Source: https://www.federalregister.gov/documents/2011/07/22/2011-18054/large-trader-reporting-for-physical-commodity-swaps
Timestamp: 2018-12-11 18:51:41
Document Index: 13954376

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Federal Register :: Large Trader Reporting for Physical Commodity Swaps
A Rule by the Commodity Futures Trading Commission on 07/22/2011
43851-43874 (24 pages)
I. Background and Summary of Comments
First Record Layout Example for § 20.4:
Second Record Layout Example for § 20.4:
Appendices to Large Trader Reporting for Physical Commodity Swaps—Commission Voting Summary and Statements of Commissioners
https://www.federalregister.gov/d/2011-18054 https://www.federalregister.gov/d/2011-18054
The Commission is adopting reporting regulations (“Reporting Rules”) that require physical commodity swap and swaption (for ease of reference, collectively “swaps”) reports. The new regulations require routine position reports from clearing organizations, clearing members and swap dealers and also apply to reportable swap trader positions.
Effective Dates: This rulemaking shall become effective September 20, 2011.
Bruce Fekrat, Senior Special Counsel, Office of the Director, (202) 418-5578, bfekrat@cftc.gov, or Ali Hosseini, Attorney-Advisor, Office of the Director, (202) 418-6144, ahosseini@cftc.gov, Division of Market Oversight, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581.
On November 2, 2010, the Commission proposed Reporting Rules that, in addition to establishing recordkeeping requirements, require routine swaps position reports from clearing organizations, clearing members and swap dealers and apply non-routine reporting requirements to large swaps traders.[1] The Reporting Rules, as finalized and adopted herein, will allow the Commission to administer its regulatory responsibilities under the Commodity Exchange Act (“CEA or Act”) by implementing and conducting effective surveillance of economically equivalent physical commodity futures, options and swaps. The Reporting Rules will directly support the Commission's transparency initiatives such as its dissemination of Commitments of Traders and Index Investment Data Reports and will allow the Commission to monitor compliance with the trading requirements of the Act.[2]
The Commission currently receives and uses for market surveillance and enforcement purposes, data on large positions in all physical commodity futures and option contracts traded on designated contract markets (“DCMs”). Without the Reporting Rules, there would be no analogous reporting system in place for economically equivalent swaps, which until recently were largely unregulated financial contracts. The Reporting Rules, as discussed below, are reasonably necessary for the effective surveillance of economically equivalent futures and swaps.
The National Futures Association (“NFA”) submitted a comment [3] suggesting that its issuance of trader identifications should be a part of the position reporting process. Although beyond the scope of this rulemaking as proposed, the Commission may review the feasibility of adopting such an approach as a part of its ongoing updating and revision of other transaction and position reporting requirements.
The Air Transport Association (“ATA”), Better Markets Inc. (“Better Markets”), the Petroleum Marketers Association of America (“PMAA”) and New England Fuel Institute (“NEFI”), and Robert Pollin and James Heintz of the Political Economy Research Institute Start Printed Page 43852(“PERI”) indicated support for the proposed regulations.[4] ATA supported the proposal as a practical solution to the Commission's current lack of swaps position data. Better Markets stated its support for the use of futures equivalence and the assembly of data based on price relationships. PMAA and NEFI argued the regulations will provide for a solid foundation for position limits.
Bindicap Comster, the Futures Industry Association (“FIA”) and a working group of commercial energy firms (“Working Group”), meanwhile, opposed the proposed regulations,[5] arguing that an expanded special call reporting mechanism, similar to the special call that the Commission has issued to support its Index Investment Data and Commitments of Traders Reports, would be a better alternative to the proposed regulations while remaining consistent with the requirements of the Act.[6] The Commission notes that its current special call for Index Investment Data Reports is a targeted collection of data. It gathers information related to specific products from a limited set of market participants. The special call was not intended to function as a tool for general market surveillance, including compliance with section 4a of the Act. In order to be able to gather data of the quality needed to conduct market surveillance the special call would have to undergo substantial modifications, such as requiring much more granular data by counterparty in a data stream on or close to a next-day basis, which in effect would convert it into the Reporting Rules.
FIA and the Working Group also questioned whether the Commission has sufficient authority to adopt such regulations. FIA argued that the Commission's authority is not clear because of the CEA section 2(h) reporting exemption for swaps on exempt commodities. The Working Group argued that the proposal is not required by the Dodd-Frank Act and that it is not necessary to comply with CEA section 4a(a)(1). The Commission has requisite statutory authority for the Reporting Rules based on CEA sections 4a, 4t and 8a(5). Specifically, section 4a of the CEA, as amended by the Dodd-Frank Act, directs the Commission to establish position limits, as appropriate, for physical commodity swaps.[7] Section 737 of the Dodd-Frank Act, which amended section 4a to direct the Commission to impose these limits, became effective on the date of enactment of the Dodd-Frank Act—i.e., July 21, 2010. Section 8a(5) of the CEA authorizes the Commission to promulgate such regulations as, in the judgment of the Commission, are reasonably necessary to effectuate any of the provisions or to accomplish any of the purposes of the CEA. In the Commission's judgment, the Reporting Rules are reasonably necessary to implement the statutory mandate in section 4a for the Commission to establish position limits, as appropriate, on an expedited basis.
With regard to the future establishment of swap data repositories (“SDRs”) and whether the Commission should wait for SDRs to provide swaps position data instead of adopting the regulations, ATA argued that the Commission should proceed with the regulations and not wait for SDRs to become operational. FIA and the Working Group, on the other hand, argued that the future role of SDRs makes adoption of the regulations unnecessary. The Commission has determined that the Reporting Rules are reasonably necessary for several reasons. It is likely that physical commodity SDRs will require the most time to become operational since, unlike for swaps in the interest rate, equity and credit default asset categories, there currently is no functional and accepted data repository for swaps in the energy, metal or agricultural commodity asset categories. In addition, even after SDRs have been established, because they are fundamentally transaction repositories, it may be a considerable time before SDRs are able to reliably convert transaction data into positional data. Thus, in view of the considerable time before physical commodity swap SDRs are likely to be operational and have the ability to convert transactions to positions, the Commission has determined to adopt the Reporting Rules. In order to address concerns raised about the possibility of redundant regulatory obligations, however, the Reporting Rules do include, in final regulation 20.9, a sunset provision.
