Swap Data Regulation - Real Time Public Reporting - Comment Letters

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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
Dodd-Frank Timeline, Real Time Public Reporting of Swap Transaction and Pricing Data, SEC
Final Rule Issue/New Proposal Proposal Comment Deadline Effective Date, Final Rule
March 19, 2015 May 4, 2015 May 18, 2015

Goldman Sachs - January 18, 2011[edit]

Real Time Public Reporting of Swap Transaction and Pricing Data
Regulation SBSR - Reporting and Dissemination of Security-Based Swap Information
January 18, 2011

Regarding the real-time reporting requirements from the comment letter:

"...we respectfully recommend that the Commissions modify the proposal in the following ways:"

  • "Define specific categories to reflect market differences within an asset class."
  • "Refine block thresholds to more accurately capture trades that would have a market inpact."
  • "Establish a tiered approach to the treatment for block trades."

"Further, we would suggest that the SEC reconsider the exclusion of certain equity swaps from the block trade regime."

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JP Morgan - January 12, 2011[edit]

Real Time Public Reporting of Swap Transaction and Pricing Data
Regulation SBSR - Reporting and Dissemination of Security-Based Swap Information
January 12, 2011
From the comment letter:

"JPM has two principal concerns with the Rules as proposed. The first is that corporate end users are likely to see a significant increase in costs for large, customized hedging transactions, particularly in Commodity, Interest Rate, Foreign Exchange and Equity markets. The second concern is a likely reduction in market depth in all derivatives markets. Both of these potential effects (increase in transaction costs and decrease in market depth) are aspects of liquidity."

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Securities Industry and Financial Markets Association (SIFMA) - January 12, 2011[edit]

Real Time Public Reporting of Swap Transaction and Pricing Data
January 18, 2011 Summary points from the comment letter:

  • The reporting party should always be the SBS Dealer or MSP, whether or not it is a U.S. Person.
  • The delay in public dissemination of block trade information should be uniform and should apply to all trade data, not just notional size.
  • The threshold for “control” for purposes of reporting under Regulation SBSR should be raised from 25% ownership to no less than majority ownership.
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Investment Company Institute (ICI) - February 7, 2011[edit]

Real Time Public Reporting of Swap Transaction and Pricing Data
Swap Data Recordkeeping and Reporting Requirements
February 7, 2011

According to the ICI, market transparency is "a key element" to achieving the goals of ensuring integrity and quality of the market. As such, the institute recommends that the commission:

  • "define a block trade by evaluating the market for a particular swap category to determine what might be an illiquid size, and
  • change the reporting time frame to the later of 24 hours after trade execution or the opening of trading the following day."

In the letter, the ICI also recommended several modifications to the proposal, regarding coordination of rulemaking among regulatory agencies.

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IntercontinentalExchange - February 7, 2011[edit]

Real Time Public Reporting of Swap Transaction and Pricing Data
Swap Data Recordkeeping and Reporting Requirements
February 7, 2011

Summary of recommendations from the comment letter:

  • Simplify the selection of a swap data repository (SDR) by allowing the reporting party to select the SDR as opposed to having such decision made by a SEF;
  • Adopt reporting by lifecycle rather than snapshot for the “Other Commodity” asset class;
  • In the event of equal parties to a trade, simplify the selection of the reporting party by requiring the selling party to be the reporting party;
  • Eliminate redundant valuation reporting by only requiring a dervatives clearing organization (DCO) to report valuation data for cleared transactions; and
  • Allow SDRs to charge commercially reasonable fees to distribute public swap data.
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Markit - February 7, 2011[edit]

Real Time Public Reporting of Swap Transaction and Pricing Data
Swap Data Repositories
February 7, 2011

Summary of key points from the comment letter:

Markit believes that:

  • the Real-Time Reporting Regulation should clarify that the data intended for real-time reporting purposes belongs to the applicable market participants and can only be used for other commercial purposes with the express permission of participants;
  • standardization of pricing methodologies should be phased in over time and the CFTC should promote industry solutions to pricing normalization rather than implementation through a mandate on the participant level;
  • the CFTC and the SEC should reconcile their reporting rules and regulations to ensure consistency of approach to similar products (e.g., a single name CDS contract should be reported consistently with the same set of standards as a broad index CDS); and
  • as part of its adoption of unique product identifiers, the Commission should first establish uniform taxonomy.
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Coalition for Derivatives End-Users - February 7, 2011[edit]

Real Time Public Reporting of Swap Transaction and Pricing Data
Swap Data Recordkeeping and Reporting Requirements
February 7, 2011

From the comment letter:

  • "The Coalition recommends that the Commission consider...a more nuanced, robust, and granular categorization of swap instruments to account for the liquidity impact of various economic terms and non-economic factors."
  • "If large market-moving trades are misclassified as normal size trades and, therefore, do not qualify for the time delay afforded to block trades, end-user counterparties could face increased hedging costs as dealer counterparties would pass the higher cost of managing their increased trading risks onto end-users."
  • In developing a block trade system, the commission "must keep in mind the fundamental difference between the bond market (with a finite set of immutable instruments) and the OTC derivatives market (with a near infinite set of mutable instruments)".
  • The coalition understands the balance that must be struck between the "two opposing objectives" of price reproducibility and anonymity.
  • "Because most end-users will be engaged in non-cleared trades, the price discovery benefits of reporting these transactions in real-time is questionable."

