practices evidence the 
ability of registered clearing agencies to report clearing 
transactions. The Commission's proposal to assign to registered 
clearing agencies the duty to report clearing transactions is intended, 
in part, to promote efficiency in the reporting process under 
Regulation SBSR by leveraging these existing workflows.
    The Commission has considered the following alternatives to 
proposed Rule 901(a)(2)(i):
    (1) Utilize the reporting hierarchy in Regulation SBSR, as re-
proposed. Under this approach, a registered clearing agency would 
occupy the lowest spot in the hierarchy, along with other persons who 
are neither registered security-based swap dealers nor registered major 
security-based swap participants. Thus, in the case of a beta or gamma 
transaction between a registered security-based swap dealer or 
registered major security-based swap participant and a registered 
clearing agency, the registered security-based swap dealer or 
registered major security-based swap participant would be the reporting 
side. In the case of a beta or gamma transaction between a non-
registered person and a registered clearing agency, the outcome would 
depend on whether the non-clearing agency direct counterparty is 
guaranteed by a registered security-based swap dealer or registered 
major security-based swap participant. If the non-clearing agency 
direct counterparty is guaranteed by a registered security-based swap 
dealer or registered major security-based swap participant, that side 
would be the reporting side. If the non-clearing agency direct 
counterparty has no guarantor or is guaranteed by a person who is not a 
registered security-based swap dealer or registered major security-
based swap participant, there would be a tie and the sides would be 
required to select the reporting side.
    (2) Modify the re-proposed hierarchy to place registered clearing 
agencies above other non-registered persons but below registered 
security-based swap dealers and registered major security-based swap 
participants. Thus, in a transaction between a registered clearing 
agency and a registered security-based swap dealer (or a transaction 
between a registered clearing agency and a non-registered person who is 
guaranteed by a registered security-based swap dealer), the outcome 
would be the same as in Alternative 1: The side with the registered 
security-based swap dealer would have the duty to report. However, the 
outcome would be different from Alternative 1 in the case of a beta or 
gamma transaction between a registered clearing agency and a non-
registered person who is not guaranteed by a registered security-based 
swap dealer or registered major security-based swap participant: 
Instead of the sides choosing, the registered clearing agency would 
have the duty to report.
    (3) Require the reporting side of the alpha to report both the beta 
and gamma transaction. Under this approach, the reporting side of the 
alpha transaction also would be the reporting side for the beta and 
gamma transactions. Under this approach, the beta and gamma could be 
viewed as life cycle events of the alpha, and thus should be treated 
like other life cycle events of the alpha, which the reporting side of 
the alpha has the duty to report.
    The Commission preliminarily believes that each of these three 
alternatives for assigning the reporting duty for clearing transactions 
would be less efficient and could result in less reliable reporting 
than assigning to registered clearing agencies the duty to report all 
clearing transactions. Two commenters have asserted that a clearing 
agency is the only party that has complete information about clearing 
transactions immediately upon their creation.\42\ Each of the three 
alternatives could require a person who does not have information about 
the clearing transaction at the time of its creation to report that 
transaction. The only way such a person could discharge its reporting 
duty would be to obtain the information from the registered clearing 
agency or from the counterparty to the registered clearing agency. This 
extra and unnecessary step could introduce more opportunities for data 
discrepancies, errors, or delays in reporting. The Commission 
preliminarily believes instead that a more efficient way to obtain a 
regulatory report of each clearing transaction would be to require the 
registered clearing agency to report each clearing transaction to a 
registered SDR directly.
---------------------------------------------------------------------------

    \42\ See CME/ICE Letter at 3-4. Even the commenters who opposed 
reporting by clearing agencies did not suggest that a clearing 
agency lacks adequate information to report the beta and the gamma.
---------------------------------------------------------------------------

    Under Alternative 1, applying the reporting hierarchy to a 
transaction between a registered clearing agency and a registered 
security-based swap dealer or registered major security-based swap 
participant would result in the side opposite the clearing agency being 
the reporting side for the security-based swap. This approach would 
comport with the suggestion of commenters who opposed placing reporting 
obligations on registered clearing agencies.\43\ As discussed above, 
however, the Commission believes that it would be more efficient to 
require the registered clearing agency to report the transaction. 
Furthermore, applying the reporting hierarchy to a transaction between 
a registered clearing agency and another non-registered person 
(assuming it is not guaranteed by a registered security-based swap 
dealer or major security-based swap participant) would require the 
sides to select the reporting side. While it is likely that the 
counterparties in this case would select the registered clearing agency 
as the reporting side, the Commission preliminarily believes that it 
would be more efficient to obviate the need for registered clearing 
agencies and non-registered persons to negotiate reporting duties. As 
discussed in the Regulation SBSR Adopting Release, the Commission 
designed Rule 901(a), in part, to minimize the possibility of reporting 
obligations being imposed on non-registered counterparties.\44\
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    \43\ See DTCC VI at 8-9; DTCC VIII (noting that Regulation SBSR, 
as proposed and re-proposed, would not have required reporting by 
clearing agencies); MarkitSERV III at 4.
    \44\ See Regulation SBSR Adopting Release, Section V. See also 
Vanguard Letter at 6 (noting that clearing agencies, platforms, 
security-based swap dealers, and major security-based swap 
participants would be better situated to report security-based swaps 
than other types of market participants, such as buy-side firms).

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[[Page 14746]]

    Alternative 2 would assign the reporting obligation to a registered 
security-based swap dealer or registered major security-based swap 
participant when it is a counterparty to a registered clearing agency, 
while avoiding the need for non-registered persons to negotiate 
reporting obligations with registered clearing agencies. The Commission 
preliminarily believes, however, that this alternative--like 
Alternatives 1 and 3--would be less efficient than requiring the 
registered clearing agency to report the transaction information 
directly to a registered SDR, because the registered clearing agency is 
the only person who has complete information about a clearing 
transaction immediately upon its creation.
    Under Alternative 3, the reporting side for the alpha also would be 
the reporting side for the beta and gamma. Alternative 3 would require 
the reporting side for the alpha also to report information about a 
security-based swap--the clearing transaction between the registered 
clearing agency and the non-reporting side of the alpha--to which it is 
not a counterparty. The Commission could require the non-reporting side 
of the alpha to transmit information about its clearing transaction to 
the reporting side of the alpha. In theory, this would allow the 
reporting side of the alpha to report both the beta and the gamma. The 
Commission believes, however, that this result could be difficult to 
achieve operationally and, in any event, could create confidentiality 
concerns, as an alpha counterparty may not wish to reveal information 
about its clearing transactions except to the registered clearing 
agency (and, if applicable, its clearing member). Moreover, all other 
things being equal, having more steps in the reporting process--e.g., 
more data transfers between execution and reporting--introduces greater 
opportunity for data discrepancies and delays than having fewer steps. 
Also, because the reporting side of the alpha would have the duty to 
report the beta and gamma, Alternative 3 is premised on the view that 
the beta and gamma are life cycle events of the alpha. The Commission, 
however, considered and rejected this approach in the Regulation SBSR 
Adopting Release.\45\
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    \45\ See Regulation SBSR Adopting Release, Section V(B)(2) at 
note 267 (``Under Rule 900(g), a security-based swap that results 
from clearing is an independent security-based swap and not a life 
cycle event of a security-based swap that is submitted to clearing. 
Thus, Rule 901(e), which addresses the reporting of life cycle 
events, does not address what person has the duty to report the 
clearing transactions that arise when a security-based swap is 
accepted for clearing'').
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    In sum, having considered these alternatives, the Commission 
preliminarily believes that the most direct and efficient way of 
reporting clearing transactions to a registered SDR is to assign to a 
registered clearing agency the duty to report all clearing transactions 
to which it is a counterparty. Therefore, the Commission is proposing 
new subparagraph (i) of Rule 901(a)(2) to achieve this result. A 
registered clearing agency has complete information about all clearing 
transactions to which it is a counterparty, including betas and gammas 
that arise from clearing alpha security-based swaps. The alternative 
reporting regimes discussed above could result in less efficiencies in 
reporting, and thus greater costs, because persons that are less likely 
to have established infrastructure for reporting or that do not possess 
the same degree of direct and complete access to the relevant data as 
the registered clearing agency could have the duty to report. 
Furthermore, these non-clearing agency counterparties would first have 
to obtain information about executed clearing transactions from the 
registered clearing agency before they, in turn, could provide the 
transaction information to a registered SDR. This extra step in 
reporting could result in delays, or create opportunities for errors 
that could lead to a loss of data integrity. The Commission 
preliminarily believes that data discrepancies, errors, and delays are 
less likely to occur if the duty to report information about clearing 
transactions were assigned to registered clearing agencies directly.
c. Choice of Registered SDR for Clearing Transactions
    The Commission has carefully considered how registered clearing 
agencies would fulfill their reporting obligations under proposed Rule 
901(a)(2)(i), including whether registered clearing agencies could 
choose the registered SDR to which they report or whether they should 
be required to report clearing transactions to the registered SDR that 
received the report of the associated alpha transaction. Regulation 
SBSR allows the reporting side to choose the registered SDR to which it 
reports, subject to the requirement that reports of life cycle events 
must be made to the same registered SDR that received the initial 
report of the security-based swap.\46\
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    \46\ See Regulation SBSR Adopting Release, Section V(B)(2) 
(``The reporting side may select the registered SDR to which it 
makes the required report'').
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    As noted in the Regulation SBSR Adopting Release, a clearing 
transaction is an independent security-based swap and not a life cycle 
event of an alpha security-based swap that is submitted to 
clearing.\47\ As discussed in the Regulation SBSR Adopting Release, the 
Commission believes that, in general, the person with the duty to 
report a security-based swap under Rule 901(a) should be permitted to 
discharge this duty by reporting to a registered SDR of its choice.\48\ 
This approach is designed to promote efficiency by allowing the person 
with the reporting duty to select the registered SDR that offers it the 
greatest ease of use or the lowest fees. Under proposed Rule 
901(a)(2)(i), a registered clearing agency would be the reporting side 
for all clearing transactions to which it is a counterparty; because 
the registered clearing agency would have the duty to report, it also 
would have the ability to choose the registered SDR. The Commission 
considered proposing that reports of betas and gammas go to the same 
registered SDR that received the report of the associated alpha, but 
has declined to do so, for the reasons discussed below.
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    \47\ See Regulation SBSR Adopting Release, Section V(B). 
However, the determination by a registered clearing agency of 
whether or not to accept the alpha for clearing is a life cycle 
event of the alpha. Proposed Rule 901(e)(1)(ii) would require 
registered clearing agencies to report these life cycle events to 
the alpha SDR.
    \48\ See Regulation SBSR Adopting Release, Section V(B).
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    If Regulation SBSR were to require registered clearing agencies to 
report betas and gammas to the registered SDR that received the report 
of the associated alpha, the registered clearing agency would be 
required to report to a registered SDR that might not offer it the 
greatest ease of use or the lowest fees. As such, this result could be 
less efficient for the registered clearing agency than the alternative 
approach of permitting the registered clearing agency to choose the 
registered SDR to which it reports the beta and gamma. Moreover, the 
Commission preliminarily believes that it would have sufficient tools 
to be able to track related transactions across SDRs,\49\ and thus that 
it would be appropriate to allow a registered clearing agency to choose 
where to report the beta and gamma, even if it chooses to report to

[[Page 14747]]

a registered SDR other than the alpha SDR.
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    \49\ See Regulation SBSR Adopting Release, Section II(B)(3)(j) 
(explaining that Rule 901(d)(10), as adopted, will facilitate the 
Commission's ability to link transactions using the transaction ID); 
Regulation SBSR Adopting Release, Section VIII (further describing 
the ability of the Commission to link related transactions using the 
transaction ID).
---------------------------------------------------------------------------

    One commenter asserted that allowing a registered clearing agency 
to report betas and gammas to a registered SDR of the clearing agency's 
choice, rather than to the alpha SDR, would impose substantial costs on 
security-based swap counterparties because the non-clearing agency 
counterparties would have to establish connectivity to multiple 
SDRs.\50\ This comment appears premised on the idea that non-clearing 
agency counterparties would have ongoing obligations to report 
subsequent information--such as life cycle events or a daily mark of 
the security-based swap--to registered SDRs not of their choosing, 
which could force them to establish connections to multiple registered 
SDRs. However, proposed Rule 901(a)(2)(ii) would assign the reporting 
duty for a clearing transaction to the registered clearing agency, and 
Regulation SBSR, as adopted, does not impose any duty on a non-
reporting side to report life cycle events or a daily mark.\51\ 
Therefore, the Commission does not believe that any duty under 
Regulation SBSR, as adopted, or the amendments to Regulation SBSR 
proposed herein, would cause non-clearing agency counterparties to 
incur significant costs resulting from the ability of a registered 
clearing agency to select the registered SDR to which it reports 
clearing transactions.\52\
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    \50\ See MarkitSERV III at 4, n. 11.
    \51\ Nor does Regulation SBSR require a non-reporting side to 
alert a registered SDR if it becomes aware that any security-based 
swap information has been reported erroneously. Under the proposed 
amendments to Rule 905(a) discussed below, if an error is discovered 
by a person other than the person having the duty to report a 
security-based swap, the person who discovered the error would 
report such error to the person who had the duty to report the 
transaction, rather than to the registered SDR directly.
    \52\ Non-clearing agency counterparties to clearing transactions 
might incur modest costs associated with reporting certain unique 
identification code (``UIC'') information required by Rule 906(a), 
e.g., their branch ID, broker ID, trader ID, and trading desk ID, as 
applicable. See Regulation SBSR Adopting Release, Section 
XXII(C)(6)(c) (discussing the costs of complying with Rule 906(a), 
as adopted).
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d. Reporting Whether an Alpha Transaction is Accepted for Clearing
    One commenter expressed the view that a clearing agency would be 
well-positioned to issue a termination report for the alpha and 
subsequently report the beta, gamma, and, if necessary, open positions 
to a registered SDR.\53\ The Commission agrees with this commenter and 
is therefore proposing a new subparagraph (ii) of Rule 901(e)(1), which 
would require a registered clearing agency to report to the alpha SDR 
whether or not it has accepted the alpha for clearing. Rule 
901(e)(1)(i), as adopted, requires the reporting side of a security-
based swap to report--to the same entity to which it reported the 
original transaction--any life cycle event (or adjustment due to a life 
cycle event) except for whether or not the security-based swap has been 
accepted for clearing. Proposed Rule 901(e)(1)(ii) would address the 
reporting of whether or not the security-based swap has been accepted 
for clearing, and would assign that duty to the registered clearing 
agency to which the transaction is submitted for clearing, rather than 
to the reporting side of the original transaction. Proposed Rule 
901(e)(1)(ii) would ensure that all potential life cycle events (and 
adjustments due to life cycle events) would be subject to regulatory 
reporting, and that Regulation SBSR would specify the person who has 
the duty to report each kind of life cycle event (or adjustment).
---------------------------------------------------------------------------

    \53\ See ICE Letter at 2-5.
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    When an alpha is submitted for clearing, the registered clearing 
agency will review the trade and decide whether or not to accept it. 
Acceptance for clearing can result in the termination of the alpha and 
the creation of the beta and gamma. Furthermore, rejection from 
clearing is an important event in the life of the alpha--because 
rejection could result in the voiding of the transaction or the 
activation of credit support provisions that would alter the character 
of the transaction--and thus is the kind of event that Rule 901(e) is 
designed to capture for regulatory purposes. Accordingly, proposed Rule 
901(e)(1)(ii) would require a registered clearing agency to report 
whether or not it has accepted a security-based swap for clearing.
    The Commission preliminarily believes that requiring a registered 
clearing agency, rather than the reporting side of the alpha, to report 
whether or not the registered clearing agency has accepted an alpha for 
clearing is consistent with the Commission's approach of assigning 
reporting obligations to the person with the most complete and 
efficient access to the required information. The registered clearing 
agency would have the most complete and efficient access to information 
about whether a particular alpha has been accepted for clearing because 
the registered clearing agency determines whether to accept a submitted 
alpha and knows the precise moment when the transaction is cleared. 
Although it would be possible for the reporting side for the alpha 
transaction to report whether a registered clearing agency has accepted 
the alpha for clearing, the reporting side would need to learn this 
information from the clearing agency. The Commission preliminarily 
believes it is more efficient to require the registered clearing agency 
to report to the alpha SDR whether or not the registered clearing 
agency has accepted the alpha for clearing.
    Rule 901(e)(2), as adopted, requires whoever has the duty to report 
a life cycle event to include in the report of the life cycle event the 
transaction ID of the original transaction. If the Commission 
ultimately adopts proposed Rule 901(e)(1)(ii), a registered clearing 
agency that accepts or rejects an alpha transaction from clearing would 
incur this duty under existing Rule 901(e)(2). The transaction ID of 
the alpha transaction is information that the registered clearing 
agency might not have, because the registered clearing agency is not 
involved in the execution or reporting to a registered SDR of the alpha 
transaction. Therefore, the Commission also is proposing a new 
subparagraph (3) of Rule 901(a), which would provide that ``a person 
who, under [Rule 901(a)(1) or 901(a)(2)(ii)] has a duty to report a 
security-based swap that has been submitted to clearing at a registered 
clearing agency shall promptly provide that registered clearing agency 
with the transaction ID of the submitted security-based swap and the 
identity of the registered security-based swap data repository to which 
the transaction will be reported or has been reported.'' Proposed Rule 
901(a)(3) would ensure that the registered clearing agency knows the 
identity of the alpha SDR and the transaction ID of the alpha, so that 
the registered clearing agency knows where to report whether or not it 
accepts the alpha for clearing--as required under existing Rule 
901(e)(2)--and so that this report can be linked to the alpha report.
    The Commission recognizes the potential for proposed Rules 
901(e)(1)(ii) and 901(a)(3) to result in the registered clearing agency 
reporting whether or not it accepted the alpha for clearing to the 
alpha SDR before the alpha transaction itself has been reported to the 
alpha SDR. This could occur during the interim phase for regulatory 
reporting and public dissemination, which the Commission discussed in 
Section VII of the Regulation SBSR Adopting Release. Rule 901(j), as 
adopted, generally permits the person with the duty to report a 
security-based swap up to 24 hours after the time of execution to 
report to a registered SDR the transaction information required by 
Rules 901(c) and 901(d). Accordingly,

[[Page 14748]]

an alpha could be submitted for clearing immediately after execution, 
but not reported to a registered SDR for up to 24 hours (or, if 24 
hours after the time of execution would fall on a day that is not a 
business day, by the same time on the next day that is a business day). 
If the registered clearing agency accepts the alpha for clearing, the 
registered clearing agency might, pursuant to proposed Rule 
901(e)(1)(ii), submit a report of this life cycle event to the alpha 
SDR before the alpha SDR has received the transaction report of the 
alpha transaction itself.\54\
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    \54\ To submit the report contemplated by proposed Rule 
901(e)(1)(ii), the registered clearing agency would need to know the 
transaction ID of the alpha. The person with the duty to report the 
alpha might know the transaction ID of the alpha before it reports 
the transaction to a registered SDR. Under Rules 903(a) and 
907(a)(5), as adopted, there is no requirement that a registered SDR 
itself assign a transaction ID. Under those rules, a registered SDR 
may allow third parties--such as reporting sides or platforms--to 
assign a transaction ID using a methodology endorsed by the 
registered SDR. If the registered SDR allows third parties to assign 
the transaction ID, the reporting side or platform could tell the 
registered clearing agency the transaction ID, which in turn could 
allow the registered clearing agency to report to the alpha SDR 
whether or not the alpha has been accepted for clearing before the 
alpha has been reported to the registered SDR. If, however, the 
person with the duty to report the alpha does not obtain the 
transaction ID until it reports the alpha to a registered SDR, the 
person could not provide the transaction ID of the alpha to the 
registered clearing agency, and the registered clearing agency could 
not report whether or not it accepts the alpha for clearing until 
after it received alpha's transaction ID.
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    To account for this possibility, the Commission is proposing a 
minor amendment to Rule 901(e)(2). Rule 901(e)(2), as adopted, states 
in relevant part that a life cycle event must be reported ``to the 
entity to which the original security-based swap transaction was 
reported'' (emphasis added). Under the proposed amendment to Rule 
901(e)(2), a life cycle event would have to be reported ``to the entity 
to which the original security-based swap transaction will be reported 
or has been reported.'' This amendment mirrors the language in proposed 
Rule 901(a)(3), which would require a person who reports an alpha to 
provide the registered clearing agency to which the alpha is submitted 
the transaction ID of the alpha and the identity of the registered SDR 
to which the alpha ``will be reported or has been reported.''
    A registered SDR should consider--in formulating its policies and 
procedures under Rule 907(a), as adopted--whether those policies and 
procedures should address the situation where it receives a report from 
a registered clearing agency stating whether or not it has accepted an 
alpha (with a particular transaction ID) for clearing before the 
registered SDR has received a transaction report of the alpha. For 
example, the policies and procedures could provide that the registered 
SDR would hold a report from a registered clearing agency that it 
accepted the alpha for clearing in a pending state until it receives 
the transaction report of the alpha, and then disseminate the security-
based swap transaction information and the fact that the alpha has been 
terminated as a single report.
2. Reporting by a Platform
    Some commenters, responding to Rule 901(a) as initially proposed, 
suggested that the Commission require a platform to report security-
based swaps executed on or through its facilities.\55\ One of these 
commenters stated that a platform would have the technology to report a 
security-based swap executed on its facilities and would be in the best 
position to ensure that the transaction was reported accurately and on 
a real-time basis.\56\ This commenter also stated that the 
counterparties to a transaction executed on a platform should be 
relieved of any reporting obligations because they would not be in a 
position to control or confirm the accuracy of the information reported 
or to control the timing of the platform's reporting.\57\ Another 
commenter expressed the view that having platforms report security-
based swaps would facilitate economies in the marketplace because fewer 
entities, including end users, would be required to build the systems 
necessary to support security-based swap reporting.\58\ Four 
commenters, however, raised concerns about imposing reporting 
requirements on platforms.\59\
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    \55\ See ICI I at 5; Tradeweb Letter at 3-4; Vanguard Letter at 
2, 7.
    \56\ See Tradeweb Letter at 3.
    \57\ See id. at 3-4. The commenter also noted that the CFTC's 
proposed swap data reporting rules would require a SEF or designated 
contract market to report a swap executed on its facilities. See id. 
at 4. The CFTC has subsequently adopted a final rule that requires 
SEFs and designated contract markets to report swaps executed on 
their facilities. See 17 CFR 45.3.
    \58\ See Vanguard Letter at 7; ICI I at 5 (arguing that because 
investment funds would need to spend significant time and resources 
to build security-based swap reporting systems, platforms and 
security-based swap dealers should be obligated to report security-
based swap data).
    \59\ See ISDA/SIFMA I at 18; ISDA IV at 7; MarkitSERV III at 4; 
WMBAA II at 6.
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    After carefully considering these comments, the Commission is 
proposing to require a platform to report any security-based swap that 
is executed on the platform, but only if the security-based swap will 
be submitted to clearing. Proposed Rule 901(a)(1) provides that, if a 
security-based swap is executed on a platform and will be submitted to 
clearing, the platform on which the transaction was executed shall 
report to a registered SDR the information required by Rules 901(c) 
(the primary trade information), 901(d)(1) (the participant ID or 
execution agent ID for each counterparty, as applicable), and 901(d)(9) 
(the platform ID). If the security-based swap will not be submitted to 
clearing, the platform would have no reporting obligations under 
Regulation SBSR. Instead, the reporting hierarchy in Rule 
901(a)(2)(ii), as adopted, will determine which side is the reporting 
side for such a platform-executed transaction.\60\ As discussed below, 
proposed subparagraph (1) of Rule 901(a) is intended to maximize the 
accuracy and completeness of data reported to registered SDRs, while 
continuing to align the reporting duty with persons that are best able 
to carry it out.
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    \60\ See Regulation SBSR Adopting Release, Section V.
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    The Commission understands that each counterparty to a platform-
executed transaction that will be submitted to clearing intends to 
assume the credit risk of the clearing agency rather than any of the 
other platform participants, so there is no need to have credit and 
other documentation in place between itself and its counterparty. Thus, 
such a transaction could be executed anonymously, as there might be no 
mechanism by which one counterparty would learn the identity of the 
other.\61\ The direct counterparties to such an alpha might not know 
which side would be the reporting side (if the hierarchy in Rule 
901(a)(2), as adopted,

[[Page 14749]]

applied) and there might be no mechanism for them to learn this 
information because they would not be assuming each other's credit 
risk.\62\ Even if the direct counterparties could agree that one side--
for example, the side selling protection in a single-name credit 
default swap--would report the trade, the reporting side might not 
learn the identity of its counterparty even though Rule 901(d)(1), as 
adopted, requires the reporting side to report all counterparty 
IDs.\63\
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    \61\ The Commission notes that the offer and sale of security-
based swaps, even if affected anonymously on a platform, must either 
be registered under the Securities Act or be made pursuant to an 
exemption from registration. The registration exemption in Section 
4(a)(2) of the Securities Act, 15 U.S.C. 77d(a)(2), generally is 
available for transactions by an issuer not involving any public 
offering. One factor in determining the availability of the Section 
4(a)(2) exemption is that the purchasers of the securities in the 
transaction must be sophisticated investors. As previously noted by 
the Commission, Congress determined that eligible contract 
participants are sophisticated investors for purposes of security-
based swap transactions. See Exemptions for Security-Based Swaps 
Issued By Certain Clearing Agencies, Securities Act Release No. 9308 
(March 30, 2012), 77 FR 20536 (April 5, 2012); Exemptions for 
Security-Based Swaps, Securities Act Release No. 9231 (July 1, 
2011), 76 FR 40605 (July 11, 2011). The Commission believes that 
Congressional determination of eligible contract participants as 
sophisticated investors for purposes of security-based swap 
transactions applies as well for purposes of Section 4(a)(2) of the 
Securities Act. In addition, the exemption in Rule 240 under the 
Securities Act, 17 CFR 230.240, also may be available for security-
based swap transactions involving eligible contract participants, to 
the extent applicable.
    \62\ Cf. Cross-Border Adopting Release, 79 FR 47325 (creating an 
exception, from having to be counted against the de minimis 
thresholds, for certain security-based swap transactions that a non-
U.S. person enters into anonymously on a platform and that are 
cleared through a clearing agency, because each counterparty would 
not be in a position to know whether the other is a U.S. person).
    \63\ Rule 901(d)(1) requires the reporting side to provide the 
counterparty ID or execution agent ID for each counterparty, as 
applicable. If the execution occurs anonymously, neither side would 
know the counterparty ID or execution agent ID of the other side.
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    Although some platform-executed transactions that will be submitted 
to clearing might not be executed anonymously, the Commission 
preliminarily believes that it would be more efficient to require the 
platform to report all security-based swaps executed on that platform 
that will be submitted to clearing, regardless of whether the 
counterparties are, in fact, anonymous to each other. The Commission 
preliminarily believes that assigning the duty to report to the 
platform minimizes the number of reporting steps and thus minimizes the 
possibility of data corruption and delays in reporting the transaction 
to a registered SDR. Thus, the Commission preliminarily believes that 
all platform-executed transactions that will be submitted to clearing 
should be reported by the platform. This approach would be more 
efficient than if the platform had to assess on a transaction-by-
transaction basis whether or not the counterparties are in fact unknown 
to each other.
    As noted above,\64\ four commenters generally opposed assigning to 
platforms the duty to report security-based swap transactions. One 
commenter stated generally that ``the reporting party should be able to 
choose which SDR to report to, while being allowed to delegate the 
actual reporting to qualified third parties where it sees fit.'' \65\ 
The commenter appeared to suggest that a platform could be a qualified 
third party acting as an agent for a reporting side.\66\ The Commission 
agrees with the commenter that the platform is well-placed to carry out 
the act of reporting, but, unlike the commenter, the Commission 
preliminarily believes that the platform itself should have the legal 
duty to report for the reasons discussed above.
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    \64\ See supra note 59.
    \65\ MarkitSERV III at 4.
    \66\ See id. (stating that counterparties should be able to 
choose the registered SDR ``regardless of whether the transaction is 
executed on a SEF'').
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    Three other commenters argued generally that platforms should not 
be assigned the duty to report because they lack certain information 
that would have to be reported. One of these commenters stated, for 
example, that ``the SB SEF or national securities exchange may not 
itself have access to all of the information required, such as whether 
the trade has been accepted for clearing.'' \67\ The other commenter 
argued that ``[t]he SB SEF would likely not be privy to all of the 
terms required to be reported in accordance with proposed Regulation 
SBSR, such as, but not limited to: (i) Contingencies of the payment 
streams of each counterparty to the other; (ii) the title of any master 
agreement or other agreement governing the transaction; (iii) data 
elements necessary to calculate the market value of the transaction; 
and (iv) other details not typically provided to the SB SEF by the 
customer, such as the actual desk on whose behalf the transaction is 
entered. Moreover, and quite critical, an SB SEF would not be in a 
position or necessarily have the capabilities to report life cycle 
event information. Indeed, even if an SB SEF were required to report 
the transaction details as the proposed regulation requires, something 
we do not think advisable, it would likely take at least 30 minutes to 
gather and confirm the accuracy of that information.'' \68\
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    \67\ ISDA/SIFMA I at 18. See also ISDA IV at 7 (stating that the 
clearing agency should be responsible for reporting the alpha trade 
once it has been accepted for clearing, and that one of the 
counterparties should be responsible per the reporting hierarchy for 
reporting a bilateral transaction that is not intended for 
clearing). The last commenter also stated that certain aspects of 
the CFTC regime for reporting bilateral swaps executed on a facility 
have been challenging due to the difficulty for SEFs to know and 
report certain trade data that is not essential to trade execution, 
and because of the shared responsibility for reporting since the 
SEF/DCM is responsible for the initial creation data reporting and 
the SD/MSP is responsible for continuation data reporting. See id. 
The Commission notes that Regulation SBSR, as adopted, applies the 
reporting hierarchy in Rule 901(a) to a security-based swap executed 
on a platform that is not intended to be cleared. See Regulation 
SBSR Adopting Release, Section V(C)(4).
    \68\ WMBAA II at 6.
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    The Commission shares the commenters' concern that it would not be 
appropriate to require platforms to report information that they do not 
have or that would be impractical to obtain. However, a close 
examination of the data elements that must be reported under Rules 
901(c) and 901(d), as adopted, suggests that a platform would not be 
put in this position:
     Rule 901(c)(1) requires reporting of the product ID, if 
available, or else other information that identifies the security-based 
swap. Proposed Rule 901(a)(1) would apply only to platform-executed 
security-based swaps submitted to clearing, which suggests that these 
are products that would have a product ID. Even if these security-based 
swaps did not have a product ID, the platform would have sufficient 
information to identify a security-based swap traded on its facilities 
to allow its subscribers to trade it; this same information would be 
sufficient for the platform to report the information required by Rule 
901(c)(1) to a registered SDR.
     Rules 901(c)(2), 901(c)(3), and 901(c)(4) require 
reporting of the date and time of execution, the price, and the 
notional amount, respectively, of the security-based swap. The platform 
will know these data elements because they were determined on the 
platform's facilities.
     Rule 901(c)(5) requires reporting of whether both sides of 
the transaction include a registered security-based swap dealer. The 
Commission anticipates that this information will be publicly 
available, or the platform could easily obtain it from a platform 
participant.
     Rule 901(c)(6) requires reporting of whether the direct 
counterparties intend that the security-based swap will be submitted to 
clearing. Rule 901(d)(6) requires reporting of the name of the clearing 
agency to which the security-based swap will be submitted to clearing. 
The fact that the transaction is intended to be cleared may be implicit 
in the product ID (e.g., if the security-based swap traded has a 
product ID of a ``made available to trade'' product). Alternatively, 
the counterparties may inform the platform that the security-based swap 
will be submitted to clearing; in some cases, the platform may provide 
the mechanism for reporting the transaction to a clearing agency. The 
Commission presumes that, if the platform knows that the security-based 
swap will be submitted to clearing, the platform will also know the 
name of the clearing agency. If the platform has no knowledge that the 
transaction will be submitted to clearing, the platform would have no 
duty to report it under proposed Rule 901(a)(1).
     Rule 901(c)(7) requires reporting, if applicable, of any 
flags pertaining to the

[[Page 14750]]

transaction that are specified in the policies and procedures of the 
registered SDR to which the transaction will be reported. The 
Commission preliminarily believes that, because the transaction occurs 
on the platform's facilities, the platform would have knowledge of any 
circumstances that would require application of a flag.
     Rule 901(d)(1) requires reporting of the counterparty ID 
or the execution agent ID of each counterparty, as applicable. A 
platform will know the identity of each direct counterparty or the 
execution agent for each direct counterparty because those market 
participants will be using the platform's facilities to execute the 
alpha transaction. To the extent that such alphas have an indirect 
counterparty, the Commission presumes that the platform will be able to 
obtain this information from the participant that is a direct 
counterparty to the alpha.
     Rule 901(d)(2) requires the reporting side to report the 
branch ID, broker ID, execution agent ID, trader ID, and trading desk 
ID ``of the direct counterparty on the reporting side.'' Regardless of 
whether a platform has these UICs for the counterparties to a security-
based swap executed on its facilities, the platform would not be the 
reporting side for such a transaction because it is not a counterparty 
to the security-based swap.\69\ Thus, when a platform has the duty to 
report a transaction, there is no reporting side, and the registered 
SDR to which the platform reports the security-based swap would be 
required to obtain the branch ID, broker ID, execution agent ID, trader 
ID, and trading desk ID, as applicable, from each direct counterparty 
using the process in Rule 906(a), as adopted.\70\
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    \69\ Under Rule 900(hh), as adopted, the sides are 
counterparties to the security-based swap. Thus, the platform would 
not be one of the sides (except possibly in unusual circumstances) 
and thus could not be the reporting side.
    \70\ See Regulation SBSR Adopting Release, Section XIII 
(describing Rule 906(a), as adopted). The Commission preliminarily 
believes that relying on the Rule 906(a) process to obtain UIC 
information from both sides to a platform-executed security-based 
swap that will be submitted to clearing would not cause 
counterparties to such transactions to incur significant additional 
costs. See Regulation SBSR Adopting Release, Section XXII(C)(6)(c) 
(estimating the costs of complying with Rule 906(a), as adopted, for 
reporting sides). As noted above, assigning the reporting duty to 
the platform should minimize the number of reporting steps and thus 
the possibility of data corruption and delays in reporting the 
transaction to a registered SDR because a platform will have 
superior access to the economic terms of security-based swaps that 
are executed on its facilities and will be submitted to clearing. 
The Commission further notes that the platform could report the 
branch ID, broker ID, execution agent ID, trader ID, and trading 
desk ID, as applicable, as agent for a direct counterparty, if the 
direct counterparty provided this information to the platform. See 
Regulation SBSR Adopting Release, Section V(C)(2) (discussing use of 
agents to carry out reporting duties).
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     Rules 901(d)(3) and 901(d)(5) require reporting of the 
terms of any fixed or floating rate payments and any other elements 
included in the agreement necessary to calculate the value of the 
contract, respectively, but only ``[t]o the extent not provided 
pursuant to [Rule 901(c)].'' The Commission believes that all of the 
identifying information would be contained in the product ID or 
otherwise available to the platform and reported by the platform 
pursuant to Rule 901(c).\71\ Therefore, the Commission preliminarily 
believes that the information required under Rules 901(d)(3) and 
901(d)(5) would be a null set for a transaction executed on a platform 
that is submitted to clearing.
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    \71\ For a platform to make a security-based swap eligible for 
trading on its facilities, it must display a product in specific 
enough detail for the platform participants to reach a meeting of 
the minds about what they are trading. In other words, the platform 
must provide information that identifies the security-based swap, 
the effective date, the scheduled termination date, and the terms of 
any standardized fixed or floating rate payments and the frequency 
of such payments. The platform would be required to report these 
elements, or a product ID that incorporates these elements, to a 
registered SDR pursuant to Rule 901(c).
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     Rule 901(d)(4) requires reporting of the titles and dates 
of agreements that are ``incorporated by reference into the security-
based swap contract.'' The terms of the alpha security-based swap will 
be established according to the rules of the platform and, potentially, 
the rules of the registered clearing agency to which the security-based 
swap will be submitted, and likely will not be written. Therefore, the 
Commission presumes that there will be no agreements incorporated by 
reference to such contracts, and the information required under Rule 
901(d)(4) would be a null set for a transaction executed on a platform 
that will be submitted to clearing.
     Rule 901(d)(7) would apply only if the direct 
counterparties do not intend to submit the security-based swap to 
clearing. Rule 901(d)(8) would apply only if the transaction is not 
submitted to clearing. Because a platform would be required to report a 
security-based swap executed on its facilities only if the transaction 
will be submitted to clearing, Rules 901(d)(7) and 901(d)(8) would not 
be applicable.
     Rule 901(d)(9) requires reporting of the platform ID. The 
platform can provide this information.
     Rule 901(d)(10) would apply only if the security-based 
swap arises from the allocation, termination, novation, or assignment 
of one or more existing security-based swaps. To the extent that 
platforms facilitate allocations, terminations, novations, or 
assignments of existing security-based swaps, the platform participants 
engaging in such exercises could provide the platform with the 
transaction IDs of those existing security-based swaps,\72\ which the 
platform would need to report pursuant to Rule 901(d)(10).
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    \72\ For a platform to facilitate allocations, terminations, 
novations, or assignments of existing security-based swaps, the 
platform participants necessarily must provide a significant amount 
of information to the platform regarding those existing security-
based swaps. Given that the platform participants must provide a 
significant amount of information about the existing transactions to 
the platform, the Commission preliminarily believes that the 
platform participants also could provide the platform with the 
transaction IDs of those existing security-based swaps.
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    Two commenters who raised general issues about platforms having the 
duty to report questioned, in particular, a platform's ability to 
report subsequent events affecting the initial alpha transaction. One 
commenter stated that ``an SB SEF would not be in a position or 
necessarily have the capabilities to report life cycle event 
information.'' \73\ The second commenter noted that ``the SB SEF or 
national securities exchange may not itself have access to . . . 
whether the trade has been accepted for clearing.'' \74\ This commenter 
further noted that ``the relevant clearing agency . . . could report 
the missing data in parallel.'' \75\ The Commission broadly agrees with 
that suggestion and therefore is proposing a new subparagraph (ii) of 
Rule 901(e)(1), which would require a registered clearing agency to 
report whether or not it has accepted a security-based swap for 
clearing. Proposed Rule 901(e)(1)(ii) reflects the Commission's 
preliminary view that the registered clearing agency--and not a 
platform or any other person--has the most direct access to that 
information and, therefore, should have the duty to report it to the 
alpha SDR.\76\ Similarly, the Commission generally agrees with the 
first commenter that a platform is not in a good position to know about 
life cycle events of security-based swaps executed on their facilities. 
However, the Commission preliminarily believes that the only life cycle 
event of a platform-executed security-based swap that will be submitted 
to clearing will be whether the security-based swap is accepted for 
clearing. Proposed Rule 901(e)(1)(ii) would require the registered 
clearing

[[Page 14751]]

agency to report that information, not the platform.
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    \73\ WMBAA II at 6.
    \74\ ISDA/SIFMA I at 18.
    \75\ Id.
    \76\ See supra Section II(C)(2)(d).
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    The Commission notes that proposed Rule 901(a)(1) would require a 
platform to report a security-based swap only if the security-based 
swap will be submitted to clearing. If the platform-executed 
transaction will not be submitted to clearing, Rule 901(a)(2)(ii), as 
adopted, already requires the counterparties to apply the reporting 
hierarchy to determine which side will have the duty to report the 
transaction, as well as any life cycle event of that transaction. This 
result is consistent with Section 13A(a)(3) of the Exchange Act,\77\ 
which sets out a reporting hierarchy under which one of the 
counterparties, but not a platform, will have the duty to report a 
security-based swap that is not accepted by any clearing agency.
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    \77\ 15 U.S.C. 78mA(a)(3).
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3. Additional Amendments To Account for Platforms and Registered 
Clearing Agencies Incurring Duties To Report
    Under Rule 901(h), as adopted, ``a reporting side'' must 
electronically transmit the information required by Rule 901 in a 
format required by the registered SDR.\78\ The Commission is now 
proposing to replace the term ``reporting side'' in Rule 901(h) with 
the phrase ``person having a duty to report'' because, under the 
proposed amendments to Rule 901(a), platforms and registered clearing 
agencies would have duties to report certain transaction information, 
in addition to reporting sides. The Commission believes that all 
persons who have a duty to report under Regulation SBSR--i.e., 
platforms, registered clearing agencies, and reporting sides--should 
electronically transmit the information required by Rule 901 in a 
format required by the registered SDR.
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    \78\ Rule 907, as adopted, requires a registered SDR to 
establish and maintain written policies and procedures to govern 
various aspects of the registered SDR's operations, including the 
manner and format in which the registered SDR will accept data from 
its participants.
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    Under Rule 900(u), as adopted, platforms and registered clearing 
agencies would not be participants of registered SDRs solely as a 
result of reporting security-based swap transaction information 
pursuant to proposed Rule 901(a)(1) or 901(e)(1)(ii), respectively.\79\ 
However, consistent with the proposed amendment to Rule 901(h) 
described immediately above, the Commission believes that platforms and 
registered clearing agencies should be participants of any registered 
SDR to which they report security-based swap transaction information. 
Imposing participant status on platforms and registered clearing 
agencies would explicitly require those entities to report security-
based swap transaction information to a registered SDR in a format 
required by that registered SDR. If platforms and registered clearing 
agencies were not participants of the registered SDR and were permitted 
to report data in a format of their own choosing, it could be difficult 
or impossible for the registered SDR to understand individual 
transaction reports or aggregate them with other reports in a 
meaningful way. This could adversely affect the ability of the 
Commission and other relevant authorities to carry out their oversight 
responsibilities and could interfere with the ability of a registered 
SDR to publicly disseminate security-based swap transaction information 
as required by Rule 902, as adopted. Therefore, the Commission is 
proposing to amend the definition of ``participant'' in Rule 900(u) to 
mean: (1) A person that is a counterparty to a security-based swap, 
provided that the security-based swap is subject to regulatory 
reporting under Regulation SBSR and is reported to a registered SDR 
pursuant to Regulation SBSR; (2) a platform that is required to report 
a security-based swap pursuant to Rule 901(a)(1); or (3) a registered 
clearing agency that is required to report a life cycle event pursuant 
to Rule 901(e).\80\
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    \79\ Rule 900(u), as adopted, provides that a ``[p]articipant, 
with respect to a registered security-based swap data repository, 
means a counterparty, that meets the criteria of [Rule 908(b)], of a 
security-based swap that is reported to that registered security-
based swap data repository to satisfy an obligation under [Rule 
901(a)].''
    \80\ A registered clearing agency that is required to report a 
clearing transaction pursuant to proposed Rule 901(a)(2)(i) would be 
a counterparty to a security-based swap and covered by the first 
prong of the proposed definition of ``participant.''
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4. Examples
    The following examples illustrate the proposed reporting process 
for alpha, beta, and gamma security-based swaps, assuming an agency 
model of clearing under which a non-clearing member counterparty 
becomes a direct counterparty to a clearing transaction: \81\
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    \81\ As noted in Section II(A), supra, because clearing of 
security-based swaps in the United States is still evolving, other 
models of clearing might emerge where customers would not become 
direct counterparties of a registered clearing agency.
---------------------------------------------------------------------------

     Example 1. A registered security-based swap dealer enters 
into a security-based swap with a private fund. The transaction is not 
executed on a platform. The counterparties intend to clear the 
transaction (i.e., the transaction is an alpha). Neither side has a 
guarantor with respect to the alpha, and both direct counterparties are 
U.S. persons.
    [cir] The registered security-based swap dealer is the reporting 
side under Rule 901(a)(2)(ii), as adopted, and must report this alpha 
transaction to a registered SDR (and may choose the registered SDR).
    [cir] Proposed Rule 901(a)(3) would require the registered 
security-based swap dealer, as the reporting side of the alpha 
transaction, to promptly provide to the registered clearing agency the 
transaction ID of the alpha and the identity of the alpha SDR.
    [cir] If the registered clearing agency accepts the alpha for 
clearing and terminates the alpha, two clearing transactions--a beta 
(between the registered security-based swap dealer and the registered 
clearing agency) and a gamma (between the registered clearing agency 
and the private fund)--take its place.
    [cir] Proposed Rule 901(e)(1)(ii) would require the registered 
clearing agency to report to the alpha SDR that it accepted the 
transaction for clearing.
    [cir] Under proposed Rule 901(a)(2)(i), the registered clearing 
agency would be the reporting side for each of the beta and the gamma. 
Therefore, the registered clearing agency would be required to report 
the beta and gamma to a registered SDR and could choose the registered 
SDR to which it reports the beta and gamma. The report for each of the 
beta and the gamma must include the transaction ID of the alpha, as 
required by Rule 901(d)(10), as adopted.
     Example 2. Same facts as Example 1, except that the 
private fund and the registered security-based swap dealer transact on 
a SB SEF.
    [cir] Proposed Rule 901(a)(1) would require the SB SEF to report 
the alpha transaction (and allow the SB SEF to choose the registered 
SDR).
    [cir] Upon submission of the alpha for clearing, proposed Rule 
901(a)(3) would require the SB SEF to promptly report to the registered 
clearing agency the transaction ID of the alpha and the identity of the 
alpha SDR.
    [cir] Once the alpha is submitted to clearing, the reporting 
workflows are the same as in Example 1.