Better Markets, FIA and the Working Group, as well as a not-for-profit electric end-user coalition (“Electric End User Coalition”),[8] argued that the proposed regulations should not be adopted by the Commission until regulations defining the terms “swap dealer” and “swap” are adopted first. As further explained below, the Commission has determined to tie the compliance date of the regulations for swap dealers that are not clearing members to the effective date of the “swap dealer” definition final rulemaking.[9] With regard to the “swap” definition, the Commission has determined to utilize, on a transitional basis and until final definitional regulations become effective, a definition of “swap” that is based on the Start Printed Page 43853reference to “commodity swap” within the definition of “swap agreement” in part 35 of the Commission's regulations. Swap market participants have relied on the definition of “swap agreement” for exempting transactions from the CEA since 1993. As a result, market participants have an understanding of the general nature of the definition of commodity swap. The swaps that would be subject to the Reporting Rules would be the same under both definitions.
With regard to the definition of “reporting entity,” FIA and the Working Group argued that it is overly broad. Bindicap Comster argued that the definition is appropriate. In the Commission's judgment, the Reporting Rules have been narrowly tailored to obtain the information reasonably necessary from clearing organizations, clearing members and swap dealers in order to implement and conduct an effective initial surveillance program for swaps.
With regard to the proposed definition of “paired swaps,” the Working Group argued that it would not always appropriately capture the concept of economic equivalence because, for example, different delivery locations may have periods of high correlation followed by periods where such correlations break down. Better Markets argued that it was too narrow because it did not consider criteria such as market hedging practices, margin netting offered by clearing organizations or historical price correlation. The proposed regulations identified three categories of swaps that would be economically equivalent to DCM contracts and thereby subject to reporting under the proposed rules: (1) Swaps directly or indirectly linked to the price of a referenced DCM contract; (2) swaps directly or indirectly linked to the price of the same commodity for delivery at the same location as that of a referenced DCM contract; and (3) swaps based on the same commodity as that of a referenced DCM contract which are deliverable at different locations that nonetheless have the same supply and demand fundamentals as the referenced DCM contract's delivery point. The first two categories of the definition of economically equivalent swaps are appropriately tailored and objectively defined, do not require case by case Commission analysis, and would provide sufficient data for the Commission to meet its responsibility under sections 4a and 4t of the Act. To further the objectives of clear applicability of the regulations and the submission of accurate reports, as well as to lower the burden on reporting entities by limiting the set of reportable swaps, the Commission has amended the definition to remove the third category.
The final Reporting Rules do, however, harmonize the data fields required to be reported by swap dealers for cleared and non-cleared swaptions. As proposed, certain fields were required for cleared swaptions that were not required for non-cleared swaptions and vice-versa. Although certain data fields may be more relevant for cleared or non-cleared swaptions, the harmonization of required data fields will simplify the reporting of swaptions and thereby will likely decrease (and not increase) any burden associated with reporting swaptions under the Reporting Rules as finalized.
The Commission is aware that a reporting level of one contract could potentially expand the Reporting Rules' books and records obligations to additional swap market participants. Therefore, final regulation 20.6 applies a books and records requirement to swap counterparties only if such persons' swaps positions meet or exceed a simplified 50 futures contract equivalent reporting level. Also, final regulation 20.6 provides that persons with swaps positions meeting or exceeding the aforementioned threshold may keep and reproduce books and records for transactions resulting in such swaps positions in the record retention format that such person has developed in the normal course of business. Regulation 20.6 also provides Start Printed Page 43854that such persons may keep and reproduce books and records for, among other things, the cash commodity underlying such swaps positions in accordance with the record retention format developed in the normal course of business.
In connection with the submission of swaps position data, FIA expressed concern about the confidential treatment of data submitted should the Commission determine to require the submission of data to third parties. This concern is not relevant as the regulations only involve the submission of position and identifying data to the Commission. The Commission will protect proprietary information according to the Freedom of Information Act and 17 CFR part 145, “Commission Records and Information.” In addition, section 8(a)(1) of the Act strictly prohibits the Commission, unless specifically authorized by the Act, from making public “data and information that would separately disclose the business transactions or market positions of any person and trade secrets or names of customers.” The Commission also is required to protect certain information contained in a government system of records according to the Privacy Act of 1974, 5 U.S.C. 552a.
The Electric End User Coalition also argued that the recordkeeping burden imposed by the proposed regulations on commercial entities would be significant. In particular it argued that the recordkeeping requirements should not apply to end-users and that the Commission should defer to other regulators, specifically the Federal Energy Regulatory Commission (“FERC”), with regard to recordkeeping obligations. In the Commission's judgment, the recordkeeping requirements for end-users with swaps positions that meet or exceed the relevant thresholds are consistent with requirements under current Commission regulation 18.05. As described above, final regulation 20.6 generally permits such end-users to keep and reproduce records of swaps positions, as well as the underlying cash commodities, in the record retention format that such entities have developed in the normal course of business.
With regard to the “swap” definition, the final part 20 regulations utilize a definition of “swap ” that is based on the reference to “commodity swaps” within the definition of “swap agreement” in part 35 of the Commission's regulations.[10] Swap market participants have relied on the definition of “swap agreement” for exempting transactions from the CEA since 1993. As a result, market participants have an understanding of the general nature of the definition of commodity swaps. The part 35 definition will become effective on the effective date of this final rulemaking and will operate until the effective date of any swap definitional rulemaking by the Commission under section 1a of the CEA. Under both definitions, the category of the swaps that would be subject to the Reporting Rules remains the same.[11] For further clarity, forwards as currently excluded from the CEA (i.e., prior to the effective date of the Dodd-Frank Act) are also outside the scope of the definition of “swap” as used in this reporting scheme.
Regulation 20.2 lists the 46 DCM-listed futures contracts covered by the Reporting Rules (“Covered Futures Contracts”), as well as an additional line item for diversified commodity indices.[12] The Commission, through the definition of paired swap or paired swaption (for ease of reference, collectively “paired swaps”) in regulation 20.1, defines a subset of swaps as economically equivalent to the Covered Futures Contracts. The definition of paired swaps (i.e., economically equivalent swaps) identifies two distinct categories of instruments.
1. Directly linked to a listed contract—A swap settled to the price of the New York Mercantile Exchange (“NYMEX”) Heating Oil Calendar Swap Futures Contract is directly linked to a Covered Futures Contract because the floating price of the futures contract is equal to the monthly average settlement price Start Printed Page 43855of the first nearby contract month for the NYMEX New York Harbor No. 2 Heating Oil Futures Contract.
2. Indirectly linked to a listed contract—The ICE WTI Average Price Option is indirectly linked to a Covered Futures Contract because the floating price of the swap references the ICE WTI 1st Line Swap Contract which in turn is equal to the monthly average settlement price of the NYMEX Front Month WTI Crude Futures Contract.
