Swap Dealers and Major Swap Participants Regulation - Reporting and Recordkeeping - Comment Letters

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Dodd-Frank Timeline, Reporting, Recordkeeping, and Daily Trading Records Requirements for Swap Dealers and Major Swap Participants
Final Rule Issue Effective Date No-action Relief, Valuation
April 3, 2012 June 4, 2012 June 30, 2014

Comment Letters addressing reporting, recordkeeping, and daily records requirements for swap dealers and major swap participants.

Depository Trust & Clearing Corporation - Nov-Dec 2012[edit]

“Regulatory Reporting of Swap Data
November 9, 2012 November 20, 2012 December 4, 2012 December 7, 2012

On November 9, 2012, CME Group filed a request to the CFTC to approve a change to the CME's Rulebook that would allow for all swaps cleared by the CME Clearing, and resulting positions, creation and continuation data shall be reported to CME's swap data repository for purposes of complying with applicable CFTC rules governing the regulatory reporting of swaps.

The request prompted a response from DTCC, in the form of three comment letters, dates November 20, December 4 and December 7, 2012. The letters challenge the CME request, citing various reasons including:

  • As a systemically important financial market utility FMU, an expedited decision is inappropriate.
  • The rule would effectively reverse CFTC rules governing DCO core principles, namely public disclosure and fair and open access.
  • The proposed rule change is inconsistent with the language and intent established by the Dodd-Frank Act and will have a negative impact on many market participants who have relied on the Part 49 and Part 45 rules, spending an entire year planning and investing hundreds of millions of dollars to comply with the CFTC’s requirements.


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Securities Industry and Financial Markets Association - January 18, 2011[edit]

Reporting, Recordkeeping, and Daily Trading Records Requirements for Swap Dealers and Major Swap Participants
January 18, 2011

Written on behalf of the Asset Management Group (AMG) of SIFMA, this comment letter argues that "the CFTC and SEC should consider different sets of regulations for swap dealers and MSPs, with MSP regulation focused primarily on default risk and swap dealer regulation focused on market-making, pricing and sales practices, as well as default risk." The letter also requests that the "CFTC formally extend the comment periods for the MSP Proposals and not take any action to finalize them until sufficient time has passed after finalization of the Definitions Proposals for the appropriate analyses to be undertaken and completed."

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American Benefits Council - February 7, 2011[edit]

Reporting, Recordkeeping, and Daily Trading Records Requirements for Swap Dealers and Major Swap Participants
February 7, 2011

The American Benefits Council reminds the CFTC that swap markets are currently not subject to any reporting regime. "Accordingly, the size of the swap market and other relevant basic swap market data (including liquidity) are not known. In order to adopt factually-based, rational real-time public reporting rules, the CFTC must first obtain and analyze this information (which will be required to be reported to swap data repositories). Any real time reporting rule that is not based on this data will, in our view, fail to promote the ultimate goal of transparency i.e., increasing the efficiency of hedging and decreasing the bid/ask spread."

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Managed Funds Association - February 7, 2011[edit]

Reporting, Recordkeeping, and Daily Trading Records Requirements for Swap Dealers and Major Swap Participants
February 7, 2011

From the comment letter:

"MFA urges the Commission to make careful and appropriate distinctions between SDs and MSPs in finalizing the reporting and recordkeeping requirements under the Proposed Rule. The Commission logically should require SDs, as market makers, to maintain more detailed information and for a longer period than MSPs. Moreover, to the extent that the Proposed Rule requires SDs to maintain certain records and information consistent with their role as market makers, it does not enhance the goals of the Commission to require MSPs to maintain the same set of records, especially where maintaining such additional records would result in substantially increased compliance burdens for MSPs."

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Working Group of Commercial Energy Firms - February 7, 2011[edit]

Reporting, Recordkeeping, and Daily Trading Records Requirements for Swap Dealers and Major Swap Participants
February 7, 2011

From the Comment letter:

Among other suggestions, the Working Group emphasizes that:

  • the requirements of the Proposed Daily Trading Records Rule are excessive and overly broad
  • the Commission adopt a single regulation to cover the recordkeeping requirements of the Proposed Daily Trading Records Rule, the Proposed General Reporting Rule, and the Proposed Real-Time Reporting Rule. Doing so would avoid costly and unnecessary duplication.
  • the Commission should not implement the Proposed Daily Trading Records Rule until certain threshold criteria are met, including: finalization and definition or all required data elements; the formation, registration, and testing of swap data repositories (“SDRs”) and third party service providers; the publication of an SDR reporting format and standardized requirements for data fields and product descriptions; and until all of the standards for Unique Identifiers are established
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Federal Home Loan Banks - February 7, 2011[edit]

Reporting, Recordkeeping, and Daily Trading Records Requirements for Swap Dealers and Major Swap Participants
February 7, 2011

From the Comment letter:

"While the FHLBanks agree that it is imperative that the CFTC obtain information about the transactions that comprise the OTC market and any potential systemic risk in connection therewith, the FHLBanks believe that the CFTC should do so in a way that does not unnecessarily burden end-users and other market participants, particularly those that are not swap dealers or major swap participants." Furthermore, the FHLBanks "are concerned about increased costs that swap dealers may transfer to and impose on their end-user counterparties if the reporting requirements for customized swap transactions and block trades alter the manner in which swap dealers hedge such transactions in the market."

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ISDA and SIFMA - February 7, 2011[edit]

Reporting, Recordkeeping, and Daily Trading Records Requirements for Swap Dealers and Major Swap Participants
February 7, 2011

From the Comment letter:

The ISDA and SIFMA propose several considerations that they believe OTC derivatives should reflect in order to ensure an effective trade reporting regime;

  • Block trade thresholds should be set so that liquidity is not impaired, in order to preserve the ability of investors and companies to hedge their risks in a cost-effective way
  • Rules should be tailored to products and markets. Rules for less liquid products should be different from rules for more liquid products. One size does not fit all
  • New rules for trade reporting should be phased in and refined over time. Rules should be re-calibrated and methodologies re-assessed in light of experience and market changes
  • Block trades may constitute a significant amount of trading volume for certain products
  • For highly customized products, price transparency may be uninformative and misleading
  • Volume dissemination caps such as those found in TRACE are important means of mitigating the effects on liquidity of real time reporting for all OTC derivatives products
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References[edit]

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