D. Request for Comment

    The Commission requests comment on all aspects of the proposed new 
Rules 901(a)(1), 901(a)(2)(i), and 901(a)(3), as well as the proposed 
amendment to Rule 901(e).
    1. Is the Commission's discussion of how Regulation SBSR--under the 
amendments proposed in this release--would apply to different steps or 
actions in the clearing process under the agency

[[Page 14752]]

model sufficiently clear and complete? If not, please provide detail 
about the operation of the agency model of clearing (e.g., particular 
steps or actions in the clearing process) that you believe the 
Commission has not adequately addressed and how you believe they should 
be treated under Regulation SBSR.
    2. Do you believe that the principal model of clearing is or is 
likely to become sufficiently prevalent in the U.S. market that the 
Commission should address how Regulation SBSR would apply to different 
steps in the clearing process under the principal model? If so, do you 
think that further guidance is necessary to apply Regulation SBSR 
effectively to the principal model? What aspects of the principal model 
should the Commission focus on for purposes of providing further 
guidance?
    3. At the time that a security-based swap is accepted for clearing, 
will any person other than the registered clearing agency have complete 
information about the beta and the gamma that result from clearing?
    4. Do you agree with the Commission's preliminary assessment of the 
data elements under Rules 901(c) and 901(d) that will be available to a 
platform and required to be reported for a platform-executed security-
based swap that will be submitted to clearing? If not, what information 
would the platform find difficult to obtain? For example, could a 
platform reasonably be expected to know of guarantors of direct 
counterparties transacting on its facilities (if the guarantors are 
clearing members who guarantee platform participants who are not 
themselves direct members of the clearing agency)?
    5. If the Commission were to adopt the basic requirement that a 
platform must report transactions executed on its facilities that are 
submitted to clearing but, as discussed above, would not require the 
platform to report certain data elements in Rule 901(c) or 901(d), what 
data elements should be excepted? Can you suggest an alternate 
mechanism--besides requiring the platform to report--for such data 
elements to be reported to the registered SDR?
    6. Would a platform have knowledge of any special circumstances of 
a transaction executed on its facilities that might have to be flagged 
pursuant to the policies and procedures of the registered SDR to which 
the platform reports the transaction? Are there any special 
circumstances that it would be difficult or impossible for a platform 
to know? If so, please discuss and suggest how the transaction could be 
appropriately flagged if the platform does not do so.
    7. Are there any potential life cycle events of a platform-executed 
security-based swap that will be submitted to clearing, other than 
acceptance or rejection from clearing? If so, what are they and who do 
you think should have the duty of reporting such life cycle events to a 
registered SDR? Why?
    8. What costs might platforms incur to report security-based swap 
transactions pursuant to proposed Rule 901(a)(1)? Could other market 
participants report these transactions more efficiently or cost 
effectively?
    9. Would a registered clearing agency have the information 
necessary to report a platform-executed alpha that will be submitted to 
clearing? If so, should the registered clearing agency, rather than the 
platform, be required to report the transaction? Why or why not? How 
long does it typically take between the execution of a security-based 
swap on a platform and submission to clearing? How long does it 
typically take between submission to clearing and when the registered 
clearing agency determines whether to accept or reject the transaction?
    10. Rule 901(d)(2), as adopted, requires the reporting side to 
report--``as applicable''--the branch ID, broker ID, execution agent 
ID, trader ID, and trading desk ID with respect to the direct 
counterparty on the reporting side. As described above, the Commission 
is proposing that the registered clearing agency would be the reporting 
side for all clearing transactions to which it is a counterparty. Would 
the branch ID, broker ID, execution agent ID, trader ID, or trading 
desk ID ever be applicable to a registered clearing agency? Why or why 
not?
    11. Rule 906(a), as adopted, provides a mechanism for a registered 
SDR to obtain the branch ID, broker ID, execution agent ID, trading ID, 
and trading desk ID--``as applicable''--for the non-reporting side of a 
security-based swap. Thus, mechanisms exist under Regulation SBSR, as 
adopted, for the Commission to learn the UICs, as applicable, for both 
sides of the alpha transaction. Would these UICs be applicable to the 
non-clearing agency side of a clearing transaction? Why or why not? If 
not, do you believe that the Commission should provide guidance that 
there is no requirement under Rule 906(a) to report the UICs for the 
non-clearing agency counterparty of a clearing transaction?
    12. Will registered clearing agencies be able to leverage existing 
reporting processes to report data to registered SDRs? What additional 
reporting processes might registered clearing agencies need to develop 
to ensure accurate reporting in accordance with the proposed amendments 
to Rule 901? What costs might registered clearing agencies incur to 
adopt these processes?
    13. Would other market participants be able to report clearing 
transactions or terminations of transactions submitted to clearing more 
efficiently or cost effectively than the registered clearing agency? 
What costs might counterparties incur if one of the sides of the alpha 
were assigned the duty to report a clearing transaction rather than the 
registered clearing agency?
    14. Should the proposed reporting requirements for registered 
clearing agencies apply only to registered clearing agencies having 
their principal place of business in the United States rather than to 
all registered clearing agencies (which could include registered 
clearing agencies having their principal place of business outside the 
United States)? Why or why not? Would U.S. persons, registered 
security-based swap dealers, and registered major security-based swap 
participants be in a better position to report transactions with non-
U.S. person registered clearing agencies? Why or why not?
    15. Under proposed Rule 901(e)(1)(ii), a registered clearing agency 
would be required to report whether or not it has accepted a security-
based swap for clearing. Should this information be required to be 
reported to the same registered SDR that receives the transaction 
report of the alpha? If not, how would the Commission and other 
relevant authorities be able to ascertain whether or not the alpha had 
been cleared? If so, what costs would be imposed on registered clearing 
agencies for having to report this transaction information to a 
registered SDR not of their choosing?
    16. Is it appropriate to require a registered clearing agency to 
become a participant of the alpha SDR solely as a result of reporting 
whether or not it has accepted an alpha for clearing? What costs would 
be imposed on registered clearing agencies as a result of this 
requirement? If a registered clearing agency did not become a 
participant of the alpha SDR solely by virtue of reporting the 
disposition of an alpha, in what other way should the registered 
clearing agency be required to report the disposition of an alpha such 
that the systems of the alpha SDR can accept and understand that 
report?
    17. What costs might platforms and reporting sides incur to comply 
with proposed Rule 901(a)(3), which would require the person with the 
duty to report a security-based swap that has been submitted to 
clearing at a

[[Page 14753]]

registered clearing agency to promptly provide that registered clearing 
agency with the transaction ID of the submitted security-based swap and 
the identity of the alpha SDR? Is there a more efficient way of 
ensuring that registered clearing agencies know the transaction ID of 
the alpha and the identity of the alpha SDR? If so, please discuss.
    18. Should platforms and registered clearing agencies be 
participants of the registered SDRs to which they report? If not, how 
would a registered SDR ensure that these persons provide data in a 
format required by the registered SDR?
    19. How might the policies and procedures of a registered SDR 
address the circumstance where the registered SDR receives a 
termination report of an alpha pursuant to proposed Rule 901(e)(1)(ii) 
before it receives the initial report of the alpha? What costs would 
registered SDRs incur to implement policies and procedures addressing 
this scenario?
    20. Can anonymous trading occur on any other type of trading venue 
besides a platform? If so, please describe where and how such activity 
occurs and provide your view as to how Regulation SBSR should, if 
necessary, be amended to require reporting of such transactions.

III. Reporting and Public Dissemination of Security-Based Swaps 
Involving Allocation

    The Regulation SBSR Adopting Release provides guidance for the 
reporting of certain security-based swaps executed by an asset manager 
on behalf of multiple clients--transactions involving what are 
sometimes referred to as ``bunched orders.'' \82\ Specifically, the 
Regulation SBSR Adopting Release explains how Regulation SBSR applies 
to executed bunched orders that are reported pursuant to the reporting 
hierarchy in Rule 901(a)(2)(ii), as adopted, including bunched order 
alphas. That release also explains how Regulation SBSR applies to the 
security-based swaps that result from allocation of that executed 
bunched order, if the resulting security-based swaps are uncleared. 
This section explains how the Commission preliminarily believes 
Regulation SBSR, as adopted and as proposed to be amended by this 
release, would apply to a platform-executed bunched order that will be 
submitted to clearing, and the security-based swaps that result from 
the allocation of any bunched order execution, if the resulting 
security-based swaps are cleared.
---------------------------------------------------------------------------

    \82\ See Regulation SBSR Adopting Release, Section VIII. The 
Commission recognizes that market participants may use a variety of 
other terms to refer to such transactions, including ``blocks,'' 
``parent/child'' transactions, and ``splits.'' The Commission has 
determined to use a single term, ``bunched orders,'' for purposes of 
this release, as this appears to be a widely accepted term. See, 
e.g., ``Bunched orders challenge SEFs,'' MarketsMedia (March 25, 
2014), available at http://marketsmedia.com/bunched-orders-challenge-sefs/, (last visited September 22, 2014); ``Cleared 
bunched trades could become mandatory rule,'' Futures and Options 
World (October 31, 2013), available at http://www.fow.com/3273356/Cleared-bunched-trades-could-become-mandatory-rule.html,(last 
visited September 22, 2014).
---------------------------------------------------------------------------

    As described in the Regulation SBSR Adopting Release, to execute a 
bunched order, an asset manager negotiates and executes a security-
based swap with a counterparty, typically a security-based swap dealer, 
on behalf of multiple clients. The bunched order could be executed on- 
or off-platform. After execution of the bunched order, the asset 
manager would allocate a fractional amount of the aggregate notional 
amount of the transaction to each of several clients, thereby creating 
several new security-based swaps and terminating the bunched order 
execution.\83\ By executing a bunched order, the asset manager avoids 
having to negotiate the client-level transactions individually, and 
obtains exposure for each client on the same terms (except, perhaps, 
for size).
---------------------------------------------------------------------------

    \83\ In aggregate, the notional amount of the security-based 
swaps that result from the allocation is the same as the notional 
amount of the executed bunched order.
---------------------------------------------------------------------------

    In the Regulation SBSR Adopting Release, the Commission explained 
that a bunched order execution and the security-based swaps resulting 
from the allocation of the bunched order execution, if they are not 
cleared, must be reported like other security-based swaps. Regulation 
SBSR provides that the registered SDR to which the initial bunched 
order execution is reported must disseminate a report of the bunched 
order execution, including the full notional amount of the transaction. 
The Commission observed that publicly disseminating bunched order 
executions in this manner would allow the public to ``know the full 
size of the bunched order execution and that this size was negotiated 
at a single price.'' \84\ Rule 902(c)(7), as adopted, provides that the 
registered SDR shall not publicly disseminate any information regarding 
the allocation of a bunched order execution, which would include the 
smaller security-based swaps resulting from the allocation of the 
initial transaction as well as the fact that the initial transaction is 
terminated following this allocation.
---------------------------------------------------------------------------

    \84\ Regulation SBSR Adopting Release, Section VIII.
---------------------------------------------------------------------------

A. Examples

    The following examples illustrate how Regulation SBSR would apply 
to platform-executed bunched order alphas, and security-based swaps 
that result from allocation of bunched order alphas, if the resulting 
security-based swaps are cleared. The examples specify which actions 
are addressed by Regulation SBSR, as adopted, and which actions would 
be addressed by the new provisions of Regulation SBSR that are being 
proposed in this release. The Commission notes that the proposed 
amendments to Rule 901(a) and the conforming changes discussed in 
Section II, supra, would not affect the examples describing the 
reporting of bunched orders and the security-based swaps that result 
from their allocation that the Commission provided in the Regulation 
SBSR Adopting Release. Furthermore, the examples assume that the 
bunched order alpha would be cleared using the agency model of 
clearing.\85\ In the case of a bunched order alpha, the final placement 
of risk will take the form of clearing transactions between: (1) The 
client accounts of the asset manager and the registered clearing agency 
that clears the bunched order alpha; and (2) the registered security-
based swap dealer and the registered clearing agency.
---------------------------------------------------------------------------

    \85\ As noted in Section II(A), supra, the agency model of 
clearing predominates in the United States.
---------------------------------------------------------------------------

    The Commission understands that market participants may use a 
variety of workflows for allocating a bunched order alpha. Regulation 
SBSR, as adopted, provides that, regardless of the workflow employed, a 
bunched order alpha that is executed off-platform shall be reported and 
publicly disseminated as a single transaction, showing the full 
notional amount.\86\ The proposed interpretation discussed below would 
take the same approach to bunched order alphas that are executed on a 
platform. Regulation SBSR, as adopted, further provides that the 
security-based swaps that result from allocation of a bunched order 
execution are subject to regulatory reporting but not public 
dissemination, if these resulting security-based swaps are uncleared. 
The proposed interpretation discussed below would take the same 
approach to cleared security-based swaps that result from the 
allocation of a bunched order alpha.\87\
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    \86\ See Regulation SBSR Adopting Release, Section VIII(A).
    \87\ See ISDA IV at 10 (recommending that bunched order 
executions be subject to public dissemination instead of the 
transactions resulting from the allocation).

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[[Page 14754]]

1. Example 1: Off-Platform Cleared Transaction
    Assume that an asset manager, acting on behalf of several advised 
accounts, executes a bunched order alpha with a registered security-
based swap dealer. The execution does not occur on a platform, and 
there are no indirect counterparties on either side of the bunched 
order alpha. The transaction is submitted to a registered clearing 
agency.
a. Reporting the Bunched Order Alpha
    The reporting hierarchy of Rule 901(a)(2)(ii), as adopted, applies 
to the bunched order alpha because the execution does not occur on a 
platform and the bunched order alpha is not a clearing transaction. 
Under Rule 901(a)(2)(ii)(B), as adopted, the registered security-based 
swap dealer is the reporting side for the bunched order alpha because 
its side includes the only registered security-based swap dealer. As 
the reporting side, the registered security-based swap dealer must 
report the primary and secondary trade information for the bunched 
order alpha to a registered SDR (the ``alpha SDR'') of its choice 
within 24 hours after the time of execution. Rule 902(a), as adopted, 
requires the alpha SDR to publicly disseminate a transaction report of 
the bunched order alpha immediately upon receiving the report from the 
registered security-based swap dealer.\88\
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    \88\ Pursuant to Rule 906(a), as adopted, the registered SDR 
also would be required to obtain any missing UICs from the 
counterparties.
---------------------------------------------------------------------------

    When the registered security-based swap dealer submits the bunched 
order alpha to a registered clearing agency for clearing, proposed Rule 
901(a)(3) would require the registered security-based swap dealer 
promptly to provide the registered clearing agency with the transaction 
ID of the bunched order alpha and the identity of the alpha SDR. This 
requirement would facilitate the registered clearing agency's ability 
to report whether or not it accepts the bunched order alpha for 
clearing pursuant to proposed Rule 901(e)(1)(ii).
b. Reporting the Security-Based Swaps Resulting From Allocation
    Proposed Rule 901(a)(2)(i) would require the registered clearing 
agency to report all clearing transactions that arise as a result of 
clearing the bunched order alpha, regardless of the workflows used to 
clear the bunched order alpha.\89\
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    \89\ Like other clearing transactions that arise from the 
acceptance of a security-based swap for clearing, these security-
based swaps would not be subject to public dissemination. See Rule 
902(c)(6). See also Rule 902(c)(7) (exempting from public 
dissemination any ``information regarding the allocation of a 
security-based swap''); Regulation SBSR Adopting Release, Section 
VI(D)(1) (describing final Rule 902(c)(7)).
---------------------------------------------------------------------------

    If the asset manager provides allocation instructions prior to or 
contemporaneous with the clearing of the bunched order alpha, clearing 
could result in the creation of a beta (i.e., the clearing transaction 
between the registered clearing agency and the security-based swap 
dealer) and a ``gamma series'' (i.e., the gammas between the registered 
clearing agency and each of the client funds selected by the asset 
manager to receive a portion of the initial notional amount). The beta 
and each security-based swap that comprises the gamma series would not 
be treated differently under Regulation SBSR than any other clearing 
transactions.\90\
---------------------------------------------------------------------------

    \90\ See supra Section II(C)(1) (explaining the reporting 
process for clearing transactions).
---------------------------------------------------------------------------

    If the asset manager does not provide allocation instructions until 
after the bunched order alpha is cleared, clearing could result in the 
creation of a beta (i.e., the clearing transaction between the 
registered clearing agency and the security-based swap dealer) and an 
``intermediate gamma'' (i.e., the clearing transaction between the 
clearing agency and the side representing the clients of the asset 
manager). The beta would be the same--and would be treated the same--as 
any other clearing transaction, while the intermediate gamma would 
continue to exist until the registered clearing agency receives the 
allocation information, which could come from the asset manager or its 
clearing member and would allow for the creation of the gamma series. 
As the registered clearing agency receives the allocation information, 
it would terminate the intermediate gamma and create new security-based 
swaps as part of the gamma series. The partial terminations of the 
intermediate gamma would be life cycle events of the intermediate gamma 
that the registered clearing agency must report under Rule 
901(e)(1)(i), as adopted. Rule 901(e)(2), as adopted, would require the 
registered clearing agency to report these life cycle events to the 
same registered SDR to which it reported the intermediate gamma. Under 
proposed Rule 901(a)(2)(i), the registered clearing agency also would 
be required to report to a registered SDR each new security-based swap 
comprising part of the gamma series. Because these security-based swaps 
arise from the termination (or partial termination) of an existing 
security-based swap (i.e., the gamma series), Rule 901(d)(10), as 
adopted, requires the registered clearing agency to link each new 
transaction in the gamma series to the intermediate gamma by including 
the transaction ID of the intermediate gamma as part of the report of 
each new security-based swap in the gamma series.
2. Example 2: Cleared Platform Transaction
    Assume the same facts as Example 1, except that the registered 
security-based swap dealer and asset manager execute the bunched order 
alpha on a SB SEF.
a. Reporting the Bunched Order Alpha
    Because the initial transaction is executed on a platform and will 
be submitted to clearing, the platform would have the duty, under 
proposed Rule 901(a)(1), to report the bunched order alpha to a 
registered SDR. To satisfy this reporting obligation, the platform 
would be required to provide all of the applicable information required 
by proposed Rule 901(a)(1). Commission staff understands from 
discussions with market participants that, even if the platform does 
not know and thus cannot report the counterparty IDs of each account 
that will receive an allocation, the platform would know the identity 
of the execution agent who executed the bunched order alpha on behalf 
of its advised accounts. The platform, therefore, could report the 
execution agent ID of the execution agent, even though it might not 
know the intended counterparties of the security-based swaps that will 
result from the allocation.\91\ Rule 902(a), as adopted, requires the 
registered SDR that receives the report of the bunched order alpha from 
the platform to publicly disseminate a report of the bunched order 
alpha. Then, pursuant to Rule 906(a), as adopted, the registered SDR 
would be required to obtain any missing UICs from its participants.
---------------------------------------------------------------------------

    \91\ See Rule 901(d)(1) (requiring reporting of the counterparty 
ID ``or the execution agent ID of each counterparty, if 
applicable''). If the counterparties--i.e., the specific accounts 
who will receive allocations--are not yet known, the requirement to 
report the execution agent ID instead of the counterparty ID would 
apply. Similarly, if the asset manager uses an execution agent to 
access the platform, the platform would report the identity of the 
asset manager's execution agent.
---------------------------------------------------------------------------

b. Reporting the Security-Based Swaps Resulting From Allocation
    If the asset manager provides allocation instructions prior to or 
contemporaneous with the clearing of the bunched order alpha, clearing 
would (under the agency model of clearing) result in the creation of a 
beta (i.e., the clearing transaction between the registered clearing 
agency and the registered security-based swap dealer)

[[Page 14755]]

and a ``gamma series'' (i.e., the gammas between the clearing agency 
and each of the asset manager's clients). The beta and each security-
based swap that comprises the gamma series would be no different--and 
would not be treated differently under Regulation SBSR--from other 
clearing transactions.\92\
---------------------------------------------------------------------------

    \92\ See supra Section II(C)(1) (explaining the reporting 
process for clearing transactions).
---------------------------------------------------------------------------

    If the asset manager does not provide allocation instructions until 
after the bunched order alpha is cleared, clearing (under the agency 
model) would result in the creation of a beta (between the registered 
clearing agency and the security-based swap dealer) and an intermediate 
gamma (between the registered clearing agency and the side representing 
the clients of the asset manager). The registered clearing agency would 
then be required to report the termination of the bunched order alpha 
and the creation of the beta and intermediate gamma, pursuant to 
proposed Rules 901(e)(1)(ii) and 901(a)(2)(i), respectively. From this 
point on, the beta would be treated the same as any other clearing 
transaction, while the intermediate gamma would be decremented and 
replaced by the gamma series, as described in Example 1.

B. Request for Comment

    The Commission requests comment on all aspects of its preliminary 
views regarding how the proposed amendments to Regulation SBSR would 
apply to various allocation scenarios involving cleared security-based 
swaps.
    21. Is the Commission's discussion of how Regulation SBSR--under 
the amendments proposed in this release--would apply to different steps 
in the process for reporting the betas and gammas that result from 
clearing a bunched order alpha sufficiently clear and complete? If not, 
please provide detail about particular steps that you believe the 
Commission has not adequately addressed and how you believe they should 
be treated under Regulation SBSR.
    22. Are there additional processes or workflows related to the 
clearing of bunched order alphas for which market participants need 
guidance? If so, please describe these situations and your 
recommendation for how Regulation SBSR should address them.
    23. Do asset managers identify the clients that will receive 
allocations from a bunched order alpha before the bunched order alpha 
is submitted to clearing? If so, when is allocation of the bunched 
order alpha complete? If the bunched order alpha is allocated prior to 
clearing, would the information provided to the registered clearing 
agency allow the registered clearing agency to recognize that it is 
clearing a bunched order alpha? If a registered clearing agency is 
unable to recognize that it is clearing a bunched order alpha, would 
the registered clearing agency be able to fulfill its reporting duties 
under the proposed amendments to Regulation SBSR?

IV. Reporting and Public Dissemination of Prime Brokerage Transactions

    Commission staff understands from discussions with market 
participants that, under a prime brokerage arrangement, a customer of a 
prime broker will negotiate and agree to the economic terms of a 
security-based swap with a registered security-based swap dealer (the 
``executing dealer'') but both the customer and the executing dealer 
ultimately will face the prime broker, rather than each other.\93\ 
Before negotiating with one or more executing dealers, the customer 
will first enter into a prime brokerage arrangement with a prime 
broker.\94\ The terms of this arrangement typically will, among other 
things, set out the types of transactions eligible for prime brokerage 
treatment, enumerate the executing dealers with whom the customer may 
negotiate, and establish terms for the credit support and other 
transaction-related services provided by the prime broker to the 
customer. A prime brokerage arrangement allows a customer to negotiate 
transactions with a range of executing dealers without having to 
negotiate credit documentation with each dealer individually. This is 
because both the customer and the executing dealer know that the 
transaction between them will be replaced by separate transactions 
between each of them and the prime broker, thus obviating the need for 
credit documentation between the two original counterparties.\95\
---------------------------------------------------------------------------

    \93\ See The Financial Markets Lawyers Group, CFTC No-Action 
Letter No. 12-53 at 2-3 (December 17, 2012) (``CFTC NAL No. 12-
53''); Division of Swap Dealer and Intermediary Oversight, CFTC No-
Action Letter at 3-4 (April 30, 2013) (``CFTC NAL No. 13-11''). 
These no-action letters describe the CFTC's understanding of prime 
brokerage arrangements in the swap market. It is the Commission's 
understanding that prime brokerage arrangements in the security-
based swap market are similar to those in the swap market.
    \94\ For purposes of this release, the Commission assumes that 
both the prime broker and the executing dealer would be registered 
security-based swap dealers.
    \95\ The agreement between the customer and the executing dealer 
would constitute a contract for the sale of a security for purposes 
of the federal securities laws. See Securities Offering Reform, 
Securities Act Release No. 33-8591 (July 19, 2005), 70 FR 44722, 
44767 (August 3, 2005) (discussing the determination of the time of 
sale with respect to a contract of sale for securities and noting 
that ``a contract of sale under the federal securities laws can 
occur before there is an unconditional bilateral contract under 
state law'').
---------------------------------------------------------------------------

    Through the prime brokerage arrangement, the prime broker permits 
the customer to negotiate and agree to the terms of security-based 
swaps with approved executing dealers, subject to specified limits and 
parameters.\96\ If the terms of the transaction agreed to by the 
customer and the executing dealer are within those parameters, the 
prime broker would replace the initial transaction between the customer 
and the executing dealer with two separate transactions--one between 
the prime broker and the customer and the second between the prime 
broker and the executing dealer--having substantially the same terms as 
the original transaction between the customer and the executing dealer. 
Thus, a prime brokerage arrangement in the security-based swap market 
typically results in the following three transactions:
---------------------------------------------------------------------------

    \96\ See ISDA, 2005 Master Give-Up Agreement (providing standard 
terms that market participants can use to document prime brokerage 
arrangements). See also CFTC NAL No. 12-53, supra note 93, at 2-3 
(describing a typical prime brokerage arrangement in the swap 
market).
---------------------------------------------------------------------------

     Transaction 1. The customer and the executing dealer 
negotiate and agree to the terms of a security-based swap transaction 
(the ``customer/executing dealer transaction'') and notify the prime 
broker of these terms.
     Transaction 2. The prime broker will accept the 
transaction and face the executing dealer in a security-based swap with 
the same economic terms agreed to by the executing dealer and the 
customer, if the terms are within the parameters established by the 
prime brokerage arrangement (the ``prime broker/executing dealer 
transaction'').
     Transaction 3. Upon executing the security-based swap with 
the executing dealer, the prime broker will enter into an offsetting 
security-based swap with the customer (the ``prime broker/customer 
transaction'').\97\
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    \97\ See CFTC NAL No. 12-53, supra note 93, at 2-3; CFTC NAL No. 
13-11, supra note 93, at 3-4 (describing typical prime brokerage 
arrangements in the swap market).
---------------------------------------------------------------------------

A. Application of Regulation SBSR as Adopted to Prime Brokerage 
Transactions

    The Commission understands that prime brokerage arrangements 
involve credit intermediation offered by the prime broker, rather than 
a registered clearing agency. Thus, prime brokerage transactions are 
not cleared. Therefore, Rule 901(a)(2)(ii), as adopted, assigns the 
reporting duty for Transaction 1,

[[Page 14756]]

because Transaction 1 is not a clearing transaction.
    If the prime broker determines that Transaction 1 meets the terms 
of the prime brokerage arrangement, the prime broker would initiate 
Transactions 2 and 3, which would have the effect of terminating 
Transaction 1. The termination would be a life cycle event of 
Transaction 1, and the reporting side for Transaction 1 (likely the 
executing dealer) would be required by Rule 901(e)(i), as adopted, to 
report the life cycle event to the same SDR to which it reported the 
transaction initially.\98\ If the reporting side for Transaction1 did 
not report whether Transaction 1 was terminated, the Commission and 
market observers might incorrectly conclude that the counterparties to 
Transaction 1 (the customer and executing dealer) continue to have 
exposure to each other.
---------------------------------------------------------------------------

    \98\ If the prime broker determines that Transaction 1 does not 
meet the terms of the prime brokerage arrangement, the executing 
dealer also would be required to report this fact to the registered 
SDR to which it reported the transaction initially pursuant to Rule 
901(e)(2), as adopted. Rule 901(e)(2) requires, in relevant part, 
reporting a life cycle event to the entity to which the original 
security-based swap was reported. Pursuant to commonly used industry 
documentation for prime brokerage trades, the rejection by the prime 
broker could cause the initial transaction to be void or, in some 
cases, the customer and executing dealer could agree to revise their 
initial agreement and preserve their contract without the 
involvement of the prime broker. See ISDA, 2005 ISDA Compensation 
Agreement, at Section 2. In either case, a life cycle event of 
Transaction 1 would result, because the terms of Transaction 1 would 
change.
---------------------------------------------------------------------------

    Transactions 2 and 3 (i.e., the prime broker/executing dealer 
transaction and the prime broker/customer transaction, respectively) 
also are security-based swaps that must be reported pursuant to Rule 
901(a)(2)(ii), as adopted. Because both sides of Transaction 2 likely 
include a registered security-based swap dealer, the sides are required 
to select the reporting side. In the case of Transaction 3, however, 
the prime broker is likely to be the only registered security-based 
swap dealer involved in the transaction, in which case the prime broker 
would be the reporting side.\99\ Furthermore, because each of these 
transactions is a security-based swap that arises from the termination 
of another security-based swap (i.e., the Transaction 1), Rule 
901(d)(10), as adopted, requires the reporting of Transaction 1's 
transaction ID as part of the secondary trade information for both 
Transaction 2 and Transaction 3. As the Commission stated in the 
Regulation SBSR Adopting Release, Rule 901(d)(10) is designed to ensure 
that the Commission and other relevant authorities have an accurate 
picture of counterparty exposures. In the case of prime brokerage 
transactions, Rule 901(d)(10) should enable the Commission and other 
relevant authorities to link the three prime brokerage transactions 
together for surveillance purposes and to identify the parties that 
ultimately assume the risks of these transactions.
---------------------------------------------------------------------------

    \99\ If, however, both sides of Transaction 3 include a 
registered security-based swap dealer, the sides would be required 
to select the reporting side. One commenter recommended that, in 
accordance with current industry practice under the CFTC rules, 
Regulation SBSR assign the reporting duty for the prime broker/
executing broker transaction (Transaction 2) to the executing 
broker, and responsibility for reporting the prime broker/client 
transaction (Transaction 3) to the prime broker. See ISDA IV at 5. 
Under the application of the rules as adopted, as just discussed, if 
both sides of the prime broker/executing broker transaction include 
a registered security-based swap dealer, the sides are required to 
choose who has the reporting duty and can choose the executing 
broker. Likewise, with respect to the prime broker/client 
transaction, it is likely that the prime broker is the only 
registered security-based swap dealer involved in the transaction, 
and thus application of the reporting hierarchy would result in the 
side with the prime broker being the reporting side.
---------------------------------------------------------------------------

    Rule 902(a), as adopted, requires public dissemination of each 
security-based swap, unless it falls within a category enumerated in 
Rule 902(c). Each prime brokerage transaction (i.e., the customer/
executing dealer transaction, the prime broker/executing dealer 
transaction, and the prime broker/customer transaction) is subject to 
Rule 902(a). The statutory provisions relating to the reporting of 
security-based swap transactions state that ``each'' security-based 
swap shall be reported; these statutory provisions do not by their 
terms limit the reporting requirement to transactions having particular 
characteristics,\100\ and Rule 902(c), as adopted, does not contain an 
exclusion from public dissemination for prime brokerage transactions.
---------------------------------------------------------------------------

    \100\ See Section 13(m)(1)(G) of the Exchange Act, 15 U.S.C. 
78m(m)(1)(G).
---------------------------------------------------------------------------

    One commenter requested that the Commission exempt the prime 
broker/customer leg of a prime broker transaction from public 
dissemination, stating its belief that dissemination of this 
transaction would not increase price transparency, and a concern that 
dissemination of this transaction may confuse the market and undermine 
the value of the data made public.\101\ The Commission believes that 
publicly disseminating reports of prime brokerage transactions could 
provide market observers with useful information about the cost of the 
prime broker's credit intermediation services, because prime brokers 
may charge for these services by pricing Transaction 2 or 3 differently 
than Transaction 1. This differentiates Transactions 2 and 3 from 
clearing transactions that are excepted from public dissemination under 
Rule 902(c)(6), because a registered clearing agency is compensated for 
its credit intermediation services through clearing fees that are 
publicly disclosed. With prime brokerage transactions, however, the 
only mechanism for ascertaining the charge for the credit 
intermediation service offered by the prime broker would be to compare 
the prices of Transaction 1 with the prices of the two subsequent 
transactions. Thus, market observers could discern useful information 
by comparing reports of the related prime brokerage transactions, and 
the Commission does not believe at this time that an exception from 
public dissemination is warranted for any prime brokerage transactions. 
If a report of each prime brokerage transaction is publicly 
disseminated, price discovery would be enhanced. The published 
transaction reports would be required to consist of all the information 
reported pursuant to Rule 901(c), as adopted, plus any condition flags 
required by the registered SDR's policies and procedures, such as a 
flag indicating that the three transactions are related.
---------------------------------------------------------------------------

    \101\ See ISDA IV at 13.
---------------------------------------------------------------------------

    Rule 907(a)(4), as adopted, requires each registered SDR to 
establish and maintain written policies and procedures for, among other 
things, establishing flags to denote special characteristics of a 
security-based swap, or special circumstances associated with the 
execution or reporting of a security-based swap. Rules 907(a)(4)(i) and 
(ii) require the registered SDR to identify those characteristics or 
circumstances that could, in the fair and reasonable estimation of the 
registered SDR, cause a person without knowledge of those 
characteristic(s) or circumstance(s), to receive a distorted view of 
the market and establish flags to denote such characteristic(s) or 
circumstance(s). In the Regulation SBSR Adopting Release, the 
Commission noted several conditions that registered SDRs generally 
should consider including in their list of condition flags.\102\ The 
fact that all three transactions in a prime brokerage arrangement are 
related, the Commission generally believes, is a special circumstance 
of the type that registered SDRs should consider in developing the 
condition flags required by Rule 907(a)(4). Absent such flags, market 
observers might interpret the three transaction reports as three 
separate pricing events and incorrectly infer the existence of more 
market

[[Page 14757]]

activity than actually exists, which could distort their view of the 
market.
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    \102\ See Regulation SBSR Adopting Release, Section VII(G).
---------------------------------------------------------------------------

B. Example of Application of the Adopted Rules

    The following example explains how Regulation SBSR, as adopted, 
would apply to the steps in a prime brokerage transaction described 
above. For purposes of this example, assume that the customer is a 
private fund and both the executing dealer and the prime broker are 
registered security-based swap dealers.\103\
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    \103\ One commenter requested that Regulation SBSR specify that 
the time of execution for the prime broker/executing dealer 
transaction is the time of commitment to economic terms with the 
prime broker's client, and that for the prime broker/customer 
transaction, the prime broker may use the time of acceptance as the 
time of execution for reporting purposes. See ISDA IV at 9. The 
Commission notes that the time of execution for all security-based 
swaps is defined in Rule 900(ii), as adopted, as the point at which 
the counterparties to a security-based swap become irrevocably bound 
under applicable law. See Regulation SBSR Adopting Release, Section 
II(A)(2)(c). The Commission sees no reason at this time to have a 
different standard for prime brokerage transactions.
---------------------------------------------------------------------------

Transaction 1: The Customer/Executing Dealer Transaction
     The executing dealer would be the reporting side under 
Rule 901(a)(2)(ii) and would be required to report the customer/
executing dealer transaction (Transaction 1) to a registered SDR.\104\
---------------------------------------------------------------------------

    \104\ See Rule 901(a)(2)(ii)(B) (``If only one side of the 
security-based swap includes a registered security-based swap 
dealer, that side shall be the reporting side'').
---------------------------------------------------------------------------

     The executing dealer would have up to 24 hours after the 
time of execution to report to the registered SDR the applicable 
primary and secondary trade information of Transaction 1.
     Immediately upon receiving the report of Transaction 1, 
the registered SDR would be required to publicly disseminate a 
transaction report with all the information required by Rule 902(a).
     When the customer and the executing dealer agree to the 
terms of Transaction 1, each party would typically report the terms to 
the prime broker. The Commission understands that, if the terms of 
Transaction 1 fall within the prime brokerage arrangement, the prime 
broker would be obligated to face the executing dealer with 
substantially the same terms agreed upon by the customer and the 
executing dealer in Transaction 1.
     If the prime broker determines that Transaction 1 meets 
the terms of the prime brokerage arrangement and accepts the 
transaction, Transaction 1 would terminate. The executing dealer, as 
the reporting side for Transaction 1, would be required to report this 
life cycle event pursuant to Rule 901(e), as adopted, to the same 
registered SDR that received the initial report of Transaction 1. 
Immediately upon receiving this report, the registered SDR would be 
required to publicly disseminate the termination information.
     If the prime broker does not accept the terms agreed to by 
the customer and executing dealer, the executing dealer, in its 
capacity as reporting side for Transaction 1, would notify the 
registered SDR that the prime broker had rejected the transaction 
pursuant to Rule 901(e)(1)(i), as adopted.
Transaction 2: The Prime Broker/Executing Dealer Transaction
     The executing dealer and prime broker would enter into a 
prime broker/executing dealer transaction (Transaction 2).
     The prime broker and executing dealer would be required by 
Rule 901(a)(2)(ii)(A), as adopted, to select the side that would be the 
reporting side for Transaction 2.
     The reporting side of Transaction 2 would have up to 24 
hours after the time of execution to report to the registered SDR the 
applicable primary and secondary trade information of the transaction. 
Because Transaction 2 arises from the termination, novation, or 
assignment of Transaction 1, the reporting side of Transaction 2 would 
need to report the transaction ID of Transaction 1 pursuant to Rule 
901(d)(10), as adopted.\105\
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    \105\ If the executing dealer is the reporting side for both 
Transaction 1 and Transaction 2, the executing dealer will know the 
transaction ID of Transaction 1 and can include it in the report of 
Transaction 2. However, if the prime broker is the reporting side 
for Transaction 2, the Commission anticipates that the prime broker 
will obtain from the executing dealer the transaction ID of 
Transaction 1, along with all of the other information regarding 
Transaction 1 that will permit the prime broker to determine whether 
to accept Transaction 1.
---------------------------------------------------------------------------

     Immediately upon receiving the report of Transaction 2, 
the registered SDR would be required to publicly disseminate a 
transaction report with all the information required by Rule 902(a) and 
with any flags required by the registered SDR's policies and procedures 
under Rule 907.
Transaction 3: The Prime Broker/Customer Transaction
     The prime broker would execute the prime broker/customer 
transaction (Transaction 3) to ``step into'' the position that the 
executing dealer established against the customer in Transaction 1.
     The prime broker would be the reporting side for 
Transaction 3 under Rule 901(a)(2)(ii), as adopted.\106\
---------------------------------------------------------------------------

    \106\ See Rule 901(a)(2)(ii)(B) (``If only one side of the 
security-based swap includes a registered security-based swap 
dealer, that side shall be the reporting side'').
---------------------------------------------------------------------------

     The prime broker would have up to 24 hours after the time 
of execution to report to the registered SDR the applicable primary and 
secondary trade information of Transaction 3. Because Transaction 3 
arises from the termination, novation, or assignment of Transaction 1, 
the prime broker would need to report the transaction ID of Transaction 
1 as part of the report of Transaction 3, pursuant to Rule 901(d)(10), 
as adopted.\107\
---------------------------------------------------------------------------

    \107\ The Commission anticipates that the prime broker (the 
reporting side for Transaction 3) will obtain the transaction ID of 
Transaction 1 from the executing dealer. See supra note 104 and 
associated text.
---------------------------------------------------------------------------

     Immediately upon receiving the report of Transaction 3, 
the registered SDR would be required to publicly disseminate a 
transaction report with all the information required by Rule 902(a) and 
with any flags required by the registered SDR's policies and procedures 
under Rule 907.

C. Request for Comment

    The Commission requests comment on its discussion above of the 
application of Regulation SBSR to security-based swaps that are part of 
a prime brokerage arrangement. In particular:
    24. Does the description of prime brokerage arrangements above 
adequately describe prime brokerage arrangements in the security-based 
swap market? Do market participants employ other types of prime 
brokerage arrangements? If so, how do these prime brokerage 
arrangements differ from the arrangements discussed above?
    25. Should the prime broker/customer and/or prime broker/executing 
dealer transactions be exempted from public dissemination? Why or why 
not?
    26. Would market observers benefit from being able to observe any 
difference in price between the customer/executing dealer transaction 
and the prime broker/customer and prime broker/executing dealer 
transactions?
    27. Should public reports of related prime brokerage transactions 
include condition flags to indicate a relationship between the 
transactions? Would a market participant receive a distorted view of 
the market if condition flags are not used? Why or why not?
    28. Rule 901(e), as adopted, requires the executing dealer to 
report the termination of the customer/executing dealer transaction, 
because the executing dealer was the reporting side of that 
transaction. Should the duty to report the termination of the customer/

[[Page 14758]]

executing dealer transaction be shifted to the prime broker? Why or why 
not? As between the executing dealer and the prime broker, which person 
do you believe is better placed to report the termination? Why?
    29. Should the time of execution for any leg of a prime brokerage 
transaction be defined differently than as provided for in Rule 
900(ii)? If so, why?

V. Additional Proposed Amendments

A. Amendments to Rule 905(a)

    Rule 905(a), as adopted, establishes a mechanism for reporting 
corrections of previously submitted security-based swap transaction 
information. Rule 905(a) applies to any counterparty to a security-
based swap that discovers an error in the information reported with 
respect to that security-based swap. Under Rule 905(a)(1), as adopted, 
if the non-reporting side discovers the error, the non-reporting side 
must promptly notify the reporting side of the error. Under Rule 
905(a)(2), as adopted, once the reporting side receives notification of 
the error from the non-reporting side, or if the reporting side 
discovers the error on its own, the reporting side must promptly submit 
an amended report--containing the corrected information--to the 
registered SDR that received the erroneous transaction report. The 
reporting side must submit the report required by Rule 905(a) in a 
manner consistent with the policies and procedures of the registered 
SDR.
    As discussed in Section II, supra, the Commission is proposing to 
amend Rule 901(a) to require a platform to report a security-based swap 
that is executed on the platform and that will be submitted to 
clearing. Accordingly, to preserve the principle in adopted Rule 905(a) 
that the person responsible for reporting a security-based swap also 
should be responsible for submitting a correction if it discovers an 
error, the Commission is proposing a conforming amendment to Rule 
905(a) to account for the possibility that a person who is not a 
counterparty and is thus not on either side \108\ of the transaction 
(i.e., a platform) could have the original duty to report the 
transaction. Thus, under the proposed amendment to Rule 905(a)(1), a 
non-reporting side that discovers an error in the information reported 
with respect to a security-based swap would be required to promptly 
notify ``the person having the duty to report'' that security-based 
swap of the error. The Commission is proposing a similar change to Rule 
905(a)(2). Under the proposed amendment to Rule 905(a)(2), the person 
having the duty to report a security-based swap, whether a side or a 
platform, would be required to correct previously reported erroneous 
information with respect to that security-based swap if it discovers an 
error or if it receives notification of an error from a counterparty.
---------------------------------------------------------------------------

    \108\ Under Rule 900(hh), as adopted, a ``side'' is a direct 
counterparty and any guarantor of that direct counterparty's 
performance who meets the definition of ``indirect counterparty'' in 
connection with the security-based swap. Under the proposed 
amendments described above, there would be no ``reporting side'' for 
a security-based swap for a platform-executed security-based swap 
that is submitted to clearing. While the platform would have the 
duty to report, it would not be a counterparty to the security-based 
swap and thus would not be a side. Furthermore, neither side would 
have the duty to report, and thus both sides would be non-reporting 
sides.
---------------------------------------------------------------------------

B. Amendments to Rules 906(b) and 907(a)(6)

    Under the proposed amendment to Rule 900(u) described above,\109\ 
the definition of ``participant'' would be expanded to include 
platforms that are required to report platform-executed security-based 
swaps that are submitted to clearing and registered clearing agencies 
that are required to report whether or not an alpha is accepted for 
clearing. Rule 906(b), as adopted, requires each participant of a 
registered SDR to provide the registered SDR information sufficient to 
identify any affiliate(s) of the participant that also are participants 
of the registered SDR and any ultimate parent(s) of the 
participant.\110\ By itself, the proposed amendment to Rule 900(u) 
would subject platforms and registered clearing agencies that are 
required to report whether or not they accept alpha transactions for 
clearing to the requirements of Rule 906(b).\111\
---------------------------------------------------------------------------

    \109\ See supra Section II(B)(3).
    \110\ See Regulation SBSR Adopting Release, Section XIII(B).
    \111\ The Commission notes that proposed Rule 901(a)(2)(i) and 
the proposed amendment to Rule 908(b) would have the effect of 
making a registered clearing agency a participant--under Rule 
900(u), as adopted--of any registered SDR to which it reports 
clearing transactions. Under Rule 900(u), as adopted, a counterparty 
of a security-based swap that is reported to a registered SDR 
becomes a participant of that registered SDR (assuming that the 
counterparty also falls within Rule 908(b), as adopted). The 
proposed amendment to the definition of ``participant'' also would 
make a registered clearing agency a participant of any alpha SDR to 
which it would be required to report whether it had accepted the 
alpha for clearing.
---------------------------------------------------------------------------

    The Commission preliminarily believes that the purposes of Rule 
906(b)--namely, facilitating the Commission's ability to measure 
derivatives exposure within the same ownership group--would not be 
advanced by requiring platforms and registered clearing agencies to 
report parent and affiliate information to a registered SDR. To the 
extent that a platform has an affiliate that transacts in security-
based swaps, the positions of any such affiliate can be derived from 
other transaction reports indicating that affiliate as a counterparty. 
There would be no need for the Commission to aggregate the platform's 
positions with those of its affiliates, because a platform would not 
assume any position in security-based swaps executed on its facilities. 
Furthermore, the risk management of a registered clearing agency is 
directly overseen by the Commission, and the Commission believes that 
it has adequate tools to carry out this function without subjecting the 
registered clearing agency to Rule 906(b). Accordingly, the Commission 
proposes to amend Rule 906(b) to state that reporting obligations under 
Rule 906(b) do not apply to participants that are platforms or 
registered clearing agencies.
    The Commission proposes to make a similar amendment to Rule 
907(a)(6). This rule, as adopted, requires a registered SDR to have 
policies and procedures ``[f]or periodically obtaining from each 
participant information that identifies the participant's ultimate 
parent(s) and any participant(s) with which the participant is 
affiliated, using ultimate parent IDs and counterparty IDs.'' The 
Commission proposes to amend Rule 907(a)(6) to require a registered SDR 
to obtain this information only from a participant that is not a 
platform or a registered clearing agency. Thus, under the proposed 
amendment, Rule 907(a)(6) would require registered SDR to have policies 
and procedures ``[f]or periodically obtaining from each participant 
other than a platform or a registered clearing agency information that 
identifies the participant's ultimate parent(s) and any participant(s) 
with which the participant is affiliated, using ultimate parent IDs and 
counterparty IDs.'' \112\
---------------------------------------------------------------------------

    \112\ The Commission notes that, once a participant reports 
parent and affiliate information to a registered SDR, Rule 906(b) 
requires the participant to ``promptly notify the registered [SDR] 
of any changes'' to its parent and affiliate information.
---------------------------------------------------------------------------

C. Extending the Applicability of Rule 906(c)

    Rule 906(c), as adopted, requires each participant of a registered 
SDR that is a registered security-based swap dealer or registered major 
security-based swap participant to establish, maintain, and enforce 
written policies and procedures that are reasonably designed to ensure 
that the participant complies with any obligations to report 
information to a registered SDR in a manner consistent with Regulation 
SBSR. As the

[[Page 14759]]

Commission stated in the Regulation SBSR Adopting Release, the policies 
and procedures required by Rule 906(c) are intended to promote complete 
and accurate reporting of security-based swap information by SDR 
participants that are registered security-based swap dealers or 
registered major security-based swap participants.\113\ Rule 906(c) 
also requires each registered security-based swap dealer and registered 
major security-based swap participant to review and update its policies 
and procedures at least annually.
---------------------------------------------------------------------------

    \113\ See Regulation SBSR Adopting Release, Section XIII(C).
---------------------------------------------------------------------------

    Because the Commission is proposing amendments to Rule 901(a) to 
assign reporting obligations to platforms and registered clearing 
agencies, the Commission preliminarily believes that such registered 
clearing agencies and platforms, like registered security-based swap 
dealers and major security-based swap participants, should be required 
to establish and maintain written policies and procedures designed to 
promote compliance with their reporting obligations. Accordingly, the 
Commission proposes to amend Rule 906(c) to extend the requirements of 
Rule 906(c) to registered clearing agencies and platforms that are 
participants of a registered SDR.
    The Commission preliminarily believes that the proposed amendment 
to Rule 906(c) should result in greater accuracy and completeness of 
the security-based swap transaction data reported to registered SDRs. 
Without written policies and procedures, compliance with reporting 
obligations might depend too heavily on key individuals or unreliable 
processes. For example, if knowledge of the reporting function was not 
reflected in written policies and procedures but existed solely in the 
memories of one or a few individuals, compliance with applicable 
reporting requirements by the firm might suffer if these key 
individuals depart the firm. The Commission preliminarily believes, 
therefore, that requiring participants that are platforms and 
registered clearing agencies to establish, maintain, and enforce 
written policies and procedures should promote clear, reliable 
reporting that can continue independent of any specific individuals. 
The Commission further believes that requiring such participants to 
establish, maintain, and enforce written policies and procedures 
relevant to their reporting responsibilities, as would be required by 
the proposed amendment to Rule 906(c), would help to improve the degree 
and quality of overall compliance with the reporting requirements of 
Regulation SBSR.

D. Rule 908(b)--Limitations on Counterparty Reporting Obligations

    Rule 908(b) is designed to help further the cross-border 
application of Regulation SBSR by specifying what types of 
counterparties would and would not be subject to any duties under 
Regulation SBSR. Rule 908(b), as adopted, provides that 
``[n]otwithstanding any other provision of [Regulation SBSR], a person 
shall not incur any obligation under [Regulation SBSR] unless it is: 
(1) A U.S. person; or (2) A registered security-based swap dealer or 
registered major security-based swap participant.'' Thus, unregistered 
non-U.S. persons are not among the kinds of persons listed in Rule 
908(b) as having any duties under Regulation SBSR.\114\
---------------------------------------------------------------------------

    \114\ In the Regulation SBSR Adopting Release, however, the 
Commission stated that it anticipates soliciting additional public 
comment on whether regulatory reporting and/or public dissemination 
requirements should be extended to transactions occurring within the 
United States between non-U.S. persons and which non-U.S. persons 
should incur reporting duties under Regulation SBSR. See Regulation 
SBSR Adopting Release, Section XV(D).
---------------------------------------------------------------------------

    Under the proposed amendments described above, platforms and 
registered clearing agencies would have the duty to report security-
based swap transactions to registered SDRs in certain circumstances. 
Under Rule 908(b), as adopted, U.S. persons are among the types of 
persons that may incur duties under Regulation SBSR. Therefore, 
platforms and registered clearing agencies that are U.S. persons 
already fall within Rule 908(b). The Commission preliminarily believes 
that all platforms and registered clearing agencies should incur the 
duties specified in the proposed amendments to Rule 901(a),\115\ even 
if they are not U.S. persons. If the Commission does not propose to 
amend Rule 908(b) to include all platforms and registered clearing 
agencies, non-U.S.-person platforms and registered clearing agencies 
would be able to avoid duties to which U.S.-person platforms and 
registered clearing agencies would be subject. Therefore, the 
Commission proposes to amend Rule 908(b) to specifically include 
platforms and registered clearing agencies as entities that may incur 
duties under Regulation SBSR. Rule 908(b), as amended, would provide: 
``Notwithstanding any other provision of [Regulation SBSR], a person 
shall not incur any obligation under [Regulation SBSR] unless it is: 
(1) A U.S. person; (2) A registered security-based swap dealer or 
registered major security-based swap participant; (3) A platform; or 
(4) A registered clearing agency.''
---------------------------------------------------------------------------

    \115\ See supra Section II(B).
---------------------------------------------------------------------------

E. Request for Comment

    The Commission requests comment on all aspects of the proposed 
amendments to Rules 905, 906(b), 906(c), 907(a)(6), and 908 described 
above. In particular:
    30. Do you believe that Rule 905(a) should be amended to include 
platforms? Why or why not? Would any other conforming changes to Rule 
905 be advisable on account of the proposal to extend reporting duties 
to platforms?
    31. Do you agree with the Commission's proposal to exclude 
platforms and registered clearing agencies from Rule 906(b)? Why or why 
not?
    32. Should Rule 906(c) be expanded to include platforms and 
registered clearing agencies? Why or why not?
    33. Do you agree with the proposed conforming amendment to Rule 
908(b) to include platforms and registered clearing agencies? Why or 
why not?
    34. Do you believe any other conforming amendments to Regulation 
SBSR are necessary or desirable in light of the Commission's proposal 
to extend reporting duties to platforms and registered clearing 
agencies as discussed above? If so, please describe.