3. Partially settled to a listed contract—A swap settled to the Argus Sour Crude Index (“ASCI”) (which also underlies the Chicago Mercantile Exchange (“CME”) Argus WTI Formula Basis Calendar Month Swap Futures Contract) is partially settled to a Covered Futures Contract.[13] Because the ASCI index uses both a physical cash market component and the NYMEX WTI Futures Contract to establish the level of the index, it would partially settle to a Covered Futures Contract and would be a paired swap under the first paragraph of the definition.[14]
4. Priced at a differential to a listed contract—The ICE Henry Physical Basis LD1 Contract is priced at a differential to a Covered Futures Contract because the settlement price is the final settlement price for natural gas futures (a Covered Futures Contract) as reported by NYMEX for the specified month plus the contract price.
As proposed, a paired swap would have also included swaps that are based on the same commodity [15] as that of a Covered Futures Contract but deliverable at locations that are different than a Covered Futures Contract's delivery locations, so long as such locations have substantially the same supply and demand fundamentals as that of a Covered Futures Contract reference delivery location. In response to comments, the Commission has determined not to include this proposed category in the final definition of paired swaps. The final definition thereby narrows the scope of the swaps that are subject to position reporting.
In addition to reports for clearing members, clearing organizations are, pursuant to regulation 20.3(c), required to provide to the Commission, for each Start Printed Page 43856futures equivalent month, end of reporting day settlement prices for each cleared product and deltas for every unique swaption put and call, expiration date, and strike price. This second daily report will allow the Commission to assign an appropriate weight to unadjusted positions.
Regulation 20.4 requires reporting entities to report principal [16] and direct legal counterparty paired swap positions to the Commission when such positions become reportable. Reporting entities are required to follow the same procedure for determining if their principal or counterparty positions are reportable to the Commission. Regulation 20.1 identifies a reporting entity as a clearing member or a swap dealer as defined in section 1a of the CEA and as subject to definitional changes that will be made through Commission regulations further defining the term swap dealer. The compliance date of any provisions relating to swap dealers will be the effective date of a final swap dealer definition.[17]
Regulation 20.4 requires reporting entities to provide positional reports when reporting entities have principal and counterparty reportable paired swap positions. The final Reporting Rules amend regulation 20.1 to define a reportable position in two distinct ways. First, regulation 20.1, as proposed and finalized, defines a reportable position as a position, in any one futures equivalent month, comprised of 50 or more futures equivalent paired swaps or swaptions based on the same commodity. This proposed level is calibrated to capture data on a sufficiently large percentage of paired swap positions and was arrived at after consultation with multiple market participants.[18] Once a paired swap position attributable to the reporting entity as principal or to its counterparty meets or exceeds the 50 futures equivalent contract threshold, all other paired swaps in the same commodity attributable to such trader becomes part of that trader's reportable position.[19]
As with reports that are required to be provided by clearing organizations to the Commission under regulation 20.3, regulation 20.4 requires paired swap positions to be represented and reported in futures equivalents. A common method of accounting for positions in swaps and futures allows for more effective market surveillance. The data collected by the Reporting Rules could be used to determine aggregate open interest levels for economically equivalent derivatives. For example, such “size-of-the-market” calculations could in turn serve as a basis for computing non-spot-month position limits, should the Commission determine to adopt such limits.
Regulation 20.5(a) requires a 102S filing for the identification of a reporting entity's counterparty when such counterparty holds a reportable position. The 102S filing consists of the “name, address, and contact information of the counterparty with the reportable account” and a “brief description of the nature of such person's paired swaps and swaptions' market activity.” The reporting entity is required to submit a 102S filing only once for each person associated with a reportable account unless prior filed information is no longer accurate.
Once an account counterparty is reportable, the Commission may contact the trader directly and require that the trader file a more detailed identification report, a 40S filing. The Commission would require a 40S filing if a trader has become reportable for the first time and is not known to the Commission. A 40S filing consists of the submission of a CFTC Form 40 “Statement of Reporting Trader.” As the current version of Form 40 covers information on positions in futures and options, traders would be required to complete the form as if the form covered information related to positions in paired swaps and swaptions.
The 102S filing and the 40S filing together would allow the Commission to identify the person(s) owning or controlling the trading of a reportable account, the person to contact regarding Start Printed Page 43857trading, the nature of the trading, whether the reportable account is related—by financial interest or control—to another account, and the principal occupation or business of the account owner. The filings also would provide the Commission information on whether the account is being used for hedging cash market exposure.
The recordkeeping duties imposed by regulations 20.6(a) and 20.6(b) are in accordance with the requirements of regulation 1.31. Regulation 1.31(a)(1) requires that these transaction records be kept for five years, the first two of which they “shall be readily accessible.” Such books and records “shall be open to inspection by any representative of the Commission.”
Regulation 20.7(a) provides that the Commission would specify, in writing to persons required to report, the format, coding structure, and electronic data transmission procedures for these reports and submissions. The purpose of this provision is to provide notice on how the Commission would determine the means by which the part 20 reports are to be formatted and submitted. The Commission notes that subsequent to the commencement of reporting, and from time to time thereafter, it will provide standardized codes for data elements such as commodity reference prices and require that submitted position reports use such standard codes instead of proprietary codes. Such information will be disseminated on the Commission's Web site.[20]
Under regulation 20.10, the compliance date for reporting requirements for clearing organizations under regulation 20.3 and clearing members under regulation 20.4 is sixty days after the publication of this notice in the Federal Register. The compliance date with regulation 20.4 for swap dealers that are not clearing members is the effective date of final regulations defining the term swap dealer.[21] All special call provisions must be complied with sixty days following the date of publication of this notice in the Federal Register.
Regulation 20.10 also allows the Commission to permit for a period, not to exceed six calendar months following the effective date of this part, during which a clearing organization or reporting entity or trader may provide reports that differ in content or are submitted in a form and manner which is other than prescribed by the provisions of part 20, provided that the submitter coordinates with the Commission and is making a good faith attempt to comply with all of the provisions of part 20. Furthermore, upon the passage of the full compliance Start Printed Page 43858schedule outlined above, all paired swaps and swaptions position and market reports that are currently reported under a Commission order or parts 15 through 19 and 21 of the Commission's regulations must instead be reported exclusively under part 20.
Section 15(a) of the Act requires that the Commission, before promulgating a regulation under the Act or issuing an order, consider the costs and benefits of its action. By its terms, CEA section 15(a) does not require the Commission to quantify the costs and benefits of a new regulation or determine whether the benefits of the regulation outweigh its costs. Rather, CEA section 15(a) requires the Commission to “consider the costs and benefits” of its action.
