CFTC Proposed Interpretive Statement: Swap Data Repository Confidentiality and Indemnification
On May 1, 2012, the CFTC voted unanimously to approve a proposed interpretive order that would clarify the indemnification and confidentiality provisions in the Dodd-Frank Act. The proposal generally exempts foreign regulators from the indemnification and confidentiality provision in the Dodd-Frank Act, and ensures that foreign regulators have access to data in Swap Data Repositories (SDR).
Section 21(c)(7) of the Commodity Exchange Act requires that SDRs "make data available to certain domestic and foreign regulators under specified circumstances; such authorities shall, according to section 21(d), agree in writing to abide by certain confidentiality requirements and to indemnify the SDR for any related litigation expenses.
The indemnification requirement has been a source of international concern, with some foreign regulators suggesting that they may consider blocking the U.S. from accessing their swap data. According to Ethiopis Tafara, the SEC's director of international affairs, "The indemnification requirement interferes with access to essential information, including information about the cross-border OTC derivatives markets."
At its August 4, 2011 open meeting, the CFTC approved itsfinal rulemaking on the registration and regulation of swap data repositories. In the final rule, the commission acknowledged that the indemnification requirement "could have the unintended effect of inhibiting direct access by other regulators to data maintained by SDRs."
Summary of the Interpretive Statement
In keeping with the goals of regulatory harmonization among jurisdictions, the CFTC proposed that a registered SDR would not be subject to the confidentiality and indemnification provisions if:
- Such registered SDR also is registered, recognized or otherwise authorized in a foreign jurisdiction’s regulatory regime; and
- The data sought to be accessed by a foreign regulatory authority has been reported to such registered SDR pursuant to the foreign jurisdiction’s regulatory regime.
The proposal, which was approved by unanimous consent, includes a statement by Chairman Gary Gensler, as well as supporting statements by Commissioners Scott O'Malia and Jill Sommers. Members of the public are invited to comment; the deadline for submission is June 6, 2012. Comments can be filed HERE.
Submitted by Larry Thompson of the Depository Trust Clearing Corporation (DTCC) :
- "DTCC has consistently expressed concerns that the Indemnification Provisions threaten to undermine global data sharing among regulators by operating to prevent or inhibit foreign regulatory authorities from accessing data maintained by SDRs, leading to the fragmentation of a global data set into multiple, unaggregated entities."
- "The continued presence of the indemnification requirement...is viewed as a significant barrier to the ability of regulators globally to effectively utilize the transparency offered by a trade repository registered in the U.S."
- "a workable interim solution is required" due to elongated legislative process.
Submitted by Rich Whiting of The:
- "The Roundtable supports this clarification as a logical outgrowth of the regulations already adopted by the Commission (CFTC)...the Commission’s Interpretative Statement...represent good faith efforts to implement Congress’s mandate to enhance the regulation of the swaps market"
- "The Commission Should Work Actively With Congress to Alter or Repeal the Indemnification Requirements of CEA Section 21(d)"
- "The Commission Should Continue its Efforts to Create a Workable Global Framework for Swaps Regulation"
- "we commend the Commission for its continuing efforts to develop an official proposal regarding the expected extra-territorial scope of its Title VII regulations. This effort will provide important clarifications concerning how the Commission will implement the concepts contained in Section 722(d) of the Dodd-Frank Act...Development of the jurisdictional concepts contained in § 722(d) will be vital in helping to clarify the applicability of Title VII in foreign transactions."
Related Documents: Federal Register Entry; Comment Letters
- Swap Data Repositories: Interpretative Statement Regarding the Confidentiality and Indemnification Provisions of Section 21(d) of the Commodity Exchange Act. Federal Register. Retrieved on May 7, 2012.
- US seeks smoother international swaps data sharing. Reuters. Retrieved on May 7, 2012.
- CFTC Votes to Clarify Indemnification and Confidentiality Provisions in the Dodd-Frank Act. CFTC. Retrieved on May 7, 2012.