Swap Data Regulation - Regulation SBSR - Comment Letters

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On November 19, 2010, the SEC held an open meeting concerning rules entailing how security-based swap transactions should be reported and publicly disseminated under the Dodd-Frank Act. Among the topics at this meeting were the parties responsible for reporting security-based swap information, the specific information to be reported, and the destination of the reported information.[1] Proposed rules were added to the Federal Register on December 2, 2010.

CME Group - January 18, 2011

Regulation SBSR - Reporting and Dissemination of Security-Based Swap Information
January 18, 2011

In the comment letter, CME Group suggests that the SEC closely coordinate its reporting and dissemination rules with the CFTC's regulation and also provide an extended timeline to allow affected market participants with sufficient time to comply with Regulation SBSR.

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Cleary Gottlieb Steen & Hamilton LLP - February 14, 2011

Regulation SBSR - Reporting and Dissemination of Security-Based Swap Information
February 14, 2011

Cleary Gottlieb Steen & Hamilton LLP sent the following comment letter 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, National Association, Societe Generale, UBS Securities LLC and Wells Fargo & Co.

The letter indicates that the SEC proposal will cause "confusion and speculation" with regard to block transactions. The firms also believe that the SEC's exclusion of equity total-return swaps (TRS) from the block transaction exception would "impair market liquidity significantly" and lend to inefficiencies within swaps markets.

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Barclays Capital - February 11, 2011

Regulation SBSR - Reporting and Dissemination of Security-Based Swap Information
February 11, 2011

In the comment letter, Barclays Capital provides comments with regard to the following issues under Regulation SBSR of the Dodd-Frank Act:

  • issues inherent to specific markets, overly broad requirements and these issues and requirements' impact on liquidity;
  • block trade size calculation and allowing for "different thresholds per entity based on transaction maturity;"
  • a delay for reporting block trades; and
  • swap execution facility (SEF) trading protocols to create greater execution efficiency.
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UBS Securities - February 7, 2011

Regulation SBSR - Reporting and Dissemination of Security-Based Swap Information
February 7, 2011

UBS Securities suggests that the timeline for implementing Regulation SBSR should be extended, and that the SEC should consider the following changes (from the letter's executive summary):

  • calibrating reporting requirements to liquidity; and
  • reporting the actual notional amount of a transaction for trades.
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LCH.Clearnet - January 18, 2011

Regulation SBSR - Reporting and Dissemination of Security-Based Swap Information
January 18, 2011

LCH.Clearnet suggests the following in the comment letter:

  • An exception from Regulation SBSR would be appropriate for some SBS-related information that "will not be in the best interests of market participants and the public generally;"
  • Some reporting and dissemination of SBS information "will undermine the default management process and have a negative effect on market stability;" and
  • The details of a portfolio being liquidated should not be publicly disseminated until individual prices and net positions are available as these conditions outside of the "normal" market will lead to increased market volatility. These details should be reported immediately to the SEC only.
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Vanguard - January 18, 2011

Regulation SBSR - Reporting and Dissemination of Security-Based Swap Information
January 18, 2011

From the comment letter:

  • "Block trades should be defined to appropriately address the relative liquidity of specific trades and maturities."
  • "Public dissemination of all information about block trades should occur no earlier than 24 hours after execution."
  • "Equity total return swaps should not be excepted from the definition of block trade."
  • "Non-U.S. swap dealers should be required to report swaps to a swap data repository when transacting with U.S.-based swap end-users."
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Investment Company Institute - January 18, 2011

Regulation SBSR - Reporting and Dissemination of Security-Based Swap Information
January 18, 2011

From the comment letter:

"We support the concept of requiring reporting and public dissemination of certain swap transaction data. We are concerned, however, that Regulation SBSR does not adequately protect information regarding block trades. We recommend that the Commission, for those trades, delay reporting of all trade information, establish granular and current thresholds to identify block trades, change the reporting time frame to 24 hours, and eliminate the proposed exclusion for equity total return swaps ... we also recommend a number of modifications to the proposed reporting obligations to reflect swaps market practices and the status of technological developments in the swaps market."

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FINRA - January 27, 2011

Regulation SBSR - Reporting and Dissemination of Security-Based Swap Information
January 27, 2011

In the letter, the Financial Industry Regulatory Authority (FINRA) commends the SEC for recognizing the success of the Trade Reporting and Compliance Engine (TRACE) used by FINRA, but also recommends using TRACE for the reporting of SBS information in order to have one centralized location for accessible transaction data.

FINRA also makes suggestions that fall under the following named categories:

  • Proposed Reporting Requirements and Regulatory Oversight;
  • Transparency;
  • Implementation and Disseminated Data;
  • Consolidation of Data; and
  • Aggregate View of Marketplace.
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SIFMA - January 18, 2011

Regulation SBSR - Reporting and Dissemination of Security-Based Swap Information
January 18, 2011

In the comment letter, the Securities Industry and Financial Markets Association (SIFMA):

  • "identifies issues and presents our suggestions for future action relating to block trade exemption rules, which we regard as a critically important element of the reforms contained in Title VII of the Dodd-Frank Act;"
  • "sets out some general considerations that apply to all areas of the Proposed Regulation;"
  • "addresses specific points relating to the reporting of trade information under Proposed Rule 901(c);"
  • "deals with considerations relating to the reporting of collateral and valuation information under Proposed Rule 901(d);"
  • "responds to the Commission’s questions relating to responsibility for reporting, including consideration of issues relating to extraterritorial application of the Proposed Regulation."

The following two documents are also attached to the letter in support of SIFMA's arguments:

  1. a table charting the letter's specific comments; and
  2. "Block Trading Study."
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Depository Trust & Clearing Corporation - January 18, 2011

Regulation SBSR - Reporting and Dissemination of Security-Based Swap Information
January 18, 2011

The Depository Trust and Clearing Corporation recommends that:

  • the SEC and CFTC coordinate efforts for reporting and dissemination regulation;
  • the SEC use "existing market practices" when possible for reporting;
  • reporting and transaction confirmation processes should be consolidated;
  • Regulation SBSR phase its implementation;
  • the aggregation of data be automated; and
  • affected market participants be allowed the use of third parties for compliance purposes.
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References

  1. Press Release - SEC Proposes Rules on Security-Based Swap Reporting. SEC. Retrieved on November 19, 2010.

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