The Electric End User Coalition also argued that the recordkeeping burden imposed by the proposed regulations would be significant. In particular it argued that the recordkeeping requirements should not apply to end-users and that the Commission should defer to other regulators, specifically FERC, with regard to recordkeeping obligations. In the Commission's judgment, the recordkeeping requirements of the regulations are not unduly burdensome and are consistent with the recordkeeping requirements of current Commission regulations 1.31 and 18.05. In addition, as the regulations have been narrowly tailored to collect routine data only from clearing organizations, clearing members and swap dealers, the Reporting Rules will not have a significant negative impact on a substantial number of end-users. The Commission has thus determined to proceed with the Reporting Rules.Start Printed Page 43859
For non-clearing member swap dealers, the reporting burden is estimated to be 37,500 hours and $8,000,000 spread across 100 entities, or 375 hours and $80,000 per entity. The recordkeeping burden for non-clearing member swap dealers is estimated to be 2,000 hours and $2,000,000 spread across 100 entities, or 20 hours and $20,000 per entity. In addition, non-clearing member swap dealers have a burden in connection with 102S submissions. The burden for 102S submissions is estimated to be 1,800 hours and $1,000,000 spread across 200 entities (of which 100 are non-clearing member swap dealers), or 9 hours and $5,000 per entity. Each non-clearing member swap dealer, then, is estimated to have a total annual burden of 404 hours and $105,000.
In addition to providing increased market transparency through the reporting of paired swap positions to the Commission, the Commission will be better able to first, protect market participants and the public (CEA section 15(a)(2)(A)) and second, increase the efficiency and competitiveness of the markets (CEA section 15(a)(2)(B)). The extension of the Commission's surveillance activities to these paired swap markets will enhance the deterrence and detection of problematic activities and, thus, help ensure the integrity of these markets and protect market participants and the public from disruptive trading, price manipulation, and the effects of market congestion. Further, with this extension, the Commission will be able to expand its Commitments of Traders Reports, for example, to include aggregate position data on the paired swaps markets, and thus will provide the public, including market participants, greater transparency into the constitution of markets covered by part 20. This increased transparency may reduce the informational asymmetries in the paired swap markets and thereby improve the efficiency of the market and promote competition.Start Printed Page 43860
The Regulatory Flexibility Act (“RFA”) requires Federal agencies, in proposing regulations, to consider the impact of those regulations on “small entities.” [22] In response to the Reporting Rules, the Electric End User Coalition argued that the recordkeeping burden imposed by the proposed regulations would be significant. In particular it argued that the recordkeeping requirements should not apply to end-users and that the Commission should defer to other regulators, specifically FERC, with regard to recordkeeping obligations. In the Commission's judgment, the recordkeeping requirements of the regulations are consistent with the recordkeeping requirements of current Commission regulations 1.31 and 18.05. In addition, as the regulations have been narrowly tailored to collect routine data only from clearing organizations, clearing members and swap dealers, the Commission has determined that the Commission does not expect the Reporting Rules to have a significant impact on a substantial number of small entities. The Commission has thus determined to proceed with the Reporting Rules.
The Reporting Rules will affect organizations including registered derivatives clearing organization (“DCOs”), clearing members (many of whom are registered with the Commission already as futures commission merchants (“FCMs”)), swap dealers, and persons who have books and records obligations under regulation 20.6.
The Commission has previously determined that DCOs [23] and FCMs [24] are not “small entities” for purposes of the RFA. As noted above, a person with non-discretionary reporting or books and records obligations under final regulations 20.3, 20.4 and 20.6 will either be a clearing organization, clearing member, swap dealer, or a person with at least 50 or more gross paired swaps positions in the same commodity on a futures equivalent and all-months-combined basis. The Commission notes this threshold is comparable to the minimum 25-contract reporting levels in effect for futures positions under regulation 15.03. Previously, the Commission had determined that the reporting levels in regulation 15.03, which determine which positions are reportable, would not affect small entities.[25] The Commission does not believe that entities who meet the Reporting Rules' non-discretionary quantitative threshold will constitute small entities for RFA purposes.
The Paperwork Reduction Act (“PRA”) [26] imposes certain requirements on Federal agencies in connection with their conducting or sponsoring any collection of information as defined by the PRA. The Reporting Rules will result in new collection of information requirements within the meaning of the PRA. The Commission submitted the proposing release to the Office of Management and Budget (“OMB”) for review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The Commission requested that OMB approve, and assign a new control number for, the collections of information covered by the proposing release. The information collection burdens created by the Commission's proposed rules, which were discussed in detail in the proposing release, are identical to the collective information collection burdens of the final rules.
The Commission received two comments on the burden estimates and information collection requirements contained in its proposing release. FIA and the Working Group argued that the costs placed by the proposed regulations would be significant and that the Commission significantly underestimated the costs to clearing members and swap dealers. FIA stated that some of its members believe the costs to be very substantial and in some cases exceeding millions of dollars, while acknowledging that it is difficult to estimate costs with any precision. The Working Group stated that some of its members estimate the total compliance costs to range up to $80,000 to $750,000 per year, inclusive of capital costs, and that the upfront costs could be as high as $1.5 million. The Commission has carefully considered the costs on market participants. Some comments regarding significant industry burdens assumed that a substantial number of end-users would be swept up into the definition of swap dealer. In response, the Commission notes that the Reporting Rules are tailored to collect routine reports only from clearing Start Printed Page 43861organizations, clearing members, and swap dealers. In addition, based on numerous meetings with potential reporting entities, the Commission has determined that the costs that would be imposed by the proposed regulations on reporting entities is reasonable given the trade capture and information technology resources of such entities.
The title for this collection of information is “Part 20—Large Trader Reporting for Physical Commodity Swaps.” OMB has approved assigned OMB control number 3038-[_] to this collection of information.
Part 20 establishes reporting requirements for clearing organizations and reporting entities and recordkeeping requirements for these firms in addition to firms that become reportable because of a reportable paired swap or swaption positions. Accordingly, the Commission is seeking a new and separate control number for reporting from clearing organizations and reporting entities (collectively “respondents”) and recordkeeping for firms that become reportable because of a reportable paired swap or swaption position operating in compliance with the requirements of part 20.