VI. Proposed Rule Prohibiting a Registered SDR From Charging Fees for 
or Imposing Usage Restrictions on Publicly Disseminated Data

A. Background

    In addition to implementing the Title VII mandate for regulatory 
reporting of all security-based swaps, Regulation SBSR also implements 
the Title VII mandate for public dissemination of all security-based 
swaps. Section 13(m)(1)(B) of the Exchange Act \116\ authorizes the 
Commission ``to make security-based swap transaction and pricing data 
available to the public in such form and at such times as the 
Commission determines appropriate to enhance price discovery.'' Section 
13(m)(1)(C) of the Exchange Act \117\ identifies four categories of 
security-based swaps and directs the Commission to require ``real-time 
public reporting'' of transaction, volume, and pricing data for each 
category. Section 13(m)(1)(D) of the Exchange Act \118\ authorizes the 
Commission to require registered entities (such as registered SDRs) to 
publicly disseminate the security-based swap transaction and

[[Page 14760]]

pricing data required to be reported under Section 13(m) of the 
Exchange Act. Finally, Section 13(n)(5)(D)(ii) of the Exchange Act 
\119\ requires SDRs to provide security-based swap information ``in 
such form and at such frequency as the Commission may require to comply 
with public reporting requirements.''
---------------------------------------------------------------------------

    \116\ 15 U.S.C. 78m(m)(1)(B).
    \117\ 15 U.S.C. 78m(m)(1)(C).
    \118\ 15 U.S.C. 78m(m)(1)(D).
    \119\ 15 U.S.C. 78m(n)(5)(D)(ii).
---------------------------------------------------------------------------

    Accordingly, Rule 902(a), as adopted, requires a registered SDR to 
publicly disseminate a transaction report of a security-based swap, or 
a life cycle event or adjustment due to a life cycle event, immediately 
upon receipt of information about the security-based swap, with certain 
exceptions noted in Rule 902(c). Rule 900(cc), as adopted, defines 
``publicly disseminate'' to mean ``to make available through the 
Internet or other electronic data feed that is widely accessible and in 
machine-readable electronic format.''
    Four commenters on Regulation SBSR, as originally proposed, raised 
issues that bear on whether--and, if so, under what terms--a registered 
SDR would be able to charge for the security-based swap data that 
Regulation SBSR requires it to publicly disseminate.\120\ One of these 
commenters stated that security-based swap transaction data ``should be 
made available on reasonable commercial terms.'' \121\ Another 
commenter, which currently operates a trade repository, believed that 
registered SDRs should make ``data available to value added providers 
on a non-discriminatory basis'' and that the public utility function of 
an SDR should be separated from potential commercial use of the 
data.\122\ A third commenter stated that, consistent with reporting 
practices in other markets, ``the reporting of SBS transaction 
information to a registered SDR should not bestow the SDR with the 
authority to use the security-based swap transaction data for any 
purpose other than those explicitly enumerated in the Commission's 
regulations.'' \123\ A fourth commenter believed that ``market 
information must be made available . . . on an equal basis, in terms of 
time of availability and content, to all market participants.'' \124\ 
Finally, a fifth commenter, responding to Regulation SBSR as re-
proposed, stated that publicly disseminated data ``should be freely 
available and readily accessible to the public.'' \125\
---------------------------------------------------------------------------

    \120\ See Better Markets II at 2; DTCC II at 27; DTCC III at 2; 
Markit I at 2; WMBAA II at 8.
    \121\ Markit I at 2.
    \122\ DTCC II at 27 (also stating that it is ``good public 
policy that the aggregating entity not itself use the data for 
commercial purposes, particularly where data is required to be 
reported to an aggregator serving a regulatory purpose, and make 
such data available to value added providers on a non-discriminatory 
basis, consistent with restrictions placed on the data by the data 
contributors themselves''); DTCC III at 2 (stating that the 
mandatory reporting regime ``creates an opportunity for the SDR to 
improperly commercialize the information it receives'' and that it 
is ``important that regulators ensure that the public utility 
function of SDRs, which . . . support regulatory oversight and 
supervisory functions, as well as regulator-mandated public 
reporting, is separated from potential commercial uses of the 
data'').
    \123\ WMBAA II at 8. See also SDR Adopting Release, Section 
VI(D)(3) (discussing commercial use of information by SDRs).
    \124\ Better Markets II at 2.
    \125\ ISDA IV at 17.
---------------------------------------------------------------------------

    In adopting its own rules for public dissemination of swap 
transactions, the CFTC addressed the issue of whether a swap data 
repository could charge for its publicly disseminated data. In Section 
43.2 of those rules,\126\ the CFTC defined ``public dissemination'' and 
``publicly disseminate'' to mean ``to publish and make available swap 
transaction and pricing data in a non-discriminatory manner, through 
the Internet or other electronic data feed that is widely published and 
in machine-readable electronic format.'' The CFTC also defined ``widely 
published'' to mean ``to publish and make available through electronic 
means and in a manner that is freely available and readily accessible 
to the public.'' \127\ Furthermore, the CFTC adopted Section 
43.3(d)(2), which provides: ``Data that is publicly disseminated . . . 
shall be available from an Internet Web site in a format that is freely 
available and readily accessible to the public.'' In doing so, the CFTC 
noted that ``implicit in this mandate [of public dissemination] is the 
requirement that the data be made available to the public at no cost'' 
\128\ and that ``Section 43.3(d)(2) reflects the [CFTC]'s belief that 
data must be made freely available to market participants and the 
public, on a nondiscriminatory basis.'' \129\ However, the CFTC's rules 
permit a swap data repository to offer, for a fee, value-added data 
products derived from the freely available regulatorily mandated public 
data and to charge fair and reasonable fees to providers of swap 
transaction and pricing data.\130\
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    \126\ 17 CFR 43.2.
    \127\ Id. (emphasis added).
    \128\ Commodity Futures Trading Commission, Real-Time Public 
Reporting of Swap Transaction Data (Final Rule), 77 FR 1182, 1207 
(January 9, 2012) (emphasis added).
    \129\ Id. at 1202.
    \130\ See id.
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    After consideration of the comments received and the CFTC's 
requirement that swap data repositories must publish and make available 
swap transaction data through electronic means and in a manner that is 
freely available and readily accessible to the public, the Commission 
now preliminarily believes that a registered SDR should not be 
permitted to charge fees for the security-based swap transaction data 
that it is required to publicly disseminate pursuant to Regulation 
SBSR. Therefore, the Commission is proposing new Rule 900(tt), which 
would define the term ``widely accessible'' as used in the definition 
of ``publicly disseminate'' in Rule 900(cc), as adopted, to mean 
``widely available to users of the information on a non-fee basis.'' As 
discussed below, this proposed definition would have the effect of 
prohibiting a registered SDR from charging fees for, or imposing usage 
restrictions on, the security-based swap transaction data that it is 
required to publicly disseminate under Regulation SBSR.
    Title VII contains numerous provisions directing the Commission to 
establish a regime for post-trade transparency in the security-based 
swap market, which will allow the public to obtain pricing, volume, and 
other relevant information about all executed transactions.\131\ In the 
Commission's preliminary view, the statutory requirement to make this 
transaction information publicly available would be frustrated if third 
parties could charge members of the public for the right to access that 
disseminated data.
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    \131\ See supra notes 116 to 119 and accompanying text.
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    The Commission furthermore believes that Title VII's public 
dissemination requirements should be interpreted in light of the 
current structure of the security-based swap market, which developed as 
an over-the-counter market without transparent volume and pricing 
information.\132\ In the current market, large dealers and certain 
other large market participants are able to observe their own order 
flow and executions to develop a better view of the market than smaller 
market participants. Because of this greater amount of private order 
flow, larger market participants are better able to assess current 
market values and have a negotiating advantage over smaller, less 
informed counterparties. The Commission is concerned that, to the 
extent that the amount or structure of the fee deters use by smaller 
market participants, information asymmetries in the security-based swap 
market would persist and there would be less efficiency and competition 
in the

[[Page 14761]]

market than if pricing and volume data were available to all market 
participants for free.
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    \132\ See Cross-Border Proposing Release, 78 FR 31126.
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    The Commission has considered the alternative of allowing 
registered SDRs to charge users fees, on a cost-recovery basis, for 
receiving the security-based swap transaction data that the registered 
SDR is required to publicly disseminate. However, the Commission is not 
proposing that alternative. A person that registers with the Commission 
as an SDR is also likely to be registered with the CFTC as a swap data 
repository. A dually registered SDR would likely use the same 
infrastructure to support public dissemination of swap transaction data 
as well as security-based swap transaction data. The Commission 
preliminarily believes that it would be difficult if not impossible to 
allocate the overhead and ongoing costs of a dually registered SDR to 
support mandated public dissemination between its swap-related 
functions and security-based-swap-related functions. As a result, it is 
unlikely that any such fee imposed on users by the SDR would go 
exclusively to offsetting the costs of publicly disseminating the 
regulatorily mandated security-based swap transaction data, rather than 
the costs associated with publicly disseminating swap data or other SDR 
functions. Therefore, the Commission preliminarily believes that 
permitting SEC-registered SDRs to impose fees on users for receiving 
the security-based swap transaction data that the SDR is required to 
publicly disseminate, even on a cost-recovery basis, while the CFTC 
prohibits swap data repositories from doing the same could result in a 
cross-subsidy for the public dissemination of swap data.
    The Commission recognizes that establishing and operating 
registered SDRs so that they can carry out the duties assigned to them 
under Title VII entails various costs. However, the Commission 
preliminarily believes that prohibiting registered SDRs from imposing 
fees on users for receiving the security-based swap transaction data 
that the SDR is required to publicly disseminate would not impede their 
ability to carry out their functions. Another means exists for 
registered SDRs to obtain funds for their operations that the 
Commission preliminarily believes is more appropriate: Imposing fees on 
those persons who are required to report transactions. Under such an 
approach, fees imposed by a registered SDR for reporting would increase 
in direct proportion to the number of transactions that a market 
participant is required to report. The Commission notes that CFTC-
registered swap data repositories, some of which are likely to apply 
for registration with the Commission as SDRs for security-based swaps, 
currently disseminate regulatorily mandated public swap data for free 
pursuant to the CFTC's rules, and obtain funds for their operations 
through other means, including reporting fees.\133\ Thus, the 
Commission preliminarily believes that--the proposed definition of 
``widely accessible'' notwithstanding--SEC-registered SDRs would have 
adequate sources for their funding even if they are prohibited from 
charging users fees for receiving the security-based swap transaction 
data that the SDR is required to publicly disseminate.
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    \133\ See BSDR Fee Schedule at http://www.bloombergsdr.com/assets/img/BSDR%20-%20Exhibit%20O%20(Fees).pdf (last visited on 
October 24, 2014); CME Swap Data Repository Fee Schedule at http://www.cmegroup.com/market-data/files/cme-repository-service-fee-schedule.pdf (last visited on October 24, 2014); DTCC Derivatives 
Repository US Fee Schedule at http://www.dtcc.com/~/media/Files/
Downloads/Data-and-Repository-Services/GTR/US-DDR/DDR_Fees.pdf (last 
visited on October 24, 2014); ICE Trade Vault Service and Pricing 
Schedule at https://www.theice.com/publicdocs/ICE_Trade_Vault_Fee_Schedule.pdf (last visited on October 24 2014).
---------------------------------------------------------------------------

    In addition, the Commission preliminarily believes that it is 
necessary to prohibit a registered SDR from charging users of 
regulatorily mandated security-based swap transaction data for public 
dissemination of the data to reinforce Rule 903(b), as adopted. Rule 
903(b) provides that a registered SDR may disseminate information using 
UICs (such as product IDs or other codes--e.g., reference entity 
identifiers--embedded within the product IDs) or permit UICs to be used 
for reporting by its participants only if the information necessary to 
interpret such UICs is widely available on a non-fee basis. The 
Commission is concerned that a registered SDR that wished to charge (or 
allow others to charge) users for the information necessary to 
understand these UICs--but could not, because of Rule 903(b)--might 
seek to do so indirectly by recharacterizing the charge as being for 
public dissemination. Under these circumstances, the economic benefit 
to the registered SDR would be the same, but how the registered SDR 
characterizes the fee--i.e., whether as a charge to users for public 
dissemination or as a charge of accessing the UICs within the publicly 
disseminated data--would be the difference between the fee being 
permissible or impermissible under Rule 903(b). Thus, permitting a 
registered SDR to charge users for receiving the publicly disseminated 
transaction data could undermine the purpose of Rule 903(b). 
Accordingly, the Commission is proposing a definition of ``widely 
accessible'' to mean ``widely available to users of the information on 
a non-fee basis.'' The language of the proposed definition echoes the 
language of Rule 903(b), as adopted, which requires a registered SDR to 
permit information to be reported or publicly disseminated using codes 
in place of certain data elements only if the information necessary to 
interpret such codes is ``widely available to users of the information 
on a non-fee basis.''
    Similar to the Commission's statement regarding Rule 903(b) in the 
Regulation SBSR Adopting Release,\134\ the proposed requirement that 
information be ``widely available to users of the information on a non-
fee basis'' necessarily implies that a registered SDR would not be 
permitted to impose--or allow to be imposed--any usage restrictions on 
the security-based swap transaction information that it is required to 
publicly disseminate, including restrictions on access to or further 
distribution of the regulatorily mandated public security-based swap 
data. Market data usage restrictions typically take the form of an 
agreement between the provider and the users of the data. If a 
registered SDR could deny or limit access to a user based solely on the 
user's violation of a usage restriction, the registered SDR would not 
be in compliance with Rule 902(a), which requires the registered SDR to 
publicly disseminate the information in a manner that is ``widely 
available.'' The Commission preliminarily believes that public 
dissemination would not satisfy the ``widely available'' standard if 
the registered SDR could deny access to users who do not agree to limit 
their use of the data in any manner directed by the registered SDR. 
Here, the Commission notes the asymmetric bargaining strength of the 
parties: A registered SDR might effectively have a monopoly position 
over the security-based swap transaction data that the registered SDR 
is required to publicly disseminate. If a registered SDR could impose 
usage restrictions with which a user does not wish to comply, there 
would be no other source from which the user could freely obtain these 
transaction data.
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    \134\ See Regulation SBSR Adopting Release, Section X(B)(3) 
(noting that the ``Commission does not believe that access to 
[publicly disseminated] information should be impeded by having to 
pay fees or agree to usage restrictions in order to understand any 
coded information that might be contained in the transaction 
data'').

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[[Page 14762]]

    The proposed prohibition on usage restrictions would have the 
effect of prohibiting a restriction on bulk redistribution by third 
parties of the regulatorily mandated transaction data that the 
registered SDR publicly disseminates. The Commission preliminarily 
believes that it could prove useful to the public for intermediaries to 
collect, consolidate, and redistribute the regulatorily mandated 
transaction data to the public. Users of the data might, instead of 
obtaining data directly from each of several SDRs, find it preferable 
to obtain the data from a single person who itself obtains the data 
directly from the multiple registered SDRs and consolidates it. The 
Commission preliminarily believes that allowing unencumbered 
redistribution would be more consistent with the policy goals of wide 
availability of the data and minimization of information asymmetries in 
the security-based swap market. If the Commission prohibits registered 
SDRs from imposing a restriction on bulk redistribution, third parties 
would be able to take in the full data set and scrub, reconfigure, 
aggregate, analyze, repurpose, or otherwise add value to those data, 
and potentially sell that value-added product to others.
    Rule 902(a), as adopted, and the proposed definition of ``widely 
available'' would not prohibit a registered SDR from creating and 
charging fees for a value-added data product that incorporates the 
regulatorily mandated transaction data, provided that the registered 
SDR has first satisfied its duty under Rule 902(a) and effected public 
dissemination of each security-based swap transaction in accordance 
with the proposed definition of ``widely available.'' \135\ In other 
words, a registered SDR could make publicly available both a 
regulatorily mandated and value-added data product. However, to comply 
with Rule 902(a), as adopted, a registered SDR is required to publicly 
disseminate a transaction report of a security-based swap (assuming 
that the transaction does not fall within Rule 902(c), as adopted) 
immediately upon receipt of information about the security-based swap. 
Thus, the registered SDR could not make the value-added product 
available before it publicly disseminated the regulatorily mandated 
transaction report. If a registered SDR makes a fee-based, value-added 
product available more quickly than the required transaction report, 
the registered SDR would not be acting consistent with Rule 902(a) 
because it would not be disseminating the required transaction report 
immediately.
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    \135\ The SDR Adopting Release discusses generally the 
commercial use of security-based swap data. See SDR Adopting 
Release, Section VI(D)(3)(c)(iii).
---------------------------------------------------------------------------

    This approach is consistent with parallel requirements under CFTC 
rules that require regulatorily mandated data be freely available to 
the public, but do not prohibit a CFTC-registered swap data repository 
from making commercial use of such data subsequent to its public 
dissemination.\136\ This approach also is designed to promote 
competition in the market for value-added security-based swap data 
products. Other potential competitors in this market will necessarily 
have to obtain the regulatorily mandated transaction information from a 
registered SDR, because the SDR has a monopoly on this information 
until it is made widely accessible to the public. Potential competitors 
could be at a disadvantage if, needing to obtain the raw material for 
their own services, they had to purchase a value-added data product 
from the registered SDR or could obtain the regulatorily mandated 
transaction data only on a delayed basis. The Commission believes that 
the transparency goals of Title VII will be furthered by reducing 
impediments to competition in the market for value-added post-trade 
data products relating to security-based swaps.
---------------------------------------------------------------------------

    \136\ See ``Real-Time Public Reporting of Swap Transaction 
Data'' (December 20, 2011), 77 FR 1182, 1207 (January 9, 2012) 
(adopting rules for the public dissemination of swaps).
---------------------------------------------------------------------------

B. Request for Comment

    The Commission requests comment on the proposed definition of 
``widely accessible'' as applied to the public dissemination 
requirement of Rule 902(a), as adopted. In particular:
    35. Do you believe that registered SDRs should be prohibited from 
charging users fees for or imposing usage restrictions on the security-
based swap transaction information that registered SDRs are required to 
publicly disseminate under Rule 902(a)? Why or why not?
    36. What effects would result if registered SDRs were permitted to 
charge users fees for regulatorily mandated public dissemination even 
though CFTC-registered SDRs are prohibited from doing so?
    37. Do means exist for registered SDRs to recoup their operating 
costs other than by imposing fees on users for receiving and using the 
publicly disseminated transaction data? If so, please describe those 
means.
    38. Should a registered SDR be prohibited from imposing any usage 
restrictions on the regulatorily mandated security-based swap 
transaction data that it publicly disseminates? Why or why not? What 
kinds of usage restrictions are typically included in user agreements 
for other types of market data? What would be the effect of prohibiting 
such usage restrictions from being imposed on the regulatorily mandated 
security-based swap transaction information that is publicly 
disseminated by registered SDRs?
    39. Should a registered SDR be permitted to impose a prohibition 
against bulk re-dissemination of the regulatorily mandated transaction 
data that it publicly disseminates? Why or why not?
    40. Do you believe that the proposed definition of ``widely 
accessible'' as applied to the public dissemination requirement of Rule 
902(a), as adopted, would impact the market for value-added post-trade 
data products in the security-based swap market? Why or why not? If so, 
how would it affect the market?

VII. Proposed Compliance Schedule for Regulation SBSR

    In the Regulation SBSR Proposing Release, the Commission proposed 
Rule 910, which would have set forth various compliance dates under 
Regulation SBSR and, in general, was designed to clarify the 
implementation process. The Commission did not adopt Rule 910 in the 
Regulation SBSR Adopting Release. Although the Commission received 
comment on its proposed compliance schedule, the Commission now 
believes that a new compliance schedule for most of the rules in 
Regulation SBSR should be proposed in light of the fact that industry 
infrastructure and capabilities have changed since the initial 
proposal. Most notably, the CFTC regime for swap data reporting and 
dissemination is operational. The Commission understands that persons 
who are likely to apply for registration with the Commission as SDRs 
are already CFTC-registered swap data repositories, and many swap 
market participants are also active in the security-based swap market. 
Thus, these SDRs and many security-based swap market participants 
already have made substantial investments in compliance and reporting 
systems that will likely also be utilized to support Regulation SBSR 
compliance.
    Finally, the Commission now believes that it is not necessary to 
include compliance dates within the text of

[[Page 14763]]

Regulation SBSR.\137\ Not including a compliance schedule in the text 
of Regulation SBSR would prevent portions of Regulation SBSR from 
becoming obsolete soon after adoption while still providing affected 
persons with guidance about when they are required to comply with the 
various provisions of Regulation SBSR.
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    \137\ Therefore, the Commission did not adopt the defined terms 
``effective reporting date,'' ``phase-in period,'' and 
``registration date'' that were included in Rule 900, as originally 
proposed, which terms appeared only in proposed Rule 910.
---------------------------------------------------------------------------

A. Initial Proposal

1. Rule 910
    In the Regulation SBSR Proposing Release, the Commission proposed 
Rule 910 to provide clarity as to security-based swap reporting and 
dissemination timelines and to establish a phased-in compliance 
schedule for Regulation SBSR.\138\ As initially proposed, Rule 910 
would have required reporting of pre-enactment security-based swaps by 
January 12, 2012, and would have implemented a compliance schedule for 
Regulation SBSR in four phases. Each registered SDR and its 
participants would have been required to comply with the requirements 
of each phase by set periods of time measured from the registration 
date of that registered SDR, as described in more detail below:
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    \138\ As part of the Cross-Border Proposing Release, the 
Commission re-proposed Rule 910 with only minor changes. Rule 
910(b)(4) was re-proposed to reflect that certain cross-border 
security-based swaps would be subject to regulatory reporting but 
not public dissemination. See Cross-Border Proposing Release, 78 FR 
31067. As originally proposed, Rule 910(b)(4) would have provided 
that all security-based swaps reported to a registered SDR would be 
subject to real-time public dissemination as specified in Rule 902. 
See Regulation SBSR Proposing Release, 75 FR 75244. The Commission 
also replaced the term ``reporting party'' with ``reporting side'' 
in re-proposed Rule 910.
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     Phase 1, six months after the registration date: (1) 
Reporting parties would have been required to report any transitional 
security-based swaps to the registered SDR; (2) reporting parties would 
have been required to report all newly executed security-based swaps to 
the registered SDR; (3) participants and the registered SDR would have 
been required to comply with the error reporting rule (except with 
respect to dissemination) and the requirements of Rules 906(a) and 
906(b); and (4) security-based swap dealers and major security-based 
swap participants would have been required to comply with Rule 906(c).
     Phase 2, nine months after the registration date: The 
registered SDR would have been required to disseminate transaction 
reports and corrected transaction reports for 50 security-based swap 
instruments.
     Phase 3, 12 months after the registration date: The 
registered SDR would have been required to disseminate transaction 
reports and corrected transaction reports for an additional 200 
security-based swap instruments.
     Phase 4, 18 months after the registration date: The 
registered SDR would have been required to disseminate transaction 
reports and corrected transaction reports for all security-based swaps 
reported to the registered SDR.
2. Rule 911
    The Regulation SBSR Proposing Release included proposed Rule 911, 
which was designed to prevent evasion of the public dissemination 
requirement during a period when two or more SDRs had registered with 
the Commission but were operating under different compliance dates. 
Rule 911, as re-proposed, would have provided that a reporting side 
shall not report a security-based swap to a registered SDR in a phase-
in period described in Rule 910 during which the registered SDR is not 
yet required to publicly disseminate transaction reports for that 
security-based swap instrument unless: (1) The security-based swap also 
is reported to a registered SDR that is disseminating transaction 
reports for that security-based swap instrument, consistent with 
proposed Rule 902; or (2) no other registered SDR is able to receive, 
hold, and publicly disseminate transaction reports regarding that 
security-based swap instrument.

B. New Proposed Compliance Schedule

    The Commission is proposing a new compliance schedule for Rules 
901, 902, 903, 904, 905, 906, and 908 of Regulation SBSR \139\ that is 
designed to provide affected persons, especially registered SDRs and 
persons with a duty to report security-based swap transactions to 
registered SDRs, with time to develop, test, and implement reporting 
and dissemination systems.\140\ The proposed compliance schedule is 
tied to the commencement of operations of a registered SDR in an asset 
class.\141\ Registered SDRs will need time to make the necessary 
technological and other preparations needed, including implementing 
policies and procedures,\142\ to begin receiving and disseminating 
security-based swap information. Persons with a duty to report 
transactions will need time to analyze the policies and procedures of 
registered SDRs to which they wish to connect, make necessary changes 
to their internal systems, policies and procedures, and processes to 
conform to the requirements of the SDR's policies and procedures, and 
establish and test their linkages to the SDRs.
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    \139\ For Rules 900, 907, and 909 of Regulation SBSR, the 
compliance date is the effective date of Regulation SBSR. See 
Regulation SBSR Adopting Release, Section I(F).
    \140\ As discussed in the Cross-Border Proposing Release, re-
proposed Rule 908(a) would have provided an exception to public 
dissemination for transactions executed by a non-U.S. person who is 
guaranteed by a U.S. person, where there is no U.S. person or 
security-based swap dealer on the other side and the transaction is 
not cleared through a clearing agency having its principal place of 
business in the United States. As discussed in the Regulation SBSR 
Adopting Release, the Commission did not adopt this proposed 
exception. Rather, Rule 908(a)(1), as adopted, requires public 
dissemination of a security-based swap if one side consists of a 
non-U.S.-person direct counterparty and a U.S.-person guarantor, 
where neither is a registered security-based swap dealer or 
registered major security-based swap participant, and the other side 
includes no counterparties that are U.S. persons, registered 
security-based swap dealers, or registered major security-based swap 
participants (a ``covered cross-border transaction''). See Cross-
Border Proposing Release, 78 FR 31062-63. The Commission anticipates 
seeking additional comment on whether or not to except covered 
cross-border transactions from public dissemination. Therefore, the 
Commission also is proposing to defer the compliance date for Rule 
908(a)(1)(i) with respect to the public dissemination of covered 
cross-border transactions until such time as the Commission receives 
and considers public comment on such an exception or establishes a 
separate compliance date for these transactions.
    \141\ Rule 13n-1(c)(3) under the Exchange Act provides that the 
Commission shall grant registration of an SDR if ``the Commission 
finds that such security-based swap data repository is so organized, 
and has the capacity, to be able to assure the prompt, accurate, and 
reliable performance of its functions as a security-based swap data 
repository, comply with any applicable provision of the federal 
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 Act (15 U.S.C. 78m(n)) and the rules and 
regulations thereunder.'' Although a registered SDR will have 
demonstrated its operational capability during the registration 
process, a registered SDR is not required to and likely will not 
formally commence operations as a registered SDR on the same day 
that it is approved for registration.
    \142\ As part of the SDR registration process, a potential 
registrant must provide all of the policies and procedures required 
by Rule 907; the Commission will review those policies and 
procedures in assessing whether to approve the registration. See 
Form SDR (requiring applicants to attach as Exhibit GG all of the 
policies and procedures required under Regulation SBSR). In 
connection with its registration as an SDR, the potential registrant 
also must register as a securities information processor (``SIP'') 
as required by Rule 909. Rule 907 provides, among other things, that 
a registered SDR must establish certain policies and procedures 
relating to the receipt, reporting, and dissemination of security-
based swap data. Rule 909, as adopted, provides that a registered 
SDR must also register with the Commission as a SIP. The compliance 
date for Rules 907 and 909 will be 60 days after publication of the 
Regulation SBSR Adopting Release in the Federal Register. See 
Regulation SBSR Adopting Release, Section I(F).
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    In light of these activities that must occur before full compliance 
with

[[Page 14764]]

Regulation SBSR can be expected, the Commission is proposing the 
following phased-in compliance schedule for Regulation SBSR:
1. Proposed Compliance Date 1
    Proposed Compliance Date 1 relates to the regulatory reporting of 
newly executed security-based swaps as well pre-enactment and 
transitional security-based swaps. On the date six months after the 
first registered SDR that accepts reports of security-based swaps in a 
particular asset class commences operations as a registered SDR, 
persons with a duty to report security-based swaps under Regulation 
SBSR would be required to report all newly executed security-based 
swaps in that asset class to a registered SDR. Furthermore, after 
Compliance Date 1, persons with a duty to report security-based swaps 
also would have a duty to report any life cycle events of any security-
based swaps that previously had been required to be reported.
    The Commission recognizes that market participants will need 
adequate time to analyze and understand the policies and procedures of 
registered SDRs, to establish reporting connections to registered SDRs, 
and to develop new systems for capturing and reporting transaction 
information. The Commission preliminarily believes that this time 
period is an appropriate amount of time for market participants to do 
so. Any registered SDR that has commenced operations will have 
established policies and procedures that are consistent with Rule 907. 
Therefore, six months should allow adequate time for market 
participants to make the preparations necessary to connect with and 
report to a registered SDR, including analyzing and complying with the 
policies and procedures of the registered SDR and performing systems 
testing.
    Also, by proposed Compliance Date 1, to the extent the information 
is available, persons with a duty to report pre-enactment security-
based swaps and transitional security-based swaps in the relevant asset 
class would be required to report these transactions, in accordance 
with Rule 901(i), to a registered SDR that accepts reports of security-
based swap transactions in that asset class.\143\ The Commission is 
proposing to require that all historical security-based swaps in that 
asset class be reported by Compliance Date 1, not on Compliance Date 1. 
Thus, a registered SDR that has commenced operations and that accepts 
reports of transactions in that asset class could allow persons with a 
duty to report to report such transactions on a rolling basis before 
Compliance Date 1. However, if it does so, the registered SDR would 
then be required to comply with the requirements of Regulation SBSR 
that are not subject to the phased compliance (i.e., those requirements 
that are immediately effective). Therefore, a registered SDR would need 
to comply with Rule 901(f) and time stamp, to the second, any security-
based swap data that it receives pursuant to Rule 901(i). The 
registered SDR also would be required to comply with Rule 901(g) and 
assign a transaction ID to each historical security-based swap that is 
reported to it on or before proposed Compliance Date 1.
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    \143\ The Commission notes that, for some transitional security-
based swaps, there might be only a short period between the date of 
execution and the date on which they must be reported to a 
registered SDR. For example, assume that Compliance Date 1 with 
respect to a particular asset class is July 14, 2016; if a security-
based swap in that asset class is executed on July 10, 2016, the 
person with the duty to report that transaction would be required to 
report it to a registered SDR within four days of execution (i.e., 
on or before July 14, 2016).
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    As participants begin reporting historical security-based swaps to 
a registered SDR in the days leading up to Compliance Date 1, 
participants and registered SDRs would be required to comply with Rules 
901(e) and 905 (except with respect to public dissemination) regarding 
any historical security-based swaps that are so reported. Thus, if 
historical security-based swap X is reported to a registered SDR 30 
days before Compliance Date 1, the counterparties to transaction X and 
the registered SDR that holds the mandatory report of transaction X 
would immediately become subject to the life cycle event reporting and 
error-correction requirements of Rules 901(e) and 905, respectively 
with respect to transaction X. However, if transaction Y has not yet 
been reported to a registered SDR (and assuming that Compliance Date 1 
has not yet arrived), the counterparties and the registered SDR would 
not yet incur any duties under Rules 901(e) or 905 with respect to 
transaction Y.
    Finally, by proposed Compliance Date 1, registered security-based 
swap dealers, registered major security-based swap participants, 
registered clearing agencies, and platforms would be required to comply 
with Rule 906(c); participants (except for platforms and registered 
clearing agencies) would be required to comply with Rules 906(a) and 
906(b); and registered SDRs also would be required to comply with Rule 
906(a).
    The Commission preliminarily believes that a six-month compliance 
phase-in would provide sufficient time for registered security-based 
swap dealers, registered major security-based swap participants, 
registered clearing agencies, and platforms to establish their own 
policies and procedures for reporting transactions in a particular 
asset class and to implement the systems changes needed to comply with 
Regulation SBSR. Participants would not be required to report to the 
first SDR that accepts security-based swaps in that asset class that 
registers with the Commission; participants could report to any SDR 
that accepts transactions in that asset class that has been registered 
by the Commission and has commenced operations by Compliance Date 1. 
Registered SDRs would not be required to publicly disseminate any 
transaction reports until Compliance Date 2, as described below.
    Registered SDRs also would be required to comply with Rule 904 
beginning on proposed Compliance Date 1, with the exception of Rule 
904(d). Rule 904 requires a registered SDR to have systems in place to 
continuously receive and disseminate security-based swap information, 
with certain exceptions. Under final Rule 904(a), a ``registered SDR 
may establish normal closing hours when, in its estimation, the U.S. 
market and major foreign markets are inactive.'' Under final Rule 
904(b), a registered SDR ``may declare, on an ad hoc basis, special 
closing hours to perform system maintenance that cannot wait until 
normal closing hours.'' In each case, the registered SDR must provide 
participants and the public with reasonable advance notice of its 
normal closing hours and special closing hours. Rule 904 also requires 
a registered SDR to have the ability to hold in queue any transaction 
data that it receives during normal and special closing hours or, if 
the registered SDR does not have the ability to received and hold data 
in queue, the registered SDR must immediately notify participants that 
it has resumed operations and any participant with a duty to report 
would be required to promptly re-report security-based swap information 
to the registered SDR.
    Also beginning on proposed Compliance Date 1, registered SDRs would 
be required to comply with the requirement in Rule 906(a) to provide to 
each participant a report of any missing UICs, and any participant 
receiving such a report would be required to comply with the 
requirement in Rule 906(a) to provide the missing UICs to the 
registered SDR. The registered SDR and its participants also would be

[[Page 14765]]

subject to the error correction requirements of Rule 905, except that 
the registered SDR would not yet be required to publicly disseminate 
any corrected transaction reports (because it would not yet be required 
to publicly disseminate a report of the initial transaction). 
Participants (except for platforms and registered clearing agencies) 
also would be required to comply with the requirement in Rule 906(b) to 
provide the registered SDR information sufficient to identity its 
ultimate parent(s) and any affiliate(s) that also are participants of 
the registered SDR. The Commission preliminarily believes that these 
requirements will facilitate accurate and complete reporting of 
transaction information.
2. Proposed Compliance Date 2
    Proposed Compliance Date 2 relates to the public dissemination of 
security-based swap transaction data. Within nine months after the 
first registered SDR that accepts security-based swaps in a particular 
asset class commences operations as a registered SDR (i.e., three 
months after Compliance Date 1), each registered SDR in that asset 
class that has registered and commenced operation would be required to 
comply with Rules 902 (regarding public dissemination), 904(d) 
(requiring dissemination of transaction reports held in queue during 
normal or special closing hours), and 905 (with respect to public 
dissemination of corrected transaction reports) for all security-based 
swaps in that asset class--except for ``covered cross-border 
transactions,'' as that term is described in the immediately following 
section. The Commission preliminarily believes that nine months after 
the first registered SDR that accepts security-based swaps in a 
particular asset class commences operations as a registered SDR is a 
sufficient amount of time for registered SDRs to begin disseminating 
security-based swap transaction data, including corrected transaction 
reports. This will allow registered SDRs a period of three months after 
they begin receiving reports of individual security-based swap 
transactions to identify and resolve any issues related to trade-by-
trade reporting by participants and further test their data 
dissemination systems.
3. Effect of Registration of Additional SDRs
    As discussed immediately above, the first SDR that is registered by 
the Commission and commences operations as a registered SDR starts the 
countdown to proposed Compliance Dates 1 and 2 for any asset class in 
which that SDR chooses to accept transaction reports. A subsequent SDR 
that is approved by the Commission, can accept reports of security-
based swaps in that asset class, and commences operations would be 
subject to the same proposed Compliance Dates, as shown in the 
following examples:
     Example 1. SDR A registers with the Commission and, 
subsequently, commences operations as a registered SDR on June 1, 2015. 
Therefore, Compliance Date 1 (with respect to transactions in any asset 
class that can be accepted by SDR A) is December 1, 2015. SDR B, which 
accepts security-based swaps in the same asset class, registers and 
subsequently commences operations as a registered SDR on November 2, 
2015. Mandatory transaction-by-transaction reporting pursuant to Rule 
901 still begins on December 1, 2015. However, persons with the duty to 
report may report to either SDR A or SDR B, even though SDR B would 
have been registered for less than one month.
     Example 2. Again, SDR A registers with the Commission and, 
subsequently, commences operations as a registered SDR on June 1, 2015. 
Therefore, Compliance Date 1 (with respect to transactions in any asset 
class that can be accepted by SDR A) is December 1, 2015, and 
Compliance Date 2 is March 1, 2016. SDR C registers and, subsequently, 
commences operations as a registered SDR on February 15, 2016. (There 
is no SDR B in this example.) Mandatory transaction-by-transaction 
reporting pursuant to Rule 901 began on December 1, 2015. As of the 
first day on which it operates, SDR C must be prepared to accept 
transaction-by-transaction reports, as required by Rule 901. Both SDR A 
and SDR C must begin publicly disseminating last-sale reports, as 
required by Rule 902, on March 1, 2016.
     Example 3. Again, SDR A registers with the Commission and, 
subsequently, commences operations as a registered SDR on June 1, 2015. 
Therefore, Compliance Date 1 (with respect to transactions in any asset 
class that can be accepted by SDR A) is December 1, 2015, and 
Compliance Date 2 is March 1, 2016. SDR D registers and, subsequently, 
commences operations as a registered SDR on June 15, 2017. SDR D must 
be prepared to accept transaction-by-transaction reports, as required 
by Rule 901, and to publicly disseminate last-sale reports, as required 
by Rule 902, as of the first day on which it operates as a registered 
SDR. SDR D's registration would not create a new set of compliance 
timeframes.
4. Proposed Changes to Certain Exemptions Related to the Proposed 
Compliance Schedule
    In connection with Compliance Date 1, the Commission is also 
proposing to extend its exemption related to the reporting of pre-
enactment security-based swaps in order to ensure consistency between 
the proposed compliance schedule and the exemption. In June 2011, the 
Commission exercised its authority under Section 36 of the Exchange Act 
\144\ to exempt any person from having to report any pre-enactment 
security-based swaps pursuant to Section 3C(e)(1) of the Exchange Act 
\145\ until six months after an SDR that is capable of receiving 
security-based swaps in that asset class is registered by the 
Commission.\146\ At the time, the Commission noted that the exemption 
was consistent with Rule 910, as proposed.\147\ Because Compliance Date 
1 is tied to the commencement of operations of a registered SDR and 
because some time may elapse between the date on which the Commission 
approves an SDR's registration and the date on which it commences 
operations as a registered SDR, the Commission is proposing to modify 
the reporting exemption to harmonize it with the proposed compliance 
schedule. The Commission is therefore proposing to exercise its 
authority under Section 36 of the Exchange Act to exempt any person 
from having to report any pre-enactment security-based swaps pursuant 
to Section 3C(e)(1) of the Exchange Act until six months after an SDR 
that is capable of receiving security-based swaps in that asset class 
is registered by the Commission and has commenced operations as a 
registered SDR.\148\ The Commission preliminarily believes that this 
exemption is necessary or appropriate in the public

[[Page 14766]]

interest, and is consistent with the protection of investors because 
such action would prevent the existing exemption from expiring before 
persons with a duty to report pre-enactment security-based swaps can 
report them to a registered SDR, taking into account that an SDR may 
require some time between the date on which the Commission approves its 
registration and the date on which it is able to commence operations as 
a registered SDR with respect to a particular asset class.
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    \144\ 15 U.S.C. 78mm.
    \145\ 15 U.S.C. 78c-3(e)(1).
    \146\ See Securities Exchange Act Release No. 64678 (June 15, 
2011), 76 FR 36287, 36291 (June 22, 2011) (Temporary Exemptions and 
Other Temporary Relief, Together With Information on Compliance 
Dates for New Provisions of the Securities Exchange Act of 1934 
Applicable to Security-Based Swaps) (``Effective Date Release'').
    \147\ See id.
    \148\ Thus, as proposed, this exemption would expire on proposed 
Compliance Date 1 with respect to persons having a duty to report 
pre-enactment security-based swap transactions in the asset class of 
the first SDR to register with the Commission and commence 
operations as a registered SDR with respect to that asset class. For 
persons having a duty to report pre-enactment security-based swaps 
in any other asset class, the exemption would remain in force until 
six months after the first registered SDR that can accept reports of 
security-based swaps in that asset class has commenced operations as 
a registered SDR with respect to that asset class.
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    In addition, in the Effective Date Release, the Commission also 
exercised its authority under Section 36 of the Exchange Act to 
temporarily exempt any security-based swap contract entered into on or 
after July 16, 2011, from being void or considered voidable by reason 
of Section 29(b) of the Exchange Act,\149\ because any person that is a 
party to the security-based swap contract violated a provision of the 
Exchange Act that was amended or added by Subtitle B of Title VII of 
the Dodd Frank Act and for which the Commission has taken the view that 
compliance will be triggered by registration of a person or by adoption 
of final rules by the Commission, or for which the Commission has 
provided an exception or exemptive relief, until such date as the 
Commission specifies.\150\ In relevant part, Section 29(b) of the 
Exchange Act provides that ``[e]very contract made in violation of any 
provision of this title or of any rule or regulation thereunder, and 
every contract . . . heretofore or hereafter made, the performance of 
which involves the violation of, or the continuance of any relationship 
or practice in violation of, any provision of this title or any rule or 
regulation thereunder, shall be void (1) as regards the rights of any 
person who, in violation of any such provision, rule, or regulation, 
shall have made or engaged in the performance of any such contract, and 
(2) as regards the rights of any person who, not being a party to such 
contract, shall have acquired any right thereunder with actual 
knowledge of the facts by reason of much the making or performance of 
such contract was in violation of any such provision rule or regulation 
. . .'' \151\ The Commission is proposing that, with respect to 
security-based swaps in a particular asset class, the exemption from 
Section 29(b) of the Exchange Act, in connection with Section 3C(e)(1), 
would terminate on proposed Compliance Date 1 (i.e., six months after 
the first registered SDR in that asset class commences operations with 
respect to that asset class).
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    \149\ 15 U.S.C. 78cc(b).
    \150\ See Effective Date Release, 76 FR 36305.
    \151\ 15 U.S.C. 78cc(b).
---------------------------------------------------------------------------

C. Discussion of Comments Received in Response to the Initial Proposal

    Commenters responding to the Regulation SBSR Proposing Release 
generally recommended that the Commission implement Regulation SBSR in 
phases, but their detailed suggestions varied.\152\ Several commenters 
emphasized the need to provide adequate time for the development and 
implementation of reporting and compliance systems and procedures.\153\ 
One of these commenters stated, for example, that ``virtually all 
existing systems would have to be significantly overhauled to satisfy 
the real-time reporting obligations'' of Regulation SBSR.\154\ Another 
commenter emphasized that ``market infrastructure must be in place 
prior to requiring market participant compliance'' and that many 
financial entities that are not swap dealers or major swap participants 
may need additional time to comply.\155\ A third commenter noted that 
requiring reporting prior to the registration of security-based swap 
dealers and major security-based swap participants would complicate 
reporting and the determination of the reporting counterparty because 
``parties entering into security-based swaps . . . may be expected . . 
. to report ahead of the point their obligation becomes certain.'' 
\156\ A fourth commenter stated that any implementation timeline ``must 
recognize the practical challenges that security-based swap data 
repositories and market participants will face in defining and 
implementing industry-wide collection and dissemination mechanisms and 
internal data collection systems, respectively.'' \157\ A fifth 
commenter stated that, although much of the existing infrastructure of 
DTCC's Trade Information Warehouse could form the core of the processes 
required by Regulation SBSR, substantial new industry-wide processes 
requiring significant coordination, testing, and development would have 
to be implemented, particularly around real-time reporting.\158\ One 
commenter believed that, given the complexity and novelty of the 
proposed reporting framework, a pilot program would allow the 
Commissions to evaluate the operational integrity of the infrastructure 
implementing the reporting rules.\159\ One commenter recommended a 
``relatively thorough phase-in period'' during which only regulators 
would receive security-based swap information because of the potential 
for disseminating misleading real-time pricing information, which 
potentially could result in market disruptions and economic 
damage.\160\
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    \152\ See Bachus/Lucas Letter at 3; Barnard I at 4; CCMR I at 2; 
Cleary I at 17-21; DTCC I at 24-25; DTCC III at 8-9; DTCC IV at 8; 
FINRA Letter at 4-5; Institutional Investors Letter at 3; ISDA III 
at 2 (suggesting a phase-in for reporting of historical security-
based swaps); ISDA/SIFMA I at 9-10; ISDA/SIFMA Block Trade Study at 
2; MarkitSERV I at 10; MFA I at 6; MFA Recommended Timeline at 1; 
Morgan Stanley Letter at 6; Roundtable Letter at 4-9; UBS Letter at 
2-3; ISDA IV at 2-3.
    \153\ See CCMR I at 2; Cleary I at 19-21; DTCC II at 24-25; 
ISDA/SIFMA I at 9.
    \154\ ISDA/SIFMA I at 9.
    \155\ Institutional Investors Letter at 3.
    \156\ See ISDA IV at 2.
    \157\ Cleary I at 19. See also WMBAA II at 4 (stating that 
``[i]t is necessary that any compliance period or registration 
deadline provides sufficient opportunity for existing trade 
execution systems or platforms to modify and test systems, policies 
and procedures to ensure that its operations are in compliance with 
the final rules'').
    \158\ See DTCC II at 25.
    \159\ See Cleary I at 20.
    \160\ DTCC IV at 9. This commenter also stated that a phased-in 
implementation of Regulation SBSR would allow time for extensive 
testing and preparation needed to avoid systemic risk and the 
dissemination of inaccurate information. See DTCC I at 2.
---------------------------------------------------------------------------

    One commenter also noted that a phased-in implementation would 
allow regulators to assess the impact of transparency on the security-
based swap market and make adjustments, if necessary, to the timing of 
dissemination and the data that is disseminated.\161\ Other commenters 
echoed the belief that a phased-in approach would allow the Commission 
to assess the impact of public dissemination on liquidity in the 
security-based swap market, monitor changes in the market, and adjust 
the reporting rules, if necessary.\162\ One of these commenters 
believed that, without staged implementation, the new security-based 
swap transparency requirements could cause market disruptions if some 
dealers withhold capital until they were able to determine whether the 
reporting requirements would adversely impact their ability to manage 
risk.\163\ Another commenter agreed with the phased-in approach 
initially proposed by the Commission and believed that the obligations 
on

[[Page 14767]]

affected parties were clear, sufficient, and achievable.\164\ Another 
commenter recommended the adoption of an incremental approach to 
reporting that would begin with ``macro'' reporting followed by more 
comprehensive reporting at a later time.\165\
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    \161\ See FINRA Letter at 5. See also ISDA/SIFMA Block Trade 
Study at 2 (stating that phased-in implementation would provide 
regulators with time to test and refine preliminary standards).
    \162\ See CCMR I at 2; Cleary I at 19; ISDA/SIFMA Block Trade 
Study at 2; UBS Letter at 2. Another commenter believed that the 
reporting requirements could apply first to products that are 
cleared and executed on a trading platform, then to products that 
are cleared, but not executed on a trading platform, and finally to 
uncleared products. See Morgan Stanley Letter at 6.
    \163\ See CCMR I at 2.
    \164\ See Barnard I at 4. The commenter also believed that the 
suggested numbers of security-based swaps included in each of the 
initially proposed phases of implementation were reasonable. See id.
    \165\ See Roundtable Letter at 4 (stating that market 
participants could prepare reports indicating the aggregate notional 
amount of swaps outstanding, subdivided by major category, and the 
identity of any counterparty representing 5% or more of their open 
positions by notional amount in that major category).
---------------------------------------------------------------------------

    Several commenters also recommended that the Commission utilize a 
gradual implementation approach similar to that of the TRACE trade 
reporting system. One commenter--the Financial Industry Regulatory 
Association (``FINRA''), which operates the TRACE trade reporting 
system for fixed income securities--supported proposed Rule 910's 
approach of staggered implementation of various requirements under 
Regulation SBSR, noting that it had implemented TRACE reporting in 
phases based on product liquidity, beginning with the largest and most 
liquid issues.\166\ FINRA stated that phased-in implementation would 
facilitate a more orderly transition that minimizes the likelihood of 
market disruptions and an unintended loss of liquidity, and would 
provide market participants with time to adjust to a market in which 
security-based swap transaction data were publicly known.\167\ Other 
commenters also expressed the view that TRACE is a useful model of a 
phased-in approach to implementation.\168\ One of these commenters 
stated, for example, that the ``TRACE experience demonstrates the 
length of time required to study, review and assess the effects of 
real-time reporting on market liquidity, as well as the need to provide 
adequate lead time for market participants to build a common 
infrastructure for reporting.'' \169\ Another commenter believed that 
Regulation SBSR would require, at a minimum, an implementation period 
similar to the four years required to implement TRACE, ``given that the 
swap markets are significantly more complex and varied and less 
developed infrastructurally than the corporate bond markets.'' \170\
---------------------------------------------------------------------------

