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CFTC Issues Time-Limited No-Action Relief for Swap Dealers From Certain Swap Data Reporting Requirements of Part 43, Part 45 and Part 46 of the Commission's Regulations (Letter No. 12-32) | White & Case LLP - JDSupra
Download PDF AlertsCFTC Issues Time-Limited No-Action Relief for Swap Dealers From CertainSwap Data Reporting Requirements of Part 43, Part 45 and Part 46 of theCommission's Regulations (Letter No. 12-32)December 2012Derivatives Insight On November 19, 2012, the Division of Swap Dealer and Intermediary Oversight ("DSIO") and the Division of MarketOversight ("DMO") of the Commodity Futures Trading Commission ("CFTC") issued CFTC Letter No. 12-32 ("Letter No. 12-32") (available here) on matters concerning reporting requirements for Swap Dealers ("SDs").Letter No. 12-32 provides SDs who register prior to their deadline (as discussed below) time-limited no-action relief withrespect to certain requirements of Parts 43 (real-time public reporting of swap transaction data), 45 (swap datarecordkeeping and swap data repository ("SDRs") reporting requirements) and 46 (swap data recordkeeping and SDRreporting requirements for historical swaps*) of the CFTC regulations (collectively referred to herein as the "ReportingRules").The Reporting Rules were adopted by the CFTC pursuant to the new reporting and recordkeeping requirements establishedunder The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). Section 727 of the Dodd-Frank Act added CEA Section 2(a)(13) which establishes real-time reporting and public availability of swap transaction dataand requires that all swaps be reported to an SDR. Section 728 of the Dodd-Frank Act added CEA Section 21(b) whichdirects the CFTC to prescribe standards for swap data recordkeeping and reporting. Sections 723 and 729 of the Dodd-Frank Act added Sections 2(h)(5) and 4(r) which establish, among other things, reporting for historical swaps.Time-Limited No-Action Relief Under Part 43 and Part 45 of the CFTC RegulationsThe CFTC had published on October 9, 2012 a Q&A entitled "Q&A—On Start of Swap Data Reporting" ("Q&A") in which itclarified how registration requirements of SDs and Major Swap Participants ("MSPs") will affect the actual effective date onwhich SDs and MSPs must first report swap data to SDRs. Under the Reporting Rules, as clarified by the Q&A, an SD mustbegin reporting swaps which are required to be reported under the Reporting Rules on the earlier of (1) two months after theend of the month in which such SD exceeded the de minimis threshold, or (2) the date on which it submits its application forregistration. The effective dates of the reporting requirements are being phased-in by asset class: the three compliance datesfor reporting swaps to an SDR are October 12, 2012 (for credit and interest rate swap transactions in which the SDs andMSPs are a party), January 10, 2013 (for equity, foreign exchange and other commodity swap transactions for which SDsand MSPs are a party) and April 10, 2013 (for non-SDs/MSPs that are nonetheless required to report a swap transaction thatthey execute with another non-SD/MSP).Several parties have raised concerns over the potential for different compliance dates for SD reporting in the event that anSD registers before its registration deadline, and have requested that a common monthly compliance date be established.To address these concerns, the DSIO and DMO have stated in Letter No. 12-32 that they will not recommend that the CFTCtake enforcement action against an SD for failing to report swap transaction data pursuant to Parts 43 and 45 of the CFTCregulations, until the earlier of (1) the registration deadline date applicable to that SD (notwithstanding the fact that the SDmay have applied for registration before the deadline), or (2) April 10, 2013. This relief is "time-limited" because the latestpossible date for compliance has been extended to no later than April 10, 2013.Time-Limited No-Action Relief Under Part 46 of the CFTC RegulationsISDA industry members also raised concerns that reporting obligations for historical swaps, which become effectivesimultaneously with the compliance date for an SD of its reporting obligations under Part 43 and Part 45 of the CFTCregulations, are too onerous because they would force members to report large volumes of historical swaps in a shortamount of time.To address this concern, the DSIO and DMO have stated in Letter No. 12-32 that they will not recommend that the CFTCtake enforcement action against an SD for failing to report historical swaps data pursuant to Part 46 of the CFTC regulationsuntil the earlier of (1) 30 days after the SD is required to begin reporting under Part 43 and Part 45 of the CFTC regulations,or (2) April 10, 2013.* "historical swaps" means swaps which were entered into prior to the enactment of the Dodd-Frank Act (July 21, 2010) andwere unexpired on the date of such enactment and (2) swaps entered into on or after the enactment of the Dodd-Frank Act(July 21, 2010) and prior to the compliance date for reporting historical swaps of the asset class to which the swap belongspursuant to Part 46 of the CFTC regulations.This Client Alert is provided for your convenience and does not constitute legal advice. It is prepared for the generalinformation of our clients and other interested persons. This Alert should not be acted upon in any specific situation withoutappropriate legal advice, and it may include links to websites other than the White & Case website. White & Case LLP hasno responsibility for any websites other than its own, and does not endorse the information, content, presentation oraccuracy, or make any warranty, express or implied, regarding any other website.This Client Alert is protected by copyright. Material appearing herein may be reproduced or translated with appropriate credit.© 2012 White & Case LLP