Part 20 will result in the collection of information on “paired swaps and swaptions” positions as defined in regulation 20.1. Specifically, part 20 provides for three new kinds of reports:
In addition to creating these reporting requirements, regulation 20.6 imposes recordkeeping requirements for (1) clearing organizations, (2) reporting entities, and (3) persons with paired swaps positions as specified in regulation 20.6(c). The Commission estimates that the recordkeeping requirements of regulation 20.6 will not be overly burdensome. For the firms subject to the reporting and recordkeeping requirements of regulation 20.6, it should be noted that these requirements are not unlike the recordkeeping requirements imposed by Congress in new CEA section 4r(c)(2) and by existing recordkeeping regulation 18.05. If a firm subject to these recordkeeping requirements was previously reportable due to a futures position in the relevant commodity above the “reporting level” (see regulation 15.03), then the regulation 20.6(b) recordkeeping burdens would not be new, as that firm would already be subject to these requirements under regulation 18.05. If a firm becomes subject to the regulation 20.6 recordkeeping requirements only because of a reportable paired swaps position (and not because of a futures position above the reportable level), then the requirements contained in the Reporting Rules add only the duty to keep records on all commercial activities that a reporting entity or person hedges to the swaps-related recordkeeping duties imposed by CEA section 4r(c)(2). These additional burdens are not expected to be substantial, given that in the normal course of business firms would collect this information on their commercial activities.
The Commission estimates that implementing part 20 will create a total annual reporting and recordkeeping hour burden of 79,503 hours across 705 firms. Based on a weighted average wage rate of $74.36,[27] this will amount to an annualized labor cost of $5.9 million. In addition, the Commission estimates that total annualized capital/start-up, operating, and maintenance costs [28] will amount to a combined $35.2 million (a typographical error in the proposed Reporting Rules indicated a $32.7 cost). This overall total reporting and recordkeeping hour burden is the sum of estimated burdens for the three reporting categories and the three recordkeeping categories mentioned above.
1. Regulation 20.3 clearing organization reports will account for 938 of these annual reporting and recordkeeping hours. These hours will be spread across 5 respondents. Annualized capital/start-up, operating, and maintenance costs for all affected clearing organizations combined will be approximately $100,000.[29]
1. Regulation 20.6(a) recordkeeping duties for clearing organizations will account for 100 of these annual Start Printed Page 43862reporting and recordkeeping hours. These hours will be spread across 5 firms. Annualized capital/start-up, operating, and maintenance costs to meet the recordkeeping requirements of regulation 20.6(a) will be approximately $100,000.
3. Regulation 20.6(c) recordkeeping duties for persons with paired swaps positions will create an annual reporting and recordkeeping burden of 10,000 hours spread across 500 firms. Annualized capital/start-up, operating, and maintenance costs for all traders in this category combined will be approximately $11.5 million.
The Commission will protect proprietary information according to the Freedom of Information Act and 17 CFR part 145, “Commission Records and Information.” In addition, section 8(a)(1) of the Act strictly prohibits the Commission, unless specifically authorized by the Act, from making public “data and information that would separately disclose the business transactions or market positions of any person and trade secrets or names of customers.” [30] The Commission also is required to protect certain information contained in a government system of records according to the Privacy Act of 1974, 5 U.S.C. 552a.
Diversified commodity indices.
(1)(i) A position, in any one futures equivalent month, comprised of 50 or more futures equivalent paired swaps or swaptions based on the same commodity underlying a futures contract listed in § 20.2, grouped separately by swaps and swaptions, then grouped by gross long contracts on a futures equivalent basis or gross short contracts on a futures equivalent basis;
(ii) For a consolidated account (described in § 20.4(a)) that includes a reportable position as defined in paragraph (1)(i) of this definition, all other positions in that account that are Start Printed Page 43863based on the commodity that renders the account reportable; and
(iii) The first reporting day on which a consolidated account (described in § 20.4(a)) no longer includes a reportable position as described in paragraph (1)(i) of this definition (because on such day, the reporting entity's consolidated account shall continue to be considered and treated as if it in fact included reportable positions as described in paragraph (1)(i) of this definition); or
(2) At the discretion of a reporting entity, and as an alternative to paragraph (1) of this definition, so long as the same method is consistently applied to all consolidated accounts (as described in § 20.4(a)) of the reporting entity, all positions on a gross basis in a consolidated account that are based on the same commodity.
(1) Until the effective date of any definitional rulemaking regarding “swap” by the Commission under section 1a of the Act, an agreement (including terms and conditions incorporated by reference therein) which is a commodity swap (including any option to enter into such swap) within the meaning of “swap agreement” under § 35.1(b)(1) of this chapter, or a master agreement for a commodity swap together with all supplements thereto; or
Diversified Commodity Index (See § 20.11).
(c) Populating reported data records with data elements. Data records reported under paragraph (b) of this Start Printed Page 43864section shall include the following data elements:
(b) 40S filing. Every person subject to books or records under § 20.6 shall after a special call upon such person by the Commission file with the Commission a 40S filing at such time and place as directed in the call. A 40S filing shall consist of the submission of a Form 40, which shall be completed by such person as if any references to futures or option contracts were references to paired swaps or swaptions as defined in § 20.1.
(a) Every clearing organization shall keep all records of transactions in paired swaps or swaptions, and methods used to convert paired swaps or swaptions into futures equivalents, in accordance with the requirements of § 1.31 of this chapter.
(b) Every reporting entity shall keep all records of transactions in paired swaps or swaptions, and methods used to convert paired swaps or swaptions into futures equivalents, in accordance with the requirements of § 1.31 of this chapter.
(3) In § 20.6(d) for issuing a special call;
(4) In § 20.7 for providing instructions or determining the format, coding structure, and electronic data transmission procedures for submitting data records and any other information required under this part; and
(5) In § 20.10 for determining the described compliance schedules.
(b) The Commission may determine, in its discretion, to maintain the effectiveness and enforceability of any section of this part, or any requirement therein, in an order issued under paragraph (a) of this section, upon finding that such sections, or requirements therein, provide the Start Printed Page 43865Commission with positional data or data elements that materially improves the accuracy and surveillance utility of the positional data processed by swap data repositories.
(c) The Commission may permit, for a period not to exceed six calendar months following the effective date specified in paragraph (a) of this section, the submission of reports pursuant to §§ 20.3 and 20.4 that differ in content, or are submitted in a form and manner which is other than prescribed by the provisions of this part, provided that the submitter is making a good faith attempt to comply with all of the provisions of this part.
(d) Unless determined otherwise by the Commission, paired swap and swaption position and market reports submitted under parts 15 through 19, or 21 of this chapter, or any order of the Commission, shall continue to be submitted under those parts or orders until swap dealers are required to comply with § 20.4.