    \166\ See FINRA Letter at 4.
    \167\ See id. at 5.
    \168\ See CCMR I at 2; Cleary I at 19-20; DTCC II at 10; ISDA/
SIFMA I at 10; UBS Letter at 2-3.
    \169\ UBS Letter at 3.
    \170\ Cleary I at 20. See also ISDA/SIFMA I at 10 (stating that 
the reporting requirements for security-based swaps are 
significantly more complex than for TRACE, and the phase-in should 
reflect this degree of complexity); CCMR I at 2 (noting that TRACE 
took a ``cautious approach'' to implementation, even though it was 
implemented initially for a single asset class, corporate bonds).
---------------------------------------------------------------------------

    While one participant at the Implementation Roundtable suggested 
that certain asset classes could need less than six months for 
implementation,\171\ several others stated that the time needed for 
implementation depended on the complexity of the asset class and 
believed that more time than the implementation schedule in Regulation 
SBSR, as initially proposed, would likely be necessary.\172\ Another 
participant believed that it could take up to two years following the 
adoption of final rules to implement the new rules because of ``the 
substantial effort required to conduct the renegotiation of tens of 
thousands of contracts between customers and counterparties.'' \173\ 
However, several participants at the Implementation Roundtable 
suggested that six to nine months would be needed for implementation 
following adoption of final rules by the SEC and CFTC.\174\ Similarly, 
two commenters indicated that market participants would require an 
implementation period of at least six months following the adoption of 
final rules.\175\
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    \171\ See Implementation Roundtable, Day 2 at 170-71 (Cummings).
    \172\ See Implementation Roundtable, Day 1 at 299, 301 (Gooch); 
Implementation Roundtable, Day 2 at 177-8 (Joachim).
    \173\ Institutional Investors Letter at 3. See also Roundtable 
Letter at 4 (stating that there could be a `` `bottleneck' both in 
the document negotiation process and in the move to clearing'').
    \174\ See Implementation Roundtable, Day 1 at 264 (Levi), 298 
(Gooch); Implementation Roundtable, Day 2 at 174-8 (Collazo, 
Cummings, Joachim).
    \175\ See DTCC II at 24 (``A six month period seems 
appropriate''); ISDA IV at 2 (expressing support for a six-month 
implementation period, provided that Regulation SBSR aligns closely 
with the CFTC's swap data reporting rules and requesting a nine-
month implementation period if Regulation SBSR deviates from the 
CFTC's swap data reporting rules).
---------------------------------------------------------------------------

    Several commenters also discussed general and specific 
implementation issues that might arise in the context of implementing 
Regulation SBSR. Some commenters,\176\ along with several participants 
at the Implementation Roundtable,\177\ supported phasing in 
implementation by asset class. Because different asset classes use 
different and often incompatible booking systems, one commenter 
recommended that both reporting to SDRs and public dissemination be 
phased in by asset class to allow market participants to work within 
the current market set-up.\178\ Other Roundtable participants did not 
specify the amount of time that they believed would be required for 
implementation and instead noted various implementation concerns.\179\ 
One commenter stated that the CFTC and SEC should synchronize 
compliance dates for their respective reporting rules as much as 
possible.\180\ Another commenter, noting that the CFTC and the 
Commission are undertaking a Dodd-Frank mandated study regarding the 
feasibility of standardized computer-readable algorithmic descriptions 
for derivatives, believed that it would be premature to adopt reporting 
rules before the completion of this study and consideration of its 
results.\181\ One Roundtable participant recommended setting an 
implementation date and establishing consequences for failure to meet 
the implementation date.\182\
---------------------------------------------------------------------------

    \176\ See DTCC II at 25 (noting that because credit products' 
operational processes are more highly automated, credit products are 
more reporting-ready than equities products); SIFMA II at 5; UBS 
Letter at 2 (stating that the initial phase of public security-based 
swap reporting for single-name CDS be limited to CDS on the top 125 
most actively traded reference entities).
    \177\ See Implementation Roundtable, Day 1 at 32 (unidentified 
speaker), 43 (Thompson). See also Implementation Roundtable, Day 2 
at 168, 173 (Collazo) (suggesting implementation in the following 
order: CDS, interest rate swaps, FX swaps, equity swaps, then 
commodity-based swaps).
    \178\ See Barclays I at 4.
    \179\ See Implementation Roundtable, Day 2 at 159 (Okochi) 
(stating that implementation will vary based on clearing of trades, 
customization of trades based on the business segment they are in, 
asset class, and volume); 183-84 (Thum) (stating that reporting by 
non-dealers will require additional work), 192-94 (Gooch) (stating 
that inclusion of timestamps, place of execution, subfund 
allocations will require additional configurations to existing 
systems and processes to support real-time reporting).
    \180\ See Implementation Roundtable, Day 1 at 77 (Olesky).
    \181\ See Cleary I at 20. The Commission notes that the 
referenced study was completed on April 7, 2011. See Securities 
Exchange Act Release No. 63423 (December 2, 2010), 75 FR 76706 
(December 9, 2010). See also http://www.sec.gov/news/studies/2011/719b-study.pdf (noting that current technology is capable of 
representing derivatives using a common set of computer-readable 
descriptions).
    \182\ See Implementation Roundtable, Day 1 at 51 (Cawley).
---------------------------------------------------------------------------

    The Commission notes the concerns about implementation expressed by 
commenters. However, it is the Commission's understanding that the 
industry has made considerable progress in improving reporting 
capability, which will facilitate compliance with Regulation SBSR. The 
CFTC already has adopted final rules for swap data repository 
registration, regulatory reporting, and public dissemination of swaps, 
and market

[[Page 14768]]

participants have been reporting to CFTC-registered SDRs since year-end 
2012.\183\ The Commission preliminarily believes that much of the 
established infrastructure that supports swap reporting and 
dissemination can be modified to support security-based swap reporting 
and dissemination. At the same time, the Commission recognizes that 
there are certain differences in the reporting requirements of the SEC 
and the CFTC; therefore, entities subject to Regulation SBSR will need 
time to meet the regulation's specific requirements.
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    \183\ The CFTC phased in compliance requirements for swap data 
reporting (depending on the reporting party and asset class) 
beginning on December 31, 2012. See CFTC Division of Market 
Oversight Advisory (March 8, 2013) at 2-3, available at http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/dmoadvisory030813.pdf (last visited on October 30, 2014).
---------------------------------------------------------------------------

    The Commission preliminarily agrees with those commenters who 
suggested that the Commission generally model the implementation of 
Regulation SBSR after the implementation of TRACE, and has designed the 
newly proposed compliance schedule to allow participants and registered 
SDRs the benefit of phased-in compliance. The Commission also is aware 
of the need for extensive testing and preparation in the implementation 
of the systems necessary to meet the requirements of Regulation SBSR 
and has developed the proposed compliance schedule with such needs in 
mind. The proposed schedule, discussed above, provides for a six-month 
period from the date on which the first registered SDR that accepts 
security-based swaps in a particular asset class commences operations 
as a registered SDR. By the end of that six-month period, to the extent 
such information is available, all pre-enactment and transitional 
security-based swaps in that asset class would be required to be 
reported.\184\ Furthermore, market participants would have six months 
from the commencement of operations of the first registered SDR that 
can accept security-based swaps in a particular asset class as a 
registered SDR before reporting of newly executed transactions in that 
asset class would be required. Although a registered SDR may already be 
operational as swap data repository under CFTC rules, to the extent 
there is a gap between the Commission's grant of registration and the 
SDR's commencement of operations as a registered SDR, the Commission 
wants to ensure that reporting parties have six months after a 
registered SDR commences operations as a registered SDR in a particular 
asset class to further test and implement processes for reporting 
security-based swap transaction information in that asset class. The 
Commission preliminarily believes that six months would provide 
affected persons with sufficient time to resolve any potential issues 
related to the reporting of security-based swap transactions on an 
individual basis. Under the proposed compliance schedule, there would 
then be an additional three months before transactions must be publicly 
disseminated. This period is designed to give registered SDRs and 
persons having a duty to report an opportunity to resolve any reporting 
issues before transactions must be publicly disseminated.
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    \184\ One commenter recommended that pre-enactment and 
transitional security-based swaps should be reported on the same 
timeline, as firms' systems cannot easily distinguish between the 
two categories. See ISDA IV at 18. The Commission notes that the 
proposed compliance schedule would provide for this outcome. This 
commenter further stated that reporting entities have found it 
practical to report ``live'' historical security-based swaps in 
advance of the effective reporting date applicable to new 
transactions and life cycle reporting, and recommended an aligned 
reporting effective date for historical security-based swaps that 
are still live, or expected to be live, as of the reporting 
effective date. However, the commenter recommended that historical 
security-based swaps that are no longer live should have a later 
reporting effective date than reporting for other security-based 
swaps, and recommends a year delay. See id. Under the proposed 
compliance schedule, all historical security-based swaps in an asset 
class would be required to be reported in the same timeframe as for 
new security-based swaps going forward--i.e., by six months from the 
date of operation of the first registered SDR that can accept 
security-based swaps in the asset class. The Commission is not 
proposing a longer reporting period for historical security-based 
swaps that are not ``live,'' but requests comment on the issue.
---------------------------------------------------------------------------

    Although several commenters advocated for longer timeframes, the 
Commission preliminarily believes that six months between the 
commencement of operations of the first registered SDR in an asset 
class as a registered SDR and the commencement of mandated trade-by-
trade reporting is sufficient. The Commission bases this view on the 
existence of market infrastructure that supports swap data reporting 
pursuant to CFTC rules. Several commenters noted that challenges 
related to the implementation of the reporting and dissemination 
requirements of proposed Regulation SBSR were related to lack of 
appropriate industry infrastructure and processes.\185\ As noted above, 
the Commission understands that persons seeking to register as SDRs are 
likely to be registered and operating as swap data repositories under 
CFTC rules, and that many swap market participants subject to CFTC 
reporting rules may also be security-based swap market participants. 
Therefore, the Commission preliminarily believes that these persons and 
market participants would be able to leverage existing infrastructure 
to report and disseminate security-based swap data.
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    \185\ See Institutional Investors Letter at 3 (``market 
infrastructure must be in place prior to requiring market 
participant compliance''); Cleary I at 19 (any implementation 
timeline ``must recognize the practical challenges that security-
based swap data repositories and market participants will face in 
defining and implementing industry-wide collection and dissemination 
mechanisms and internal data collection systems, respectively.''); 
DTCC II at 25 (noting that although much of the existing 
infrastructure of DTCC's Trade Information Warehouse could form the 
core of the processes required by Regulation SBSR, substantial new 
industry-wide processes requiring significant coordination, testing, 
and development would have to be implemented, particularly around 
real-time reporting).
---------------------------------------------------------------------------

    The Commission also preliminarily believes that it is unnecessary 
to delay the implementation of Regulation SBSR until registration 
requirements take effect for security-based swap dealers and major 
security-based swap participants, as suggested by one commenter.\186\ 
As described in Section V(B)(1) of the Regulation SBSR Adopting 
Release, the Commission has adopted a modified version of the security-
based swap reporting hierarchy in Rule 901(a)(2) to ensure that no 
person will need to evaluate whether it meets the definition of 
``security-based swap dealer'' or ``major security-based swap 
participant'' solely in connection with identifying which counterparty 
must report a security-based swap under Regulation SBSR.\187\ Under the 
reporting hierarchy as adopted, until registration requirements come 
into effect, there will be no registered security-based swap dealers or 
major security-based swap participants, so the sides will be required 
to select the reporting side. The Commission preliminarily believes 
that having the sides choose who reports should not complicate 
reporting.
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    \186\ See ISDA IV at 2-3.
    \187\ In the Cross-Border Adopting Release, the Commission 
estimated the assessment costs for making such evaluations. See 
Cross-Border Adopting Release, 79 FR 47330-34. The Commission's 
approach in Regulation SBSR is consistent with the approach 
described in the Cross-Border Adopting Release, where the Commission 
noted that security-based swap dealers and major security-based swap 
participants ``will not be subject to the requirements applicable to 
those dealers and major participants until the dates provided in the 
applicable final rules.'' 79 FR 47368. See also Intermediary 
Definitions Adopting Release, 77 FR 30700.
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    The Commission preliminarily believes that it is not necessary or 
appropriate to establish multiple or phased compliance dates for 
reporting security-based swaps within the same

[[Page 14769]]

asset class to registered SDRs.\188\ Preliminarily, the Commission 
seeks to have all regulatory reports of security-based swaps reported 
to registered SDRs in the manner set forth in Regulation SBSR at the 
earliest practicable date. This information would greatly increase 
relevant authorities' understanding of the security-based swap market, 
help them perform their regulatory duties, and provide more and better 
data to support the Commission's additional Title VII rulemakings. For 
example, with required regulatory reporting of all security-based swaps 
in an asset class, the Commission and other relevant authorities would 
be able to more easily determine the positions of security-based swap 
dealers, giving them greater visibility into possible systemic risks. 
Phased compliance within a security-based swap class would not provide 
a holistic view of dealer positions until the final security-based 
swaps in that asset class were required to be reported.
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    \188\ See Roundtable Letter at 4 (stating that market 
participants could initially prepare reports indicating the 
aggregate notional amount of swaps outstanding, subdivided by major 
category, and the identity of any counterparty representing 5% or 
more of their open positions by notional amount in that major 
category).
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    However, the Commission is proposing a separate compliance date 
(proposed Compliance Date 2) for public dissemination. The three-month 
delay between the date on which persons with a duty to report must 
begin reporting new security-based swaps to a registered SDR and the 
date on which the registered SDR must publicly disseminate transaction 
reports is designed to provide ample time for registered SDRs and 
market participants to identify and address any problems with trade-by-
trade reporting to registered SDRs before registered SDRs are required 
to publicly disseminate newly executed transactions.\189\
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    \189\ This timeframe generally comports with the recommendation 
of several of the participants at the Implementation Roundtable, who 
suggested that six to nine months would be needed for implementation 
following adoption of final rules by the SEC and CFTC. See 
Implementation Roundtable, Day 1 at 264 (Levi), 298 (Gooch); 
Implementation Roundtable, Day 2 at 174-8 (Collazo, Cummings, 
Joachim).
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    One commenter agreed with the requirements of proposed Rule 911 
\190\ and believed that they were sufficient to prevent the evasion of 
reporting.\191\ The Commission continues to be concerned with potential 
efforts to evade public dissemination, but believes that Rule 911 is 
not necessary in light of the proposed new compliance timeframes. 
Another commenter believed that the Commission should delay the 
implementation of Regulation SBSR until more than one SDR is registered 
because, absent such a delay, the first SDR to register would have a 
monopoly on security-based swap reporting and a competitive advantage 
over new entrants.\192\ The Commission preliminarily believes instead 
that a delay in implementation to permit additional registrations would 
be inconsistent with the objectives of Title VII. Title VII closed 
major gaps in the regulation of security-based swaps and provided the 
Commission and other relevant authorities with new regulatory tools to 
oversee the OTC derivatives markets, which are large and are capable of 
affecting significant sectors of the U.S. economy. The primary goals of 
Title VII include increasing transparency in the security-based swap 
markets and reducing the potential for counterparty and systemic 
risk.\193\
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    \190\ Rule 911, as proposed, was designed to prevent evasion of 
the public dissemination requirement during a period when two or 
more SDRs had registered with the Commission and were operating 
under different compliance dates.
    \191\ See Barnard I at 4.
    \192\ See MFA I at 6 (also arguing that a diverse range of 
options for reporting security-based swap data would benefit the 
market and market participants). See also ISDA IV at 3 (recommending 
that the Commission have a single registration date for all SDRs 
that will be approved ahead of the effective reporting date to 
``ensure that all market participants have equal time to build to 
their chosen [SDR]'').
    \193\ See, e.g., S. Comm. on Banking, Hous., & Urban Affairs, 
The Restoring American Financial Stability Act of 2010, S. Rep. No. 
111-176, at 32 (``As a key element of reducing systemic risk and 
protecting taxpayers in the future, protections must include 
comprehensive regulation and rules for how the OTC derivatives 
market operates. Increasing the use of central clearinghouses, 
exchanges, appropriate margining, capital requirements, and 
reporting will provide safeguards for American taxpayers and the 
financial system as a whole'').
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    Furthermore, other Commission rules are designed to minimize the 
potential that any a ``first mover'' or monopoly advantage that the 
first SDR might burden users of SDR services. All SDRs, even the only 
SDR that can accept transactions in a particular asset class, must 
offer fair, open, and not unreasonably discriminatory access to users 
of its services,\194\ and any fees that it charges must be fair and 
reasonable and not unreasonably discriminatory.\195\ The Commission 
preliminarily believes that basing the compliance schedule on the date 
that the first registered SDR commences operations as a registered SDR 
would encourage all potential SDRs to file complete applications for 
registration to the Commission and develop their systems and procedures 
for accepting and maintaining security-based swap data as expeditiously 
as possible, which will in turn more quickly allow regulators and the 
public the benefit of increased transparency in the security-based swap 
market and allow them to better monitor systemic risk.
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    \194\ See Rule 13n-4(c)(1)(iii) under the Exchange Act, 
discussed in the SDR Adopting Release.
    \195\ See Rule 13n-4(c)(1)(i) under the Exchange Act, discussed 
in the SDR Adopting Release.
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    Given these potential benefits, the Commission preliminarily 
believes that the compliance schedule should begin even if only one 
registered SDR that can receive reports of transactions in a particular 
asset class has commenced operations. The Commission preliminarily 
believes that it is not necessary or appropriate to wait for multiple 
SDRs to register and commence operations as registered SDRs before 
beginning the proposed six-month countdown to proposed Compliance Date 
1.\196\ The Commission seeks to ensure that registration of new SDRs 
not delay post-trade transparency for security-based swaps. This could 
occur if the Commission were to phase in compliance on an SDR-by-SDR 
basis. If each registered SDR had its own phase-in period, the first 
registered SDR could be in a phase where public dissemination was 
required where the second registered SDR may not be. This could create 
an incentive for persons with a duty to report to choose to report to 
later-registering SDRs in order to avoid having their transactions 
publicly disseminated.
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    \196\ However, as the Commission noted in the SDR Adopting 
Release: ``In considering initial applications for registration on 
Form SDR filed contemporaneously with the Commission, the Commission 
intends to process such applications for multiple SDRs accepting 
[security-based swap] transaction data from the same asset classes 
within the same period of time so as to address competition concerns 
that could arise if such SDRs were granted registration at different 
times.'' SDR Adopting Release, Section VI(A)(2)(c). The Commission 
also noted that certain unexpected events that raise compliance 
concerns could affect the Commission's ability to process these 
applications within the same time period. See id.
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D. Request for Comment

    The Commission requests comment on all aspects of the proposed 
compliance dates for Regulation SBSR. In particular:
    41. Would the proposed compliance timeline allow reporting parties 
and registered SDRs sufficient time to implement the requirements of 
Regulation SBSR? Why or why not? If not, why not and what alternative 
time period(s) of time would be sufficient?
    42. Do you generally agree with the Commission's proposed approach 
to calculating the compliance dates based on the first registered SDR 
to accept security-based swaps in a particular asset class commencing 
operations as a registered SDR? If not, how should the

[[Page 14770]]

Commission calculate compliance dates? If the Commission used an 
alternative method for calculating compliance dates, how could the 
Commission prevent or minimize evasion of the public dissemination 
requirement?
    43. Do you believe that the proposed implementation schedule and 
SDR registration process would minimize potential ``first mover'' 
advantages for the first SDR to register? Why or why not? How could the 
Commission further minimize any potential ``first mover'' advantage?
    44. Do you agree that the current infrastructure that supports swap 
reporting also can be used to support security-based swap reporting? 
Why or why not? If so, how much time would be necessary for 
participants and registered SDRs to make necessary changes to report 
security-based swaps to registered SDRs? If not, how much time would be 
needed to create the necessary infrastructure?
    45. Do you believe that registered SDRs would be able to satisfy 
their obligations by proposed Compliance Date 1? Why or why not? If six 
months after the first registered SDR that accepts security-based swaps 
in a particular asset class commences operations as a registered SDR is 
not a sufficient amount of time to comply, what amount of time would be 
sufficient? In particular, do you believe that six months after the 
first registered SDR that accepts security-based swaps in an asset 
class commences operations is a sufficient amount of time to have 
reported all historical security-based swaps that are no longer 
``live,'' as discussed by one commenter? \197\ Why or why not? If not, 
by when do you believe that such security-based swaps should be 
reported, and why?
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    \197\ See ISDA IV at 18 and supra note 184.
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    46. Do you believe that persons with the duty to report would be 
able to satisfy their obligations by proposed Compliance Date 1? Why or 
why not? If six months after the first registered SDR that accepts 
security-based swaps in a particular asset class commences operations 
as a registered SDR is not a sufficient amount of time to comply, what 
amount of time would be sufficient? Would persons with the duty to 
report require additional time to comply with certain requirements by 
proposed Compliance Date 1? If so, which requirement(s), and what 
additional amount of time would be necessary?
    47. Do you agree with the Commission's proposal to extend the 
exemption for the reporting of pre-enactment security-based swaps until 
six months after an SDR that is capable of receiving security-based 
swaps in that asset class is registered by the Commission and has 
commenced operations as a registered SDR? Why or why not?
    48. Do you agree with the Commission's proposal to terminate the 
exemption from Section 29(b) of the Exchange Act in connection with 
Section 3C(e)(1) on proposed Compliance Date 1? Why or why not? If not, 
when should the Section 29(b) exemption terminate?
    49. Do you believe that registered SDRs will be able to time stamp 
and assign transaction IDs to pre-enactment and transitional security-
based swaps even if they are reported prior to Compliance Date 1? Why 
or why not? If not, would registered SDRs require additional time to 
comply with the requirements to time stamp and/or assign transaction 
IDs?
    50. Do you believe that registered security-based swap dealers, 
registered major security-based swap participants, registered clearing 
agencies, and platforms would be able to satisfy their obligations to 
establish policies and procedures for carrying out their reporting 
obligations by proposed Compliance Date 1? Why or why not? If six 
months after the first registered SDR that accepts security-based swaps 
in a particular asset class commences operations as a registered SDR is 
not a sufficient amount of time to comply, what amount of time would be 
sufficient?
    51. Do you believe that registered SDRs would be able to satisfy 
their obligations by proposed Compliance Date 2? Why or why not? If 
nine months after the first registered SDR that accepts security-based 
swaps in a particular asset class commences operations as a registered 
SDR is not a sufficient amount of time to comply, what amount of time 
would be sufficient?
    52. Do commenters agree with the Commission's preliminary belief 
that persons likely to apply for registration as SDRs with the 
Commission would already be registered with the CFTC as swap data 
repositories? If so, how easily and how quickly could the systems and 
processes that support swap data dissemination be configured to support 
security-based swap data dissemination? Would this process will take 
more or less than the 3 months that is proposed? Why or why not?
    53. Registered clearing agencies may be required to modify their 
rules to address their reporting obligations under Regulation SBSR, as 
proposed to be modified in this release. Would the implementation 
timeframe described above provide registered clearing agencies 
sufficient time to implement any rule changes that may be required by 
Regulation SBSR? How would the timing be affected if the registered 
clearing agency also intends to register as an SDR or is affiliated 
with a person that intends to register as an SDR?

VIII. Economic Analysis

    The Dodd-Frank Act amended the Exchange Act to require the 
reporting of security-based swap transactions to registered SDRs. 
Regulation SBSR, as adopted, implements this mandate and assigns the 
reporting obligation for covered transactions.\198\ In addition, 
Regulation SBSR requires registered SDRs, with a handful of exceptions, 
to publicly disseminate a subset of the reported transaction 
information immediately upon receipt.
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    \198\ See supra notes 15 and 16 and accompanying text.
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    The proposed amendments to Rule 901(a) would assign to a platform 
the duty to report security-based swaps executed on its facilities and 
submitted for clearing, and would assign the duty to report any 
transactions to which a registered clearing agency is a counterparty to 
that clearing agency. In addition, this release proposes guidance for 
how Regulation SBSR would apply to security-based swaps executed in 
connection with prime brokerage arrangements, which involve an 
executing broker, a customer, and a prime broker who offers credit 
intermediation services to the customer. This release also proposes a 
definition of ``widely accessible'' in Rule 900(tt), which would have 
the effect of prohibiting registered SDRs from charging users fees or 
imposing usage restrictions on the security-based swap transaction data 
that they are required to publicly disseminate. Finally, this release 
proposes new compliance dates for the rules in Regulation SBSR for 
which the Commission has not specified a compliance date.
    The Commission is sensitive to the economic consequences and 
effects, including costs and benefits, of its rules. Some of these 
costs and benefits stem from statutory mandates, while others are 
affected by the discretion exercised in implementing these mandates. 
The following economic analysis seeks to identify and consider the 
benefits and costs--including the effects on efficiency, competition, 
and capital formation--that would result from the proposed rules and 
rule amendments. The costs and benefits considered in relation to these 
proposed rules and rule

[[Page 14771]]

amendments have informed the policy choices described throughout this 
release.

A. Broad Economic Considerations

    In the Regulation SBSR Adopting Release, the Commission highlighted 
certain overarching effects on the security-based swap markets that it 
believes will result from the adoption of Regulation SBSR. These 
benefits could include, generally, improved market quality, improved 
risk management, greater efficiency, and improved oversight by the 
Commission and other relevant authorities.\199\ Regulation SBSR, as 
adopted, requires market participants to make infrastructure 
investments in order to report security-based swap transactions to 
registered SDRs and, as is most relevant for these proposed rules and 
amendments, for SDRs to make investments in order to receive 
transaction data from market participants and to publicly disseminate a 
subset of that transaction information.
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    \199\ See Regulation SBSR Adopting Release, Section XXII.
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    The rules, amendments, and guidance proposed in this release are 
focused on the requirements relevant to the reporting of certain 
information regarding cleared security-based swaps, which will affect 
the platforms, registered clearing agencies, and registered SDRs that 
constitute an infrastructure for the security-based swap market and 
provide services to counterparties who participate in security-based 
swap transactions. In particular, the Commission preliminarily believes 
that the proposed rules and amendments could affect the manner in which 
firms that provide these services compete with one another and exercise 
market power over security-based swap counterparties. In turn, there 
could be implications for the counterparties who are customers of these 
infrastructure providers and the security-based swap market generally.
1. Security-Based Swap Market Infrastructure
    Title VII requires the Commission to create a new regulatory regime 
for the security-based swap market that includes trade execution, 
central clearing, and reporting requirements aimed at increasing 
transparency and customer protection as well as mitigating the risk of 
financial contagion.\200\ These new requirements, once implemented, 
will oblige market participants, who may have previously engaged in 
bilateral transaction activity without any need to engage third-party 
service providers, to interface with platforms, registered clearing 
agencies, and registered SDRs.
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    \200\ See Cross-Border Adopting Release, 79 FR 47285.
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    As a general matter, rules that require regulated parties to obtain 
services can have a material impact on the prices of those services in 
the absence of a competitive market for those services. In particular, 
if service providers are monopolists or otherwise have market power, 
requiring market participants to obtain their services can potentially 
allow the service providers to increase the profits they earn from 
providing the required services.\201\ Because Title VII requires the 
Commission to implement rules requiring market participants to use the 
services provided by platforms, registered clearing agencies, and 
registered SDRs, these requirements could reduce the sensitivity of 
demand to changes in prices or quality of the services of firms that 
create and develop security-based swap market infrastructure.\202\ As 
such, should security-based swap infrastructure providers--such as 
platforms, registered clearing agencies, and registered SDRs--enjoy 
market power, they might be able to change their prices or service 
quality without a significant effect on demand for their services. In 
turn, these changes in prices or quality could have effects on activity 
in the security-based swap market.
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    \201\ These effects, as they relate specifically to the proposed 
rules and amendments, as well as alternative approaches, are 
discussed in in Section VIII(D), infra.
    \202\ These requirements might reduce the price elasticity of 
demand for the services provided by platforms, registered clearing 
agencies, and registered SDRs.
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    As discussed below, the proposed rules, amendments, and guidance 
proposed herein could have an impact on the level of competition among 
suppliers of trade reporting services and affect the relative 
bargaining power of suppliers and consumers in determining the prices 
of those services. In particular, when the supply of trade reporting 
services is concentrated among a small number of firms, consumers of 
these services have few alternative suppliers from which to choose. 
Such an outcome could limit the incentives to produce more efficient 
trade reporting processes and services and could, in certain 
circumstances, result in less security-based swap transaction activity 
than would otherwise be optimal. In the case of security-based swap 
transaction activity, these welfare losses could result from higher 
costs to counterparties for hedging financial or commercial risks.
2. Competition Among Security-Based Swap Infrastructure Providers
    The Commission's economic analysis of the proposed rules, 
amendments, and guidance considers how the competitive landscape for 
platforms, registered clearing agencies, and registered SDRs might 
affect the market power of these entities and hence the level and 
allocation of costs related to regulatory requirements. Some of the 
factors that may influence this competitive landscape have to do with 
the nature of the trade reporting and are unrelated to regulation, 
while others may be a result of, or influenced by, the rules that we 
are proposing. To the extent that the proposed rules inhibit 
competition among infrastructure providers, this could result in fees 
charged to counterparties that deviate from the underlying costs of 
providing the services.
    As a general matter, and for reasons unrelated to the regulation of 
the security-based swap market, trade execution, clearing, and 
reporting services are likely to be concentrated among a small number 
of providers. For example, SDRs and clearing agencies must make 
significant infrastructure and human capital investments to enter their 
respective markets, but once these start-up costs are incurred, the 
addition of data management or transaction clearing services is likely 
to occur at low marginal costs. As a result, the average cost to 
provide infrastructure services quickly falls for SDRs and clearing 
agencies as their customer base grows, because they are able to 
amortize the fixed costs associated with serving counterparties over a 
larger number of transactions. These economies of scale should favor 
incumbent service providers who can leverage their market position to 
discourage entry by potential new competitors that face significant 
fixed costs to enter the market. As a result, the markets for clearing 
services and SDR services are likely to be dominated by a small number 
of firms that each have large market share, which is borne out in the 
current security-based swap market.\203\
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    \203\ See infra Section IX(B).
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    Competition among registered clearing agencies and registered SDRs 
could also be influenced by the fact that security-based swap market 
participants incur up-front costs for each connection that they 
establish with an SDR or clearing agency. If these costs are 
sufficiently high, an SDR or clearing agency could establish itself as 
an industry leader by ``locking-in'' customers who are unwilling or 
unable

[[Page 14772]]

to make a similar investment for establishing a connection with a 
competitor.\204\ An SDR or clearing agency attempting to enter the 
market or increase market share would have to provide services valuable 
enough, or set fees low enough, to offset the costs of switching from a 
competitor. In this way, costs to security-based swap market 
participants of interfacing with market infrastructure could serve as a 
barrier to entry for firms that would like to provide market 
infrastructure services provided by SDRs and clearing agencies.
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    \204\ See Joseph Farrell and Paul Klemperer, ``Coordination and 
Lock-in: Competition with Switching Costs and Network Effects,'' in 
Handbook of Industrial Organization, Mark Armstrong and Robert 
Porter (ed.) (2007), at 1,972. The authors describe how switching 
costs affect entry, noting that, on one hand, ``switching costs 
hamper forms of entry that must persuade customers to pay those 
costs'' while, on the other hand, if incumbents must set a single 
price for both new and old customers, a large incumbent might focus 
on harvesting its existing customer base, ceding new customers to 
the entrant. In this case, a competitive market outcome would be 
characterized by prices for services that equal the marginal costs 
associated with providing services to market participants.
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    The proposed rules, amendments, and guidance might also influence 
the competitive landscape for firms that provide security-based swap 
market infrastructure. Fundamentally, requiring the reporting of 
security-based swap transactions creates an inelastic demand for the 
service that would not be present if not for regulation. This 
necessarily reduces a counterparty's ability to bargain with 
infrastructure service providers over price or service because the 
option of not reporting is unavailable. Moreover, infrastructure 
requirements imposed by Title VII regulation will increase the fixed 
costs of an SDR operating in the security-based swap market and 
increase the barriers to entry into the market, potentially 
discouraging firms from entering the market for SDR services. For 
example, under Rule 907, as adopted, registered SDRs are required to 
establish and maintain certain written policies and procedures. The 
Commission estimated that this requirement will impose initial costs on 
each registered SDR of approximately $12,250,000.\205\
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    \205\ See Regulation SBSR Adopting Release at note 1250.
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    The proposed rules, amendments, and guidance might also affect the 
competitive landscape by increasing the incentives for security-based 
swap infrastructure service providers to integrate horizontally or 
vertically. As a general matter, firms engage in horizontal integration 
when they expand their product offerings to include similar goods and 
services or acquire competitors. For example, SDRs that presently serve 
the swap market might horizontally integrate by offering similar 
services in the security-based swap market. Firms vertically integrate 
by entering into businesses that supply the market that they occupy 
(``backward vertical integration'') or by entering into businesses that 
they supply (``forward vertical integration'').
    As discussed in more detail in Section VIII(D)(1), infra, while 
proposing a reporting methodology that assigns reporting 
responsibilities to registered clearing agencies, who will hold the 
most complete and accurate information for cleared transactions, could 
minimize potential data discrepancies and errors, rules that give 
registered clearing agencies discretion over where to report 
transaction data could provide incentives for registered clearing 
agencies to create affiliate SDRs and compete with other registered 
SDRs for post-trade reporting services. The cost to a clearing agency 
of entering the market for SDR services is likely to be low, given that 
many of the infrastructure requirements for entrant SDRs are shared by 
clearing agencies. Clearing agencies already have the infrastructure 
necessary for capturing transaction records from clearing members and 
might be able to leverage that pre-existing infrastructure to provide 
services as an SDR at low incremental cost. Because all clearing 
transactions, like all other security-based swaps, must be reported to 
a registered SDR, there would be a set of potentially captive 
transactions that clearing agencies could initially use to vertically 
integrate into SDR services.\206\
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    \206\ A registered clearing agency expanding to provide SDR 
services is an example of forward vertical integration. In the 
context of these proposed rules and amendments, SDRs ``consume'' the 
data supplied by registered clearing agencies. Clearing agencies 
engage in forward vertical integration by creating or acquiring the 
SDRs that consume the data that they produce as a result of their 
clearing business.
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    Entry into the SDR market by registered clearing agencies could 
potentially lower the cost of SDR services if clearing agencies are 
able to transmit data to an affiliated SDR at a lower cost relative to 
transmitting the same data to an independent SDR. The Commission 
preliminarily believes that this is likely to be true for clearing 
transactions, given that the clearing agency and affiliate SDR would 
have greater control over the reporting process relative to sending to 
an unaffiliated SDR. Even if registered clearing agencies did not enter 
the market for SDR services, their ability to pursue a vertical 
integration strategy could motivate incumbent SDRs to offer service 
models that are sufficiently competitive to discourage entry by 
registered clearing agencies.
    However, the Commission recognizes that the entry of clearing 
agency-affiliated SDRs might not necessarily result in increased 
competition among SDRs or result in lower costs for SDR services. In an 
environment where registered clearing agencies with affiliated SDRs 
have discretion to send their clearing transaction data to their 
affiliates, security-based swap market participants who wish to submit 
their transactions to clearing may have reduced ability to direct the 
reporting of the clearing transaction to an unaffiliated SDR. As a 
result, clearing agency-affiliated SDRs would not directly compete with 
unaffiliated SDRs on the basis of price or quality, because they 
inherit their clearing agency affiliate's market share. This might 
allow clearing agency incumbents to exercise market power through their 
affiliate SDRs relative to stand-alone SDRs.
    In summary, the Commission's economic analysis of these proposed 
rules and amendments considers the features of the market for 
infrastructure services that support security-based swap market 
participants. The Commission acknowledges that the allocation of 
reporting obligations that result from these proposed rules and 
amendments could affect the balance of competition between different 
providers of infrastructure. As discussed below, the effect of these 
proposed rules and amendments on competition between infrastructure 
providers could ultimately affect security-based swap counterparties.

B. Baseline

    The Commission's analysis of the economic effects of the proposed 
rules, amendments, and guidance includes in its baseline the effects of 
Regulation SBSR, as adopted, and the SDR core principles and 
registration rules, as adopted in the SDR Adopting Release. Hence, the 
Commission's analysis of the potential impacts of the proposed rules, 
amendments, and guidance takes into account the anticipated effects of 
the adoption of Regulation SBSR and the SDR rules as described in those 
releases.
    Furthermore, the overall Title VII regulatory framework will have 
consequences for the transaction activity addressed by this proposal. 
For example, the scope of future mandatory clearing requirements will 
affect the overall costs borne by registered clearing agencies, which 
under the

[[Page 14773]]

proposal would be obligated to report security-based swap transactions 
that arise as a consequence of clearing. Similarly, the scope of future 
mandatory trade execution requirements will affect the volume of 
transactions that take place on platforms, and ultimately the number of 
transactions that platforms would be obligated to report under this 
proposal. Finally, as noted in the Cross-Border Adopting Release,\207\ 
the market for security-based swaps is global in nature and regulatory 
requirements may differ across jurisdictions. To the extent that the 
costs of regulatory requirements differ, certain market participants 
may have incentives to restructure their operations to avoid regulation 
under Title VII, which generally would reduce the number of 
transactions affected by this proposal.
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    \207\ See 79 FR 47280.
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    The following sections provide an overview of aspects of the 
security-based swap market that are likely to be most affected by the 
proposal, as well as elements of the current market structure, such as 
central clearing and platform trading, that are likely to determine the 
scope of transactions that will be covered by the proposed rules, 
amendments, and guidance.\208\
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    \208\ See Regulation SBSR Adopting Release, Section XXIII(B) 
(providing additional information regarding the OTC derivatives 
market generally, and counterparties specifically).
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1. Current Security-Based Swap Market
    The Commission's analysis of the current state of the security-
based swap market is based on data obtained from DTCC-TIW, especially 
data regarding the activity of market participants in the single-name 
credit default swap (``CDS'') market during the period 2008 to 
2013.\209\ While other trade repositories may collect data on equity 
security-based swaps, the Commission currently has no access to 
detailed data about these products (or other products that are 
security-based swaps). As such, the Commission is unable to analyze 
security-based swaps other than single-name CDS. However, the 
Commission believes that the single-name CDS data are representative of 
the overall security-based swap market and therefore can directly 
inform the Commission's analysis of the security-based swap 
market.\210\
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    \209\ The data available from DTCC-TIW do not encompass CDS 
transactions (1) based on non-U.S. reference entities and (ii) where 
neither counterparty is a U.S. person. Commission staff quantified 
the proportion of transaction activity included in the DTCC-TIW 
transaction data. In 2013, DTCC-TIW reported on its Web site new 
trades in single-name CDSs with gross notional of $12.0 trillion. 
DTCC-TIW provided to the Commission data that included only 
transactions with a U.S. counterparty or a U.S. reference entity. 
During the same period, these data included new trades with gross 
notional equaling $9.3 trillion, or 77% of the total reported by 
DTCC-TIW. Hence, the Commission believes that the DTCC-TIW data 
provide sufficient information to identify the types of market 
participants active in the security-based swap market and the 
general pattern of dealing within that market.
    \210\ According to data published by BIS, the global notional 
amount outstanding in equity forwards and swaps as of December 2013 
was $2.28 trillion. The notional amount outstanding in single-name 
CDS was approximately $11.32 trillion, in multi-name index CDS was 
approximately $8.75 trillion, and in multi-name, non-index CDS was 
approximately $950 billion. See Semi-annual OTC derivatives 
statistics at end-December 2013 (June 2014), Table 19, available at 
http://www.bis.org/statistics/dt1920a.pdf. For the purposes of this 
analysis, the Commission assumes that multi-name index CDS are not 
narrow-based index CDS and, therefore, do not fall within the 
``security-based swap'' definition. See Section 3(a)(68)(A) of the 
Exchange Act; Product Definitions Adopting Release, 77 FR 48208. The 
Commission also assumes that all instruments reported as equity 
forwards and swaps are security-based swaps, potentially resulting 
in underestimation of the proportion of the security-based swap 
market represented by single-name CDS. Based on those assumptions, 
single-name CDS appear to constitute roughly 78% of the security-
based swap market. Although the BIS data reflect the global OTC 
derivatives market and not just the U.S. market, the Commission has 
no reason to believe that these ratios differ significantly in the 
U.S. market.
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2. Clearing Activity in Single-Name Credit Default Swaps
    Currently, there is no regulatory requirement in the United States 
to clear security-based swaps. Clearing for certain single-name CDS 
products occurs on a voluntary basis. Voluntary clearing activity in 
single-name CDS has steadily increased alongside the Title VII 
rulemaking process. As a result, any rule that would allocate reporting 
obligations for clearing transactions would affect the accessibility of 
data related to a large number of security-based swap transactions. In 
addition, the size of this part of the market would affect the 
magnitude of the regulatory reporting burdens. As of the end of 2013, 
ICE Clear Credit accepted for clearing security-based swap products 
based on a total of 161 North American corporate reference entities, 
121 European corporate reference entities, and six individual sovereign 
(nation-state) reference entities.
    Figure 1, below, shows characteristics of new trades in single-name 
CDS that reference North American standard corporate ISDA 
documentation. In particular, the figure documents that about half of 
all clearable transactions are cleared. Moreover, over the sample 
period, transaction volume accepted for clearing increased as a 
fraction of total volume in these products. Analysis of trade activity 
from July 2012 to December 2013 indicates that, out of $938 billion of 
notional amount traded in North American corporate single-name CDS 
products that are accepted for clearing during the 18 months ending 
December 2013, approximately 71%, or $666 billion, had characteristics 
making them suitable for clearing by ICE Clear Credit and represented 
trades between two ICE Clear Credit clearing members. Approximately 79% 
of this notional value, or $525 billion, was cleared through ICE Clear 
Credit, or 56% of the total volume of new trade activity. As of the end 
of 2013, ICE Clear Europe accepted for clearing single-name CDS 
products referencing a total of 136 European corporate reference 
entities. Analysis of new trade activity from July 2012 to December 
2013 indicates that, out of [euro]531 billion of notional amount traded 
in European corporate single-name CDS products that are accepted for 
clearing during the 18 months ending December 2013, approximately 70%, 
or [euro]372 billion had characteristics making them suitable for 
clearing by ICE Clear Europe and represented trades between two ICE 
Clear Europe clearing members. Approximately 51% of this notional 
amount, or [euro]191 billion. was cleared through ICE Clear Europe, or 
36% of the total volume of new trade activity.\211\
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    \211\ These numbers do not include transactions in European 
corporate single-name CDS that were cleared by ICE Clear Credit. 
However, during the sample period, there was only one day (December 
20, 2013) on which there were transactions in European corporate 
single-name CDS that were cleared by ICE Clear Credit, and the 
traded notional of these transactions was de minimis. For historical 
data, see https://www.theice.com/marketdata/reports/99.

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[[Page 14774]]

[GRAPHIC] [TIFF OMITTED] TP19MR15.000

3. Execution Methods in the Security-Based Swap Market
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    \212\ The Commission prelimdissemination requirements of 
proposed Regulation SBSR were related to lack of inarily believes 
that it is reasonable to assume that, when clearing occurs within 14 
days of execution, counterparties made the decision to clear at the 
time of execution and not as a result of information arriving after 
execution.
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    The proposed rules and amendments address regulatory reporting 
obligations for, among others, security-based swap transactions 
executed on platforms and submitted to clearing. While trading in 
security-based swaps is currently dominated by bilateral negotiation 
and the use of interdealer brokers, the Commission anticipates that 
future rulemaking will address mandatory trade execution requirements 
that will likely result in increased incidence of trading on 
platforms.\213\
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    \213\ See Securities Exchange Act Release No. 67177 (June 11, 
2012), 77 FR 35640 (June 14, 2012) (``General Policy on 
Sequencing'').
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4. Current Market Structure for Security-Based Swap Infrastructure
a. Exchanges and SB SEFs
    The proposed rules and amendments would address how transactions 
conducted on platforms (i.e., national securities exchanges and SB 
SEFs) would be required to be reported under Regulation SBSR. 
Currently, there are no SB SEFs registered with the Commission, and as 
a result, there is no registered SB SEF trading activity to report. 
There are, however, currently 24 SEFs that are either temporarily 
registered with the CFTC or whose temporary registrations are pending 
with the CFTC and currently are exempt from registration with the 
Commission.\214\ As the Commission noted in the Cross-Border Adopting 
Release, the cash flows of security-based swaps and other swaps are 
closely related and many participants in the swap market also 
participate in the security-based swap market.\215\ Likewise, the 
Commission preliminarily believes that many entities that currently act 
as swap execution facilities are likely to also register with the 
Commission as SB SEFs. The Commission anticipates that, owing to the 
smaller size of the security-based swap market, there will be fewer 
platforms for executing transactions in security-based swaps than the 
24 SEFs reported within the CFTC's jurisdiction. Under proposed Rule 
901(a)(1), a platform would be required to report to a registered SDR 
any security-based swap transactions executed on its facilities and 
submitted to clearing.
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    \214\ See Effective Date Release, 76 FR 36306 (exempting persons 
that operate a facility for the trading or processing of security-
based swaps that is not currently registered as a national 
securities exchange or that cannot yet register as an SB SEF because 
final rules for such registration have not yet been adopted from the 
requirements of Section 3D(a)(1) of the Exchange Act until the 
earliest compliance date set forth in any of the final rules 
regarding registration of SB SEFs). A list of SEFs that are either 
temporarily registered with the CFTC or whose temporary 
registrations are pending with the CFTC is available at http://sirt.cftc.gov/SIRT/SIRT.aspx?Topic=SwapExecutionFacilities (last 
visited November 3, 2014).
    \215\ See Cross-Border Adopting Release, 79 FR 47300.
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b. Clearing Agencies
    The market for clearing services and data reporting services in the 
security-based swap market is currently concentrated among a handful of 
firms. Table 1 lists the firms that currently clear index and single-
name CDS and identifies the segments of the market each firm serves. 
While there may be limited choices available to participants interested 
in cleared index CDS transactions, only two firms (albeit with the same 
parent) clear sovereign single-name CDS and only a single firm serves 
the market for North American single-name CDS. Concentration of 
clearing services within a limited set of clearing agencies can be 
explained, in part, by the existence of strong economies of scale in 
central clearing.\216\
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    \216\ See Securities Exchange Act Release No. 68080 (October 22, 
2012), 77 FR 66265 (November 2, 2012) (noting that economies of 
scale can result in natural monopolies). See also Craig Pirrong, 
``The Industrial Organization of Execution, Clearing and Settlement 
in Financial Markets,'' Working Paper (2007), available at http://www.bauer.uh.edu/spirrong/Clearing_silos.pdf (last visited November 
2, 2014) (discussing the presence of economies of scale in central 
clearing).

