CFTC Final Rule: Real-Time Public Reporting of Swap Transaction Data

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Gavel.png FINAL RULE: CFTC Final Rule on real-time public reporting of swap transaction data approved at December 20, 2011 open meeting.
Gavel.png FINAL RULE: Block trade final rules approved at CFTC Open Meeting, May 16, 2013.
Dodd-Frank Timeline, Real Time Public Reporting of Swap Transaction and Pricing Data
Final Rule Issue Effective Date Compliance Date
December 20, 2011 March 9, 2012 December 31, 2012

On December 20, 2011, the Commodity Futures Trading Commission (CFTC) approved a final rulemaking on real-time reporting of swap transaction and price data.[1] Eventually, real-time data will be used to monitor compliance with, among other things, position limits and high frequency trading rules.

Under the final rulemaking, swaps subject to a clearing requirement will be required to be made public within 30 minutes of the consummation of the transaction. This delay will be narrowed to 15 minutes after the first year. End users will be required to report within 48 hours.[2] For more information on the phase-in, see the timetable in the "Related Documents" section below.

The compliance date for swaps that are not traded on a designated contract market or a swap execution facility was scheduled for October 12, 2012, but the CFTC has since issued no-action relief until at least December 31, 2012.

On December 31, 2012, registered swap dealers (SDs) and designated contract markets (DCMs) began reporting swap transaction and pricing data to registered swap data repositories (SDRs). Swap execution facilities (SEFs) will be required to comply once the SEF rules become finalized.

Contents

Background

One of the provisions of Title VII of the Dodd-Frank Act is the addition to the Commodity Exchange Act of Section 2(a)(13), which "requires public availability of swap transaction data."

On November 19, 2010, the commission issued its proposed rules for real-time reporting. The proposed rule would require the parties to a swap report the data to a "real-time disseminator" such as a swap data repository, or to a third party such as a designated contract market (DCM) or swap execution facility (SEF). The data shall be made public "as soon as technologically practicable." Block trades and "large notional swaps" transactions are allowed a time delay of up to 15 additional minutes before dissemination by the third party disseminator.

Finally, the proposal specified two tests to be conducted to determine the appropriate minimum block size for block trades and large notional transactions:

  • Distribution Test: The size threshold that is larger than 95% of a category's transactions over the last calendar year;
  • Social Size Test: The size threshold that is five times (5X) largest of "the mean, median, and mode of transaction sizes for that category swap instrument over the past calendar year."
  • The minimum threshold for block transactions would be the larger of the two.

Note: The block trading proposals were removed from the final rule on real-time reporting. Block trading rules were subsequently re-proposed at the CFTC Open Meeting, February 23, 2012. In the new proposal, the distribution and social size tests were replaced with a "67 percent notional" threshold.[3]

Final Rule, December 20, 2011

The final rulemaking keeps intact most of the proposed rules, with a few exceptions:[4]

  • All swap transaction and pricing data must be reported to the appropriate registered swap data repository, regardless of whether the swap is executed on a regulated trading platform or bilaterally. Registered swap data repositories must ensure the public dissemination of all publicly reportable swap transactions.
  • A “Publicly reportable swap transaction” is defined as either (1) any executed swap that is an arm’s length transaction between two parties that results in a corresponding change in the market risk position between the two parties or (2) any termination, assignment, novation, exchange, transfer, amendment, conveyance, or extinguishing of rights or obligations of a swap that changes the pricing of the swap.
  • Certain data fields described in Appendix A to part 43 have been revised, deleted or added for clarification and to enhance price discovery.
  • With the exception of the recordkeeping requirements relating to timestamps, the final rules remove all other recordkeeping requirements.
  • Time delays for public dissemination differ based on the type of execution, underlying asset and market participant, among other things. See Appendix C below for time delay thresholds.
  • The final rules do not address the minimum size for "block trades large notional off-facility swaps, nor does it address public dissemination of swaps in the "other commodity" asset class that are not executed on or pursuant to a registered swap execution facility or designated contract market. The final block trade rules were approved in May 2013.

Related Documents: Fact Sheet, Q&A, Phase-in Timetable, Time Delay Thresholds (Appendix C), and Final Rule as it Appeared in the Federal Register

References

  1. CFTC to Hold Open Meeting to Consider Two Final Rules. CFTC. Retrieved on December 20, 2011.
  2. CFTC Approves 30-Minute Delay in Swap-Trade Price Reporting. Bloomberg BusineesWeek. Retrieved on December 21, 2011.
  3. CFTC Open Meeting on One Final Rule and One Proposed Rule. CFTC. Retrieved on February 24, 2012.
  4. [http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/rtpr_factsheet_final.pdf Final Rules Regarding Real-Time Public Reporting of Swap Transaction and Pricing Data]. CFTC. Retrieved on December 20, 2011.

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