Company A position (long) †
Company B position (short) †
† Contracts rounded to the nearest integer.
Start Printed Page 43866
Start Printed Page 43867
Start Printed Page 43868
Reference Price The Platts Gas Daily Columbia Gulf, Mainline Midpoint (``Midpoint'') and the next to expire NYMEX (Henry Hub) Natural Gas Futures contract.
Company A position in Columbia Gulf, Mainline Midpoint (“Midpoint”) natural gas (long) MMBtu
Total number of days = 31Start Printed Page 43869
†† Deltas should be calculated in an economically reasonable and analytically supportable basis.
† Deltas should be calculated in an economically reasonable and analytically supportable basis.
†† Contracts rounded to the nearest integer.
The following example (in Tables 1, 2 and 3) covers reporting for a particular clearing organization. “Clearing Organization One” would report, for the 27th of September 2010, the following eleven unique data record submissions. Each data record submission represents a unique position, as indicated by § 20.3, held by a clearing member of Clearing Organization One. Paragraph (a) of § 20.3 broadly outlines the data elements that determine unique positions for reports on clearing member positions. Paragraphs (b) of § 20.3 present all of the data elements that should be submitted in reference to a particular data record for a particular clearing member (in Table 1). Paragraph (c) identifies data elements that would comprise end of day record data on cleared products (in Tables 2 and 3). Therefore, paragraphs (b) and (c) of § 20.3 present all of the data elements that should be submitted in reference to a particular data record.
Table 1—Data Records Reported Under Paragraphs (a) and (b) of § 20.3
Proprietary/ customer account indicator
Data record 1 CCO_ID_1 CM_ID_2 CP_04 9/27/2010 C Nov-10 NYMEX NY Harbor No.2.
Data record 2 CCO_ID_1 CM_ID_2 CP_04 9/27/2010 C Oct-10 NYMEX NY Harbor No.2.
Data record 3 CCO_ID_1 CM_ID_2 CP_02 9/27/2010 C Nov-10 NYMEX Henry Hub.
Data record 4 CCO_ID_1 CM_ID_2 CP_02 9/27/2010 C Oct-10 NYMEX Henry Hub.
Data record 5 CCO_ID_1 CM_ID_2 CP_02 9/27/2010 C Nov-10 NYMEX Henry Hub.
Data record 6 CCO_ID_1 CM_ID_2 CP_02 9/27/2010 C Oct-10 NYMEX Henry Hub.
Data record 7 CCO_ID_1 CM_ID_1 CP_03 9/27/2010 P Mar-11 NYMEX Light Sweet.
Data record 8 CCO_ID_1 CM_ID_1 CP_03 9/27/2010 P Feb-11 NYMEX Light Sweet.
Data record 9 CCO_ID_1 CM_ID_1 CP_01 9/27/2010 P Mar-11 NYMEX Light Sweet.
Data record 10 CCO_ID_1 CM_ID_1 CP_01 9/27/2010 P Feb-11 NYMEX Light Sweet.
Data record 11 CCO_ID_1 CM_ID_1 CP_01 9/27/2010 P Jan-11 NYMEX Light Sweet.
Table 2—Example of Data Records Required Under § 20.3(c) for Cleared Swaption Products
Data record 1 CCO_ID_1 CP_02 9/27/2010 Nov-10 NYMEX Henry Hub 7/29/2011 5.59 C .5 6.25
Data record 2 CCO_ID_1 CP_02 9/27/2010 Oct-10 NYMEX Henry Hub 7/29/2011 5.59 C .5 5.50
Data record 3 CCO_ID_1 CP_02 9/27/2010 Nov-10 NYMEX Henry Hub 7/29/2011 5.50 P .2 4.53
Data record 4 CCO_ID_1 CP_02 9/27/2010 Oct-10 NYMEX Henry Hub 7/29/2011 5.50 P .2 4.78
Table 3—Example of Data Records Required Under § 20.3(c) for Cleared Swap Products
Data record 1 CCO_ID_1 CP_04 9/27/2010 Nov-10 NYMEX NY Harbor No. 2 20.35
Data record 2 CCO_ID_1 CP_04 9/27/2010 Oct-10 NYMEX NY Harbor No. 2 10.50
Data record 3 CCO_ID_1 CP_03 9/27/2010 Mar-11 NYMEX Light Sweet 15.00
Data record 4 CCO_ID_1 CP_03 9/27/2010 Feb-11 NYMEX Light Sweet 21.00
Data record 5 CCO_ID_1 CP_01 9/27/2010 Mar-11 NYMEX Light Sweet 17.50
Data record 6 CCO_ID_1 CP_01 9/27/2010 Feb-11 NYMEX Light Sweet 21.65
Data record 7 CCO_ID_1 CP_01 9/27/2010 Jan-11 NYMEX Light Sweet 12.50
This first example shows the data records generated under § 20.4 by a single reporting firm for report date September 27, 2011. Each data record represents a unique part of a reportable position in heating oil and natural gas by the reporting entity and its counterparties. Paragraph (b) of § 20.4 outlines the data elements that determine unique positions.