[[Page 14775]]

                     Table 1--Clearing Agencies Currently Clearing Index and Single-Name CDS
----------------------------------------------------------------------------------------------------------------
                                                       North American     European      Sovereign       Index
----------------------------------------------------------------------------------------------------------------
ICE Clear Credit \217\..............................                X             X             X             X
ICE Clear Europe \218\..............................  ................            X             X             X
CME \219\...........................................  ................  ............  ............            X
LCH.Clearnet \220\..................................  ................            X   ............            X
----------------------------------------------------------------------------------------------------------------

c. SDRs
    The market for data services has evolved along similar lines. While 
there is currently no mandatory reporting requirement for the single-
name CDS market, virtually all transactions are voluntarily reported to 
DTCC-TIW, which maintains a legal record of transactions.\221\ That 
there currently is a single dominant provider of record-keeping 
services for security-based swaps is consistent with the presence of a 
natural monopoly for a service that involves a predominantly fixed cost 
investment with low marginal costs of operation.
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    \217\ A current list of single-name and index CDS cleared by ICE 
Clear Credit is available at: https://www.theice.com/publicdocs/clear_credit/ICE_Clear_Credit_Clearing_Eligible_Products.xls (last 
visited November 3, 2014).
    \218\ A current list of single-name and index CDS cleared by ICE 
Clear Europe is available at: https://www.theice.com/publicdocs/clear_europe/ICE_Clear_Europe_Cleared_Products_List.xls (last 
visited November 3, 2014).
    \219\ A current list of products cleared by CME is available at: 
http://www.cmegroup.com/trading/otc/files/otc-cds-product-scope.pdf 
(last visited November 3, 2014).
    \220\ A current list of single-name and index CDS cleared by 
LCH.Clearnet is available at: http://www.lchclearnet.com/documents/731485/762470/cdsclear+clearable+product+list+%28october+2014%29.xlsx/b0f514f2-d876-4aa4-9e6b-5b4c76985fb8 (last visited November 3, 2014).
    \221\ See http://www.isdacdsmarketplace.com/exposures_and_activity (last visited September 22, 2014) (describing 
the function and coverage of DTCC-TIW).
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    There are currently no SDRs registered with the Commission. 
Registration requirements are part of the new rules discussed in the 
SDR Adopting Release. In the absence of SEC-registered SDRs, the 
analysis of the economic effects of the proposed rules and amendments 
discussed in this release on SDRs is informed by the experience of the 
CFTC-registered SDRs that operate in the swap market. The CFTC has 
provisionally registered four SDRs to accept transactions in swap 
credit derivatives.\222\
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    \222\ A list of SDRs provisionally registered with the CFTC is 
available at http://sirt.cftc.gov/sirt/sirt.aspx?Topic=DataRepositories (last visited November 13, 2014).
---------------------------------------------------------------------------

    It is reasonable to estimate that a similar number of persons 
provisionally registered with the CFTC to service the equity and credit 
swap markets might seek to register with the Commission as SDRs, and 
that other persons could seek to register with both the CFTC and the 
Commission as SDRs. There are economic incentives for the dual 
registration attributed to the fact that many of the market 
participants in the security-based swap market also participate in the 
swap market. Moreover, once an SDR is registered with the CFTC and the 
required infrastructure for regulatory reporting and public 
dissemination is in place, the marginal costs for an SDR to also 
register with the Commission, adding products and databases and 
implementing modifications to account for difference between Commission 
and CFTC rules, will likely to be lower than the initial cost of 
registration with the CFTC.
d. Vertical Integration of Security-Based Swap Market Infrastructure
    The Commission has already observed vertical integration of swap 
market infrastructure: Clearing agencies have entered the market for 
record-keeping services for swaps by provisionally registering 
themselves, or their affiliates, as SDRs with the CFTC. Under the CFTC 
swap reporting regime, two provisionally registered SDRs are, or are 
affiliated with, clearing agencies that clear swaps. These clearing 
agencies have adopted rules providing that they will satisfy their CFTC 
swap reporting obligations by reporting to their own, or their 
affiliated, SDR.\223\ As a result, beta and gamma transactions and 
subsequent netting transactions that arise from the clearing process 
are reported by each of these clearing agencies to their associated 
SDRs.
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    \223\ See CME Clearing Rule 1001 (Regulatory Reporting of Swap 
Data); ICE Clear Credit Clearing Rule 211 (Regulatory Reporting of 
Swap Data).
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C. Programmatic Costs of Proposed Amendments to Regulation SBSR

1. Proposed Amendments to Rule 901
    Proposed Rule 901(a)(2)(i) would provide that the reporting side 
for a clearing transaction is the clearing agency that is a 
counterparty to the clearing transaction. Rule 901(a)(3) would require 
any person that has a duty to report a security-based swap that has 
been submitted to clearing at a registered clearing agency to promptly 
provide that registered clearing agency with the transaction ID of the 
submitted security-based swap and the identity of the registered SDR to 
which the transaction will be reported or has been reported.
    These proposed amendments to Rule 901 would impose initial and 
ongoing costs on platforms, clearing agencies, and reporting sides. The 
Commission preliminarily believes that certain of these costs would be 
a function of the number of reportable events and the data elements 
required to be submitted for each reportable event. The discussion 
below first highlights those burdens and costs related to proposed Rule 
901(a)(2)(i), followed by burdens and costs related to proposed Rule 
901(a)(3).
a. For Platforms and Registered Clearing Agencies--Rule 901(a)(1) and 
Rule 901(a)(2)(i)
    The Commission preliminarily believes that platforms and registered 
clearing agencies would face the same costs that reporting sides face. 
Specifically, platforms and registered clearing agencies would have to: 
(1) Develop transaction processing systems; (2) implement a reporting 
mechanism; and (3) establish an appropriate compliance program and 
support for the operation of the transaction processing system. The 
Commission also preliminarily believes that, once a platform or 
registered clearing agency's reporting infrastructure and compliance 
systems are in place, the burden of reporting each individual 
reportable event would represent a small fraction of the burdens of 
establishing the reporting infrastructure and compliance systems. The 
Commission preliminarily believes that all reportable events, for which 
platforms and registered clearing agencies would be responsible for 
reporting, would be reported through electronic means. The Commission 
preliminarily believes that there would be ten platforms and four 
registered clearing agencies that would incur duties to report 
security-based swap transactions under the proposed amendments to Rule 
901.
    The Commission preliminarily estimates that transaction processing

[[Page 14776]]

system related to Rule 901 and applicable to platforms and registered 
clearing agencies would result in initial one-time aggregate costs of 
approximately $1,428,000, which corresponds to $102,000 for each 
platform or registered clearing agency.\224\ The Commission estimates 
that the cost to establish and maintain connectivity to a registered 
SDR to facilitate the reporting required by Rule 901 would impose an 
annual (first-year and ongoing) aggregate cost of approximately 
$2,800,000, which corresponds to $200,000 for each platform or 
registered clearing agency.\225\ The Commission estimates, as a result 
of having to establish a reporting mechanism for security-based swap 
transactions, platforms and registered clearing agencies would 
experience certain development, testing, and supports costs. Such costs 
would amount to an initial one-time aggregate cost of approximately 
$686,000, which corresponds to an initial one-time cost of $49,000 for 
each platform or registered clearing agency.\226\ The Commission 
preliminarily estimates that order management costs related to the 
proposed amendments to Rule 901 would impose ongoing annual aggregate 
costs of approximately $1,078,000, which corresponds to $77,000 per 
platform or registered clearing agency.\227\ In addition, the 
Commission estimates that platforms and registered clearing agencies 
would incur an initial and ongoing aggregate annual cost of $14,000, 
which corresponds to $1,000 for each platform or registered clearing 
agency.\228\ The Commission estimates that designing and implementing 
an appropriate compliance and support program will impose an initial 
one-time aggregate cost of approximately $756,000, which corresponds to 
a cost of approximately $54,000 for each platform or registered 
clearing agency.\229\ The Commission estimates that maintaining its 
compliance and support program would impose an ongoing annual aggregate 
cost of approximately $539,000, which corresponds to a cost of 
approximately $38,500 for each platform or registered clearing 
agency.\230\
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    \224\ This estimate is based on the following: [((Sr. Programmer 
(160 hours) at $303 per hour) + (Sr. Systems Analyst (160 hours) at 
$260 per hour) + (Compliance Manager (10 hours) at $283 per hour) + 
(Director of Compliance (5 hours) at $446 per hour) + (Compliance 
Attorney (20 hours) at $334 per hour)) x 14 platforms and registered 
clearing agencies)] = approximately $1,428,000, or $102,000 per 
platform or registered clearing agency. All hourly cost figures are 
based upon data from SIFMA's Management & Professional Earnings in 
the Securities Industry 2013 (modified by Commission staff to 
account for an 1,800-hour-work-year and multiplied by 5.35 to 
account for bonuses, firm size, employee benefits, and overhead). 
See also Regulation SBSR Adopting Release, Section XXII(C)(2)(b).
    \225\ The Commission derived the total estimated expense from 
the following: ($100,000 hardware- and software-related expenses, 
including necessary backup and redundancy, per SDR connection) x (2 
SDR connections per platform or registered clearing agency) x (14 
platforms or registered clearing agencies) = $2,800,000, or $200,000 
per platform or registered clearing agency. See also Regulation SBSR 
Adopting Release, Section XXII(C)(2)(b).
    \226\ This figure is calculated as follows: [((Sr. Programmer 
(80 hours) at $303 per hour) + (Sr. Systems Analyst (80 hours) at 
$260 per hour) + (Compliance Manager (5 hours) at $283 per hour) + 
(Director of Compliance (2 hours) at $446 per hour) + (Compliance 
Attorney (5 hours) at $334 per hour) x (14 platforms or registered 
clearing agencies)] = approximately $686,000, which equates to 
$49,000 per platform or registered clearing agency. See also 
Regulation SBSR Adopting Release, Section XXII(C)(2)(b).
    \227\ This estimate is based on the following: [((Sr. Programmer 
(32 hours) at $303 per hour) + (Sr. Systems Analyst (32 hours) at 
$260 per hour) + (Compliance Manager (60 hours) at $283 per hour) + 
(Compliance Clerk (240 hours) at $64 per hour) + (Director of 
Compliance (24 hours) at $446 per hour) + (Compliance Attorney (48 
hours) at $334 per hour)) x 14 platforms and registered clearing 
agencies)] = approximately $1,078,000, or $77,000 per platform or 
registered clearing agency. See also Regulation SBSR Adopting 
Release, Section XXII(C)(2)(b).
    \228\ This estimate is calculated as follows: [$250/gigabyte of 
storage capacity x (4 gigabytes of storage) x (14 platforms or 
registered clearing agencies)] = $14,000, or $1,000 per platform or 
registered clearing agency. See also Regulation SBSR Adopting 
Release, Section XXII(C)(2)(b).
    \229\ This figure is based on discussions with various market 
participants and is calculated as follows: [((Sr. Programmer (100 
hours) at $303 per hour) + (Sr. Systems Analyst (40 hours) at $260 
per hour) + (Compliance Manager (20 hours) at $283 per hour) + 
(Director of Compliance (10 hours) at $446 per hour) + (Compliance 
Attorney (10 hours) at $334 per hour) x (14 platforms and registered 
clearing agencies)] = approximately $756,000, or $54,000 per 
platform or registered clearing agency.
    \230\ This figure is based on discussions with various market 
participants and is calculated as follows: [((Sr. Programmer (16 
hours) at $303 per hour) + (Sr. Systems Analyst (16 hours) at $260 
per hour) + (Compliance Manager (30 hours) at $283 per hour) + 
(Compliance Clerk (120 hours) at $64 per hour) + (Director of 
Compliance (12 hours) at $446 per hour) + (Compliance Attorney (24 
hours) at $334 per hour) x (14 platforms and registered clearing 
agencies)] = approximately $539,000, or $38,500 per platform or 
registered clearing agency. See also Regulation SBSR Adopting 
Release, Section XXII(C)(2)(b).
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    In the Regulation SBSR Adopting Release, the Commission revised its 
previous estimates of the number of reportable events associated with 
security-based swap transactions per year.\231\ These revised estimates 
were a result of the Commission obtaining additional, more recent, and 
more granular data regarding participation in the security-based swap 
market from DTCC-TIW. In the Regulation SBSR Adopting Release, the 
Commission estimated that there will be approximately 3 million 
reportable events per year under Rule 901, an estimate that the 
Commission continues to believe is valid for the purposes of this 
release.\232\ The Commission estimated in the Regulation SBSR Adopting 
Release that Rule 901(a), as adopted, will result in approximately 2 
million reportable events related to covered transactions.\233\
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    \231\ See Regulation SBSR Adopting Release, Section XXI.
    \232\ The Commission originally estimated that there would be 
15.5 million reportable events per year under Regulation SBSR. See 
Regulation SBSR Proposing Release, 75 FR 75247-48. In the Cross-
Border Proposing Release, the Commission updated its estimate of the 
number of reportable events to approximately 5 million per year. The 
Commission noted that the change in the estimate of the number of 
reportable events per year was due to better and more precise data 
available from the industry on the scope, size, and composition of 
the security-based swap market. See Cross-Border Proposing Release, 
78 FR 31114-15. For these same reasons, the Commission has further 
updated its estimate of the number of reportable events to 
approximately 3 million per year. See infra note 233.
    \233\ The Commission now estimates that there were approximately 
2.26 million single-name CDS transactions in 2013. The data studied 
by the Commission cover single-name CDS transactions, which the 
Commission continues to believe account for approximately 80-90% of 
the security-based swap market. The Commission continues to use 78% 
as its measure of CDS as a percentage of the entire security-based 
swap market, resulting in a revised estimate of 3 million security-
based swap transactions (i.e., 2,260,000/0.78 = 2,897,436 reportable 
events). See Regulation SBSR Adopting Release, Section XXI(B)(4)(b).
---------------------------------------------------------------------------

    The Commission preliminarily estimates that 1 million of the 3 
million total reportable events would result from the proposed 
amendments to Rule 901.\234\ This estimate of 1 million reportable 
events would include the initial reporting of the security-based swaps 
by platforms and registered clearing agencies as well as any life

[[Page 14777]]

cycle events of such transactions. Specifically, the Commission 
preliminarily estimates that, of the 1 million reportable events, 
approximately 370,000 would involve the reporting of new security-based 
swap transactions and approximately 630,000 would involve the reporting 
of life cycle events under Rule 901(e).\235\ As a result, the 
Commission preliminarily estimates that platforms would be responsible 
for the reporting of approximately 120,000 security-based swaps,\236\ 
at an annual cost of approximately $45,300 or $4,530 per platform.\237\ 
The Commission preliminarily estimates that registered clearing 
agencies would be responsible for the reporting of approximately 
250,000 security-based swaps, at an annual cost of approximately 
$94,375 or $23,593.75 per registered clearing agency.\238\ The 
Commission preliminarily estimates that the proposed amendments to Rule 
901(a) would result in registered clearing agencies having to report a 
significant number of life cycle events under Rule 901(e) over the 
course of a year--consisting primarily of terminations of clearing 
transactions occurring as part of the netting process--at an annual 
cost of approximately $237,825 or $59,456.25 per registered clearing 
agency.\239\ The Commission preliminarily believes that all reportable 
events that would be reported by platforms and registered clearing 
agencies pursuant to these proposed amendments would be reported 
through electronic means.
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    \234\ The Commission is proposing to amend Rule 901(a)(2) to 
require a clearing agency to be the reporting side for clearing 
transactions to which it is a counterparty. The Commission is 
further proposing to amend Rule 901(e)(1) to provide that a 
``clearing agency shall report whether or not it has accepted a 
security-based swap for clearing.'' Pursuant to Rule 901(e)(1), a 
registered clearing agency would be required to report whether or 
not it has accepted a security-based swap for clearing. Proposed 
Rule 901(a)(2)(i), discussed above, would require clearing agencies 
to report security-based swap transaction information for clearing 
transactions. These reportable events have been included in the 
Commission's estimates of the number of reportable events for the 
purposes of Rule 901.
    In arriving at the Commission's estimate of 1 million reportable 
events, the Commission has included the following: (1) The 
termination of the original or ``alpha'' security-based swap; (2) 
the creation of beta and gamma security-based swaps; (3) the 
termination of beta, gamma, and any previous open positions during 
each netting cycle; and (4) any other transactions that are entered 
into by the registered clearing agency, arriving at 645,000 
observations. Inflating this figure by 0.78, the Commission's 
measure of CDS as a percentage of the entire security-based swap 
market, is 645,000/0.78 = 826,923 or approximately 1 million 
reportable events.
    \235\ Commission staff arrived at this estimate by summing the 
number of beta and gamma transactions that would result from 
observed termination of alphas by a registered clearing agency 
(197,798) and the number of other betas and gammas for which 
terminations were not available due to same-day clearing (88,935) to 
arrive at 286,733 total transactions. Inflating this figure by 0.78, 
the Commission's measure of CDS as a percentage of the entire 
security-based swap market, results in an estimate of 286,733/0.78, 
or approximately 370,000 reportable events.
    \236\ As discussed in Section II(C)(2), supra, proposed Rule 
901(a)(1) would require a platform to report any security-based swap 
executed on its facilities that will be submitted to clearing. 
Platforms, however, would not be responsible for reporting life 
cycle events of such security-based swaps. The Commission 
preliminarily believes that the only life cycle event of a platform-
executed security-based swap that is submitted to clearing will be 
whether the security-based swap is accepted for clearing. Proposed 
Rule 901(e)(1)(ii) would require the registered clearing agency to 
report that information, not the platform. The Commission estimates 
that platforms would be responsible only for the reporting of 
approximately one third of the 370,000 security-based swaps (or 
about 120,000 security-based swaps) and registered clearing agencies 
(as a result of the creation of new security-based swaps during the 
clearing process) would be responsible for the reporting of the 
remaining two-thirds of security-based swaps (or 250,000 security-
based swaps).
    \237\ The Commission estimates: ((120,000 x 0.005 hours per 
transaction)/(10 platforms)) = 60 hours per platform, or 600 total 
hours. The Commission further estimates the total cost to be: 
[((Compliance Clerk (30 hours) at $64 per hour) + (Sr. Computer 
Operator (30 hours) at $87 per hour)) x (10 platforms)] = 
approximately $45,300, or $4,530 per platform. See also Regulation 
SBSR Adopting Release, Section XXII(C)(2)(b).
    \238\ The Commission estimates: ((250,000 x 0.005 hours per 
transaction)/(4 registered clearing agencies)) = 312.5 hours per 
registered clearing agency, or 1,250 total hours. The Commission 
further estimates the total cost to be: [((Compliance Clerk (156.25 
hours) at $64 per hour) + (Sr. Computer Operator (156.25 hours) at 
$87 per hour)) x (4 registered clearing agencies)] = $94,375, or 
$23,593.75 per registered clearing agency. See also Regulation SBSR 
Adopting Release, Section XXII(C)(2)(b).
    \239\ The Commission estimates: ((630,000 x 0.005 hours per 
transaction)/(4 registered clearing agencies)) = 787.5 hours per 
registered clearing agency, or 3,150 total hours. The Commission 
further estimates the total cost to be: [((Compliance Clerk (393.75 
hours) at $64 per hour) + (Sr. Computer Operator (393.75 hours) at 
$87 per hour)) x (4 registered clearing agencies)] = approximately 
$237,825, or $59,456.25 per registered clearing agency. See also 
Regulation SBSR Adopting Release, Section XXII(C)(2)(b).
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    In the Cross-Border Proposing Release, the Commission stated that, 
to the extent that security-based swaps become more standardized and 
trade more frequently on electronic platforms (rather than manually), 
the act of reporting transactions to a registered SDR should become 
less costly.\240\ Together, these trends are likely to reduce the 
number of transactions that would necessitate the manual capture of 
bespoke data elements, which is likely to take more time and be more 
expensive than electronic capture.
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    \240\ See Cross-Border Proposing Release, 78 FR 31198.
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b. For Platforms and Reporting Sides of Alphas--Rule 901(a)(3)
    Pursuant to proposed Rule 901(a)(3), a person--either the platform 
upon which the security-based swap was executed or the reporting side 
for those security-based swaps other than clearing transactions--to 
report, for those security-based swaps submitted to a registered 
clearing agency, the transaction ID of the submitted security-based 
swap and the identity of the registered SDR to which the transaction 
will be or has been reported.
    Rule 901(a)(3) requires certain information (transaction ID and the 
identity of the registered SDR) to be reported to a registered clearing 
agency only if such security-based swap has been submitted to a 
registered clearing agency for clearing. As a result, platforms and 
reporting sides required to report transaction IDs and the identity of 
a registered SDR will already have put into place any infrastructure 
needed to report these security-based swaps to a registered clearing 
agency. However, requiring the person who has the duty to report the 
alpha transaction to a registered SDR to provide these data elements to 
the registered clearing agency to which the alpha has been submitted 
would result in certain additional development and maintenance costs. 
Specifically, the Commission preliminarily believes that the additional 
one-time cost related to the development of the ability to capture the 
relevant transaction information would be $2,815, and the additional 
one-time burden related to the implementation of a reporting mechanism 
for these two data elements would be $1,689 per platform or reporting 
side.\241\ The Commission preliminarily believes that the additional 
ongoing cost related to the development of the ability to capture the 
relevant transaction information would be $2,815 and the additional 
ongoing burden related to the maintenance of the reporting mechanism 
would be $563, per platform or reporting side.\242\
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    \241\ The Commission estimates that the addition burdens would 
be: [(Sr. Programmer (5 hours at $303 per hour) + Sr. Systems 
Analyst (5 hours) at $260 per hour) = 10 burden hours (development 
of the ability to capture transaction information) = $2,815 per 
platform or reporting side; (Sr. Programmer (3 hours) at $303 per 
hour + Sr. Systems Analyst (3 hours) at $260 per hour) = $1689 per 
platform or reporting side (implementation of reporting mechanism)]. 
The total one-time cost associated with proposed Rule 901(a)(3) 
would be $4,504 per platform or reporting side for a total one-time 
cost $1,396,240 ($4,504 x 310 (300 reporting sides + 10 platforms)).
    \242\ The Commission estimates that the additional burdens would 
be: [(Sr. Programmer (5 hours) + Sr. Systems Analyst (5 hours)) = 10 
burden hours (maintenance of transaction capture system); (Sr. 
Programmer (1 hour) + Sr. Systems Analyst (1 hour)) = 2 burden hours 
(maintenance of reporting mechanism)]. The total ongoing burden 
associated with the amendments to 901(a) would be 12 burden hours 
per platform and reporting side for a total ongoing burden of 3720 
hours (12 x 310 (300 reporting sides + 10 platforms)).
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c. Total Costs of Platforms, Registered Clearing Agencies, and 
Reporting Sides Relating to Proposed Amendments to Rule 901
    Summing these costs, the Commission preliminarily estimates that 
the initial, first-year cost of complying with the proposed amendments 
to Rule 901 (including the initial reporting and the reporting of any 
life cycle events) would be $5,288,450, which corresponds to 528,845 
per platform.\243\ The Commission estimates that the ongoing aggregate 
annual costs, after the first

[[Page 14778]]

year, of complying with the proposed amendments to Rule 901 (including 
the initial reporting and the reporting of any life cycle events) would 
be $3,215,930, which corresponds to $321,593 per platform.\244\ The 
Commission estimates that the initial, first-year cost of complying 
with the proposed amendments to Rule 901 (including the initial 
reporting and the reporting of any life cycle events) would be 
$2,418,200, which corresponds to $604,550 per registered clearing 
agency.\245\ The Commission preliminarily estimates that the ongoing 
aggregate annual costs, after the first year, of complying with the 
proposed amendments to Rule 901 (including the initial reporting and 
the reporting of any life cycle events) would be $1,598,200, which 
corresponds to $399,550 per registered clearing agency.\246\ The 
Commission estimates that the initial, first-year cost of complying 
with proposed Rule 901(a)(3) would be $844,500, which corresponds to 
$2,815 per reporting side.\247\ The Commission preliminarily estimates 
that the ongoing aggregate annual costs, after the first year, of 
complying with proposed Rule 901(a)(3) would be $168,900, which 
corresponds to $563 per reporting side.\248\
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    \243\ This estimate is based on the following: (($102,000 + 
$200,000 + $49,000 + $77,000 + $54,000 + $1,000 + $38,500 + $4,530 + 
$2,815) x (10 platforms)) = $5,288,450, which corresponds to 
$528,845 per platform.
    \244\ This estimate is based on the following: (($200,000 + 
$77,000 + $1,000 + $38,500 + $4,530 + $563) x (10 platforms)) = 
$3,215,930, or $321,593 per platform.
    \245\ This estimate is based on the following: (($102,000 + 
$200,000 + $49,000 +$77,000 + $54,000 + $1,000 + $38,500 + 
$23,593.75 + $59,456.25) x (4 registered clearing agencies)) = 
$2,418,200, which corresponds to $604,550 per registered clearing 
agency.
    \246\ This estimate is based on the following: (($200,000 + 
$77,000 + $1,000 + $38,500 + $23,593.75 + $59,456.25) x (4 
registered clearing agencies)) = $1,598,200, or $399,550 per 
registered clearing agency.
    \247\ This estimate is based on the following: ($2,815 x (300 
reporting sides)) = $844,500, which corresponds to $2,815 per 
reporting side.
    \248\ This estimate is based on the following: ($563 x 300 
reporting sides) = $168,900, or $563 per reporting side.
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2. Proposed Amendment to Rule 905(a)
    In the Regulation SBSR Adopting Release, the Commission estimated 
that Rule 905(a), as adopted, will impose an initial, one-time burden 
associated with designing and building a reporting side's reporting 
system to be capable of submitting amended security-based swap 
transaction information to a registered SDR.\249\ The Commission stated 
its belief that designing and building appropriate reporting system 
functionality to comply with Rule 905(a)(2) will be a component of, and 
represent an incremental ``add-on'' to, the cost to build a reporting 
system and develop a compliance function as required under Rule 901, as 
adopted.\250\ Specifically, the Commission estimated that, based on 
discussions with industry participants, the incremental burden would be 
equal to 5% of the one-time and annual burdens associated with 
designing and building a reporting system that is in compliance with 
Rule 901, plus 10% of the corresponding one-time and annual burdens 
associated with developing the reporting side's overall compliance 
program required under Rule 901.\251\ This estimate was based on 
similar calculations contained in the Regulation SBSR Proposing 
Release,\252\ updated to reflect new estimates relating to the number 
of reportable events and the number of reporting sides.\253\
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    \249\ See Regulation SBSR Adopting Release, Section XXII(C)(6).
    \250\ See id.
    \251\ See id.
    \252\ See 75 FR 75254.
    \253\ See Regulation SBSR Adopting Release, Section XXII(C)(1).
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    The Commission preliminarily believes that the above methodology is 
applicable to error reporting by platforms under the proposed amendment 
to Rule 905(a). Thus, for platforms, the Commission preliminarily 
estimates that the proposed amendment to Rule 905(a) would impose an 
initial (first-year) aggregate cost of $118,250, or $11,825 per 
platform,\254\ and an ongoing aggregate annualized cost of $39,750, 
which is $3,975 per platform.\255\
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    \254\ See Regulation SBSR Proposing Release, 75 FR 75254-55. 
This figure is calculated as follows: [((($49,000 for one-time 
development of reporting system) x (0.05)) + (($2,500 annual 
maintenance of reporting system) x (0.05)) + (($54,000 one-time 
compliance program development) x (0.1)) + (($38,500 annual support 
of compliance program) x (0.1))) x (10 platforms)] = $118,250, which 
is $11,825 per platform.
    \255\ See Regulation SBSR Proposing Release, 75 FR 75254-55. 
This figure is calculated as follows: [(($2,500 annual maintenance 
of reporting system) x (0.05)) + (($38,500 annual support of 
compliance program) x (0.1))) x (10 platforms)] = $39,750, which is 
$3,975 per platform.
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3. Proposed Amendments to Rule 906(c)
    For Registered Clearing Agencies and Platforms. Rule 906(c), as 
adopted, requires each participant of a registered SDR that is a 
registered security-based swap dealer and registered major security-
based swap participant to establish, maintain, and enforce written 
policies and procedures that are reasonably designed to ensure 
compliance with any security-based swap transaction reporting 
obligations in a manner consistent with Regulation SBSR. Rule 906(c), 
as adopted, also requires such participants to review and update the 
required policies and procedures at least annually.
    The proposed amendment to Rule 906(c) would extend these same 
requirements to participants of a registered SDR that are platforms or 
registered clearing agencies. The Commission preliminarily estimates 
that the one-time, initial burden for each registered clearing agency 
or platform to adopt written policies and procedures as required under 
the proposed amendment would be similar to the Rule 906(c) burdens 
discussed in the Regulation SBSR Adopting Release for registered 
security-based swap dealers and registered major security-based swap 
participants. As a result, the Commission preliminarily estimates that 
the first year cost of complying with the proposed amendment to Rule 
906(c) would be approximately $58,000 per registered clearing agency or 
platform.\256\ As discussed in the Regulation SBSR Proposing 
Release,\257\ this figure is based on the estimated cost to develop 
written policies and procedures, program systems, implement internal 
controls and oversight, train relevant employees, and perform necessary 
testing. In addition, the Commission preliminarily estimates the cost 
of maintaining such policies and procedures, including a full review at 
least annually--as would be required by the proposed amendment to Rule 
906(c)--would be approximately $34,000 per registered clearing agency 
or platform.\258\ This figure includes an estimate of the cost related 
to reviewing existing policies and procedures, making necessary 
updates, conducting ongoing training, maintaining internal controls 
systems, and performing necessary testing.
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    \256\ See Regulation SBSR Adopting Release, note 1238.
    \257\ See Regulation SBSR Proposing Release, 75 FR 75257.
    \258\ See Regulation SBSR Adopting Release, note 1240.
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D. Economic Effects and Effects on Efficiency, Competition, and Capital 
Formation

    Section 3(f) of the Exchange Act \259\ 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, in addition to the protection of investors, 
whether the action will promote efficiency, competition, and capital 
formation. In addition, Section 23(a)(2) of the Exchange Act \260\ 
requires the Commission, when making rules under the Exchange Act, to 
consider the impact of such rules on competition.

[[Page 14779]]

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.
---------------------------------------------------------------------------

    \259\ 15 U.S.C. 78c(f).
    \260\ 15 U.S.C. 78w(a)(2).
---------------------------------------------------------------------------

    The Commission preliminarily believes that this proposal will 
result in further progress towards the goals identified in the 
Regulation SBSR Adopting Release: Providing a means for the Commission 
and other relevant authorities to gain a better understanding of the 
aggregate risk exposures and trading behaviors of participants in the 
security-based swap market; facilitating public dissemination of 
security-based swap transaction information, thus promoting price 
discovery and competition by improving the level of information to all 
market participants; and improving risk management by security-based 
swap counterparties, which would need to capture and store their 
transactions in security-based swaps to facilitate reporting.\261\
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    \261\ See Regulation SBSR Adopting Release, Section XXII(D).
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    The economic effects of the proposed rules, amendments, and 
guidance on firms that provide services to security-based swap 
counterparties and the security-based swap market are discussed in 
detail below. The Commission also considered the effects that the 
proposed rules, amendments, and guidance might have on competition, 
efficiency, and capital formation. The Commission preliminarily 
believes that the proposal is likely to affect competition between 
firms that provide services to security-based swap counterparties and 
affect efficiency as a result of the way that the proposed rules and 
amendments allocate regulatory burdens. The Commission preliminarily 
believes that most of the effects of the proposal on capital formation 
would be indirect and would be related to the way in which the proposed 
rules and amendments result in efficient delivery of services by 
registered clearing agencies and registered SDRs, reducing transactions 
costs and freeing resources for investment.\262\
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    \262\ These transactions costs would include both implicit and 
explicit costs. Implicit transactions costs are the spread between 
transaction prices and the fundamental value of the assets being 
traded. Explicit transactions costs, by contrast, are commissions 
and other fees paid by counterparties to access the security-based 
swap market.
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    This analysis has been informed by the relationships among 
regulation, competition, and market power discussed in Section VIII(A), 
supra. An environment in which there is limited competition in SDR 
services could impose certain costs on the security-based swap market, 
including higher prices or lower quality services from SDRs. For 
example, a registered SDR might be able to extract monopoly profits 
from reporting sides when there are few competitors, if reporting sides 
cannot identify a competing SDR offering prices close enough to 
marginal cost to make changing service providers privately efficient 
for the reporting side. However, it is also possible that limited 
competition in the market for SDR services could yield certain benefits 
for both regulatory authorities and the public. In particular, a small 
set of registered SDRs could make it simpler for relevant authorities 
to build a complete picture of transaction activity and outstanding 
risk exposures in the security-based swap market, and could limit the 
need for users of publicly disseminated transaction data to merge these 
data from multiple sources before using it as an input to economic 
decisions.
1. Reporting of Clearing Transactions
    Proposed Rule 901(a)(2)(i) would assign the duty to report all 
security-based swaps that have a registered clearing agency as a direct 
counterparty to that registered clearing agency. Regulation SBSR, as 
adopted, does not assign reporting obligations for any clearing 
transactions; thus, in the absence of proposed Rule 901(a)(2)(i), these 
transactions would not be subject to any regulatory reporting 
requirement. Without these data, the ability of the Commission and 
other relevant authorities to carry out their market oversight 
functions would be limited. For example, while the Commission would 
have access to uncleared transactions that are reported to a registered 
SDR, the Commission--in the absence of proposed Rule 901(a)(2)(i)--
would not be able to obtain from registered SDRs information about 
changes to the open positions of the relevant counterparties after 
alpha transactions are cleared. Without access to this information from 
registered SDRs, the Commission would be unable to easily observe risk 
exposures in the security-based swap market, because information about 
the net open positions in cleared security-based swaps would not be 
held in registered SDRs. Ensuring that clearing transactions are 
reported to registered SDRs and delineating reporting responsibilities 
for these transactions is particularly important given the level of 
voluntary clearing activity in the market as well as the mandatory 
clearing determinations required under Title VII.\263\
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    \263\ See General Policy on Sequencing, 77 FR 35636.
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    The Commission preliminarily believes that the costs associated 
with required reporting pursuant to the proposed amendments could 
represent a barrier to entry for new, smaller clearing agencies that 
might not have the ability to comply with the proposed reporting 
requirements or for whom the expected benefits of compliance might not 
justify the costs of compliance. To the extent that the proposed rules 
and amendments might deter new clearing agencies from entering the 
security-based swap market, this could negatively impact competition 
between registered clearing agencies.
    A registered clearing agency is responsible for executing each of 
the clearing transactions to which it is a counterparty and, thus, is 
well-situated to report the resulting transaction information. By 
proposing to assign the reporting responsibility to registered clearing 
agencies, the Commission intends to eliminate additional steps in the 
reporting process that would be needed if another market participant 
were assigned the duty to report a clearing transaction or if the duty 
were to remain unassigned.\264\ By proposing a reporting methodology 
with as few steps as possible, the Commission intends to minimize 
potential data discrepancies and errors by assigning reporting 
responsibilities to persons that hold the most complete and accurate 
information for cleared security-based swaps.\265\ Inaccurate 
information would negatively impact the ability of the Commission and 
other relevant authorities to understand and act on the transaction 
information reported; accurate information should positively affect 
their ability to oversee the security-based swap market.
---------------------------------------------------------------------------

    \264\ If, for example, the non-clearing agency counterparty had 
the duty to report a clearing transaction, the registered clearing 
agency would first have to convey the transaction information to the 
counterparty--and the counterparty might have to reconfigure the 
transaction data into the format required by a registered SDR--
before the counterparty could report it to a registered SDR.
    \265\ See CME/ICE Letter at 3-4.
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    Proposed Rule 901(a)(1)(i) would place the obligation for reporting 
all clearing transactions on registered clearing agencies and allow 
them to choose the registered SDR to which they submit transaction 
data. As noted in Section VIII(A), supra, the Commission preliminarily 
believes that, because many of the infrastructure requirements for 
entrant SDRs are shared by registered clearing agencies, registered 
clearing agencies might pursue vertical

[[Page 14780]]

integration into the market for SDR services at a lower cost relative 
to potential entrants from unrelated markets. If the costs of reporting 
to affiliated SDRs are lower than the costs of reporting to 
unaffiliated SDRs, then one likely response to the proposed rules and 
amendments is that registered clearing agencies will choose to report 
clearing transactions to an affiliated SDR. Such vertical integration 
of security-based swap clearing and reporting could be beneficial to 
other market participants if they ultimately share in these efficiency 
gains. For example, efficiency gains due to straight-through processing 
from execution to reporting could lower transactions costs for market 
participants and reduce the likelihood of data discrepancies and 
delays.
    The Commission is also aware of the potential costs of placing the 
duty on registered clearing agencies to report transactions and 
allowing them to choose the registered SDR to which they report, as 
such clearing agencies would likely select their affiliated SDRs. If 
proposed Rule 901(a)(1)(i) would encourage the formation of affiliate 
SDRs that would not otherwise emerge, then the aggregate number of 
registered SDRs might reflect an inefficient level of service 
provision. As noted in Section VIII(A)(2), supra, economies of scale 
exist in the market for SDR services from the ability to amortize the 
fixed costs associated with infrastructure over a large volume of 
transactions. As a result, the entry of clearing agency-affiliated SDRs 
could indicate that, in aggregate, transaction data is processed at a 
higher average cost than if there were fewer SDRs. Inefficiencies could 
be introduced by the Commission and the public receiving security-based 
swap transaction data from a larger number of registered SDRs. 
Connecting to a larger number of SDRs and merging transaction data with 
potentially different data formats and schema could be costly and could 
lead to losses in data integrity.
    The potential for efficiency gains through vertical integration of 
registered clearing agencies and registered SDRs could foreclose entry 
into the market for SDR services except by those firms that are willing 
to simultaneously enter the market for clearing services. The 
Commission preliminarily believes that registered clearing agencies are 
more likely to benefit from these efficiencies in shared infrastructure 
than stand-alone SDRs, given that it is likely to be more difficult for 
a registered SDR to enter into clearing activity than for a registered 
clearing agency to enter into SDR activity. Moreover, to the extent 
that an affiliate SDR is not as cost-effective as a competing 
unaffiliated SDR, the registered clearing agency could subsidize the 
operation of its affiliate SDR to provide a competitive advantage in 
its cost structure over SDRs unaffiliated with a registered clearing 
agency. Even if the registered clearing agency does not provide a 
subsidy to its affiliate SDR, and the resulting service is not as price 
competitive as an unaffiliated SDR, counterparties have less recourse 
in choosing alternative reporting venues because the duty to report 
would reside with the registered clearing agency.
    Hence, providing registered clearing agencies with the discretion 
to report transaction information to the registered SDR of their choice 
could provide a competitive advantage for clearing agency-affiliated 
SDRs relative to unaffiliated SDRs. This could also have implications 
for the reporting of uncleared swaps. In particular, a clearing agency-
affiliated SDR could leverage its repository activity for cleared 
transactions by offering SDR services to clearing members for uncleared 
swaps. If security-based swap counterparties who clear transactions 
prefer to have their transaction records consolidated in a single 
database, then a clearing agency-affiliated SDR would be able to offer 
these counterparties recordkeeping and cost saving benefits by also 
recording their uncleared transactions. By contrast, to the extent that 
an unaffiliated SDR is unable to compete with a clearing agency's 
affiliated SDR for cleared transactions, it would not be able to offer 
a consolidated record of a counterparty's trade activity. This then 
provides a unique advantage to clearing agency-affiliated SDRs.
    Alternatively, a clearing member seeking to consolidate its 
transactions at an unaffiliated SDR might contract with the registered 
clearing agency, for a fee, to transmit data for clearing transactions 
to an SDR of the clearing member's choice, either as a duplicate report 
or as a required report by Regulation SBSR. This would allow the 
registered clearing agency to satisfy its obligations while permitting 
the clearing member to maintain access to centralized data. However, in 
this case, the registered clearing agency could choose a fee schedule 
that encourages the clearing member to report its uncleared bilateral 
transactions to the affiliate SDR. Such a fee schedule might involve 
the clearing agency offering to terminate alpha transactions reported 
to its affiliate SDR for a lower price than alpha transactions at a 
third-party SDR.
    As discussed in Section VIII(C)(1)(a), supra, the Commission has 
estimated the annual and on-going costs associated with requiring 
registered clearing agencies to establish connections to registered 
SDRs. The Commission preliminarily believes that, for a given 
registered clearing agency, these costs may be lower for connections to 
affiliate SDRs than for connections to unaffiliated SDRs. Because the 
registered clearing agency might have been involved in developing its 
affiliated SDR's systems, the clearing agency might, as a result, avoid 
costs related to translating or reformatting data due to 
incompatibilities between data reporting by the registered clearing 
agency and data intake by the SDR.
2. Reporting of Clearing Transactions Involving Allocation
    This release explains the Commission's preliminary view of the 
application of Regulation SBSR to allocations of bunched order 
executions that are submitted to clearing. The final placement of risk 
of a bunched order alpha is the series of clearing transactions--the 
``gamma series''--that results from clearing the bunched order alpha 
and is economically relevant to risk monitoring and market 
surveillance. This proposed interpretation would not create any new 
duties under Regulation SBSR but rather would explain the application 
of Regulation SBSR to events that occur as part of the allocation 
process.\266\ Additionally, because the proposed interpretation 
explains how Regulation SBSR, as adopted and as proposed to be amended 
by this release, would apply to a platform-executed bunched order that 
will be submitted to clearing, and the security-based swaps that result 
from the allocation of any bunched order execution, if the resulting 
security-based swaps are cleared, the Commission preliminarily believes 
that the proposed interpretation is not likely to have consequences for 
efficiency, competition, or capital formation beyond those stemming 
from allocating transaction reporting obligations to platforms and 
registered clearing agencies discussed in Section VIII(D)(1), supra, 
and in Section VIII(D)(4), infra.
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    \266\ The Commission's estimates of events reportable under 
these proposed rules and amendments includes observable allocation 
by clearing agencies in the DTCC-TIW data. Therefore, the costs 
associated with clearing transactions involving allocation are 
included in our estimate of the programmatic costs of proposed Rules 
901(a)(1) and 901(a)(2)(i).
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    The proposed interpretation discusses the manner in which the 
bunched order alpha and the security-based swaps

[[Page 14781]]

resulting from its allocation would be reported to a registered SDR. 
This proposed interpretation is designed to accommodate the various 
workflows that market participants employ to execute and allocate 
bunched order alphas. For example, in a case where a registered 
clearing agency receives allocation instructions only subsequent to 
clearing, the registered clearing agency would decrement the size of 
the ``intermediate gamma'' until it eventually reached zero and would 
novate all of the security-based swaps in a ``gamma series.'' \267\ 
Under proposed Rule 901(a)(2)(i), the registered clearing agency would 
have the duty to report each new security-based swap that it creates as 
part of the gamma series. Pursuant to Rule 901(d)(10), as adopted, the 
registered clearing agency also would be responsible for including the 
transaction ID of the bunched order alpha in the transaction report of 
each new security-based swap in the gamma series that results from the 
termination of the bunched order alpha. The benefit of regulatory 
reporting of clearing transactions is that relevant authorities would 
be able to observe allocations at the level of client accounts, 
facilitating more granular monitoring of risk and market abuse.\268\
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    \267\ See supra Section III(A) (providing additional examples of 
workflows for allocation of security-based swaps that are cleared).
    \268\ See Regulation SBSR Adopting Release, Section VIII.
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3. Alternative Approaches to Reporting Clearing Transactions
    As part of the economic analysis of these proposed rules and 
amendments, the Commission has considered the market power that 
providers of security-based swap market infrastructure might be able to 
exercise in pricing the services that they offer counterparties to 
security-based swaps and/or shifting regulatory burdens onto their 
customers. The Commission recognizes that the treatment of clearing 
transactions in this proposal might influence the market power of 
certain providers of these services by imposing the reporting duty on 
registered clearing agencies. The Commission considered three 
alternative allocations of reporting obligations for clearing 
transactions, each of which implies different allocations of costs 
across market participants along with different effects on efficiency 
and competition, and, indirectly, capital formation.
a. Apply the Re-Proposed Reporting Hierarchy
    The first alternative to the proposed approach is to apply the 
reporting hierarchy in Regulation SBSR, as re-proposed. Under this 
approach, a registered clearing agency would occupy the lowest spot in 
the hierarchy, along with other persons who are neither registered 
security-based swap dealers nor registered major security-based swap 
participants. Under this alternative, when one of the sides of the 
transaction included a security-based swap dealer or major security-
based swap participant and the other side did not, the side including 
the security-based swap dealer or major security-based swap participant 
would have the duty to report any resulting clearing transactions, as 
well as the choice of which registered SDR to which to report. As 
described in more detail below, placing the duty to report with non-
clearing agency reporting sides would likely leave them in a position 
to either request transaction information from registered clearing 
agencies to re-transmit that information to registered SDRs, or request 
that the registered clearing agency report to a registered SDR on their 
behalf. To the extent that each transmission of data introduces some 
possibility for error or delay, the additional step of requesting data 
from a registered clearing agency could result in security-based swap 
data that are marginally less reliable than under our proposed 
approach. Alternatively, having the registered clearing agency report 
clearing transactions would require fewer processing steps and would 
result in the same outcome for data integrity as the proposed rules.
    Under this alternative, one of the sides of the initial alpha 
transaction would report the resulting clearing transactions according 
to the hierarchy originally proposed in the Regulation SBSR Proposing 
Release. For the beta, gamma, and any subsequent clearing transactions 
(resulting from netting and compression of multiple betas and gammas), 
the non-clearing agency counterparties could obtain the information 
needed for regulatory reporting from the registered clearing agency and 
transmit this information to the registered SDR of its choice.
    The Commission preliminarily believes that it is unlikely that non-
clearing agency counterparties would be subject to significant 
additional costs associated with building infrastructure to support 
regulatory reporting for clearing transactions under this alternative. 
This is for two reasons. First, to the extent that market participants 
that submit security-based swaps to clearing also engage in uncleared 
transactions and fall high on the reporting hierarchy, they likely 
already have the required infrastructure in place to support regulatory 
reporting of alphas and uncleared transactions. The Commission 
anticipates that, as a result, there might be only marginal additional 
costs for reporting sides to report clearing transactions, if the 
Commission selected this alternative. Moreover, the Commission 
anticipates that, once infrastructure is built, the per-transaction 
cost of data transmission would not vary substantially between 
registered clearing agencies, who would be required to report pursuant 
to proposed Rule 901(a)(1)(i), and reporting sides, who would be 
required to report under this alternative.
    Second, counterparties (who are not themselves a registered 
clearing agency), particularly those who engage solely in cleared 
trades or who are not high on the Regulation SBSR reporting hierarchy, 
may enter into an agreement under which the registered clearing agency 
would submit the information to a registered SDR on their behalf. This 
service could be bundled as part of the other clearing services 
purchased, and would result in an outcome substantially similar to 
giving the registered clearing agency the duty to report. One 
difference, however, is that the customer of the registered clearing 
agency could, under this alternative, request that the information be 
submitted to a registered SDR unaffiliated with the registered clearing 
agency, a choice that would, under the proposed approach, be at the 
discretion of the registered clearing agency. Nevertheless, the 
Commission preliminarily believes that, to the extent that it is 
economically efficient for the registered clearing agency to report the 
details of cleared transactions on behalf of its counterparties, this 
alternative would likely result in ongoing costs of data transmission 
for market participants and infrastructure providers that are, in the 
aggregate, similar to the Commission's approach in proposed Rule 
901(a)(2)(i).
    If registered clearing agencies reporting to registered SDRs on 
behalf of counterparties is not available under this alternative, then 
some counterparties would be required to build infrastructure to 
support regulatory reporting for clearing transactions. Analysis of 
single-name CDS transactions in 2013 in which a clearing agency was a 
direct counterparty shows approximately 10 market participants that are 
not likely to register as security-based swap dealers or major 
security-based swap participants, and therefore might be required to 
build infrastructure to support regulatory reporting for clearing 
transactions in order to maintain current

[[Page 14782]]

trading practices in the security-based swap market.\269\
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    \269\ To arrive at this estimate, Commission staff used single-
name CDS transaction data for 2013 to produce a list of all direct 
counterparties to a clearing agency and removed those persons likely 
to register as security-based swap dealers or major security-based 
swap participants. The list of likely registrants was constructed 
using the methodology described in the Cross-Border Adopting 
Release. See Cross-Border Adopting Release, 79 FR 47296, note 150 
(describing the methodology employed by the Commission to estimate 
the number of potential security-based swap dealers); id. at 47297, 
note 153 (describing the methodology employed by the Commission to 
estimate the number of potential major security-based swap 
participants).
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    Under this alternative, non-clearing agency counterparties would 
have the ability to choose which registered SDR receives their reports. 
Because non-clearing agency counterparties would have this choice, 
registered SDRs under the alternative approach might have additional 
incentive to provide high levels of service to attract this reporting 
business by, for example, providing such counterparties with convenient 
access to reports submitted to the registered SDR or by supporting the 
counterparties' efforts at data validation and error correction. 
Additionally, ensuring that these counterparties have discretion over 
which registered SDR receives their data could allow them to 
consolidate their security-based swap transactions into a single SDR 
for record-keeping purposes, or for operational reasons, though only to 
the extent that they can identify a registered SDR that accepts reports 
for all relevant asset classes.
    In assessing this alternative, the Commission recognizes that 
registered clearing agencies have a comparative advantage in processing 
and preparing data for reporting cleared transactions to a registered 
SDR. Registered clearing agencies terminate alpha transactions, as well 
as create beta and gamma transactions and all subsequent netting 
transactions, and so already possess all of the relevant information to 
report these transaction events to a registered SDR. Moreover, the 
volume of transactions at registered clearing agencies means that they 
can amortize the fixed costs of establishing and maintaining 
connections to a registered SDR over a large quantity of reportable 
activity, potentially allowing them to report transactions at a lower 
average cost per transaction than many other market participants, 
particularly non-registered persons.
    The Commission preliminarily believes that, given this comparative 
advantage, applying to clearing transactions the same reporting 
hierarchy that it has adopted for uncleared transactions would result 
in registered clearing agencies reporting the transaction data to 
registered SDRs as a service to the non-clearing agency counterparties 
to clearing transactions. In this respect, the outcome would be the 
same as with proposed Rule 901(a)(2)(i), which would assign this duty 
to registered clearing agencies. The key difference is that the non-
clearing agency counterparty would generate this responsibility through 
private contract and could terminate the agreement and assume the 
reporting responsibility, should it perceive the fee or service terms 
as unreasonable. The ability to terminate such an agreement could 
diminish the potential bargaining power that the registered clearing 
agency would otherwise have if the registered clearing agency were 
assigned the duty to report. However, because the non-clearing agency 
counterparty might still have to rely on assistance from the clearing 
agency to satisfy the reporting obligations--particularly for any 
subsequent clearing transactions resulting from netting and compression 
of multiple betas and gammas--the reduction in clearing agency 
bargaining power might not be substantial. A registered clearing agency 
that supplies this information and converts it into the formats 
prescribed by the counterparties' chosen SDRs so that a non-clearing 
agency counterparty can fulfill their reporting requirement could still 
have significant bargaining power with respect to providing that 
information.
    The Commission preliminarily believes that the proposed rules are 
generally consistent with the outcome under this alternative in a 
number of key respects. Under both approaches to reporting--one in 
which the Commission assigns the reporting responsibility for clearing 
transactions to registered clearing agencies, and the other in which 
the market allocated the reporting responsibility in the same way--
registered clearing agencies would report clearing transactions to 
their affiliated SDRs.\270\ Under an approach in which the Commission 
does not assign any reporting duties to registered clearing agencies, 
counterparties would likely be assessed an explicit fee by registered 
clearing agencies for submitting reports on the counterparties' behalf. 
Under proposed Rule 901(a)(1)(i), the fees associated with these 
services would likely be part of the total fees associated with 
clearing security-based swaps. Under this alternative and under the 
proposed approach, efficiency gains stemming from consolidation of the 
reporting function within registered clearing agencies would be split 
between such clearing agencies and security-based swap counterparties. 
The difference between these two regulatory approaches turn on how 
these gains are split.
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    \270\ Unless it preferred a particular registered SDR for 
operational reasons discussed above, a non-clearing agency 
counterparty to a clearing transaction would likely contract with 
the clearing agency to report clearing transactions to the 
registered SDR that offers the lowest price, most likely the 
clearing agency affiliate.
---------------------------------------------------------------------------

    The Commission preliminarily believes that this alternative would 
not necessarily restrict the ability of registered clearing agencies to 
exercise market power in ways that may allow them to capture the bulk 
of any efficiency gains. First, while a counterparty to a registered 
clearing agency could contract with the clearing agency to receive the 
information about netting and compression transactions that would 
enable re-transmission to a registered SDR, depending on the policies 
and procedures of the registered clearing agency, these data might not 
be in the format that is required for submission to the counterparty's 
SDR of choice. As a result, counterparties to registered clearing 
agencies would bear the costs associated with restructuring the data 
that they receive from registered clearing agencies before submitting 
transaction reports to a registered SDR. Such costs could limit the 
feasibility of assuming the reporting responsibility rather than 
contracting to have the registered clearing agency to perform the duty.
    Second, in an environment where reporting obligations for clearing 
transactions rest with counterparties and there is limited competition 
among registered clearing agencies, registered clearing agencies might 
be able to charge high fees to counterparties who must rely on them to 
provide information necessary to make required reports to registered 
SDRs. A registered clearing agency could otherwise impair the ability 
of its counterparties to perform their own reporting if the clearing 
agency does not provide sufficient support or access to clearing 
transaction data. In particular, the clearing agency might have 
incentives to underinvest in the infrastructure necessary to provide 
clearing transaction data to its counterparties unless the Commission, 
by rule, established minimum standards for communication of clearing 
transactions data from registered clearing agencies to their 
counterparties. The result could be greater difficulties faced by 
counterparties in reporting data and an increased likelihood of 
incomplete,

[[Page 14783]]

inaccurate, or untimely data being submitted to registered SDRs.
    Third, under this alternative the registered clearing agency that 
also is party to the transaction potentially has weaker incentives to 
provide high-quality regulatory data to the counterparty with a duty to 
report, which could reduce the quality of regulatory data collected by 
registered SDRs. The person with the duty to report a transaction has 
strong incentives to ensure that the transaction details are 
transmitted in a well-structured format with data fields clearly 
defined, and that contain data elements that are validated and free of 
errors because, pursuant to Regulation SBSR, this person is responsible 
for making accurate reports and, if necessary, making corrections to 
previously submitted data. Not only would the registered clearing 
agency have no duty under Regulation SBSR to provide information to its 
counterparty, but additionally, market forces might not provide 
sufficient motivation to the registered clearing agency to provide data 
to the counterparty in a manner that would minimize the counterparty's 
reporting burden. If registered clearing agencies exercise their market 
power against counterparties, the counterparties might have limited 
ability to demand high-quality data reporting services from registered 
clearing agencies. The Commission notes, however, that it could, by 
imposing minimum standards on data services provided by registered 
clearing agencies and regulating the fees associated with data 
transmission by registered clearing agencies, mitigate some of the 
effects of market frictions under these alternatives.
    The Commission preliminarily believes, however, that despite a 
similarity in ultimate outcomes, and any benefits that might flow from 
enabling registered SDRs to compete for clearing transaction business, 
this alternative does not compare favorably to the proposed approach.
b. Move Registered Clearing Agencies Within the Regulation SBSR 
Reporting Hierarchy
    A second, closely related alternative would involve placing 
registered clearing agencies within the Regulation SBSR reporting 
hierarchy below registered security-based swap dealers and registered 
major security-based swap participants but above counterparties that 
are not registered with the Commission. This alternative would assign 
the reporting obligation to a registered security-based swap dealer or 
registered major security-based swap participant when it is a 
counterparty to a registered clearing agency, while avoiding the need 
for non-registered persons to negotiate reporting obligations with 
registered clearing agencies.
    As with the previous alternative of maintaining the reporting 
hierarchy in Regulation SBSR, as adopted, this alternative potentially 
results in additional reporting steps and could marginally reduce the 
quality of regulatory data relative to the proposed approach. A key 
difference, however, is that this alternative would reduce the 
likelihood of reporting obligations falling on unregistered persons, 
who would likely have less market power in negotiations with registered 
clearing agencies over the terms of reporting to a registered SDR. 
Larger counterparties, i.e., those with greater transaction flow, are 
likely to be better able to negotiate the terms of reporting 
transactions on their behalf or access to the clearing data so that 
they can perform their own reporting.
    Above, the Commission noted three particular ways in which limited 
competition among registered clearing agencies could result in poorer 
outcomes for non-clearing agency counterparties. First, when these 
counterparties obtain clearing data from a registered clearing agency, 
they would likely incur any costs related to reformatting the data for 
submission to a registered SDR. Second, registered clearing agencies 
might charge these counterparties high fees for access to regulatory 
data that counterparties are required to submit to registered SDRs. 
Third, registered clearing agencies might have weak incentives to 
ensure that the data that they supply to reporting sides are of high 
quality, since the non-clearing agency counterparties would bear the 
costs of error correction.
    Limiting the extent to which registered clearing agencies can 
exercise the market power from limited competition over their 
counterparties may reduce some of the drawbacks to the first 
alternative. In particular, registered clearing agencies may be less 
likely to exercise market power in negotiations with larger market 
participants, particularly when these market participants are also 
clearing members. Clearing members play key roles in the governance and 
operation of registered clearing agencies, often contributing members 
to the board of directors. Moreover, clearing members contribute to 
risk management at registered clearing agencies by, for example, 
contributing to clearing funds that mutualize counterparty risk.\271\ 
Nevertheless, the Commission preliminarily believes that this 
alternative does not fully address frictions that arise from limited 
competition between registered clearing agencies, such as high clearing 
fees or low quality services. The Commission preliminarily believes 
that this alternative would be less efficient than requiring the 
registered clearing agency to report the transaction information 
directly to a registered SDR, because the registered clearing agency is 
the only person who has complete information about a clearing 
transaction immediately upon its creation.
---------------------------------------------------------------------------

    \271\ See Securities Exchange Act Release No. 34-68080 (October 
22, 2013), 77 FR 66220, 66267 (November 2, 2012) (``Clearing Agency 
Standards Adopting Release'') (discussing financial resources of 
clearing agencies).
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c. Require the Reporting Side for an Alpha To Also Report the Beta and 
Gamma Transactions
    The Commission also considered a third alternative that would make 
the reporting side for the alpha responsible for reporting both the 
beta and gamma. This alternative would require the reporting side for 
the alpha also to report information about a security-based swap--the 
clearing transaction between the registered clearing agency and the 
non-reporting side of the alpha--to which it is not a counterparty. The 
Commission could require the non-reporting side of the alpha to 
transmit information about its clearing transaction to the reporting 
side of the alpha. In theory, this would allow the reporting side of 
the alpha to report both the beta and the gamma. The Commission 
believes, however, that this result could be difficult to achieve 
operationally and, in any event, could create confidentiality concerns, 
as an alpha counterparty may not wish to reveal information about its 
clearing transactions except to the registered clearing agency (and, if 
applicable, its clearing member). This alternative also would require 
reporting sides to negotiate with registered clearing agencies to 
obtain transaction data and to bear the costs of reformatting these 
data and correcting errors in these data, exposing them to the market 
power exercised by registered clearing agencies. Moreover, all other 
things being equal, having more steps in the reporting process--e.g., 
more data transfers between execution and reporting--introduces greater 
opportunity for data discrepancies and delays than having fewer steps. 
Also, because the reporting side of the alpha would report the beta and 
gamma, this

[[Page 14784]]

alternative is premised on the view that the beta and gamma are life 
cycle events of the alpha. The Commission, however, considered and 
rejected this approach in the Regulation SBSR Adopting Release.\272\
---------------------------------------------------------------------------

    \272\ See Regulation SBSR Adopting Release, Section V(B)(2) at 
note 267 (``Under Rule 900(g), a security-based swap that results 
from clearing is an independent security-based swap and not a life 
cycle event of a security-based swap that is submitted to clearing. 
Thus, Rule 901(e), which addresses the reporting of life cycle 
events, does not address what person has the duty to report the 
clearing transactions that arise when a security-based swap is 
accepted for clearing'').
---------------------------------------------------------------------------

    In addition, this alternative could result in incomplete regulatory 
data because it could raise questions about who would report clearing 
transactions associated with the compression and netting of beta or 
gamma transactions. For example, suppose a non-dealer clears two 
standard contracts on the same reference entity using a single 
registered clearing agency, each contract having a different registered 
security-based swap dealer as counterparty. Under this alternative to 
the proposed approach, each dealer would be responsible for reporting a 
gamma security-based swap between the non-dealer and the registered 
clearing agency. However, this alternative does not specify which of 
four potential persons would be required to report the contract that 
results from netting of the two gamma security-based swaps between the 
non-dealer and the registered clearing agency.
4. Reporting by Platforms
    With the ability to clear trades, it is possible for two 
counterparties to trade anonymously on an SB SEF or an exchange. In an 
anonymous trade, because neither counterparty would be aware of the 
name or registration status of the other, it might not be possible for 
either counterparty to use the reporting hierarchy in Rule 
901(a)(1)(i), as adopted, to determine who must report this initial 
alpha transaction to a registered SDR.\273\ Therefore, because the 
platform would be the only entity at the time of execution, before the 
transaction is submitted for clearing, who is certain to know the 
identity of both transaction sides, the Commission proposes to assign 
to the platform the duty to report all alpha transactions executed on 
the platform that will be submitted to clearing.
---------------------------------------------------------------------------

    \273\ Some commenters specifically pointed out this fact and 
argued that SB SEFs and exchanges should therefore incur the duty to 
report. See supra note 55.
---------------------------------------------------------------------------

    As discussed above in the context of reporting obligations for 
registered clearing agencies, the Commission preliminarily believes 
that the costs associated with required reporting pursuant to the 
proposed amendments could represent a barrier to entry for new, smaller 
trading platforms that might not have the ability to comply with the 
proposed reporting requirements or for whom the expected benefits of 
compliance might not justify the costs of compliance. To the extent 
that the proposed rules and amendments might deter new trading 
platforms from entering the security-based swap market, this could 
negatively impact competition.
    Requiring the execution platform to report information associated 
with anonymous transactions, preserves counterparties' anonymity and 
reduces the number of data transmission steps between execution and 
reporting to a registered SDR. The Commission, however, proposes having 
the platform report all alpha transactions that will be submitted to 
clearing, even those that are not anonymous.
    Under proposed Rule 901(a)(1), platforms would be required to 
report all transactions occurring on their facilities that are 
submitted to clearing. A platform that matches orders and executes 
transactions will possess all of the primary and secondary trade 
information necessary to be reported to a registered SDR, and proposed 
Rule 901(a)(1) would make it unnecessary for counterparties to report 
these transactions. This approach is designed to result in a more 
efficient reporting process for platform-executed trades that are 
submitted to clearing. By reducing the number of steps between the 
generation of transaction data and reporting to a registered SDR, the 
Commission preliminarily believes that proposed Rule 901(a)(1) would 
minimize the possibility of data discrepancies and delays.
    At the same time, the Commission recognizes that, because anonymous 
transactions executed on platforms must be cleared, the platforms that 
support anonymous trading will more than likely select the registered 
clearing agency at which to clear a trade. Moreover, because only 
platforms know the identities of counterparties to anonymous 
transactions, they will be responsible for submitting these 
transactions for clearing. If the infrastructure necessary for 
submitting transactions for clearing is similar to that required to 
report transactions to clearing agency-affiliated SDRs, then these 
platforms may prefer to use clearing-agency affiliated SDRs for all of 
their transaction reports. This is particularly true if the fixed costs 
to platforms of submitting transactions for clearing and regulatory 
reporting are high because platforms could avoid interfacing separately 
with clearing agencies and unaffiliated SDRs. As a result, the proposed 
rules for platform-executed trades subsequently submitted to clearing 
might disadvantage registered SDRs that are not affiliated with 
registered clearing agencies.
    While the level of security-based swap activity that currently 
takes place on platforms and is subsequently submitted for clearing is 
currently low, future rulemaking under Title VII could cause platform 
volumes to increase. The Commission has proposed, but not adopted, 
rules governing the registration and operation of SB SEFs and 
anticipates considering rules to determine which security-based swaps 
are subject to mandatory trade execution on national securities 
exchanges or registered or exempt SB SEFs.\274\
---------------------------------------------------------------------------

    \274\ See General Policy on Sequencing, 77 FR 35640.
---------------------------------------------------------------------------

5. Alternative Approaches to Reporting Platform-Executed Transactions
    For platform-executed transactions that are submitted to clearing 
but are not anonymous, a reasonable alternative would be for the 
Commission to require these transactions to be reported to a registered 
SDR using the reporting hierarchy in Rule 901(a)(2)(ii), as adopted. 
Under such an alternative, a platform would have to determine which of 
the trades it executed were anonymous and which were not, performing 
due diligence to ensure that transaction reports it sends to its 
participants do not violate the anonymity of counterparties.\275\ The 
Commission preliminarily believes that it is likely that the platform 
would pass these costs to counterparties, or, alternatively, offer to 
report on behalf of the reporting side, for a fee. Counterparties who 
trade on a platform would have to determine who among them is 
responsible for reporting their trade and would incur the costs of 
reporting to a registered SDR. Moreover, such an alternative would 
exhibit many of the shortcomings of the alternative to proposed Rule 
901(a)(1)(i) discussed in Section XI(C)(3), even though it would allow 
the reporting counterparty to choose the SDR that receives transaction 
information.
---------------------------------------------------------------------------

    \275\ The Commission is aware that certain market structures 
could result in situations where a single security-based swap 
transaction results in a split trade where one portion is 
anonymously executed and another portion is not anonymously 
executed. This could complicate separation of anonymous and non-
anonymous executions.
---------------------------------------------------------------------------

    A second alternative would be to assign the reporting duty for all

[[Page 14785]]

platform-executed transactions that are submitted to clearing to the 
registered clearing agency. While the registered clearing agency 
receiving information about a platform-executed alpha will likely have 
the information necessary for reporting--because the registered 
clearing agency will need much of the same information about the alpha 
transaction to clear it--the Commission preliminarily believes that it 
would be more appropriate to assign the reporting duty to the platform. 
This approach would imply a more direct flow of information from the 
point of execution on the platform to the registered SDR, thus 
minimizing opportunities for data discrepancies or delays. This 
approach would also reduce the need for registered clearing agencies to 
invest resources in systems to receive data elements from platforms 
beyond what is already required for clearing.
6. Application of Regulation SBSR to Prime Brokerage Transactions
    This release proposes interpretive guidance for how Regulation SBSR 
should be applied to prime brokerage transactions. As this guidance 
would not create any new duties--but instead would merely explain how 
the series of related transactions under a prime brokerage arrangement 
would have to be reported and publicly disseminated under Regulation 
SBSR, as adopted--there would be no additional costs or benefits beyond 
those already considered in the Regulation SBSR Adopting Release.\276\
---------------------------------------------------------------------------

    \276\ See Regulation SBSR Adopting Release, Section XXII(C)(1). 
The Commission's estimates in that release of the number of 
reportable events included all legs of prime brokerage transactions.
---------------------------------------------------------------------------

    Prime brokerage transactions involve a reallocation of counterparty 
risk when the prime broker interposes itself between the counterparties 
to the original transaction (a customer of the prime broker and a 
third-party executing dealer). Regulatory reporting of this activity 
would allow relevant authorities to more accurately conduct market 
surveillance and monitor counterparty risk. As a result of public 
dissemination of all three related transactions, market observers would 
have access to information of the transaction between the two original 
counterparties and the subsequent two transactions with the prime 
broker, thereby allowing them to compare the prices and conditions of 
these transactions. This would allow users of publicly disseminated 
data to infer from these disseminated reports the fees that the prime 
broker charges for its credit intermediation service and separate these 
fees from the transaction price of the security-based swap.
7. Proposed Prohibition on Fees for Public Dissemination
    The Commission is proposing new Rule 900(tt), which would define 
the term ``widely accessible'' as used in the definition of ``publicly 
disseminate'' in Rule 900(cc), as adopted, to mean ``widely available 
to users of the information on a non-fee basis.'' This proposed 
definition would have the effect of prohibiting a registered SDR from 
charging fees for or imposing usage restrictions on the security-based 
swap transaction data that it is required to publicly disseminate under 
Regulation SBSR.
    Allowing access to transaction information without cost or 
restriction allows it to be quickly incorporated into security-based 
swap prices by market participants, leading to increased informational 
efficiency of these prices and prices in related financial markets. 
Free and unrestricted access to transaction prices and volumes 
facilitates a more level playing field for market participants, 
particularly those that otherwise have less access to security-based 
swap order flow information, potentially enhancing competition between 
market participants.\277\ Finally, unburdened access to security-based 
swap market data also could benefit non-security-based swap financial 
market participants who may use data from the security-based swap 
market as input for their decision making, potentially improving the 
efficiency of capital allocation and indirectly improving the 
environment for capital formation.\278\ For instance, if a single-name 
CDS on a reference entity trades more often than the underlying bonds, 
single-name CDS transaction prices may help investors in evaluating 
whether the prices of the underlying bonds incorporate available 
information about the credit risk of the issuer.\279\
---------------------------------------------------------------------------

    \277\ See Regulation SBSR Adopting Release, Section XXII(D)(3).
    \278\ See Philip Bond, Alex Edmans, and Itay Goldstein, ``The 
Real Effects of Financial Markets,'' Annual Review of Financial 
Economics, Vol. 4 (October 2012) (reviewing the theoretical 
literature on the feedback between financial market price and the 
real economy).
    \279\ See Sugato Chakravarty, Huseyin Gulen, and Stewart Mayhew, 
``Informed Trading in Stock and Option Markets,'' Journal of 
Finance, Vol. 59, No. 3 (2004) (estimating that the proportion of 
information about underlying stocks revealed first in option markets 
ranges from 10% to 20%); Gary Gorton, ``Are Naked Credit Default 
Swaps Too Revealing?'' (June 4, 2010), available at http://faculty.som.yale.edu/garygorton/documents/NakedCDSTooRevealingIDDJune2010.pdf (last visited October 2, 2014) 
(discussing how the introduction of CDS contracts may increase the 
information sensitivity of underlying bonds).
---------------------------------------------------------------------------

    The proposed prohibition on a registered SDR charging fees for 
public dissemination of the regulatorily mandated security-based swap 
transaction data also is consistent with the CFTC's current prohibition 
on CFTC-registered SDRs charging for public dissemination of 
regulatorily mandated swap transaction data. Such consistency lessens 
the incentives for SDRs registered with the CFTC to enter the security-
based swap market and also register with the Commission and charge for 
public dissemination of security-based swap market data.\280\ Entering 
the security-based swap market would allow them to charge for public 
dissemination of security-based swap market data and use those revenues 
from this business to subsidize their operations in the swap market, in 
which they are not permitted to charge for public dissemination of swap 
market data. If an SEC-registered SDR charges fees for security-based 
swap data in order to subsidize its reporting activity in the CFTC 
regime, then security-based swap market participants reporting to this 
SDR could face higher costs than those it would face if the SDR 
participated only in the security-based swap market.
---------------------------------------------------------------------------

    \280\ Dual registration is likely to occur independent of the 
ability to charge for public dissemination of data in the security-
based swap market. However, the ability to charge for public 
dissemination would add an additional incentive to do so.
---------------------------------------------------------------------------

    The Commission notes two ways in which market forces may limit the 
extent of cross-subsidization by registered SDRs that also publicly 
disseminate swap data. First, if SDRs compete for customers of raw 
security-based swap data, then SDRs operating in both regimes who 
choose to subsidize their activities in the swap market by charging 
higher fees for security-based swap data will likely find themselves at 
a disadvantage relative to SDRs that operate only in the security-based 
swap regime who can afford to offer lower fees since they, by 
definition, do not cross-subsidize because they do not participate in 
both markets. However, this result depends significantly on the 
assumption of a competitive market for security-based swap data, which 
is less likely to exist when the number of registered of SDRs is small. 
Second, it is possible that there are synergies available to SDRs that 
operate in both regimes. These synergies would lower the average cost 
of public dissemination by these SDRs and reduce the level of subsidies 
needed to cover these costs. As a result, these synergies could limit

[[Page 14786]]

the size of the subsidy that users of security-based swap data would 
pay to users of swap data.
    Additionally, the Commission preliminarily believes that requiring 
free and unrestricted access to publicly-disseminated data will 
reinforce the economic effects of Rule 903(b). Rule 903(b), as adopted, 
provides that a registered SDR may disseminate information using UICs 
(such as product IDs or other codes--e.g., reference entity 
identifiers--embedded within the product IDs) or permit UICs to be used 
for reporting by its participants only if the information necessary to 
interpret such UICs is widely available on a non-fee basis. In the 
absence of a prohibition on fees for or restricted access to publicly-
disseminated data, the Commission is concerned that a registered SDR 
that wished to charge (or allow others to charge) users for the 
information necessary to understand these UICs--but could not, because 
of Rule 903(b)--might seek to do so indirectly by recharacterizing the 
charge as being for public dissemination. The Commission preliminarily 
believes that this could reduce the economic benefits of Rule 903(b).
    The Commission acknowledges that receiving data from market 
participants; cleaning, processing, and storing these data; and making 
these data available to the Commission and the public are costly 
services for registered SDRs to provide. If charging fees for raw 
security-based swap data is prohibited, registered SDRs could employ a 
number of alternative measures to ensure they have sufficient resources 
to comply with the statutory and regulatory requirements imposed on 
registered SDRs. Some of these measures may have negative consequences 
for market participants, reducing the benefits of publicly-disseminated 
data. For example, registered SDRs could charge fees to recipients of 
value-added data and services. Registered SDRs that provide such data 
and services for a fee may have incentives to limit the usefulness of 
transaction information through free public feeds, particularly in form 
and manner in which it is made available, to push market participants 
towards the fee-based services. Such an outcome could hinder the 
transparency goals of the reporting regime because those market 
participants with resources sufficient to buy value added data and 
services would continue to have an informational advantage over those 
without.
    Registered SDRs also could pass the costs of publicly disseminating 
security-based swap data through to the reporting parties who report 
transaction data to the registered SDR. Direct fees imposed on market 
participants would likely be in proportion to the number of 
transactions they execute, with more active market participants, who 
contribute more to the production of transaction information, paying a 
larger share of the costs of disseminating that information. These 
costs of SDR reporting would likely be passed through to non-dealers as 
a component of transactions costs. Non-security-based swap market 
participants, by contrast, would not bear any of the costs. This could 
have the effect of security-based swap market participants subsidizing 
other users of the raw security-based swap data through free public 
feeds.
8. Proposed Compliance Schedule for Regulation SBSR
    The compliance schedule proposed in this release is designed to 
provide affected persons, especially registered SDRs and persons with a 
duty to report security-based swap transactions to registered SDRs, 
with time to develop, test, and implement reporting and dissemination 
systems. The new proposed compliance schedule takes into consideration 
the fact that the CFTC's regulatory reporting and public dissemination 
rules are now in effect. As a result, several SDRs have registered and 
are operating under the CFTC regime in the swap market, and swap market 
participants have developed substantial infrastructure to support swap 
transaction reporting.\281\ It is likely that much of the 
infrastructure implemented in the swap market can be repurposed for the 
security-based swap market, and if so, would enable more efficient 
implementation of the Commission's regime for security-based swap 
reporting.
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    \281\ See Sec. Indus. & Fin. Mkts. Ass'n v. CFTC, Civil Action 
No. 13-1916 (PLF), slip op. at 89 (D.D.C., September 16, 2014) 
(noting that ``the plaintiffs' associations' members' declarants 
have made clear that the members (or their foreign affiliates) 
already have come into compliance with the [CFTC] Rules as they 
apply extraterritorially'').
---------------------------------------------------------------------------

    In the newly proposed compliance schedule, the two compliance 
dates, with respect to security-based swaps in a particular asset 
class, are based on the date that the first registered SDR that can 
accept security-based swaps in that asset class commences operations. 
This approach is designed to prevent regulatory reporting and public 
dissemination of security-based swap transaction data from being 
delayed while additional SDRs register with the Commission and commence 
operations, while still offering time for SDRs and market participants 
to develop the necessary policies, procedures, and infrastructure to 
become operational. For example, while reporting to a registered SDR on 
a transaction-by-transaction basis would be required on the date six 
months after the first registered SDR in an asset class commences 
operations (i.e., proposed Compliance Date 1), public dissemination 
would not be required for an additional three months (i.e., on proposed 
Compliance Date 2). This three-month period is designed to allow 
registered SDRs to evaluate compliance with the SDRs' requirements for 
transaction reports being submitted on a mandatory basis beginning on 
Compliance Date 1, and to allow persons having the duty to report--
which, as a result of the amendments proposed herein, would include 
platforms, registered clearing agencies, and reporting sides--to make 
any necessary adjustments to the transaction records that they submit. 
Registered SDRs also would have time to test that the appropriate 
subset of information provided in the regulatory report will be 
publicly disseminated, with flags as required by the registered SDR's 
policies and procedures.\282\
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    \282\ See Rules 907(a)(3) and 907(a)(4), as adopted.
---------------------------------------------------------------------------

    There are potential drawbacks to the proposed compliance schedule 
as well. First, new entrants into the SDR market might be at a 
competitive disadvantage since they would have to adhere to compliance 
dates that were set based on registration of the first SDR in that 
asset class that commences operations. This would be true particularly 
if persons with a duty to report face high switching costs between SDRs 
and could be locked in to the first registered SDR with which they 
engage. Second, the proposed compliance schedule hinges on a person 
registering and then commencing operations as an SDR. As a result, 
reporting to an SDR, and the associated public dissemination, might not 
occur for an extended period of time.
    The Commission preliminarily believes, however, that most persons 
that have the desire and ability to operate as SEC-registered SDRs are 
already operational in the swaps market as CFTC-registered SDRs, and 
each should have a strong incentive to submit applications to register 
with the Commission quickly. Thus, there is less likelihood of multiple 
applications arriving over an extended period of time, which could have 
been the case when the Commission originally proposed Rules 910 and 911 
in the Regulation SBSR Proposing Release in 2010, before the CFTC had 
finalized its

[[Page 14787]]

rules and SDRs were registered by the CFTC. The newly proposed 
compliance schedule could give added incentive to avoid delaying the 
submission of an application for registration, and to commence 
operation as an SEC-registered SDR as quickly as possible. This result 
would help the Commission and other relevant authorities obtain more 
complete information about the security-based swap market for oversight 
purposes as quickly as possible, and also allow the public to obtain 
price, volume, and transaction information about all security-based 
swaps as quickly as possible.

IX. Paperwork Reduction Act

    Certain provisions of these proposed amendments to Regulation SBSR 
contain ``collection of information requirements'' within the meaning 
of the Paperwork Reduction Act of 1995 (``PRA'').\283\ As discussed in 
Section I, supra, these proposed amendments to Regulation SBSR would 
impact Rules 900, 901, 905, 906, and 908. This release also proposes 
guidance for complying with certain aspects of Regulation SBSR and 
proposes new compliance dates for the rules in Regulation SBSR for 
which the Commission has not specified a compliance date. The titles of 
the collections for Regulation SBSR are: (1) Rule 901--Reporting 
Obligations--For Reporting Sides; (2) Rule 901--Reporting Obligations--
For Registered SDRs; (3) Rule 902--Public Dissemination of Transaction 
Reports; (4) Rule 904--Operating Hours of Registered Security-Based 
Swap Data Repositories; (5) Rule 905--Correction of Errors in Security-
Based Swap Information--For Reporting Sides; (6) Rule 905--Correction 
of Errors in Security-Based Swap Information--Non-Reporting Sides; (7) 
Rule 906(a)--Other Duties of All Participants--For Registered SDRs; (8) 
Rule 906(a)--Other Duties of All Participants--For Non-Reporting Sides; 
(9) Rule 906(b)--Other Duties of All Participants--For All 
Participants; (10) Rule 906(c)--Other Duties of All Participants--For 
Covered Participants; (11) Rule 907--Policies and Procedures of 
Registered Security-Based Swap Data Repositories; and (12) Rule 
908(c)--Substituted Compliance (OMB Control No. 3235-0718). The 
estimated collection of information burdens for Regulation SBSR are 
contained in the Regulation SBSR Adopting Release.\284\ The estimated 
changes to these burdens and costs that would result from the proposed 
rules and amendments are discussed below. Compliance with these 
collections of information requirements is mandatory. The Commission is 
submitting these collections of information to the Office of Management 
and Budget (``OMB'') for review in accordance with 44 U.S.C. 3507(d) 
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 the 
agency displays a currently valid control number.
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    \283\ 44 U.S.C. 3501 et seq.
    \284\ See Regulation SBSR Adopting Release, Section XXI.
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A. Definitions--Rule 900

    Rule 900 sets forth definitions of various terms used in Regulation 
SBSR. In this release, the Commission is proposing to amend the 
definition of ``participant'' in Rule 900(u) and to create a new 
defined term ``widely accessible''--in proposed Rule 900(tt)--that is 
used in the definition of ``publicly disseminate'' in Rule 900(cc), as 
adopted. The proposed definition of ``widely accessible'' would have to 
effect of prohibiting a registered SDR from charging fees for or 
imposing usage restrictions on the security-based swap transaction data 
that it is required to publicly disseminate under Regulation SBSR.
    Although the Commission discusses certain costs associated with 
these proposed definitions in this Section, the Commission does not 
believe that these changes themselves would result in a ``collection of 
information'' within the meaning of the PRA.

B. Reporting Obligations--Rule 901

1. Rule 901--As Adopted
    Rule 901, as adopted, specifies, with respect to each reportable 
event pertaining to covered transactions, who is required to report, 
what data must be reported, when it must be reported, where it must be 
reported, and how it must be reported. Rule 901(a), as adopted, 
establishes a ``reporting hierarchy'' that specifies the side that has 
the duty to report a security-based swap that is a covered transaction. 
Pursuant to Rule 901(b), as adopted, if there is no registered SDR that 
will accept the report required by Rule 901(a), the person required to 
make the report must report the transaction to the Commission. Rule 
901(c) sets forth the primary trade information and Rule 901(d) sets 
forth the secondary trade information that must be reported. Rule 
901(e) requires the reporting of life cycle events and adjustments due 
to life cycle events, which pursuant to Rule 901(j) must be reported 
within 24 hours of the time of occurrence, to the entity to which the 
original transaction was reported. Rule 901(f) requires a registered 
SDR to timestamp, to the second, any information submitted to it 
pursuant to Rule 901, and Rule 901(g) requires a registered SDR to 
assign a transaction ID to each security-based swap, or establish or 
endorse a methodology for transaction IDs to be assigned by third 
parties. Rule 901(h) requires reporting sides to electronically 
transmit the information required by Rule 901 in a format required by 
the registered SDR. Rule 901(i) requires reporting of pre-enactment 
security-based swaps and transitional security-based swaps to the 
extent that information about such transactions is available.
    For Reporting Sides. The Commission estimated that Rule 901, as 
adopted, will impose an estimated total first-year burden of 
approximately 1,394 hours \285\ per reporting side for a total first-
year burden of 418,200 hours for all reporting sides.\286\ The 
Commission estimated that Rule 901, as adopted, will impose ongoing 
annualized aggregate burdens of approximately 687 hours \287\ per 
reporting side for a total aggregate annualized cost of 206,100 hours 
for all reporting sides.\288\ The Commission further estimated that 
Rule 901, as adopted, will impose initial and ongoing annualized dollar 
cost burdens of $201,000 per reporting side, for total aggregate 
initial and ongoing annualized dollar cost burdens of $60,300,000.\289\
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    \285\ See Regulation SBSR Adopting Release, Section XXI(B). The 
Commission derived its estimate from the following: (355 hours (one-
time hourly burden for establishing and OMS) + 172 hours (one-time 
hourly burden for establishing security-based swap reporting 
mechanisms) + 180 hours (one-time hourly burden for compliance and 
ongoing support) = 707 hours (one-time total hourly burden). See 
Regulation SBSR Proposing Release, 75 FR 75248-50, notes 186, 194, 
and 201. (436 hours (annual-ongoing hourly burden for internal order 
management) + 33.3 hours (revised annual-ongoing hourly burden for 
security-based swap reporting mechanisms) + 218 hours (annual-
ongoing hourly burden for compliance and ongoing support) = 687.3 
hours (one-time total hourly burden. See id. at 75248-50, notes 187 
and 201 (707 one-time hourly burden + 687 revised annual-ongoing 
hourly burden = 1,394 total first-year hourly burden).
    \286\ See Regulation SBSR Adopting Release, Section XXI(B). The 
Commission derived its estimate from the following: (1,394 hours per 
reporting side x 300 reporting sides) = 418,200 hours.
    \287\ See Regulation SBSR Adopting Release, Section XXI(B). See 
Cross-Border Proposing Release, 78 FR 31112-15.
    \288\ See Regulation SBSR Adopting Release, Section XXI(B). The 
Commission derived its estimate from the following: (687 hours per 
reporting side x 300 reporting sides) = 206,100 hours.
    \289\ See Regulation SBSR Adopting Release, Section XXI(B). The 
Commission derived its estimate from the following: ($201,000 per 
reporting side x 300 reporting sides) = $60,300,000. See Cross-
Border Proposing Release, 78 FR 31113-15. The Commission originally 
estimated this burden based on discussions with various market 
participants. See Regulation SBSR Proposing Release, 75 FR 75247-50.

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[[Page 14788]]

    For Registered SDRs. The Commission estimated that the first-year 
aggregate annualized burden on registered SDRs associated with Rules 
901(f) and 901(g) will be 2,820 burden hours, which corresponds to 282 
burden hours per registered SDR.\290\ The Commission also estimated 
that the ongoing aggregate annualized burden associated with Rules 
901(f) and 901(g) will be 1,520 burden hours, which corresponds to 152 
burden hours per registered SDR.\291\
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    \290\ See Regulation SBSR Adopting Release, Section XXI(B). See 
Regulation SBSR Proposing Release, 75 FR 75250. This figure is based 
on the following: [(1,200) + (1,520)] = 2,720 burden hours, which 
corresponds to 272 burden hours per registered SDR.
    \291\ See Regulation SBSR Adopting Release, Section XXI(B).
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2. Rule 901--Proposed Amendments
    The proposed amendments to Rule 901 would establish certain 
requirements relating to the reporting of security-based swap 
transactions to a registered SDR. Rule 901 of Regulation SBSR, as 
adopted, contained ``collection of information requirements'' within 
the meaning of the PRA, and the proposed amendments to Rule 901 contain 
additional ``collection of information requirements'' within the 
meaning of the PRA, which are discussed below. The title of this 
collection is ``Rule 901--Reporting Obligations for Platforms and 
Clearing Agencies.''
a. Summary of Collection of Information
    The Commission is proposing reporting obligations for those 
security-based swaps that are clearing transactions or that are 
executed on a platform and will be submitted to clearing. In order to 
facilitate such reporting, the Commission is proposing Rules 901(a)(1), 
901(a)(2)(i), and 901(a)(3). Pursuant to new subparagraph (1) of Rule 
901(a), if a security-based swap is executed on a platform and will be 
submitted to clearing, the platform on which the transaction was 
executed shall have the duty to report the transaction to a registered 
SDR. The Commission also is proposing a new subparagraph (2)(i) of Rule 
901(a) that would assign the reporting duty for a clearing transaction 
to the registered clearing agency that is a counterparty to the 
security-based swap.
    The Commission also is proposing to add a new subparagraph (3) to 
Rule 901(a) that would require any person that has a duty to report a 
security-based swap that is submitted to clearing--which would be a 
platform or a reporting side--to provide the registered clearing agency 
with the transaction ID of the alpha and the identity of the registered 
SDR to which the alpha will be reported or has been reported.
b. Proposed Use of Information
    The security-based swap transaction information that would be 
required by the proposed amendments to Rule 901 would be used by 
registered SDRs, market participants, the Commission, and other 
relevant authorities. The information reported by platforms and 
registered clearing agencies pursuant to Rule 901 would be used by 
registered SDRs to publicly disseminate reports of security-based swap 
transactions, as well as to offer a resource for the Commission and 
other relevant authorities to obtain detailed information about the 
security-based swap market. Market participants also would use the 
information about these transactions that is publicly disseminated, 
among other things, to assess the current market for security-based 
swaps and any underlying securities and to assist in the valuation of 
their own positions. The Commission and other relevant authorities 
would use information about security-based swap transactions reported 
to and held by registered SDRs to monitor and assess systemic risks, as 
well as to examine for and consider whether to take enforcement action 
against potentially abusive trading behavior, as appropriate.
c. Respondents
    In the Regulation SBSR Adopting Release, the Commission estimated 
300 reporting side respondents and that, among the 300 reporting sides, 
approximately 50 are likely to be required to register with the 
Commission as security-based swap dealers and approximately five are 
likely to register as major security-based swap participants.\292\ The 
Commission noted that these 55 reporting sides likely will account for 
the vast majority of recent security-based swap transactions and 
reports and that there are only a limited number of security-based swap 
transactions that do not include at least one of these larger 
counterparties on either side.\293\ Finally, the Commission estimated 
that the number of registered SDRs would not exceed ten.\294\
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    \292\ See Regulation SBSR Adopting Release, Section XXI(B)(3).
    \293\ See id.
    \294\ See id.
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    Proposed Rules 901(a)(1) and 901(a)(2)(i) would assign reporting 
duties for security-based swap transactions, in certain enumerated 
cases set forth in these rules, to platforms and registered clearing 
agencies, respectively. The Commission preliminarily believes that 
these proposed amendments to Rule 901(a) would result in 14 additional 
respondents incurring the duty to report under Regulation SBSR. 
Specifically, the Commission believes that there would be ten platforms 
(exchanges and SB SEFs) and four registered clearing agencies that 
would incur such duties. Proposed Rule 901(a)(3) would require a 
person--either the platform upon which the security-based swap was 
executed or the reporting side for those security-based swaps other 
than clearing transactions--to report, for those security-bases swaps 
submitted to a registered clearing agency, the transaction ID of the 
submitted security-based swap and the identity of the registered SDR to 
which the transaction will be or has been reported. The Commission 
preliminarily believes that proposed Rule 901(a)(3) would place 
reporting obligations on 300 reporting sides and 10 platforms.
d. Total Initial and Annual Reporting and Recordkeeping Burdens
i. Platforms and Registered Clearing Agencies
    Pursuant to Rule 901, all security-based swap transactions must be 
reported to a registered SDR or to the Commission. Together, paragraphs 
(a), (b), (c), (d), (e), (h), and (j) of Rule 901 set forth the 
parameters that reporting entities must follow to report security-based 
swap transactions. Because platforms and registered clearing agencies 
now would have the duty to report, initial and ongoing burdens would be 
placed on these entities. The Commission preliminarily believes that 
these burdens will be a function of, among other things, the number of 
reportable events and the data elements required to be reported for 
each such event.
    In the Regulation SBSR Adopting Release, the Commission estimated 
that respondents would face three categories of burdens to comply with 
Rule 901.\295\ The Commission preliminarily believes that platforms and 
registered clearing agencies would face the same categories of burdens 
as those identified in the Regulation SBSR Adopting Release for other 
types of respondents. First, each platform and registered clearing 
agency

[[Page 14789]]

would likely have to develop the ability to capture the relevant 
transaction information.\296\ Second, each platform and registered 
clearing agency would have to implement a reporting mechanism. Third, 
each platform and registered clearing agency would have to establish an 
appropriate compliance program and support for the operation of any 
system related to the capture and reporting of transaction information. 
The Commission preliminarily believes that platforms and registered 
clearing agencies would need to develop capabilities similar to those 
highlighted in the Regulation SBSR Adopting Release in order to be able 
to capture and report security-based swap transactions. The Commission 
also preliminarily believes that, once a platform or registered 
clearing agency's reporting infrastructure and compliance systems are 
in place, the burden of reporting each individual reportable event will 
be small when compared to the burdens of establishing the reporting 
infrastructure and compliance systems.\297\ The Commission 
preliminarily believes that all of the reportable events, for which 
platforms and registered clearing agencies would be responsible for 
reporting, will be reported through electronic means.
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    \295\ See Regulation SBSR Adopting Release, Section XXI(B)(4).
    \296\ In the Regulation SBSR Adopting Release, the Commission 
discussed the development, by reporting sides, of an internal order 
and trade management system. The Commission believes that the costs 
of developing a transaction processing system are comparable to the 
costs discussed therein. Although the actual reporting 
infrastructure needed by platforms and registered clearing agencies 
could have some attributes that differ from the attributes of an 
internal order and trade management system, the Commission 
nonetheless preliminarily believes that the cost of implementing a 
transaction processing system, and establishing an appropriate 
compliance program and support for the operation of the system, will 
be similar to the costs for reporting sides discussed in the 
Regulation SBSR Adopting Release.
    \297\ In the Regulation SBSR Adopting Release, the Commission 
reiterated its belief that reporting specific security-based swap 
transactions to a registered SDR--separate from the establishing of 
infrastructure and compliance systems that support reporting--would 
impose an annual aggregate cost of approximately $5,400,000. See 
Regulation SBSR Adopting Release, Section XXI(B)(4).
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    The Commission estimates that the total burden placed upon 
reporting sides as a result of Rule 901 would be approximately 1,361 
hours \298\ per reporting side during the first year.\299\ The 
Commission preliminarily believes that this per-entity cost would be 
the same for platforms and registered clearing agencies, resulting in a 
total first-year burden of 19,054 hours for all platforms and 
registered clearing agencies under the proposed amendments to Rule 
901.\300\ The Commission estimates that the proposed amendments to Rule 
901 would impose ongoing annualized aggregate burdens of approximately 
654 hours \301\ per reporting entity for a total aggregate annualized 
cost of 9,156 hours for all platforms and registered clearing 
agencies.\302\ The Commission further preliminarily estimates that the 
proposed amendments to Rule 901 would impose initial and ongoing 
annualized dollar cost burdens of $201,000 per reporting entity,\303\ 
for total aggregate initial and ongoing annualized dollar cost burdens 
of $2,814,000.\304\
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    \298\ The Commission derived its estimate from the following: 
(355 hours (one-time hourly burden for establishing and OMS) + 172 
hours (one-time hourly burden for establishing security-based swap 
reporting mechanisms) + 180 hours (one-time hourly burden for 
compliance and ongoing support) = 707 hours (one-time total hourly 
burden). See Regulation SBSR Proposing Release, 75 FR 75248-50, 
notes 186, 194, and 201. (436 hours (annual-ongoing hourly burden 
for order management) + 218 hours (annual-ongoing hourly burden for 
compliance and ongoing support) = 654 hours (one-time total hourly 
burden. See id. at 75248-50, notes 187 and 201 (707 one-time hourly 
burden + 654 revised annual-ongoing hourly burden = 1,361 total 
first-year hourly burden).
    \299\ See Regulation SBSR Adopting Release, Section XXI(B)(4).
    \300\ The Commission derived its estimate from the following: 
(1,361 hours per reporting entity x 14 platforms and registered 
clearing agencies) = 19,054 hours.
    \301\ See supra note 298.
    \302\ The Commission derived its estimate from the following: 
(654 hours per reporting entity x 14 platforms and registered 
clearing agencies) = 9,156 hours.
    \303\ This figure is based on the sum of per-reporting entity 
estimates for connectivity to SDRs for data reporting, as follows: 
[($100,000 hardware- and software-related expenses, including 
necessary back-up and redundancy, per SDR connection) x (2 SDR 
connections per reporting entity)] + [($250/gigabyte of storage 
capacity) x (4 gigabytes of storage capacity)] = $201,000. See 
Regulation SBSR Proposing Release, 75 FR 75248-49, notes 188 and 
193.
    \304\ The Commission derived its estimate from the following: 
($201,000 per reporting side x 14 reporting sides) = $2,814,000. See 
also Cross-Border Proposing Release, 78 FR 31112-15.
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    In the Regulation SBSR Adopting Release, the Commission revised its 
previous estimates of the number of reportable events associated with 
security-based swap transactions to approximately 3 million reportable 
events per year under Rule 901, an estimate that the Commission 
continues to believe is valid for the purposes of the Regulation SBSR 
Proposed Amendments.\305\ The Commission estimated in the Regulation 
SBSR Adopting Release that Rule 901(a), as adopted in that release, 
will result in approximately 2 million reportable events related to 
covered transactions.\306\
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    \305\ See Regulation SBSR Adopting Release, Section 
XXI(B)(4)(b).
    \306\ See id.
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    The Commission preliminarily estimates that 1 million of the 3 
million total reportable events would be reported as a result of the 
proposed amendments to Rule 901.\307\ The Commission believes that 
these 1 million reportable events would include the initial reporting 
of the security-based swap by platforms and clearing agencies as well 
as the reporting of any life cycle events. The Commission preliminarily 
estimates that of the 1 million reportable events, approximately 
370,000 would involve the reporting of new security-based swap 
transactions, and approximately 630,000 would involve the reporting of 
life cycle events under Rule 901(e).\308\ As a result, the Commission 
preliminarily estimates that platforms will be responsible for the 
reporting of approximately 120,000 security-based swaps.\309\ The 
Commission preliminarily estimates that the proposed amendments to Rule 
901(a) would result in platforms having a total burden of 600 hours 
attributable to the reporting of security-based swaps by platform to 
registered SDRs under Rules 901(c) and 901(d) over the course of a 
year.\310\ The Commission preliminarily