Table 4—Example of Data Records Reported Under § 20.4(c)
Data record 1 CRE_ID_1 PRIN 9/27/2011 CPID_05 HO Jan-12
Data record 2 CRE_ID_1 COUNT CP_01 Energy_Firm_1 9/27/2011 CPID_05 HO Jan-12
Data record 3 CRE_ID_1 COUNT CP_02 Energy_Firm_2 9/27/2011 CPID_05 HO Jan-12
Data record 4 CRE_ID_1 PRIN 9/27/2011 CPID_04 HO Feb-12
Data record 5 CRE_ID_1 COUNT CP_03 Energy_Firm_3 9/27/2011 CPID_04 HO Feb-12
Data record 6 CRE_ID_1 PRIN 9/27/2011 CPID_04 HO Mar-12
Data record 7 CRE_ID_1 COUNT CP_04 ABC_Firm 9/27/2011 CPID_04 HO Mar-12
Data record 8 CRE_ID_1 PRIN 9/27/2011 CDIP_07 NG Mar-12
Data record 9 CRE_ID_1 COUNT CP_05 XYZ_Firm 9/27/2011 CDIP_07 NG Mar-12
Data record 10 CRE_ID_1 COUNT CP_06 WVU_Firm 9/27/2011 CDIP_07 NG Mar-12
Data record 11 CRE_ID_1 COUNT CP_01 Energy_Firm_1 9/27/2011 CDIP_07 NG Mar-12
Data record 12 CRE_ID_1 PRIN 9/27/2011 CDIP_07 NG Mar-12
Data record 13 CRE_ID_1 COUNT CP_07 MNO_Firm 9/27/2011 CDIP_07 NG Mar-12
Data record 14 CRE_ID_1 PRIN 9/27/2011 UNCL NG Jan-12
Data record 15 CRE_ID_1 COUNT CP_02 Energy_Firm_2 9/27/2011 UNCL NG Jan-12
Data record 1 C CCO_ID_1 Platts Oilgram Price Report for New York No. 2 (Barge) EX1 200
Data record 2 C CCO_ID_1 Platts Oilgram Price Report for New York No. 2 (Barge) EX1 50
Data record 3 C CCO_ID_1 Platts Oilgram Price Report for New York No. 2 (Barge) EX1 150
Data record 4 C CCO_ID_1 NYMEX NY Harbor No.2 EX2 350
Data record 5 C CCO_ID_1 NYMEX NY Harbor No.2 EX2 350
Data record 6 C CCO_ID_1 NYMEX NY Harbor No.2 EX1 100
Data record 7 C CCO_ID_1 NYMEX NY Harbor No.2 EX1 100
Data record 8 C CCO_ID_1 NYMEX Henry Hub EX3 200 100
Data record 9 C CCO_ID_1 NYMEX Henry Hub EX3 125
Data record 10 C CCO_ID_1 NYMEX Henry Hub EX3 75
Data record 11 C CCO_ID_1 NYMEX Henry Hub EX3 100
Data record 12 C CCO_ID_1 NYMEX Henry Hub EX1
Data record 13 C CCO_ID_1 NYMEX Henry Hub EX1
In this second example, the data records generated by § 20.4(c) are displayed for a hypothetical swap, as detailed in Example 1 of Appendix A. In contrast to the above example, this second example of a § 20.4(c) data record is simplistic in that it displays a situation where the position records arise from a single swap transaction, in one commodity, with a single counterparty.
For the sake of this example, assume the swap dealer gained long exposure from the swap, and that the swap was cleared. The price of crude is assumed to be $100/bbl for all contract months on January 1 and $95/bbl for all contract months on January 2. An illustration of the data records generated for January 1, 2011 and January 2, 2011 as a result of this hypothetical swap can be found in Tables 5 and 6, respectively.Start Printed Page 43873
Table 5—Example of Data Records Reported Under § 20.4(c) for January 1, 2011 (Appx A, Example 1)
Data record 1 SD_1 PRIN 1/1/2011 CPID_03 CL Feb-11
Data record 2 SD_1 PRIN 1/1/2011 CPID_03 CL Mar-11
Data record 3 SD_1 PRIN 1/1/2011 CPID_03 CL Apr-11
Data record 4 SD_1 PRIN 1/1/2011 CPID_03 CL May-11
Data record 5 SD_1 PRIN 1/1/2011 CPID_03 CL Jun-11
Data record 6 SD_1 PRIN 1/1/2011 CPID_03 CL Jul-11
Data record 7 SD_1 PRIN 1/1/2011 CPID_03 CL Aug-11
Data record 8 SD_1 COUNT CP_01 Energy_Firm_1 1/1/2011 CPID_03 CL Feb-11
Data record 9 SD_1 COUNT CP_01 Energy_Firm_1 1/1/2011 CPID_03 CL Mar-11
Data record 10 SD_1 COUNT CP_01 Energy_Firm_1 1/1/2011 CPID_03 CL Apr-11
Data record 11 SD_1 COUNT CP_01 Energy_Firm_1 1/1/2011 CPID_03 CL May-11
Data record 12 SD_1 COUNT CP_01 Energy_Firm_1 1/1/2011 CPID_03 CL Jun-11
Data record 13 SD_1 COUNT CP_01 Energy_Firm_1 1/1/2011 CPID_03 CL Jul-11
Data record 14 SD_1 COUNT CP_01 Energy_Firm_1 1/1/2011 CPID_03 CL Aug-11
Data record 1 C CCO_ID_1 NYMEX Light Sweet EX1 73
Data record 2 C CCO_ID_1 NYMEX Light Sweet EX1 103
Data record 3 C CCO_ID_1 NYMEX Light Sweet EX1 93
Data record 4 C CCO_ID_1 NYMEX Light Sweet EX1 103
Data record 5 C CCO_ID_1 NYMEX Light Sweet EX1 99
Data record 6 C CCO_ID_1 NYMEX Light Sweet EX1 103
Data record 7 C CCO_ID_1 NYMEX Light Sweet EX1 27
Data record 8 C CCO_ID_1 NYMEX Light Sweet EX1 73
Data record 9 C CCO_ID_1 NYMEX Light Sweet EX1 103
Data record 10 C CCO_ID_1 NYMEX Light Sweet EX1 93
Data record 11 C CCO_ID_1 NYMEX Light Sweet EX1 103
Data record 12 C CCO_ID_1 NYMEX Light Sweet EX1 99
Data record 13 C CCO_ID_1 NYMEX Light Sweet EX1 103
Data record 14 C CCO_ID_1 NYMEX Light Sweet EX1 27
Table 6—Example of Data Records Reported Under § 20.4(c) for January 2, 2011 (Appx A, Example 1)
Data record 1 SD_1 PRIN 1/2/2011 CPID_03 CL Feb-11
Data record 2 SD_1 PRIN 1/2/2011 CPID_03 CL Mar-11
Data record 3 SD_1 PRIN 1/2/2011 CPID_03 CL Apr-11
Data record 4 SD_1 PRIN 1/2/2011 CPID_03 CL May-11
Data record 5 SD_1 PRIN 1/2/2011 CPID_03 CL Jun-11
Data record 6 SD_1 PRIN 1/2/2011 CPID_03 CL Jul-11
Data record 7 SD_1 PRIN 1/2/2011 CPID_03 CL Aug-11
Data record 8 SD_1 COUNT Counterparty_1 Energy Firm 1/2/2011 CPID_03 CL Feb-11
Data record 9 SD_1 COUNT Counterparty_1 Energy Firm 1/2/2011 CPID_03 CL Mar-11
Data record 10 SD_1 COUNT Counterparty_1 Energy Firm 1/2/2011 CPID_03 CL Apr-11
Data record 11 SD_1 COUNT Counterparty_1 Energy Firm 1/2/2011 CPID_03 CL May-11
Data record 12 SD_1 COUNT Counterparty_1 Energy Firm 1/2/2011 CPID_03 CL Jun-11
Data record 13 SD_1 COUNT Counterparty_1 Energy Firm 1/2/2011 CPID_03 CL Jul-11
Data record 14 SD_1 COUNT Counterparty_1 Energy Firm 1/2/2011 CPID_03 CL Aug-11
Data record 1 C CCO_ID_1 NYMEX Light Sweet EX1 70
Data record 8 C CCO_ID_1 NYMEX Light Sweet EX1 70
1. 75 FR 67258, November 2, 2010. Comments and ex parte communications list available at http://comments.cftc.gov/​PublicComments/​CommentList.aspx?​id=​889.