[[Page 14790]]

estimates that the proposed amendments to Rule 901(a) would result in 
registered clearing agencies having a total burden of 1,250 hours 
attributable to the reporting of security-based swaps to registered 
SDRs over the course of a year.\311\ The Commission preliminarily 
estimates that the proposed amendments to Rule 901(a) would result in 
registered clearing agencies having a total burden of 3,150 hours 
attributable to the reporting of life cycle events to registered SDRs 
under Rule 901(e) over the course of a year.\312\ The Commission 
preliminarily believes that the proposed amendments would result in a 
total reporting burden for registered clearing agencies under Rules 
901(c) and (d) along with the reporting of life cycle events under Rule 
901(e) of 4,400 burden hours.\313\ The Commission believes that all 
reportable events that would be reported by platforms and registered 
clearing agencies pursuant to these proposed amendments would be 
reported through electronic means.
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    \307\ The Commission is proposing to amend Rule 901(a)(2) to 
require a registered clearing agency to be the reporting side for 
clearing transactions to which it is a counterparty. The Commission 
is further proposing to amend Rule 901(e)(1) to provide that a 
``registered clearing agency shall report whether or not it has 
accepted a security-based swap for clearing.'' Proposed Rule 
901(a)(2)(i), discussed above, would require registered clearing 
agencies to report security-based swap transaction information for 
clearing transactions. These reportable events have been included in 
the Commission's estimates of the number of reportable events for 
the purposes of Rule 901. In arriving at the of 1 million reporting 
events, the Commission has included the following: (1) The 
termination of the original or ``alpha'' security-based swap; (2) 
the creation of beta and gamma security-based swaps; (3) the 
termination of beta, gamma, and any previous open positions during 
each netting cycle; and (4) any other transactions that are entered 
into by the registered clearing agency.
    \308\ See supra note 235.
    \309\ The Commission preliminarily believes that platforms will 
be responsible only for the reporting of any initial security-based 
swaps that are executed on their facilities. Since only platform-
executed security-based swaps that will be submitted to a registered 
clearing agency for clearing are subject to this proposal, platforms 
would not be responsible for any life cycle event reporting under 
Rule 901(e). The Commission estimates that platforms would be 
responsible for reporting only approximately one third of the 
360,000 security-based swaps (or 120,000 security-based swaps) and 
registered clearing agencies (as a result of the creation of new 
security-based swaps during the clearing process) would be 
responsible for the reporting of the remaining two-thirds of 
security-based swaps (or 250,000 security-based swaps).
    \310\ See Regulation SBSR Adopting Release, Section XXI(B)(4). 
In the Regulation SBSR Proposing Release, the Commission estimated 
that it would take approximately 0.005 hours for each security-based 
swap transaction to be reported. See 75 FR 75249, note 195. The 
Commission calculates the following: ((120,000 x 0.005)/(10 
platforms)) = 60 burden hours per platform or 600 total burden hours 
attributable to the reporting of security-based swaps.
    \311\ See Regulation SBSR Adopting Release, Section XXI(B)(4). 
In the Regulation SBSR Proposing Release, the Commission estimated 
that it would take approximately 0.005 hours for each security-based 
swap transaction to be reported. See 75 FR 75249, note 195. The 
Commission calculates the following: ((250,000 x 0.005)/(4 
registered clearing agencies)) = 312.5 burden hours per registered 
clearing agency or 1,250 total burden hours attributable to the 
reporting of security-based swaps.
    \312\ See Regulation SBSR Adopting Release, Section XXI(B)(4). 
In the Regulation SBSR Proposing Release, the Commission estimated 
that it would take approximately 0.005 hours for each security-based 
swap transaction to be reported. See 75 FR 75249, note 195. The 
Commission calculates the following: ((630,000 x 0.005)/(4 
registered clearing agencies)) = 787.5 burden hours per registered 
clearing agency or 3,150 total burden hours attributable to the 
reporting of life cycle events under Rule 901(e).
    \313\ As is discussed immediately above, the Commission 
preliminarily believes that registered clearing agencies would incur 
a burden of 1,250 hours attributable to the reporting of security-
based swaps pursuant to proposed Rule 901(a)(2)(i) along with a 
burden of 3,150 hours attributable to the reporting of life cycle 
events under Rule 901(e). As discussed in note 309, supra, platforms 
would not be responsible for the reporting of any life cycle events 
of any platform-executed security-based swap that will be submitted 
to clearing.
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    The Commission recognizes that some entities that would qualify as 
platforms or registered clearing agencies may have already spent time 
and resources building the infrastructure that will support their 
eventual reporting of security-based swaps. The Commission notes that, 
as a result, the burdens and costs estimated herein could be greater 
than those actually incurred by affected parties as a result of 
compliance with the proposed amendments to Rule 901(a). Nonetheless, 
the Commission believes that its estimates represent a reasonable upper 
bound of the actual burdens and costs required to comply with the 
paperwork burdens associated with the proposed amendments to Rule 
901(a).
ii. Platforms and Reporting Sides
    Proposed Rule 901(a)(3) would require a person, either the platform 
upon which the security-based swap was executed or the reporting side 
for those security-based swaps other than clearing transactions, to 
report, for those security-bases swaps submitted to a registered 
clearing agency, the transaction ID of the submitted security-based 
swap and the identity of the registered SDR to which the transaction 
will be or has been reported.
    Rule 901(a)(3) would require certain information (transaction ID 
and the identity of the registered SDR) to be reported to a registered 
clearing agency only if such security-based swap has been submitted to 
a registered clearing agency for clearing. As a result, platforms and 
reporting sides required to report transaction IDs and the identity of 
a registered SDR will already have put into place any infrastructure 
needed to report these security-based swaps to a registered clearing 
agency.\314\ However, the Commission does believe that including these 
items would result in additional development and maintenance burdens. 
Specifically, the Commission preliminarily believes that the additional 
one-time burden related to the development of the ability to capture 
the additional specific data elements required by proposed Rule 
901(a)(3) would be 10 burden hours and the additional one-time burden 
related to the implementation of a reporting mechanism would be 6 
burden hours, per platform and reporting side.\315\ The Commission 
preliminarily believes that the additional ongoing burden related to 
the ability to capture the additional specific data elements required 
by proposed Rule 901(a)(3) would be 10 burden hours and the additional 
ongoing burden related to the maintenance of the reporting mechanism 
would be 2 burden hours, per platform and reporting side.\316\
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    \314\ The required infrastructure for platforms and related 
burdens and costs are discussed in Section IX(B)(2)(d)(i), supra. 
For reporting sides, the required infrastructure and related burdens 
and costs are already accounted for in the Regulation SBSR Adopting 
Release, Section XXI(B)(4). The additional burdens discussed in this 
paragraph related to the ability to capture the additional specific 
data elements, as would be required by proposed Rule 901(a)(3), 
would be incremental burdens that are in addition to the previously 
established infrastructure burdens and costs.
    \315\ The Commission preliminarily estimates that the additional 
burdens would be: [(Sr. Programmer (5 hours) + Sr. Systems Analyst 
(5 hours)) = 10 burden hours (development of the ability to capture 
transaction information); (Sr. Programmer (3 hours) + Sr. Systems 
Analyst (3 hours)) = 6 burden hours (implementation of reporting 
mechanism)]. The total one-time burden associated with the 
amendments to 901(a) would be 16 burden hours per platform and 
reporting side for a total one-time burden of 4960 hours (16 x 310 
(300 reporting sides + 10 platforms)).
    \316\ The Commission preliminarily estimates that the additional 
burdens would be: [(Sr. Programmer (5 hours) + Sr. Systems Analyst 
(5 hours)) = 10 burden hours (maintenance of transaction capture 
system); (Sr. Programmer (1 hour) + Sr. Systems Analyst (1 hour)) = 
2 burden hours (maintenance of reporting mechanism)]. The total 
ongoing burden associated with the proposed amendments to Rule 
901(a) would be 12 burden hours per platform and reporting side for 
a total ongoing burden of 3,720 hours (12 x 310 (300 reporting sides 
+ 10 platforms)).
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iii. Bunched Order Executions and Allocations
    As explained in Section VIII of the Regulation SBSR Adopting 
Release and Section III, supra, bunched order executions and 
allocations must be reported to a registered SDR pursuant to Rule 
901(a). The Regulation SBSR Adopting Release explains how Regulation 
SBSR applies to executed bunched orders that are reported pursuant to 
the reporting hierarchy in Rule 901(a)(2)(ii), as adopted. That release 
also explains how Regulation SBSR applies to the security-based swaps 
that result from allocation of an executed bunched order, if the 
resulting security-based swaps are uncleared. In Section III, supra, 
the Commission explained how Regulation SBSR, as adopted and as 
proposed to be amended by this release, would apply to a platform-
executed bunched order that will be submitted to clearing, and the 
security-based swaps that result from the allocation of any bunched 
order execution, if the resulting security-based swaps are cleared. The 
Commission included in its estimates of the number of reportable events 
in the Regulation SBSR Adopting Release security-based swaps that 
result from the allocation of bunched order executions that would be 
submitted to clearing, if the resulting security-based swaps are 
cleared. Thus, there is no burden associated with bunched order 
executions and allocations that has not already been taken into 
account.
iv. Prime Brokerage Transactions
    The Commission preliminarily believes that in a prime brokerage 
transaction the customer/executing dealer transaction is a security-
based

[[Page 14791]]

swap that must be reported pursuant to Rule 901(a)(2)(ii), as adopted. 
The Commission further preliminarily believes that the prime broker/
customer and prime broker/executing dealer transactions also are 
security-based swaps that must be reported pursuant to Rule 
901(a)(2)(ii). In this release, the Commission clarifies that prime 
brokerage transactions were included in the estimates of security-based 
swap transactions that are required to be reported, and as a result, do 
not represent any new burdens.\317\
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    \317\ As is discussed in Section VIII(D)(6), supra, the 
Commission does not believe that the interpretive guidance would 
create any new duties. As a result, the Commission does not believe 
that there would be any burdens or any additional costs or benefits 
beyond those already considered in the Regulation SBSR Adopting 
Release. The Commission's estimates of the number of reportable 
events included all legs of prime brokerage transactions. See supra 
note 276.
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e. Recordkeeping Requirements
    Apart from the duty to report certain transaction information to a 
registered SDR, the Commission does not believe that Rule 901 would 
result in any recordkeeping requirement for platform and reporting 
sides. As is stated in the SDR Adopting Release, Rule 13n-5(b)(4) under 
the Exchange Act requires an SDR to maintain the transaction data and 
related identifying information that it collects for not less than five 
years after the applicable security-based swap expires, and historical 
positions for not less than five years.\318\ Accordingly, security-
based swap transaction reports received by a registered SDR pursuant to 
Rule 901 would be required to be retained by the registered SDR for not 
less than five years after the applicable security-based swap expires. 
The Commission does not believe that reporting of security-based swap 
transactions by platforms or registered clearing agencies--or the 
inclusion of two additional data elements--would have any impact on the 
PRA burdens of registered SDRs as detailed in the SDR Adopting Release.
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    \318\ See SDR Adopting Release, Section VI(E)(4).
---------------------------------------------------------------------------

f. Collection of Information Is Mandatory
    Each collection of information discussed above is mandatory.
g. Confidentiality of Responses to Collection of Information
    A registered SDR, pursuant to Sections 13(n)(5) of the Exchange Act 
and Rules 13n-4(b)(8) and 13n-9 thereunder, is required to maintain the 
privacy of the security-based swap information it receives. For the 
majority of security-based swap transactions, the information collected 
pursuant to Rule 901(c) by a registered SDR will be publicly 
disseminated. However, certain security-based swaps are not subject to 
Rule 902's public dissemination requirement; therefore, information 
about these transactions will not be publicly available. In addition, 
for all security-based swaps, the information collected pursuant to 
Rule 901(d) is for regulatory purposes only and will not be widely 
available to the public. To the extent that the Commission receives 
confidential information pursuant to this collection of information, 
such information would be kept confidential, subject to the provisions 
of applicable law.
3. Rule 901--Aggregate Total PRA Burdens and Costs
    Based on the foregoing, the Commission estimates the following 
aggregate total PRA burdens and costs, by category of entity, resulting 
from Rule 901, as adopted and as proposed to be amended herein.
a. For Platforms
    As discussed above, the Regulation SBSR Adopting Release, the 
Commission estimated burdens and costs for reporting sides under Rule 
901. The Commission estimated that Rule 901, as adopted, will impose an 
estimated total first-year burden of approximately 1,394 hours \319\ 
per reporting side for a total first-year burden of 418,200 hours for 
all reporting sides.\320\ The Commission estimated that Rule 901, as 
adopted, will impose ongoing annualized aggregate burdens of 
approximately 687 hours \321\ per reporting side for a total aggregate 
annualized cost of 206,100 hours for all reporting sides.\322\ The 
Commission further estimated that Rule 901, as adopted, will impose 
initial and ongoing annualized dollar cost burdens of $201,000 per 
reporting side, for total aggregate initial and ongoing annualized 
dollar cost burdens of $60,300,000.\323\
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    \319\ See Regulation SBSR Adopting Release, Section XXI(B).
    \320\ See id.
    \321\ See id.
    \322\ See id.
    \323\ See id.
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    The Commission preliminarily believes that platforms would have a 
first-year burden of 1,361 hours per platform, for a total first-year 
burden of 13,610 hours under proposed Rule 901(a)(1).\324\ The 
Commission also preliminarily estimates that proposed Rule 901(a)(1) 
would impose ongoing annualized aggregate burdens of approximately 654 
hours \325\ per platform for a total aggregate annualized burden of 
6,540 hours for all platforms.\326\ The Commission further 
preliminarily estimates that the proposed Rule 901(a)(1) would impose 
initial and ongoing annualized dollar cost burdens of $201,000 per 
platform,\327\ for total aggregate initial and ongoing annualized 
dollar cost burdens of $2,010,000.\328\
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    \324\ The Commission derived its estimate from the following: 
(1,361 hours per platform x 10 platforms) = 13,610 hours.
    \325\ See Cross-Border Proposing Release, 78 FR 31112-15.
    \326\ The Commission derived its estimate from the following: 
(654 hours per platform x 10 platforms) = 6,540 hours.
    \327\ This figure is based on the sum of per-entity estimates 
for connectivity to SDRs for data reporting, as follows: [($100,000 
hardware- and software-related expenses, including necessary back-up 
and redundancy, per SDR connection) x (2 SDR connections per 
platform)] + [($250/gigabyte of storage capacity) x (4 gigabytes of 
storage capacity)] = $201,000.
    \328\ The Commission derived its estimate from the following: 
($201,000 per platform x 10 platforms) = $2,010,000. See also Cross-
Border Proposing Release, 78 FR 31112-15.
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    The Commission preliminarily estimates that the proposed amendments 
to Rule 901(a) would result in platforms having a total burden of 600 
hours attributable to the reporting of security-based swaps to 
registered SDRs over the course of a year, or 60 hours per platform.
    The Commission preliminarily believes that the additional one-time 
burden related to the development of the ability to capture the 
relevant transaction information, required by proposed Rule 901(a)(3), 
would be 10 burden hours and the additional one-time burden related to 
the implementation of a reporting mechanism would be 6 burden hours, 
per platform. The Commission preliminarily believes that the additional 
ongoing burden related to the development of the ability to capture the 
relevant transaction information would be 10 burden hours and the 
additional ongoing burden related to the maintenance of the reporting 
mechanism would be 2 burden hours, per platform. As a result, the 
Commission estimates that the total first-year burden would be 28 hours 
and the ongoing annual burden would be 12 hours.
    As a result of these proposed requirements, the Commission 
preliminarily estimates that platforms would have a total first-year 
burden of 14,490 hours, or 1,449 hours per platform.\329\ In addition, 
the

[[Page 14792]]

Commission preliminarily estimates that platforms would have an ongoing 
annual burden of 7,260 hours, or 726 hours per platform.\330\ The 
Commission also preliminarily estimates that each platform would have 
connectivity costs of $201,000 in the first year and each year 
thereafter.
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    \329\ The Commission derived its estimate from the following: 
((1,361 hours + 60 hours + 28) per platform x 10 platforms) = 14,490 
hours.
    \330\ The Commission derived its estimate from the following: 
((654 hours + 60 hours + 12 hours) per platform x 10 platforms) = 
7,260 hours.
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b. For Registered Clearing Agencies
    The Commission preliminarily believes that registered clearing 
agencies would have a first-year burden of 1,361 hours per registered 
clearing agency, for a total first-year burden of 5,444 hours under 
Rule 901 (before including the burdens related to the reporting of 
individual security-based swap transactions).\331\ The Commission also 
preliminarily estimates that Rule 901 would impose ongoing annualized 
aggregate burdens of approximately 654 hours \332\ per registered 
clearing agency for a total aggregate annualized burden of 2,616 hours 
for all registered clearing agencies.\333\ The Commission further 
preliminarily estimates that the proposed Rule 901(a)(2)(i) would 
impose initial and ongoing annualized dollar cost burdens of $201,000 
per registered clearing agency,\334\ for total aggregate initial and 
ongoing annualized dollar cost burdens of $804,000.\335\
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    \331\ The Commission derived its estimate from the following: 
(1,361 hours per registered clearing agency x 4 registered clearing 
agencies) = 5,444 hours.
    \332\ See supra note 302.
    \333\ The Commission derived its estimate from the following: 
(654 hours per reporting entity x 4 registered clearing agencies) = 
2,616 hours.
    \334\ This figure is based on the sum of per-reporting entity 
estimates for connectivity to SDRs for data reporting, as follows: 
[($100,000 hardware- and software-related expenses, including 
necessary back-up and redundancy, per SDR connection) x (2 SDR 
connections per reporting entity)] + [($250/gigabyte of storage 
capacity) x (4 gigabytes of storage capacity)] = $201,000.
    \335\ The Commission derived its estimate from the following: 
($201,000 per reporting side x 4 registered clearing agencies) = 
$804,000. See also Cross-Border Proposing Release, 78 FR 31112-15.
---------------------------------------------------------------------------

    The Commission preliminarily estimates that the proposed Rule 
901(a)(2)(i) would result in registered clearing agencies having a 
total burden of 1,250 hours attributable to the initial reporting of 
security-based swaps to registered SDRs over the course of a year, or 
312.5 hours per registered clearing agency. The Commission 
preliminarily estimates that the proposed amendments to Rule 901(a) 
would result in registered clearing agencies having a total burden of 
3,150 hours attributable to the reporting of life cycle events by 
registered clearing agencies to registered SDRs under Rule 901(e) over 
the course of a year, or 787.5 hours per registered clearing agency. 
The Commission preliminarily believes that the proposed amendments 
would result in a total annual burden on registered clearing agencies 
to report security-based swaps and life cycle events of 4,400 burden 
hours, or 1,100 hours per registered clearing agency.
    The Commission preliminarily estimates that, as a result of these 
proposed requirements, registered clearing agencies would have a total 
first-year burden of 9,844 hours, or 2,461 hours per registered 
clearing agency.\336\ In addition, the Commission preliminarily 
estimates that registered clearing agencies would have an ongoing 
annual burden of 7,328 hours, or 1,754 hours per registered clearing 
agency.\337\ The Commission also preliminarily estimates that each 
registered clearing agency would have connectivity costs of $201,000 in 
the first year and each year thereafter.\338\
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    \336\ The Commission derived its estimate from the following: 
((1,361 hours + 312.5 hours + 787.5 hours) per registered clearing 
agency x 4 registered clearing agencies) = 9,844 hours.
    \337\ The Commission derived its estimate from the following: 
((654 hours + 312.5 hours + 787.5 hours) per registered clearing 
agency x 4 registered clearing agencies) = 7,016 hours.
    \338\ See supra note 334.
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c. For Reporting Sides
    The Commission preliminarily believes that, as a result of proposed 
Rule 901(a)(3), reporting sides would have a first-year burden of 1,394 
hours per reporting side, for a total first-year burden of 418,200 
hours.\339\ The Commission also preliminarily estimates that proposed 
Rule 901(a)(3) would impose ongoing annualized aggregate burdens of 
approximately 687 hours \340\ per reporting side, for a total aggregate 
annualized burden of 206,100 hours for all reporting sides.\341\ The 
Commission further preliminarily estimates that the proposed Rule 
901(a)(3) would impose initial and ongoing annualized dollar cost 
burdens of $201,000 per registered clearing agency,\342\ for total 
aggregate initial and ongoing annualized dollar cost burdens of 
$60,300,000.\343\
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    \339\ The Commission derived its estimate from the following: 
(1,394 hours per reporting side x 300 reporting sides) = 418,200 
hours.
    \340\ See Cross-Border Proposing Release, 78 FR 31112-15.
    \341\ The Commission derived its estimate from the following: 
(687 hours per reporting side x 300 reporting sides) = 206,100 
hours.
    \342\ This figure is based on the sum of per-reporting side 
estimates for connectivity to SDRs for data reporting, as follows: 
[($100,000 hardware- and software-related expenses, including 
necessary back-up and redundancy, per SDR connection) x (2 SDR 
connections per reporting side)] + [($250/gigabyte of storage 
capacity) x (4 gigabytes of storage capacity)] = $201,000.
    \343\ The Commission derived its estimate from the following: 
($201,000 per reporting side x 300 reporting sides) = $60,300,000. 
See also Cross-Border Proposing Release, 78 FR 31112-15.
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    As discussed above, the Commission estimated that Rule 901(a), as 
previously adopted, will result in reporting sides having a total 
burden of 2,500 hours attributable to the reporting of security-based 
swaps to registered SDRs under Rules 901(c) and 901(d) over the course 
of a year, or 8.33 hours per reporting side. The Commission further 
estimated that Rule 901(a), as previously adopted, would result in 
reporting sides having a total burden of 7,500 hours attributable to 
the reporting of life cycle events to registered SDRs under Rule 901(e) 
over the course of a year, or 25 hours per reporting side. As a result, 
the Commission stated its belief that the total burden associated with 
the reporting of security-based swaps under Rules 901(c) and 901(d), 
along with the reporting of life cycle events under Rule 901(e), would 
be 10,000 hours, or 33.33 hours per reporting side.
    The Commission preliminarily believes that the additional one-time 
burden related to the development of the ability to capture the 
relevant transaction information, required by proposed Rule 901(a)(3), 
would be 10 burden hours and the additional one-time burden related to 
the implementation of a reporting mechanism would be 6 burden hours, 
per reporting side. The Commission preliminarily believes that the 
additional ongoing burden related to the development of the ability to 
capture the relevant transaction information would be 10 burden hours 
and the additional ongoing burden related to the maintenance of the 
reporting mechanism would be 2 burden hours, per reporting side. As a 
result, the Commission estimates that the total first-year burden would 
be 28 hours and the ongoing annual burden would be 12 hours.
    As a result of these proposed requirements, the Commission 
preliminarily estimates that reporting sides would have a total first-
year burden of 436,599 hours, or 1,455.33 hours per reporting 
side.\344\ In addition, the Commission preliminarily estimates that 
reporting sides would have an ongoing annual burden of 219,699 hours, 
or 732.33 hours per reporting

[[Page 14793]]

side.\345\ The Commission also preliminarily estimates that each 
reporting side would have connectivity costs of $201,000 in the first 
year and each year thereafter.
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    \344\ The Commission derived its estimate from the following: 
((1,394 hours + 33.33 hours + 28) per reporting sides x 300 
reporting sides) = 436,599 hours.
    \345\ The Commission derived its estimate from the following: 
((687 hours + 33.33 hours + 12 hours) per reporting side x 300 
reporting sides) = 219,699 hours.
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C. Correction of Errors in Security-Based Swap Information--Rule 905

1. Rule 905--As Adopted
    Rule 905, as adopted, establishes procedures for correcting errors 
in reported and disseminated security-based swap information. Under 
Rule 905(a)(1), where a side that was not the reporting side for a 
security-based swap transaction discovers an error in the information 
reported with respect to such security-based swap, the counterparty 
must promptly notify the reporting side of the error. Under Rule 
905(a)(2), as adopted, where a reporting side for a security-based swap 
transaction discovers an error in the information reported with respect 
to a security-based swap, or receives notification from its 
counterparty of an error, the reporting side must promptly submit to 
the entity to which the security-based swap was originally reported an 
amended report pertaining to the original transaction. The amended 
report must be submitted to the registered SDR in a manner consistent 
with the policies and procedures of the registered SDR required 
pursuant to Rule 907(a)(3).
    Rule 905(b), as adopted, sets forth the duties of a registered SDR 
relating to corrections. If the registered SDR either discovers an 
error in a transaction on its system or receives notice of an error 
from a reporting side, Rule 905(b)(1) requires the registered SDR to 
verify the accuracy of the terms of the security-based swap and, 
following such verification, promptly correct the erroneous information 
contained in its system. Rule 905(b)(2) further requires that, if such 
erroneous information relates to a security-based swap that the 
registered SDR previously disseminated and falls into any of the 
categories of information enumerated in Rule 901(c), the registered SDR 
must publicly disseminate a corrected transaction report of the 
security-based swap promptly following verification of the trade by the 
counterparties to the security-based swap, with an indication that the 
report relates to a previously disseminated transaction.
    In the Regulation SBSR Adopting Release, the Commission stated its 
belief that, with respect to reporting sides, Rule 905(a) will impose 
an initial, one-time burden associated with designing and building the 
reporting side's reporting system to be capable of submitting amended 
security-based swap transactions to a registered SDR. In the Regulation 
SBSR Adopting Release, for reporting sides, the Commission estimated 
that Rule 905(a) will impose an initial (first-year) aggregate burden 
of 15,015 hours, which is 50.0 burden hours per reporting side,\346\ 
and an ongoing aggregate annualized burden of 7,035 hours, which is 
23.5 burden hours per reporting side.\347\
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    \346\ See Regulation SBSR Adopting Release, Section XXI(F).
    \347\ See id.
---------------------------------------------------------------------------

    With respect to the actual submission of amended transaction 
reports required under Rule 905(a)(2), the Commission stated its belief 
that this will not result in a material burden because this will be 
done electronically though the reporting system that the reporting side 
must develop and maintain to comply with Rule 901. The overall burdens 
associated with such a reporting system are addressed in the 
Commission's analysis of Rule 901.
    With regard to non-reporting-side participants, the Commission 
stated its belief that Rule 905(a) will impose an initial and ongoing 
burden associated with promptly notifying the relevant reporting entity 
after discovery of an error as required under Rule 905(a)(1). In the 
Regulation SBSR Adopting Release, the Commission estimated that the 
annual burden will be 998,640 hours, which corresponds to 208.05 burden 
hours per non-reporting-side participant.\348\ This figure was based on 
the Commission's estimate of (1) 4,800 non-reporting-side participants; 
and (2) 1 transaction per day per non-reporting-side participant.\349\ 
The burdens of Rule 905 on reporting sides and non-reporting-side 
participants will be reduced to the extent that complete and accurate 
information is reported to registered SDRs in the first instance 
pursuant to Rule 901.
---------------------------------------------------------------------------

    \348\ See id.
    \349\ See id.
---------------------------------------------------------------------------

    Rule 905(b) requires a registered SDR to develop protocols 
regarding the reporting and correction of erroneous information. In the 
Regulation SBSR Adopting Release, however, the Commission stated its 
belief that this duty would represent only a minor extension of other 
duties for which the Commission is estimating burdens, and 
consequently, will not impose substantial additional burdens on a 
registered SDR. The Commission noted that a registered SDR will be 
required to have the ability to collect and maintain security-based 
swap transaction reports and update relevant records under the rules 
adopted in the SDR Adopting Release. Likewise, the Commission noted 
that a registered SDR must have the capacity to disseminate additional, 
corrected security-based swap transaction reports under Rule 902. The 
Commission concluded that the burdens associated with Rule 905--
including systems development, support, and maintenance--are addressed 
in the Commission's analysis of those other rules and, thus, the 
Commission stated its belief that Rule 905(b) will impose only an 
incremental additional burden on registered SDRs. In the Regulation 
SBSR Adopting Release, the Commission estimated that developing and 
publicly providing the necessary procedures will impose on each 
registered SDR an initial one-time burden on each registered SDR of 
approximately 730 burden hours.\350\ The Commission further estimated 
that to review and update such procedures on an ongoing basis will 
impose an annual burden on each SDR of approximately 1,460 burden 
hours.\351\
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    \350\ See id.
    \351\ See id.
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    Accordingly, in the Regulation SBSR Adopting Release, the 
Commission estimated that the initial (first-year) aggregate annualized 
burden on registered SDRs under Rule 905 will be 21,900 burden hours, 
which corresponds to 2,190 burden hours for each registered SDR.\352\ 
The Commission further estimated that the ongoing aggregate annualized 
burden on registered SDRs under Rule 905 will be 14,600 burden hours, 
which corresponds to 1,460 burden hours for each registered SDR.\353\
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    \352\ See id.
    \353\ See id.
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2. Rule 905--Proposed Amendments
    Rule 905, as adopted, establishes a mechanism for reporting 
corrections of previously submitted security-based swap transaction 
information and assigns certain duties to the counterparties to a 
transaction and to the registered SDR that holds the transaction. In 
light of the Commission's proposed amendment to Rule 901(a) to require 
a platform to report a security-based swap that is executed on the 
platform and that will be submitted to clearing, the Commission is 
proposing to make conforming changes to Rule 905(a) to require the 
person having the duty to report the initial transaction to correct 
previously reported erroneous

[[Page 14794]]

information if it discovers an error. Thus, under the proposed 
amendments to Rule 905(a), the person having the duty to report a 
security-based swap, whether a counterparty or a platform, would be 
required to correct previously reported erroneous information with 
respect to that security-based swap if it discovers an error.
    Certain provisions of Rule 905 of Regulation SBSR contain 
``collection of information requirements'' within the meaning of the 
PRA. The title of this collection is ``Rule 905--Correction of Errors 
in Security-Based Swap Information.''
a. Summary of Collection of Information
    Rule 905 establishes duties for security-based swap counterparties 
and registered SDRs to correct errors in information that previously 
has been reported.
    Duty to correct. Under the proposed amendment to Rule 905(a)(1), 
where a person that was not the reporting side for a security-based 
swap transaction discovers an error in the information reported with 
respect to such security-based swap, that person must promptly notify 
the person having the duty to report the security-based swap of the 
error. Under the proposed amendment to Rule 905(a)(2), where a person 
having the duty to report a security-based swap transaction discovers 
an error in the information reported with respect to a security-based 
swap, or receives notification from a counterparty of an error, such 
person must promptly submit to the entity to which the security-based 
swap was originally reported an amended report pertaining to the 
original transaction. The amended report must be submitted to the 
registered SDR in a manner consistent with the policies and procedures 
of the registered SDR required pursuant to Rule 907(a)(3), as adopted. 
As a result the proposed amendments to Rule 905, a platform would have 
the duty to report if it discovers an error.
b. Proposed Use of Information
    The security-based swap transaction information required to be 
reported under the proposed amendments to Rule 905 would be used by 
registered SDRs, its participants, the Commission, and other relevant 
authorities. Participants will be able to use such information to 
evaluate and manage their own risk positions and satisfy their duties 
to report corrected information to a registered SDR. A registered SDR 
will need the required information to correct security-based swap 
transaction records, in order to maintain an accurate record of a 
participant's positions as well as to disseminate corrected 
information. The Commission and other relevant authorities will need 
the corrected information to have an accurate understanding of the 
market for surveillance and oversight purposes.
c. Respondents
    Rule 905, as proposed to be amended, would apply to platforms. As 
noted above, the Commission estimates that there will be approximately 
10 platforms that incur a duty to report security-based swap 
transactions pursuant to Rule 901.
d. Total Initial and Annual Reporting and Recordkeeping Burdens
    In the Regulation SBSR Adopting Release, the Commission estimated 
that Rule 905(a), as adopted, will impose an initial, one-time burden 
associated with designing and building the reporting side's reporting 
system to be capable of submitting amended security-based swap 
transactions to a registered SDR.\354\ The Commission stated its belief 
that designing and building appropriate reporting system functionality 
to comply with Rule 905(a)(2), as adopted, will be a component of, and 
represent an incremental ``add-on'' to, the cost to build a reporting 
system and develop a compliance function as required under Rule 901, as 
adopted.\355\ Specifically, the Commission estimated that, based on 
discussions with industry participants, the incremental burden would be 
equal to 5% of the one-time and annual burdens associated with 
designing and building a reporting system that is in compliance with 
Rule 901, plus 10% of the corresponding one-time and annual burdens 
associated with developing the reporting side's overall compliance 
program required under Rule 901.\356\
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    \354\ See id.
    \355\ See id.
    \356\ See id.
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    The Commission preliminarily believes that the above methodology is 
applicable to error reporting by platforms under the proposed 
amendments to Rule 905(a). Thus, for platforms, the Commission 
estimates that the proposed amendments to Rule 905(a) would impose an 
initial (first-year) aggregate burden of 500.5 hours, which is 50.0 
burden hours per platform,\357\ and an ongoing aggregate annualized 
burden of 234.5 hours, which is 23.5 burden hours per platform.\358\
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    \357\ See Regulation SBSR Proposing Release, 75 FR 75254-55. 
This figure is calculated as follows: [(((172 burden hours for one-
time development of reporting system) x (0.05)) + ((33 burden hours 
annual maintenance of reporting system) x (0.05)) + ((180 burden 
hours one-time compliance program development) x (0.1)) + ((218 
burden hours annual support of compliance program) x (0.1))) x (10 
platforms)] = 500.5 burden hours, which is 50 burden hours per 
reporting side. See also Regulation SBSR Adopting Release, Section 
XXI(F).
    \358\ See Regulation SBSR Proposing Release, 75 FR 75254-55. 
This figure is calculated as follows: [(((33 burden hours annual 
maintenance of reporting system) x (0.05)) + ((218 burden hours 
annual support of compliance program) x (0.1))) x (10 platforms)] = 
234.5 burden hours, which is 23.5 burden hours per platform.
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e. Recordkeeping Requirements
    Security-based swap transaction reports received pursuant to Rule 
905 are subject to Rule 13n-5(b)(4) under the Exchange Act. This rule 
requires an SDR to maintain the transaction data and related 
identifying information for not less than five years after the 
applicable security-based swap expires and historical positions for not 
less than five years.
    With respect to corrected information that is disseminated by a 
registered SDR in compliance with Rule 905(b)(2), Rule 13n-7(b) under 
the Exchange Act requires an SDR to keep and preserve at least one copy 
of all documents, including all policies and procedures required by the 
Exchange Act and the rules or regulations thereunder, for a period of 
not less than five years, the first two years in a place that is 
immediately available. This requirement encompasses amended security-
based swap transaction reports disseminated by the registered SDR. The 
amendments to Rule 905(a) clarify the duties of counterparties and 
other persons to report corrected information to a registered SDR. The 
requirement that a registered SDR disseminate corrected information 
would not change. The Commission preliminarily believes that the number 
of corrections reported to the registered SDR would not be impacted by 
the proposed amendments. As a result, the Commission preliminarily 
believes that the burdens under Rule 905(b)(2) would not be impacted by 
the proposed amendments to Rule 905(a).
f. Collection of Information Is Mandatory
    Each collection of information discussed above is mandatory.
g. Confidentiality of Responses to Collection of Information
    Information collected pursuant to the proposed amendments to Rule 
905 would be widely available to the extent that it corrects 
information previously reported pursuant to Rule 901(c) and 
incorporated into security-based swap

[[Page 14795]]

transaction reports that are publicly disseminated by a registered SDR 
pursuant to Rule 902. Most of the information required under Rule 902 
will be widely available to the public to the extent it is incorporated 
into security-based swap transaction reports that are publicly 
disseminated by a registered SDR pursuant to Rule 902. However, Rule 
902(c) prohibits public dissemination of certain kinds of transactions 
and certain kinds of transaction information. An SDR, pursuant to 
Sections 13(n)(5) of the Exchange Act and Rules 13n-4(b)(8) and Rule 
13n-9 thereunder, is required to maintain the privacy of this security-
based swap information. To the extent that the Commission receives 
confidential information pursuant to this collection of information, 
such information will be kept confidential, subject to the provisions 
of applicable law.
3. Rule 905--Aggregate Total PRA Burdens and Costs
    The Commission estimates the following aggregate total PRA burdens 
and costs, by category of entity, resulting from the proposed 
amendments to Rule 905.
a. For Platforms
    For platforms, the Commission estimates that the proposed 
amendments to Rule 905(a) would impose an initial (first-year) 
aggregate burden of 500.5 hours, which is 50.0 burden hours per 
platform,\359\ and an ongoing aggregate annualized burden of 234.5 
hours, which is 23.5 burden hours per platform.\360\
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    \359\ This figure is calculated as follows: [(((172 burden hours 
for one-time development of reporting system) x (0.05)) + ((33 
burden hours annual maintenance of reporting system) x (0.05)) + 
((180 burden hours one-time compliance program development) x (0.1)) 
+ ((218 burden hours annual support of compliance program) x (0.1))) 
x (10 platforms)] = 500.5 burden hours, which is 50 burden hours per 
reporting side.
    \360\ This figure is calculated as follows: [(((33 burden hours 
annual maintenance of reporting system) x (0.05)) + ((218 burden 
hours annual support of compliance program) x (0.1))) x (10 
platforms)] = 234.5 burden hours, which is 23.5 burden hours per 
platform.
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    For reporting sides, the Commission estimates that Rule 905(a), as 
adopted, will impose an initial (first-year) aggregate burden of 15,015 
hours, which is 50.0 burden hours per reporting side,\361\ and an 
ongoing aggregate annualized burden of 7,035 hours, which is 23.5 
burden hours per reporting side.\362\
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    \361\ This figure is calculated as follows: [(((172 burden hours 
for one-time development of reporting system) x (0.05)) + ((33 
burden hours annual maintenance of reporting system) x (0.05)) + 
((180 burden hours one-time compliance program development) x (0.1)) 
+ ((218 burden hours annual support of compliance program) x (0.1))) 
x (300 reporting sides)] = 15,015 burden hours, which is 50 burden 
hours per reporting side. The burden hours for annual maintenance of 
the reporting system has been updated to reflect new information on 
the number of reportable events.
    \362\ This figure is calculated as follows: [(((33 burden hours 
annual maintenance of reporting system) x (0.05)) + ((218 burden 
hours annual support of compliance program) x (0.1))) x (300 
reporting sides)] = 7,035 burden hours, which is 23.5 burden hours 
per reporting side. The burden hours for annual maintenance of the 
reporting system has been updated to reflect new information on the 
number of reportable events.
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b. For Non-Reporting Sides
    For non-reporting sides, the Commission estimates that the annual 
burden will be 998,640 hours, which corresponds to 208.05 burden hours 
per non-reporting-side participant.\363\
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    \363\ This figure is based on the following: [(1.14 error 
notifications per non-reporting-side participant per day) x (365 
days/year) x (Compliance Clerk at 0.5 hours/report) x (4,800 non-
reporting-side participants)] = 998,640 burden hours, which 
corresponds to 208.05 burden hours per non-reporting-side 
participant.
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c. For Registered SDRs
    For registered SDRs, the Commission estimates that the initial 
(first-year) aggregate annualized burden on registered SDRs under Rule 
905, as adopted and as proposed to be amended herein, would be 21,900 
burden hours, which corresponds to 2,190 burden hours for each 
registered SDR.\364\ The Commission further estimates that the ongoing 
aggregate annualized burden on registered SDRs under Rule 905, as 
adopted and as proposed to be amended herein, would be 14,600 burden 
hours, which corresponds to 1,460 burden hours for each registered 
SDR.\365\
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    \364\ This figure is based on the following: [(730 burden hours 
to develop protocols) + (1,460 burden hours annual support)) x (10 
registered SDRs)] = 21,900 burden hours, which corresponds to 2,190 
burden hours per registered SDR.
    \365\ This figure is based on the following: [(1,460 burden 
hours annual support) x (10 registered SDRs)] = 14,600 burden hours, 
which corresponds to 1,460 burden hours per registered SDR.
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D. Other Duties of Participants--Rule 906

1. Rule 906--As Adopted
    Rule 906(a), as adopted, sets forth a procedure designed to ensure 
that a registered SDR obtains relevant UICs for both sides of a 
security-based swap, not just of the reporting side. Rule 906(a) 
requires a registered SDR to identify any security-based swap reported 
to it for which the registered SDR does not have a counterparty ID and 
(if applicable) broker ID, trading desk ID, and trader ID of each 
counterparty. Rule 906(a) further requires the registered SDR, once a 
day, to send a report to each participant identifying, for each 
security-based swap to which that participant is a counterparty, the 
security-based swap(s) for which the registered SDR lacks counterparty 
ID and (if applicable) broker ID, trading desk ID, and trader ID. A 
participant that receives such a report must provide the missing ID 
information to the registered SDR within 24 hours.
    Rule 906(b) requires each participant of a registered SDR to 
provide the registered SDR with information sufficient to identify the 
participant's ultimate parent(s) and any affiliate(s) of the 
participant that are also participants of the registered SDR.
    Rule 906(c) requires each participant that is a registered 
security-based swap dealer or registered major security-based swap 
participant to establish, maintain, and enforce written policies and 
procedures that are reasonably designed to ensure compliance with any 
security-based swap transaction reporting obligations in a manner 
consistent with Regulation SBSR. In addition, Rule 906(c) requires each 
such participant to review and update its policies and procedures at 
least annually.
    For Registered SDRs. Rule 906(a) requires a registered SDR, once a 
day, to send a report to each of its participants identifying, for each 
security-based swap to which that participant is a counterparty, any 
security-based swap(s) for which the registered SDR lacks counterparty 
ID and (if applicable) broker ID, trading desk ID, and trader ID. In 
the Regulation SBSR Adopting Release, the Commission estimated that 
there will be a one-time, initial burden of 112 burden hours for a 
registered SDR to create a report template and develop the necessary 
systems and processes to produce a daily report required by Rule 
906(a).\366\ Further, the Commission estimated that there will be an 
ongoing annualized burden of 308 burden hours for a registered SDR to 
generate and issue the daily reports, and to enter into its systems the 
ID information supplied by participants in response to the daily 
reports.\367\
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    \366\ See Regulation SBSR Adopting Release, Section XXI(G).
    \367\ See id.
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    Accordingly, in the Regulation SBSR Adopting Release, the 
Commission estimated that the initial aggregate annualized burden for 
registered SDRs under Rule 906(a) will be 4,200 burden hours for all 
SDR respondents, which corresponds to 420 burden hours per registered 
SDR.\368\ The Commission estimated that the ongoing aggregate 
annualized burden for registered SDRs

[[Page 14796]]

under Rule 906(a) will be 3,080 burden hours, which corresponds to 308 
burden hours per registered SDR.\369\
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    \368\ See id.
    \369\ See id.
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    For Participants. Rule 906(a) requires any participant of a 
registered SDR that receives a report from that registered SDR to 
provide the missing UICs to the registered SDR within 24 hours. Because 
all SDR participants will likely be the non-reporting side for at least 
some transactions to which they are counterparties, in the Regulation 
SBSR Adopting Release, the Commission stated its belief that all 
participants will be impacted by Rule 906(a). In the Regulation SBSR 
Adopting Release, the Commission estimated that the initial and ongoing 
annualized burden under Rule 906(a) for all participants will be 
199,728 burden hours, which corresponds to 41.6 burden hours per 
participant.\370\ This figure is based on the Commission's estimates of 
(1) 4,800 participants; and (2) approximately 1.14 transactions per day 
per participant.\371\
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    \370\ See id.
    \371\ See id.
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    Rule 906(b) requires every participant to provide the registered 
SDR an initial parent/affiliate report and subsequent reports, as 
needed. In the Regulation SBSR Adopting Release, the Commission 
estimated that there will be 4,800 participants, that each participant 
will connect to two registered SDRs on average, and that each 
participant will submit two reports each year.\372\ Accordingly, the 
Commission estimated that the initial and ongoing aggregate annualized 
burden associated with Rule 906(b) will be 9,600 burden hours, which 
corresponds to 2 burden hours per participant.\373\ The aggregate 
burden represents an upper estimate for all participants; the actual 
burden will likely decrease because certain larger participants are 
likely to have multiple affiliates, and one member of the group could 
report ultimate parent and affiliate information on behalf of all of 
its affiliates at the same time.
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    \372\ See id. The Commission estimates that, during the first 
year, each participant will submit an initial report and one update 
report and, in subsequent years, will submit two update reports.
    \373\ See id.
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    Rule 906(c) requires each participant that is a registered 
security-based swap dealer or registered major security-based swap 
participant (each, a ``covered participant'') to establish, maintain, 
and enforce written policies and procedures that are reasonably 
designed to ensure compliance with applicable security-based swap 
transaction reporting obligations. Rule 906(c) also requires the review 
and updating of such policies and procedures at least annually. In the 
Regulation SBSR Adopting Release, the Commission estimated that the 
one-time, initial burden for each covered participant to adopt written 
policies and procedures as required under Rule 906(c) will be 
approximately 216 burden hours.\374\ As discussed in the Regulation 
SBSR Adopting Release,\375\ this figure is based on the estimated 
number of hours to develop a set of written policies and procedures, 
program systems, implement internal controls and oversight, train 
relevant employees, and perform necessary testing. In addition, in the 
Regulation SBSR Adopting Release, the Commission estimated the burden 
of maintaining such policies and procedures, including a full review at 
least annually, as required by Rule 906(c), will be approximately 120 
burden hours for each covered participant.\376\ This figure includes an 
estimate of hours related to reviewing existing policies and 
procedures, making necessary updates, conducting ongoing training, 
maintaining internal controls systems, and performing necessary 
testing. Accordingly, the Commission estimated that the initial 
aggregate annualized burden associated with Rule 906(c) will be 18,480 
burden hours, which corresponds to 336 burden hours per covered 
participant.\377\ In the Regulation SBSR Adopting Release, the 
Commission estimated that the ongoing aggregate annualized burden 
associated with Rule 906(c) will be 6,600 burden hours, which 
corresponds to 120 burden hours per covered participant.\378\
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    \374\ See id.
    \375\ See id.
    \376\ See id.
    \377\ See id.
    \378\ See id.
---------------------------------------------------------------------------

    Therefore, in the Regulation SBSR Adopting Release, the Commission 
estimated that the total initial aggregate annualized burden associated 
with Rule 906 will be 230,370 burden hours,\379\ and the total ongoing 
aggregate annualized burden will be 217,370 burden hours for all 
participants.\380\
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    \379\ See id.
    \380\ See id.
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2. Rule 906--Proposed Amendments
a. Rule 906(b)--Proposed Amendments
    The Commission is proposing to revise Rule 906(b) to indicate that 
reporting obligations under Rule 906(b) would not attach to 
participants that are platforms or registered clearing agencies. Under 
the proposed amendments to Rule 901(a) and 901(e), platforms and 
registered clearing agencies would have the duty to report certain 
security-based swaps and therefore would become participants of 
registered SDRs. Rule 906(b), as adopted, requires each participant of 
a registered SDR to provide the registered SDR information sufficient 
to identify its ultimate parent(s) and any affiliate(s) of the 
participant that also are participants of the registered SDR, using 
ultimate parent IDs and participant IDs. The Commission does not 
believe that this change, which would relieve platforms and registered 
clearing agencies of the requirement to provide ultimate parent IDs and 
participant IDs, would affect the existing burdens being placed on 
platforms and registered clearing agencies.
b. Rule 906(c)--Proposed Amendments
i. Summary of Collection of Information
    The proposed amendments to Rule 906(c) would require each 
participant that is a registered clearing agency or platform to 
establish, maintain, and enforce written policies and procedures that 
are reasonably designed to ensure compliance with applicable security-
based swap transaction reporting obligations. Each such participant 
also would be required to review and update its policies and procedures 
at least annually.
ii. Proposed Use of Information
    The policies and procedures required under the proposed amendments 
to Rule 906(c) would be used by participants to aid in their compliance 
with Regulation SBSR, and also used by the Commission as part of its 
ongoing efforts to monitor and enforce compliance with the federal 
securities laws, including Regulation SBSR, through, among other 
things, examinations and inspections.
iii. Respondents
    The proposed amendments to Rule 906(c) would result in the rule 
applying to registered clearing agencies and platforms. The Commission 
estimates that there will be 4 registered clearing agencies and 10 
platforms.
iv. Total Initial and Annual Reporting and Recordkeeping Burdens
    For Registered Clearing Agencies and Platforms. The proposed 
amendment to Rule 906(c) would require each registered clearing agency 
or platform to establish, maintain, and enforce written policies and 
procedures that are reasonably designed to ensure compliance with 
applicable security-based swap transaction reporting obligations. The 
proposed amendment to Rule 906(c) also would require each registered 
clearing agency and platform to review and update such policies and

[[Page 14797]]

procedures at least annually. The Commission estimates that the one-
time, initial burden for each registered clearing agency or platform to 
adopt written policies and procedures as required under the proposed 
amendments to Rule 906(c) would be similar to the Rule 906(c) burdens 
discussed in the Regulation SBSR Adopting Release for covered 
participants, and would be approximately 216 burden hours per 
registered clearing agency or platform.\381\ As discussed in the 
Regulation SBSR Proposing Release,\382\ this figure is based on the 
estimated number of hours to develop a set of written policies and 
procedures, program systems, implement internal controls and oversight, 
train relevant employees, and perform necessary testing. In addition, 
the Commission estimates the burden of maintaining such policies and 
procedures, including a full review at least annually will be 
approximately 120 burden hours for each registered clearing agency or 
platform.\383\ This figure includes an estimate of hours related to 
reviewing existing policies and procedures, making necessary updates, 
conducting ongoing training, maintaining internal controls systems, and 
performing necessary testing. Accordingly, the Commission estimates 
that the initial aggregate annualized burden associated with the 
proposed amendments to Rule 906(c) would be 4,704 burden hours, which 
corresponds to 336 burden hours per registered clearing agency or 
platform.\384\ The Commission estimates that the ongoing aggregate 
annualized burden associated with the proposed amendments to Rule 
906(c) will be 1,680 burden hours, which corresponds to 120 burden 
hours per registered clearing agency or platform.\385\
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    \381\ See Regulation SBSR Proposing Release, 75 FR 75257. This 
figure is based on the following: [(Sr. Programmer at 40 hours) + 
(Compliance Manager at 40 hours) + (Compliance Attorney at 40 hours) 
+ (Compliance Clerk at 40 hours) + (Sr. Systems Analyst at 32 hours) 
+ (Director of Compliance at 24 hours)] = 216 burden hours per 
registered clearing agency or platform.
    \382\ See Regulation SBSR Proposing Release, 75 FR 75257.
    \383\ See id. This figure is based on the following: [(Sr. 
Programmer at 8 hours) + (Compliance Manager at 24 hours) + 
(Compliance Attorney at 24 hours) + (Compliance Clerk at 24 hours) + 
(Sr. Systems Analyst at 16 hours) + (Director of Compliance at 24 
hours)] = 120 burden hours per registered clearing agency or 
platform.
    \384\ This figure is based on the following: [(216 + 120 burden 
hours) x (14 registered clearing agencies and platforms)] = 4,704 
burden hours.
    \385\ This figure is based on the following: [(120 burden hours) 
x (14 registered clearing agencies and platforms)] = 1,680 burden 
hours.
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v. Recordkeeping Requirements
    The Commission has adopted recordkeeping rules for registered 
clearing agencies \386\ and proposed recordkeeping rules for 
platforms.\387\
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    \386\ See Clearing Agency Standards Adopting Release.
    \387\ See Securities Exchange Act Release No. 63825 (February 2, 
2011), 76 FR 10948 (February 29, 2011) (``SB SEF Proposing 
Release'').
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vi. Collection of Information Is Mandatory
    Each collection of information discussed above is mandatory.
vii. Confidentiality of Responses to Collection of Information
    The collection of information required by the proposed amendments 
to Rule 906 would not be widely available. To the extent that the 
Commission receives confidential information pursuant this collection 
of information, such information will be kept confidential, subject to 
applicable law.
3. Rule 906--Aggregate Total PRA Burdens and Costs
    Based on the foregoing, the Commission estimates the following 
aggregate total PRA burdens and costs, by category of entity, resulting 
from Rule 906, as adopted and as proposed to be amended herein.
a. For Platforms and Registered Clearing Agencies
    The Commission estimates that the one-time, initial burden for each 
registered clearing agency or platform to adopt written policies and 
procedures as required under Rule 906(c), as adopted and as proposed to 
be amended herein, would be similar to the Rule 906(c) burdens 
discussed in the Regulation SBSR Adopting Release for covered 
participants, and would be approximately 216 burden hours per 
registered clearing agency or platform.\388\ This figure is based on 
the estimated number of hours to develop a set of written policies and 
procedures, program systems, implement internal controls and oversight, 
train relevant employees, and perform necessary testing. In addition, 
the Commission estimates the burden of maintaining such policies and 
procedures, including a full review at least annually, as required by 
Rule 906(c), would be approximately 120 burden hours for each 
registered clearing agency or platform.\389\ This figure includes an 
estimate of hours related to reviewing existing policies and 
procedures, making necessary updates, conducting ongoing training, 
maintaining internal controls systems, and performing necessary 
testing. Accordingly, the Commission estimates that the initial 
aggregate annualized burden associated with Rule 906(c), as adopted and 
as proposed to be amended herein, would be 4,704 burden hours, which 
corresponds to 336 burden hours per registered clearing agency or 
platform.\390\ The Commission estimates that the ongoing aggregate 
annualized burden associated with Rule 906(c), as adopted and as 
proposed to be amended herein, would be 1,680 burden hours, which 
corresponds to 120 burden hours per registered clearing agency or 
platform.\391\
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    \388\ This figure is based on the following: [(Sr. Programmer at 
40 hours) + (Compliance Manager at 40 hours) + (Compliance Attorney 
at 40 hours) + (Compliance Clerk at 40 hours) + (Sr. Systems Analyst 
at 32 hours) + (Director of Compliance at 24 hours)] = 216 burden 
hours per registered clearing agency or platform.
    \389\ This figure is based on the following: [(Sr. Programmer at 
8 hours) + (Compliance Manager at 24 hours) + (Compliance Attorney 
at 24 hours) + (Compliance Clerk at 24 hours) + (Sr. Systems Analyst 
at 16 hours) + (Director of Compliance at 24 hours)] = 120 burden 
hours per registered clearing agency or platform.
    \390\ This figure is based on the following: [(216 + 120 burden 
hours) x (14 registered clearing agencies and platforms)] = 4,704 
burden hours.
    \391\ This figure is based on the following: [(120 burden hours) 
x (14 registered clearing agencies and platforms)] = 1,680 burden 
hours.
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b. For Registered SDRs
    The proposed amendments to Regulation SBSR discussed in this 
release would not modify any requirements in Rule 906(a), as adopted. 
Therefore, the Commission is not modifying its analysis of the burden 
that Rule 906(a), as adopted, will impose on registered SDRs.
c. For Participants
    The Commission estimates that the initial and ongoing annualized 
burden under Rule 906(a) for all participants will be 199,728 burden 
hours, which corresponds to 41.6 burden hours per participant.\392\ 
This figure is based on the Commission's estimates of (1) 4,800 
participants; and (2) approximately 1.14 transactions per day per 
participant.\393\
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    \392\ See Regulation SBSR Adopting Release, Section XXI(G). This 
burden was calculated using the same methodology as was used in the 
Regulation SBSR Proposing Release, updated to account for new 
estimates of the number of missing information reports resulting 
from updates in the number of reportable events. See Regulation SBSR 
Proposing Release, 75 FR 75256-57. This figure is based on the 
following: [(1.14 missing information reports per participant per 
day) x (365 days/year) x (Compliance Clerk at 0.1 hours/report) x 
(4,800 participants) = 199,728 burden hours, which corresponds to 
47.5 burden hours per participant.
    \393\ This figure is based on the following: [((2,000,000 
estimated annual security-based swap transactions)/4,800 
participants))/(365 days/year)] = 1.14, or approximately 1 
transaction per day.