2. See 76 FR 4752, January 26, 2011.
3. Letter from Thomas W. Sexton, Senior Vice President and General Counsel, NFA, to David A. Stawick, Secretary, CFTC (December 2, 2010).
4. Letter from David A. Berg, Vice President and General Counsel, ATA, to David A. Stawick, Secretary, CFTC (December 2, 2010); letter from Dennis M. Kelleher, President & CEO, and Wallace C. Turbeville, Derivatives Specialist, Better Markets Inc., to David A. Stawick, Secretary, CFTC (December 2, 2010); letter from Dan Gilligan, President, PMAA, and Shane Sweet, President & CEO, NEFI, to David A. Stawick, Secretary, CFTC (December 2, 2010); and letter from Robert Pollin, Professor of Economics and Co-Director, and James Heintz, Associate Research Professor and Associate Director, PERI, to David A. Stawick, Secretary, CFTC (December 2, 2010).
5. Letter from Bindicap Comster to David A. Stawick, Secretary, CFTC (December 2, 2010); letter from John M. Damgard, President, FIA, to David A. Stawick, Secretary, CFTC (December 2, 2010); and letter from R. Michael Sweeney Jr., David T. McIndoe, and Mark W. Menezes, Counsel for the Working Group, to David A. Stawick, Secretary, CFTC (December 2, 2010).
6. The Commission conducts its current special call pursuant to Commission regulation 18.05. Swap dealers and index traders that receive a special call file monthly reports with the Commission within five business days after the end of the month.
7. Section 754 of the Dodd-Frank Act provides that, unless otherwise provided, the provisions of subtitle A of Title VII “shall take effect on the later of 360 days after the date of the enactment of this subtitle or, to the extent a provision of this subtitle requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provisions of this subtitle.” CEA section 4a, as amended by Dodd-Frank section 737, requires the Commission to establish position limits for exempt commodities within 180 days after the date of enactment, and position limits for agricultural commodities within 270 days after the date of enactment. The Commission is proceeding deliberatively to meet this Congressional mandate. As previously noted, on November 2, 2010, the Commission proposed these Reporting Rules, and on January 26, 2011, the Commission proposed position limits, including aggregate limits, for 28 major physical commodity DCM contracts and economically equivalent swaps.
8. Letter from Russell Wasson, Director, Tax, Finance and Accounting Policy, National Rural Electric Cooperative Association, Susan N. Kelly, Senior Vice President of Policy Analysis and General Counsel, American Public Power Association, and Noreen Roche-Carter, Chair, Tax & Finance Task Force, Large Public Power Council, to David A. Stawick, Secretary, CFTC (December 2, 2010).
9. Further Definition of “Swap Dealer,” “Security-Based Swap Dealer,” “Major Swap Participant,” “Major Security-Based Swap Participant” and “Eligible Contract Participant,” 75 FR 80174, December 21, 2010.
10. 17 CFR 35.1(b)(1).
11. This definition of “swap” is also intended to be generally consistent with how swaps are defined in the Commission's Policy Statement Concerning Swap Transactions, 54 FR 30694, July 21, 1989. That is, a “swap” as used in this rulemaking refers to an agreement between two parties to exchange one or more cash flows measured by different rates or prices with payments calculated by reference to a principle base (notional amount).
12. For the purpose of reporting in futures equivalents, paired swaps and swaptions using commodity reference prices that are commonly known diversified indices with publicly available weightings may be reported as if such indices underlie a single futures contract with monthly expirations for each calendar month and year.
13. The floating price of the CME futures contract is equal to the arithmetic average of the ASCI (1st month) outright price from Argus Media for each business day that the ASCI is determined during the contract month.
14. For a description of the ASCI methodology, see, e.g., http://web04.us.argusmedia.com/​ArgusStaticContent/​/Meth/​ASCI.pdf.
15. A commodity is considered to be the same (for the purposes of reporting under these regulations) if such commodity has the same economic characteristics with respect to grade and quality specifications as those referenced by a Covered Futures Contract.
16. The Reporting Rules, as proposed, used the term proprietary to refer to principal positions in the context of reporting by clearing members and swap dealers.
17. The Reporting Rules render a swap dealer in any paired swap to be a reporting entity with the responsibility to provide data on all reportable positions, regardless of the specific types of paired swaps that render the entity a statutory swap dealer under the CEA.
18. See http://comments.cftc.gov/​PublicComments/​CommentList.aspx?​id=​889.
19. In order to verify that a reporting entity's paired swap positions are no longer above the threshold, the proposed definition of reportable position would also encompass positions in paired swaps held by the reporting entity on the first day after which the reporting entity's paired swap positions are no longer reportable.
20. As section II.(B).(8) herein describes, the Commission anticipates consulting with clearing organizations and reporting entities before determining the format, coding structure, and electronic data transmission procedures referenced in final regulation 20.7.
21. See 75 FR 80174, December 21, 2010.
23. 66 FR 45604, 45609, August 29, 2001.
24. Policy Statement and Establishment of Definitions of “Small Entities” for Purposes of the Regulatory Flexibility Act, 47 FR 18618, 18619, April 30, 1982.
25. Id. at 18620 (excluding large traders from the definition of small entity).
27. The Commission staff's estimates concerning the wage rates are based on salary information for the securities industry compiled by the Securities Industry and Financial Markets Association (“SIFMA”). The $74.36 per hour is derived from figures from a weighted average of salaries and bonuses across different professions from the SIFMA Report on Management & Professional Earnings in the Securities Industry 2009, modified to account for an 1,800-hour work year and multiplied by 1.3 to account for overhead and other benefits. The wage rate is a weighted national average of salary and bonuses for professionals with the following titles (and their relative weight): “programmer (senior)” (60% weight), “compliance advisor (intermediate)” (20%), “systems analyst” (10%), and “assistant/associate general counsel” (10%).
28. The capital/start-up cost component of “annualized capital/start-up, operating, and maintenance costs” is based on an initial capital/start-up cost that is straight-line depreciated over five years.
29. All of the capital cost estimates in these estimates are based on a five-year, straight-line depreciation.
30. 7 U.S.C. 12(a)(1).