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[[Page 14798]]

    The Commission estimates that the initial and ongoing aggregate 
annualized burden associated with Rule 906(b), as adopted and as 
proposed to be amended herein, would be 9,600 burden hours, which 
corresponds to 2 burden hours per participant.\394\
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    \394\ See Regulation SBSR Adopting Release, Section XXI(G). See 
also Regulation SBSR Proposing Release, 75 FR 75257. This figure is 
based on the following: [(Compliance Clerk at 0.5 hours per report) 
x (2 reports/year/SDR connection) x (2 SDR connections/participant) 
x (4,800 participants)] = 9,600 burden hours, which corresponds to 2 
burden hours per participant.
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    The Commission estimates that the one-time, initial burden for each 
covered participant to adopt written policies and procedures as 
required under Rule 906(c), as adopted and as proposed to be amended 
herein, would be approximately 216 burden hours.\395\ This figure is 
based on the estimated number of hours to develop a set of written 
policies and procedures, program systems, implement internal controls 
and oversight, train relevant employees, and perform necessary testing. 
In addition, the Commission estimates the burden of maintaining such 
policies and procedures, including a full review at least annually, as 
required by Rule 906(c), as adopted and as proposed to be amended 
herein, would be approximately 120 burden hours for each covered 
participant.\396\ This figure includes an estimate of hours related to 
reviewing existing policies and procedures, making necessary updates, 
conducting ongoing training, maintaining internal controls systems, and 
performing necessary testing. Accordingly, the Commission estimates 
that the initial aggregate annualized burden associated with Rule 
906(c), as adopted and as proposed to be amended herein, would be 
18,480 burden hours, which corresponds to 336 burden hours per covered 
participant.\397\ The Commission estimates that the ongoing aggregate 
annualized burden associated with Rule 906(c), as adopted and as 
proposed to be amended herein, would be 6,600 burden hours, which 
corresponds to 120 burden hours per covered participant.\398\
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    \395\ See Regulation SBSR Adopting Release, Section XXI(G). See 
also Regulation SBSR Proposing Release, 75 FR 75257. This figure is 
based on the following: [(Sr. Programmer at 40 hours) + (Compliance 
Manager at 40 hours) + (Compliance Attorney at 40 hours) + 
(Compliance Clerk at 40 hours) + (Sr. Systems Analyst at 32 hours) + 
(Director of Compliance at 24 hours)] = 216 burden hours per covered 
participant.
    \396\ See Regulation SBSR Adopting Release, Section XXI(G). See 
also Regulation SBSR Proposing Release, 75 FR 75257. This figure is 
based on the following: [(Sr. Programmer at 8 hours) + (Compliance 
Manager at 24 hours) + (Compliance Attorney at 24 hours) + 
(Compliance Clerk at 24 hours) + (Sr. Systems Analyst at 16 hours) + 
(Director of Compliance at 24 hours)] = 120 burden hours per covered 
participant.
    \397\ See Regulation SBSR Adopting Release, Section XXI(G). This 
figure is based on the following: [(216 + 120 burden hours) x (55 
covered participants)] = 18,480 burden hours.
    \398\ See Regulation SBSR Adopting Release, Section XXI(G). This 
figure is based on the following: [(120 burden hours) x (55 covered 
participants)] = 6,600 burden hours.
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    Therefore, the Commission estimates that the total initial 
aggregate annualized burden associated with Rule 906, as adopted and as 
proposed to be amended herein, would be 232,008 burden hours,\399\ and 
the total ongoing aggregate annualized burden would be 219,008 burden 
hours for all participants.\400\
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    \399\ See Regulation SBSR Adopting Release, Section XXI(G). This 
figure is based on the following: [(4,200 burden hours for 
registered SDRs under Rule 906(a)) + (199,728 burden hours for 
participants under Rule 906(a)) + (9,600 burden hours for 
participants under Rule 906(b)) + (18,480 burden hours for covered 
participants under Rule 906(c))] = 232,008 burden hours.
    \400\ See Regulation SBSR Adopting Release, Section XXI(G). This 
figure is based on the following: [(3,080 burden hours for 
registered SDRs under the proposed amendment to Rule 906(a)) + 
(199,728 burden hours for participants under the proposed amendment 
to Rule 906(a)) + (9,600 burden hours for participants under the 
proposed amendment to Rule 906(b)) + (6,600 burden hours for covered 
participants under the proposed amendment to Rule 906(c))] = 219,008 
burden hours.
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E. Policies and Procedures of Registered SDRs--Rule 907

1.Rule 907--As Adopted
    Rule 907(a), as adopted, requires a registered SDR to establish and 
maintain written policies and procedures that detail how it will 
receive and publicly disseminate security-based swap transaction 
information. Rule 907(a)(4) requires policies and procedures for 
assigning ``special circumstances'' flags to the necessary transaction 
reports.
    Rule 907(c), as adopted, requires a registered SDR to make its 
policies and procedures available on its Web site. Rule 907(d), as 
adopted, requires a registered SDR to review, and update as necessary, 
the policies and procedures that it is required to have by Regulation 
SBSR at least annually. Rule 907(e), as adopted, requires a registered 
SDR to have the capacity to provide to the Commission, upon request, 
information or reports related to the timeliness, accuracy, and 
completeness of data reported to it pursuant to Regulation SBSR and the 
registered SDR's policies and procedures established thereunder.
    In the Regulation SBSR Adopting Release, the Commission estimated 
that the one-time, initial burden for a registered SDR to adopt written 
policies and procedures as required under Rule 907 will be 
approximately 15,000 hours.\401\ In the Regulation SBSR Adopting 
Release, the Commission stated that, drawing on the Commission's 
experience with other rules that require entities to establish and 
maintain policies and procedures,\402\ this figure is based on the 
estimated number of hours to develop a set of written policies and 
procedures, program systems, implement internal controls and oversight, 
train relevant employees, and perform necessary testing.\403\ In 
addition, in the Regulation SBSR Adopting Release, the Commission 
estimated the annual burden of maintaining such policies and 
procedures, including a full review at least annually, making available 
its policies and procedures on the registered SDR's Web site, and 
information or reports on non-compliance, as required under Rule 
907(e), will be approximately 30,000 hours for each registered 
SDR.\404\ As discussed in the Regulation SBSR Proposing Release, this 
figure includes an estimate of hours related to reviewing existing 
policies and procedures, making necessary updates, conducting ongoing 
training, maintaining relevant systems and internal controls systems, 
performing necessary testing, monitoring participants, and compiling 
data.
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    \401\ See Regulation SBSR Adopting Release, Section XXI(H). 
These burdens are the result of Rule 907 only and do not account for 
any burdens that result from the SDR Rules. Such burdens are 
addressed in a separate release. See SDR Adopting Release, Section 
VIII(D).
    \402\ See supra note 382.
    \403\ See Regulation SBSR Adopting Release, Section XXI(H). This 
figure also includes time necessary to design and program systems 
and implement policies and procedures to assign certain UICs, as 
required by Rule 907(a)(5).
    \404\ See Regulation SBSR Adopting Release, Section XXI(H).
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    In the Regulation SBSR Adopting Release, the Commission estimated 
that the initial annualized burden associated with Rule 907 will be 
approximately 45,000 hours per registered SDR, which corresponds to an 
initial annualized aggregate burden of approximately 450,000 
hours.\405\ The Commission further estimated that the ongoing 
annualized burden associated with Rule 907 will be approximately 30,000 
hours per registered SDR,\406\ which corresponds to an ongoing 
annualized

[[Page 14799]]

aggregate burden of approximately 300,000 hours.\407\
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    \405\ This figure is based on the following: [((15,000 burden 
hours per registered SDR) + (30,000 burden hours per registered 
SDR)) x (10 registered SDRs)] = 450,000 initial annualized aggregate 
burden hours during the first year.
    \406\ See Regulation SBSR Adopting Release, Section XXI(H).
    \407\ See id.
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2. Rule 907--Proposed Amendments
    The Commission is proposing to revise Rule 907(a)(6) to indicate 
that a registered SDR's policies and procedures need not contain 
provisions for obtaining ultimate parent IDs and participant IDs from 
participants that are platforms or registered clearing agencies. Under 
the proposed amendments to Rule 901(a) and 901(e), platforms and 
registered clearing agencies would have the duty to report certain 
security-based swaps and become participants of registered SDRs to 
which they report. Rule 907(a)(6), as adopted, requires a registered 
SDR to establish and maintain written policies and procedures ``[f]or 
periodically obtaining from each participant information that 
identifies the participant's ultimate parent(s) and any participant(s) 
with which the participant is affiliated, using ultimate parent IDs and 
participant IDs.'' The Commission preliminarily believes that requiring 
a platform or registered clearing agency to report parent and affiliate 
information to a registered SDR would not serve any regulatory purpose 
and, therefore, has proposed to amend Rule 907(a)(6) to indicate that 
the obligations under Rule 907(a)(6) do not attach to participants that 
are platforms or a registered clearing agencies. This proposed 
amendment would not result in any burdens being placed on platforms and 
registered clearing agencies.
3. Rule 907--Aggregate Total PRA Burdens and Costs
    Based on the foregoing, the Commission estimates that the one-time, 
initial burden for a registered SDR to adopt written policies and 
procedures as required under Rule 907 will be approximately 15,000 
hours. In addition, the Commission estimated the annual burden of 
maintaining such policies and procedures, including a full review at 
least annually, making available its policies and procedures on the 
registered SDR's Web site, and information or reports on non-
compliance, as required under Rule 907(e), will be approximately 30,000 
hours for each registered SDR. The Commission therefor estimates that 
the initial annualized burden associated with Rule 907 will be 
approximately 45,000 hours per registered SDR, which corresponds to an 
initial annualized aggregate burden of approximately 450,000 
hours.\408\ The Commission further estimated that the ongoing 
annualized burden associated with Rule 907 will be approximately 30,000 
hours per registered SDR,\409\ which corresponds to an ongoing 
annualized aggregate burden of approximately 300,000 hours.\410\
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    \408\ This figure is based on the following: [((15,000 burden 
hours per registered SDR) + (30,000 burden hours per registered 
SDR)) x (10 registered SDRs)] = 450,000 initial annualized aggregate 
burden hours during the first year.
    \409\ See Regulation SBSR Proposing Release, 75 FR 75259. This 
figure is based on the following: [(Sr. Programmer at 3,333 hours) + 
(Compliance Manager at 6,667 hours) + (Compliance Attorney at 10,000 
hours) + (Compliance Clerk at 5,000 hours) + (Sr. System Analyst at 
3,333 hours) + (Director of Compliance at 1,667 hours)] = 30,000 
burden hours per registered SDR.
    \410\ See Regulation SBSR Proposing Release, 75 FR 75259. This 
figure is based on the following: [(30,000 burden hours per 
registered SDR) x (10 registered SDRs)] = 300,000 ongoing, 
annualized aggregate burden hours.
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F. Cross-Border Matters--Rule 908

1. Rule 908--As Adopted
    Rule 908(a), as adopted, defines when a security-based swap 
transaction is subject to regulatory reporting and/or public 
dissemination. Specifically, Rule 908(a)(1)(i), as adopted, provides 
that a security-based swap shall be subject to regulatory reporting and 
public dissemination if ``[t]here is a direct or indirect counterparty 
that is a U.S. person on either or both sides of the transaction.'' 
Rule 908(a)(1)(ii), as adopted, provides that a security-based swap 
shall be subject to regulatory reporting and public dissemination if 
``[t]he security-based swap is submitted to a clearing agency having 
its principal place of business in the United States.'' Rule 908(a)(2), 
as adopted, provides that a security-based swap not included within the 
above provisions would be subject to regulatory reporting but not 
public dissemination ``if there is a direct or indirect counterparty on 
either or both sides of the transaction that is a registered security-
based swap dealer or a registered major security-based swap 
participant.''
    Regulation 908(b), as adopted, defines when a person might incur 
obligations under Regulation SBSR. Rule 908(b) provides that, 
notwithstanding any other provision of Regulation SBSR, a person shall 
not incur any obligation under Regulation SBSR unless it is a U.S. 
person, a registered security-based swap dealer, or a registered major 
security-based swap participant.
    The Commission stated its belief in the Regulation SBSR Adopting 
Release that Rules 908(a) and 908(b) do not impose any collection of 
information requirements. To the extent that a security-based swap 
transaction or person is subject to Rule 908(a) or 908(b), 
respectively, the collection of information burdens are calculated as 
part of the underlying rule (e.g., Rule 901, which imposes the basic 
duty to report security-based swap transaction information).
    Rule 908(c), as adopted, sets forth the requirements surrounding 
requests for substituted compliance. Rule 908(c)(1) sets forth the 
general rule that compliance with Title VII's regulatory reporting and 
public dissemination requirements may be satisfied by compliance with 
the rules of a foreign jurisdiction that is the subject of a Commission 
order described in Rule 908(c)(2), provided that at least one of the 
direct counterparties is either a non-U.S. person or a foreign branch.
    Rule 908(c)(2)(ii), as adopted, applies to any person that requests 
a substituted compliance determination with respect to regulatory 
reporting and public dissemination of security-based swaps. In 
connection with each request, the requesting party must provide the 
Commission with any supporting documentation that the entity believes 
is necessary for the Commission to make a determination, including 
information demonstrating that the requirements applied in the foreign 
jurisdiction are comparable to the Commission's and describing the 
methods used by relevant foreign financial regulatory authorities to 
monitor compliance with those requirements. In the Regulation SBSR 
Adopting Release, the Commission estimated that the total paperwork 
burden associated with submitting a request for a substituted 
compliance determination with respect to regulatory reporting and 
public dissemination will be approximately 1,120 hours, plus $1,120,000 
for 14 requests.\411\ The Commission noted that this estimate includes 
all collection burdens associated with the request, including burdens 
associated with analyzing whether the regulatory requirements of the 
foreign jurisdiction impose a comparable, comprehensive system for the 
regulatory reporting and public dissemination of all security-based 
swaps. Furthermore, the Commission observed that this estimate assumes 
that each request will be prepared de novo, without any benefit of 
prior work on related subjects. The Commission noted,

[[Page 14800]]

however, that as such requests are developed with respect to certain 
jurisdictions, the cost of preparing such requests with respect to 
other foreign jurisdictions could decrease.\412\
---------------------------------------------------------------------------

    \411\ The Commission staff estimates that the paperwork burden 
associated with making a substituted compliance request pursuant to 
Rule 908(c)(2)(ii) will be approximately 80 of in-house counsel 
time, plus $80,000 for the services of outside professionals (based 
on 200 hours of outside counsel time x $400). See Cross-Border 
Proposing Release, 78 FR 31110.
    \412\ If and when the Commission grants a request for 
substituted compliance, subsequent applications might be able to 
leverage work done on the initial application. However, the 
Commission is unable to estimate the amount by which the cost could 
decrease without knowing the extent to which different jurisdictions 
have similar regulatory structures.
---------------------------------------------------------------------------

    In the Regulation SBSR Adopting Release, the Commission estimated, 
assuming ten requests in the first year, that the aggregated burden for 
the first year will be 800 hours, plus $800,000 for the services of 
outside professionals.\413\ The Commission estimated that it would 
receive 2 requests for substituted compliance determinations pursuant 
to Rule 908(c)(2)(ii) in each subsequent year. Assuming the same 
approximate time and costs, the Commission stated that the aggregate 
burden for each year following the first year will be up to 160 hours 
of company time and $160,000 for the services of outside 
professionals.\414\
---------------------------------------------------------------------------

    \413\ The Commission staff estimates that the paperwork burden 
associated with making a substituted compliance request pursuant to 
Rule 242.908(c)(2)(ii) will be up to approximately 800 hours (80 
hours of in-house counsel time x 10 respondents), plus $800,000 for 
the services of outside professionals (based on 200 hours of outside 
counsel time x $400 x 10 respondents). See Cross-Border Proposing 
Release, 78 FR 31110.
    \414\ The Commission staff estimates that the paperwork burden 
associated with making a substituted compliance request pursuant to 
Rule 908(c)(2)(ii) would be up to approximately 160 hours (80 hours 
of in-house counsel time x two respondents) + plus $160,000 for the 
services of outside professionals (based on 200 hours of outside 
counsel time x $400 x two respondents). See Cross-Border Proposing 
Release, 78 FR 31110.
---------------------------------------------------------------------------

2. Rule 908--Proposed Amendments
    The Commission is proposing to amend Rule 908(b) to make it 
consistent with 901(a)(1) which would provide that platforms and 
registered clearing agencies would have the duty to report in certain 
circumstances. The Commission proposes to amend Rule 908(b) to provide: 
``Notwithstanding any other provision of [Regulation SBSR], a person 
shall not incur any obligation under [Regulation SBSR] unless it is: 
(1) A U.S. person; (2) A registered security-based swap dealer or 
registered major security-based swap participant; (3) A platform; or 
(4) A registered clearing agency.'' The Commission preliminarily 
believes that, since the proposed amendment to Rule 908(b) simply makes 
it clear that platforms and registered clearing agencies may have 
obligations under Regulation SBSR, there are no burdens associated with 
the amendment to Rule 908(b). In addition, to the extent that a 
platform or registered clearing agency does have obligations under 
Regulation SBSR, those burdens are discussed under the applicable rule.
3. Rule 908--Aggregate Total Burdens and Costs
    Based on the foregoing, the Commission estimates the following 
aggregate total PRA burdens and costs, by category of entity, resulting 
from Rule 908, as adopted and as proposed to be amended herein.
    The Commission has estimated that the total paperwork burden 
associated with submitting a request for a substituted compliance 
determination with respect to regulatory reporting and public 
dissemination will be approximately 1,120 hours, plus $1,120,000 for 14 
requests.\415\ The Commission further estimated that the aggregated 
burden for the first year will be 800 hours, plus $800,000 for the 
services of outside professionals.\416\ The Commission estimated that 
it would receive 2 requests for substituted compliance determinations 
pursuant to Rule 908(c)(2)(ii) in each subsequent year. Assuming the 
same approximate time and costs, the Commission stated that the 
aggregate burden for each year following the first year will be up to 
160 hours of company time and $160,000 for the services of outside 
professionals.\417\
---------------------------------------------------------------------------

    \415\ The Commission staff estimates that the paperwork burden 
associated with making a substituted compliance request pursuant to 
Rule 908(c)(2)(ii) will be approximately 80 of in-house counsel 
time, plus $80,000 for the services of outside professionals (based 
on 200 hours of outside counsel time x $400). See id. at 31110
    \416\ The Commission staff estimates that the paperwork burden 
associated with making a substituted compliance request pursuant to 
Rule 908(c)(2)(ii) will be up to approximately 800 hours (80 hours 
of in-house counsel time x 10 respondents), plus $800,000 for the 
services of outside professionals (based on 200 hours of outside 
counsel time x $400 x 10 respondents). See Cross-Border Proposing 
Release, 78 FR 31110.
    \417\ The Commission staff estimates that the paperwork burden 
associated with making a substituted compliance request pursuant to 
Rule 908(c)(2)(ii) would be up to approximately 160 hours (80 hours 
of in-house counsel time x 2 respondents) + plus $160,000 for the 
services of outside professionals (based on 200 hours of outside 
counsel time x $400 x 2 respondents). See Cross-Border Proposing 
Release, 78 FR 31110.
---------------------------------------------------------------------------

G. Request for Comments

    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 proper performance of our functions, including 
whether the information shall have practical utility;
    2. Evaluate the accuracy of our estimate of the burden of the 
proposed collection of information;
    3. Determine whether there are ways to enhance the quality, 
utility, and clarity of the information to be collected; and
    4. Evaluate whether there are ways to 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.
    Persons submitting comments on the collection of information 
requirements should direct them to the Office of Management and Budget, 
Attention: Desk Officer for the Securities and Exchange Commission, 
Office of Information and Regulatory Affairs, Washington, DC 20503, and 
should also send a copy of their comments to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090, with reference to File Number S7-03-15. 
Requests for materials submitted to OMB by the Commission with regard 
to this collection of information should be in writing, with reference 
to File Number S7-03-15 and be submitted to the Securities and Exchange 
Commission, Office of FOIA/PA Operations, 100 F Street NE., Washington, 
DC 20549-2736. As OMB is required to make a decision concerning the 
collections of information between 30 and 60 days after publication, a 
comment to OMB is best assured of having its full effect if OMB 
receives it within 30 days of publication.

X. Consideration of Impact on the Economy

    For purposes of the Small Business Regulatory Enforcement Fairness 
Act of 1996 (``SBREFA) \418\ the Commission must advise the OMB whether 
the proposed regulation constitutes a ``major'' rule. Under SBREFA, a 
rule is considered ``major'' where, if adopted, it results or is likely 
to result in: (1) An annual effect on the economy of $100 million or 
more; (2) a major increase in costs or prices for consumers or 
individual industries; or (3) significant adverse effect on 
competition, investment or innovation.
---------------------------------------------------------------------------

    \418\ Public Law 104-121, Title II, 110 Stat. 857 (1996) 
(codified in various sections of 5 U.S.C. and 15 U.S.C. and as a 
note to 5 U.S.C. 601).
---------------------------------------------------------------------------

    The Commission requests comment on the potential impact of the 
proposed rules and amendments on the economy on an annual basis. 
Commenters are requested to provide empirical data and other factual 
support for their views to the extent possible.

[[Page 14801]]

XI. Regulatory Flexibility Act Certification

    Section 3(a) of the Regulatory Flexibility Act of 1980 (``RFA'') 
\419\ requires the Commission to undertake an initial regulatory 
flexibility analysis of the proposed rules on ``small entities.'' 
Section 605(b) of the RFA \420\ provides that this requirement shall 
not apply to any proposed rule or proposed rule amendment which, if 
adopted, would not have a significant economic impact on a substantial 
number of small entities. Pursuant to 5 U.S.C. 605(b), the Commission 
hereby certifies that the proposed rules and rule amendments to 
Regulation SBSR would not, if adopted, have a significant economic 
impact on a substantial number of small entities. In developing these 
proposed amendments to Regulation SBSR, the Commission has considered 
their potential impact on small entities. For purposes of Commission 
rulemaking in connection with the RFA, a small entity includes: (1) 
When used with reference to an ``issuer'' or a ``person,'' other than 
an investment company, an ``issuer'' or ``person'' that, on the last 
day of its most recent fiscal year, had total assets of $5 million or 
less; \421\ or (2) a broker-dealer with total capital (net worth plus 
subordinated liabilities) of less than $500,000 on the date in the 
prior fiscal year as of which its audited financial statements were 
prepared pursuant to Rule 17a-5(d) under the Exchange Act,\422\ or, if 
not required to file such statements, a broker-dealer with total 
capital (net worth plus subordinated liabilities) of less than $500,000 
on the last day of the preceding fiscal year (or in the time that it 
has been in business, if shorter); and is not affiliated with any 
person (other than a natural person) that is not a small business or 
small organization.\423\
---------------------------------------------------------------------------

    \419\ 5 U.S.C. 603(a).
    \420\ 5 U.S.C. 605(b).
    \421\ See 17 CFR 240.0-10(a).
    \422\ 17 CFR 240.17a-5(d).
    \423\ See 17 CFR 240.0-10(c).
---------------------------------------------------------------------------

    The Commission believes, based on input from security-based swap 
market participants and its own information, that the majority of 
security-based swap transactions have at least one counterparty that is 
either a security-based swap dealer or major security-based swap 
participant, and that these entities--whether registered broker-dealers 
or not--would exceed the thresholds defining ``small entities'' set out 
above. Accordingly, neither of these types of entities would likely 
qualify as small entities for purposes of the RFA. Moreover, even in 
cases where one of the counterparties to a security-based swap is not 
covered by these definitions, the Commission believes that any such 
entities would not be ``small entities'' as defined in Commission Rule 
0-10. Feedback from industry participants and the Commission's own 
information about the security-based swap market indicate that only 
persons or entities with assets significantly in excess of $5 million 
participate in the security-based swap market.\424\ Given the magnitude 
of this figure, and the fact that it so far exceeds $5 million, the 
Commission continues to believe that the vast majority of, if not all, 
security-based swap transactions are between large entities for 
purposes of the RFA.
---------------------------------------------------------------------------

    \424\ For example, as revealed in a current survey conducted by 
Office of the Comptroller of the Currency, 99.9% of CDS positions by 
U.S. commercial banks are held by those with assets over $80 
billion. See Office of the Comptroller of the Currency, ``Quarterly 
Report on Bank Trading and Derivatives Activities First Quarter 
2014'' (2014).
---------------------------------------------------------------------------

    In addition, the Commission believes that persons that are likely 
to register as SDRs would not be small entities. Based on input from 
security-based swap market participants and its own information, the 
Commission continues to believe that most if not all registered SDRs 
would be part of large business entities, and that all registered SDRs 
would have assets exceeding $5 million and total capital exceeding 
$500,000. Therefore, the Commission continues to believe that no 
registered SDRs would be small entities.
    The proposed rules and rule amendments would apply to all platforms 
on which security-based swaps are executed and registered clearing 
agencies that clear security-based swaps. Based on the Commission's 
existing information about the security-based swap market and the 
entities likely to be platforms and registered clearing agencies, the 
Commission preliminarily believes that these entities would not be 
small entities. The Commission preliminarily believes that most, if not 
all, of the platforms and registered clearing agencies would be large 
business entities or subsidiaries of large business entities, and that 
all platforms would have assets in excess of $5 million and annual 
receipts in excess of $7,000,000. Therefore, the Commission 
preliminarily believes that no platforms or registered clearing 
agencies would be small entities.
    The Commission encourages written comments regarding this 
certification. The Commission solicits comment as to whether the 
proposed rules and amendments to Regulation SBSR could have an effect 
on small entities that has not been considered. The Commission requests 
that commenters describe the nature of any impact on small entities and 
provide empirical data to support the extent of such impact.

XII. Statutory Basis and Text of Proposed Rules

    Pursuant to the Exchange Act, 15 U.S.C. 78a et seq., and 
particularly Sections 3C(e), 11A(b), 13(m)(1), 13A(a), 23(a)(1), 30(c), 
and 36(a), 15 U.S.C. 78c-3(e), 78k-1(b), 78m(m)(1), 78m-1(a), 
78w(a)(1), 78dd(c), and 78mm(a) thereof, the Commission is proposing to 
amend Rules 900, 901, 905, 906, 907, and 908 of Regulation SBSR under 
the Exchange Act, 17 CFR 242.900, 242.901, 242.905, 242.906, 242.907, 
and 242.908.

List of Subjects in 17 CFR Part 242

    Brokers, Reporting and recordkeeping requirements, Securities.

Text of Amendments

    In accordance with the foregoing, and as amended elsewhere in this 
issue of the Federal Register, the Commission proposes to further amend 
17 CFR part 242 as follows:

PART 242--REGULATIONS M, SHO, ATS, AC, NMS, AND SBSR AND CUSTOMER 
MARGIN REQUIREMENTS FOR SECURITY FUTURES

0
1. The authority citation for part 242 continues to read as follows:

    Authority: 15 U.S.C. 77g, 77q(a), 77s(a), 78b, 78c, 78g(c)(2), 
78i(a), 78j, 78k-l(c), 78l, 78m, 78n, 78o(b), 78o(c), 78o(g), 
78q(a), 78q(b), 78q(h), 78w(a), 78dd-1, 78mm, 80a-23, 80a-29, and 
80a-37, unless otherwise noted.

0
2. In Sec.  242.900, revise paragraph (u) and add paragraph (tt) to 
read as follows:

Regulation SBSR--Regulatory Reporting and Public Dissemination of 
Security-Based Swap Information

Sec.  242.900  Definitions.

* * * * *
    (u) Participant, with respect to a registered security-based swap 
data repository, means:
    (1) A counterparty, that meets the criteria of Sec.  242.908(b), of 
a security-based swap that is reported to that registered security-
based swap data repository to satisfy an obligation under Sec.  
242.901(a);
    (2) A platform that reports a security-based swap to that 
registered security-based swap data repository to satisfy an obligation 
under Sec.  242.901(a); or
    (3) A registered clearing agency that is required to report to that 
registered

[[Page 14802]]

security-based swap data repository whether or not it has accepted a 
security-based swap for clearing pursuant to Sec.  242.901(e)(1)(ii).
* * * * *
    (tt) Widely accessible, as used in paragraph (cc) of this section, 
means widely available to users of the information on a non-fee basis.
0
3. In Sec.  242.901 add paragraphs (a)(1), (a)(2)(i), (a)(3), and 
(e)(1)(ii) and revise paragraphs (e)(2) and (h) to read as follows:

Sec.  242.901  Reporting obligations.

    (a) * * *
    (1) Platform-executed security-based swaps that will be submitted 
to clearing. If a security-based swap is executed on a platform and 
will be submitted to clearing, the platform on which the transaction 
was executed shall report to a registered security-based swap data 
repository the information required by Sec. Sec.  242.901(c), 
901(d)(1), 901(d)(9), and 901(d)(10).
    (2) * * *
    (i) Clearing transactions. For a clearing transaction, the 
reporting side is the registered clearing agency that is a counterparty 
to the transaction.
* * * * *
    (3) Notification to registered clearing agency. A person who, under 
Sec.  242.901(a)(1) or Sec.  242.901(a)(2)(ii), has a duty to report a 
security-based swap that has been submitted to clearing at a registered 
clearing agency shall promptly provide that registered clearing agency 
with the transaction ID of the submitted security-based swap and the 
identity of the registered security-based swap data repository to which 
the transaction will be reported or has been reported.
* * * * *
    (e) * * *
    (1) * * *
    (ii) Acceptance for clearing. A registered clearing agency shall 
report whether or not it has accepted a security-based swap for 
clearing.
    (2) All reports of life cycle events and adjustments due to life 
cycle events shall, within the timeframe specified in paragraph (j) of 
this section, be reported to the entity to which the original security-
based swap transaction will be reported or has been reported and shall 
include the transaction ID of the original transaction.
* * * * *
    (h) Format of reported information. A person having a duty to 
report shall electronically transmit the information required under 
this section in a format required by the registered security-based swap 
data repository to which it reports.
* * * * *
0
4. In Sec.  242.905, revise paragraph (a) to read as follows:

Sec.  242.905  Correction of errors in security-based swap information.

    (a) Duty to correct. Any counterparty or other person having a duty 
to report a security-based swap that discovers an error in information 
previously reported pursuant to Sec. Sec.  242.900 through 242.909 
shall correct such error in accordance with the following procedures:
    (1) If a person that was not the reporting side for a security-
based swap transaction discovers an error in the information reported 
with respect to such security-based swap, that person shall promptly 
notify the person having the duty to report the security-based swap of 
the error; and
    (2) If the person having the duty to report a security-based swap 
transaction discovers an error in the information reported with respect 
to a security-based swap, or receives notification from a counterparty 
of an error, such person shall promptly submit to the entity to which 
the security-based swap was originally reported an amended report 
pertaining to the original transaction report. If the person having the 
duty to report reported the initial transaction to a registered 
security-based swap data repository, such person shall submit an 
amended report to the registered security-based swap data repository in 
a manner consistent with the policies and procedures contemplated by 
Sec.  242.907(a)(3).
* * * * *
0
5. In Sec.  242.906, revise paragraphs (b) and (c) to read as follows:

Sec.  242.906  Other duties of participants.

* * * * *
    (b) Duty to provide ultimate parent and affiliate information. Each 
participant of a registered security-based swap data repository that is 
not a platform or a registered clearing agency shall provide to the 
registered security-based swap data repository information sufficient 
to identify its ultimate parent(s) and any affiliate(s) of the 
participant that also are participants of the registered security-based 
swap data repository, using ultimate parent IDs and counterparty IDs. 
Any such participant shall promptly notify the registered security-
based swap data repository of any changes to that information.
    (c) Policies and procedures of security-based swap dealers, major 
security-based swap participants, registered clearing agencies, and 
platforms. Each participant of a registered security-based swap data 
repository that is a security-based swap dealer, major security-based 
swap participant, registered clearing agency, or platform shall 
establish, maintain, and enforce written policies and procedures that 
are reasonably designed to ensure that it complies with any obligations 
to report information to a registered security-based swap data 
repository in a manner consistent with Sec. Sec.  242.900 through 
242.909. Each such participant shall review and update its policies and 
procedures at least annually.
0
6. In Sec.  242.907, revise paragraph (a)(6) to read as follows:

Sec.  242.907  Policies and procedures of registered security-based 
swap data repositories.

    (a) * * *
    (6) For periodically obtaining from each participant other than a 
platform or a registered clearing agency information that identifies 
the participant's ultimate parent(s) and any participant(s) with which 
the participant is affiliated, using ultimate parent IDs and 
counterparty IDs.
* * * * *
0
7. In Sec.  242.908, revise paragraphs (b)(1) and (2) and add 
paragraphs (b)(3) and (4) to read as follows:

Sec.  242.908  Cross-border matters.

* * * * *
    (b) * * *
    (1) A U.S. person;
    (2) A registered security-based swap dealer or registered major 
security-based swap participant;
    (3) A platform; or
    (4) A registered clearing agency.
* * * * *

    By the Commission.
    Dated: February 11, 2015.
Brent J. Fields,
Secretary.

    Note: The following appendix will not appear in the Code of 
Federal Regulations:

Appendix

Reopening of Comment Periods for Certain Rulemaking Releases and Policy 
Statement Applicable to Security-Based Swaps Proposed Pursuant to the 
Securities Exchange Act of 1934 and the Dodd-Frank Wall Street Reform 
and Consumer Protection Action

[Release No. 34-69491; File No. S7-34-10]

http://www.sec.gov/comments/s7-34-10/s73410.shtml

     Email message from Christopher Young, Director, U.S. 
Public Policy, ISDA, to Thomas Eady, SEC, dated March 27, 2014 
(``ISDA III'').

[[Page 14803]]

     Email message from Marisol Collazo, Chief Executive 
Officer, DTCC Data Repository US LLC, to Thomas Eady and Michael J. 
Gaw, SEC, dated March 24, 2014 (with attached letters submitted to 
the CFTC regarding CME Rule 1001) (``DTCC VIII'').
     Letter from Kim Taylor, President, Clearing, CME Group, 
and Kara L. Dutta, General Counsel, ICE Trade Vault (``ICE''), LLC, 
to Elizabeth M. Murphy, Secretary, Commission, dated November 19, 
2013 (``CME/ICE Letter'').
     Letter from Kara L. Dutta, General Counsel, ICE Trade 
Vault, LLC, to Elizabeth M. Murphy, Secretary, Commission, dated 
September 23, 2013 (``ICE Letter'').
     Letter from Larry E. Thompson, General Counsel, 
Depository Trust & Clearing Corporation (``DTCC''), to Elizabeth M. 
Murphy, Secretary, SEC, dated August 21, 2013 (``DTCC VI'').
     Letter from Jeff Gooch, Head of Processing, Markit, 
Chair and CEO, MarkitSERV, to Elizabeth M. Murphy, Secretary, 
Commission, dated August 21, 2013 (``MarkitSERV IV'').
     Letter from Kathleen Cronin, Senior Managing Director, 
General Counsel, CME Group Inc., to Elizabeth M. Murphy, Secretary, 
Commission, dated August 21, 2013 (``CME II'').

Comments on Proposed Rule: Regulation SBSR--Reporting and Dissemination 
of Security-Based Swap Information

[Release No. 34-63346; File No. S7-34-10]

http://www.sec.gov/comments/s7-34-10/s73410.shtml

     Letter from Larry E. Thompson, General Counsel, the 
Depository Trust & Clearing Corporation (``DTCC''), to the Honorable 
Mary L. Schapiro, Chairman, Commission, and the Honorable Gary 
Gensler, Chairman, CFTC, dated June 3, 2011 (``DTCC IV'').
     Letter from John R. Gidman, Association of 
Institutional Investors, to David A. Stawick, Secretary, CFTC, and 
Elizabeth M. Murphy, Secretary, Commission, dated June 2, 2011 
(``Institutional Investors Letter''). [Note: This comment letter is 
in fact dated ``June 2, 2010,'' but the Commission deems the true 
date to be June 2, 2011. The comment letter references proposed 
Regulation SBSR, which the Commission issued in November 2010, and 
thus the comment could not have been submitted in June 2010.]
     Letter from Richard M. Whiting, Executive Director and 
General Counsel, FSR, to David A. Stawick, Secretary, CFTC, and 
Elizabeth M. Murphy, Secretary, Commission, dated May 12, 2011 
(``Roundtable Letter'').
     MFA Recommended Timeline for Adoption and 
Implementation of Final Rules Pursuant to Title VII of the Dodd-
Frank Act (``MFA Recommended Timeline''), attached to letter from 
Richard H. Baker, President and Chief Executive Officer, MFA, to the 
Honorable Mary L. Schapiro, Chairman, Commission, dated March 24, 
2011.
     Letter from Edward J. Rosen, Cleary Gottlieb Steen & 
Hamilton LLP, on behalf of Bank of America Merrill Lynch, BNP 
Paribas, Citi, Credit Agricole Corporate and Investment Bank, Credit 
Suisse Securities (USA), Deutsche Bank AG, Morgan Stanley, Nomura 
Securities International, Inc., PNC Bank, Soci[eacute]t[eacute] 
General, UBS Securities LLC, and Wells Fargo & Company, to Elizabeth 
M. Murphy, Secretary, Commission, and David A. Stawick, Secretary, 
CFTC, dated February 14, 2011 (``Cleary I'').
     Letter from Andrew Downes, Managing Director, UBS 
Investment Bank, and James B. Fuqua, Managing Director, UBS 
Securities LLC, to Elizabeth M. Murphy, Secretary, Commission, dated 
February 7, 2011 (``UBS Letter'').
     Letter from Richard G. Ketchum, Chairman and Chief 
Executive Officer, Financial Industry Regulatory Authority 
(``FINRA''), to Elizabeth M. Murphy, Secretary, Commission, dated 
January 27, 2011 (``FINRA Letter'').
     Letter from Dennis M. Kelleher, President and Chief 
Executive Officer, Stephen W. Hall, Securities Specialist, and 
Wallace C. Turbeville, Derivatives Specialist, Better Markets, Inc. 
(``Better Markets''), to Elizabeth M. Murphy, Secretary, Commission, 
dated January 24, 2011 (``Better Markets II'').
     Letter from Kevin Gould, President, Markit North 
America, Inc., to Elizabeth M. Murphy, Secretary, Commission, dated 
January 24, 2011 (``Markit I'').
     Letter from Jeff Gooch, Chief Executive Officer, 
MarkitSERV LLC, to Elizabeth M. Murphy, Secretary, Commission, dated 
January 24, 2011 (``MarkitSERV I'').
     Letter from Larry E. Thompson, General Counsel, DTCC, 
dated January 18, 2011 (``DTCC II'').
     Letter from Karrie McMillan, General Counsel, ICI, to 
Elizabeth M. Murphy, Secretary, Commission, dated January 18, 2011 
(``ICI I'').
     Letter from Robert Pickel, Executive Vice Chairman, 
ISDA, and Kenneth E. Bentsen, Jr., Executive Vice President, Public 
Policy and Advocacy, SIFMA, to Elizabeth M. Murphy, Secretary, 
Commission, dated January 18, 2011 (``ISDA/SIFMA I''), and 
accompanying study, ``Block trade reporting for over-the-counter 
derivatives markets'' (``ISDA/SIFMA Block Trade Study'').
     Letter from Stuart J. Kaswell, Executive Vice 
President, Managing Director, and General Counsel, Managed Funds 
Association, to Elizabeth M. Murphy, Secretary, Commission, dated 
January 18, 2011 (``MFA I'').
     Letter from Lee H. Olesky, Chief Executive Officer, and 
Douglas L. Friedman, General Counsel, Tradeweb Markets LLC, to 
Elizabeth M. Murphy, Secretary, Commission, dated January 18, 2011 
(``Tradeweb Letter'').
     Letter from Gus Sauter, Managing Director and Chief 
Investment Officer, and John Hollyer, Principal and Head of Risk 
Management and Strategy Analysis, Vanguard, to Elizabeth M. Murphy, 
Secretary, Commission, dated January 18, 2011 (``Vanguard Letter'').
     Letter from Julian Harding, Chairman, WMBAA, to 
Elizabeth M. Murphy, Secretary, Commission, dated January 18, 2011 
(``WMBAA II'').
     Letter from R. Glenn Hubbard, Co-Chair, John L. 
Thornton, Co-Chair, and Hal S. Scott, Director, Committee on Capital 
Markets Regulation, David A. Stawick, Secretary, CFTC, and Elizabeth 
M. Murphy, Secretary, Commission, dated January 18, 2011 (``CCMR 
I'').
     Letter from Spencer Bachus, Ranking Member, Committee 
on Financial Services, and Frank Lucas, Ranking Member, Committee on 
Agriculture, U.S. House of Representatives, to The Honorable Timothy 
Geithner, Secretary, Department of Treasury, the Honorable Gary 
Gensler, Chairman, CFTC, the Honorable Mary Schapiro, Chairman, 
Commission, and the Honorable Ben Bernanke, Chairman, Federal 
Reserve, dated December 16, 2010 (``Bachus/Lucas Letter'').
     Letter from Chris Barnard, dated December 3, 2010 
(``Barnard I'').

Re-Opening of Comment Periods for Certain Rulemaking Releases and 
Policy Statement Applicable to Security-Based Swaps Proposed Pursuant 
to the Securities Comments on Statement of General Policy on the 
Sequencing of the Compliance Dates for Final Rules Applicable to 
Security-Based Swaps Adopted Pursuant to the Securities Exchange Act of 
1934 and the Dodd-Frank Wall Street Reform and Consumer Protection Act

[Release No. 34-67177; File No. S7-05-12]

     Letter from Kenneth E. Bentsen, Jr., Executive Vice 
President, Public Policy and Advocacy, SIFMA, to Elizabeth M. 
Murphy, Secretary, Commission, dated August 13, 2012 (``SIFMA II'').

Comments on Cross-Border Security-Based Swap Activities; Re-Proposal of 
Regulation SBSR and Certain Rules and Forms Relating to the 
Registration of Security-Based Swap Dealers and Major Security-Based 
Swap Participants

(Release No. 34-69490; File No. S7-02-13)

http://www.sec.gov/comments/s7-02-13/s70213.shtml

     Letter from Karel Engelen, Senior Director, Head of 
Data, Reporting & FpML, ISDA, to Elizabeth M. Murphy, Secretary, 
Commission, dated November 14, 2014 (``ISDA IV'').

Real-Time Reporting: Title VII Provisions of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act

http://www.sec.gov/comments/df-title-vii/real-time-reporting/real-time-reporting.shtml

     Letter from Gerald Donini, Barclays Capital, Inc., to 
David A Stawick, Secretary, CFTC, and Elizabeth M. Murphy, 
Secretary, SEC, dated February 3, 2011 (``Barclays I'').
     Letter from James Hill, Managing Director, Morgan 
Stanley, to David A Stawick, Secretary, CFTC, and Elizabeth M. 
Murphy, Secretary, SEC, dated November 1, 2010 (``Morgan Stanley 
Letter'').

Comments on Reporting of Security-Based Swap Transaction Data

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

http://www.sec.gov/comments/s7-28-10/s72810.shtml

     Letter from Larry E. Thompson, General Counsel, DTCC, 
to Elizabeth M. Murphy,

[[Page 14804]]

Secretary, Commission, dated December 20, 2010 (``DTCC I'').
     Letter from Robert Pickel, Executive Vice Chairman, 
ISDA, to Elizabeth Murphy, Secretary, Commission, dated December 10, 
2010 (``ISDA I'').

Comments on Proposed Rule: Security-Based Swap Data Repository 
Registration, Duties, and Core Principles

[Release No. 34-63347; File No. S7-35-10]

http://www.sec.gov/comments/s7-35-10/s73510.shtml

     Letter from Larry E. Thompson, General Counsel, DTCC, 
to Elizabeth M. Murphy, Secretary, Commission, dated January 24, 
2011 (``DTCC III'').

Comments on Joint Public Roundtable on International Issues Relating to 
the Implementation of Title VII of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act

[Release No. 34-64939; File No. 4-636]

http://www.sec.gov/comments/4-636/4-636.shtml

     Letter from Jeff Gooch, Chief Executive Officer, 
MarkitSERV, to David A. Stawick, Secretary, CFTC, and Elizabeth M. 
Murphy, Secretary, Commission, dated September 19, 2011 
(``MarkitSERV III'').

Roundtable Transcripts

     Joint CFTC-SEC Staff Roundtable on Implementation, May 
2, 2011. Available at: http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/csjac_transcript050211.pdf 
(``Implementation Roundtable, Day 1'').
     Joint CFTC-SEC Staff Roundtable on Implementation, May 
3, 2011. Available at: http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/csjac_transcript050311.pdf 
(``Implementation Roundtable, Day 2'').
[FR Doc. 2015-03125 Filed 3-18-15; 8:45 am]
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