For each point, the coalition makes recommendations as to how the final rules would alleviate its concerns.

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Global Foreign Exchange Division (SIFMA, AFME, ASIFMA) - February 7, 2011[edit]

Real Time Public Reporting of Swap Transaction and Pricing Data
Swap Data Recordkeeping and Reporting Requirements
February 7, 2011

In the comment letter, the Global Foreign Exchange Division offers several recommendations and observations, including:

  • No real time reporting obligation should be required for FX forwards and swaps.
  • The industry should be granted the requisite amount of time to build the appropriate infrastructure to avoid the risk that the initial data repository proves inadequate and further resources and expense must be dedicated by the industry to achieve the desired repository structure."
  • Additional criteria are needed to classify a swap within a certain asset class.
  • "For FX, there are significant implementation issues in determining which counterparty should report if they are of the same hierarchy," as opposed to other asset classes where "there is usually a distinct buyer and seller of the swap".
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LCH.Clearnet Group - February 7, 2011[edit]

Real Time Public Reporting of Swap Transaction and Pricing Data
February 7, 2011

From the comment letter:

"LCH.Clearnet is concerned that the real time reporting and public dissemination of information with respect to swap transactions effected in connection with the default management processes of a Derivatives Clearing Organization (“DCO”) upon the default of a clearing member will undermine the default management process and have a negative effect on market stability. This is especially true as such a default is likely to happen against the backdrop of stressed market conditions."

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CME Group - February 7, 2011[edit]

Real Time Public Reporting of Swap Transaction and Pricing Data
Swap Data Recordkeeping and Reporting Requirements
February 7, 2011

From the comment letter:

"The Commission should clarify in its final rules that each initial regulatory report for a cleared swap must be directly reported to the applicable DCO or SDR chosen by such DCO (“DCO-SDR”). This approach is the lowest cost and least burdensome method for implementing the regulatory reporting requirements."

"DCOs will necessarily have already established connections with relevant execution venues and other market participants for cleared trades. These existing connections can be used for reporting purposes as well. Requiring entirely redundant reporting channels to non-DCO SDRs for cleared trades is at best unnecessary and costly and at worst could create unnecessary ambiguity about the true state of a trade or position."

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Managed Funds Association - February 7, 2011[edit]

Real Time Public Reporting of Swap Transaction and Pricing Data
Swap Data Recordkeeping and Reporting Requirements
February 7, 2011

From the comment letter:

  • "Protecting counterparty identification information is of paramount importance to our members. Each of our members employs a customized and proprietary trading strategy, so disclosure of identifying information of swap participants could result in disclosure of the trading positions and strategy of our members."
  • "The Proposed Reporting Rule does not address whether the public dissemination of such swap transaction detail is to be completed pre- or post-allocation. We believe the real-time disseminator should publicly disseminate such swap transaction data pre-allocation..."
  • If the Commission elects to set block trade levels prior to obtaining appropriate data, it should set the initial levels for all swap asset classes sufficiently low such that they will not reduce market liquidity.
  • "We are concerned, however, that the proposed 15 minute delay for dissemination of block transaction data could have a negative impact on pricing and therefore liquidity."
  • "Congress did not intend for the public dissemination of comprehensive data for non-standardized (bespoke) swaps. Such disclosure, even anonymously, could reveal proprietary trading strategy information."
  • "We are concerned that the timing requirements for reporting of swap data to an SDR are impracticable and burdensome."
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ISDA/SIFMA - February 7, 2011[edit]

Real Time Public Reporting of Swap Transaction and Pricing Data
Swap Data Recordkeeping and Reporting Requirements
Reporting, Recordkeeping, and Daily Trading Records Requirements for Swap Dealers and Major Swap Participants
February 7, 2011

From the comment letter:

"Drawing on the lessons from three trade reporting regimes and market data on interest rate and credit derivatives, we propose several considerations that an effective trade reporting regime for OTC derivatives should reflect:

  • 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.

The proposed rules by the CFTC and SEC should be modified with these considerations in mind. Most importantly, rules should calibrate block trade thresholds to reflect trade volume and liquidity for specific instruments and limit disclosure for certain large block trades."

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Barclays Capital - February 7, 2011[edit]

Real Time Public Reporting of Swap Transaction and Pricing Data
February 7, 2011 Recommendations from the comment letter:

  • Post trade reporting requirements to be based on objective observations of market data;
  • A more flexible and tailored approach to transparency requirements;
  • Dynamic thresholds for block trade sizing;
  • A reporting accommodation for illiquid markets based on average daily volume;
  • Special accommodations for bespoke markets; and
  • Consider transparency requirements consider the needs of end-users.
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BlackRock - February 7, 2011[edit]

Real Time Public Reporting of Swap Transaction and Pricing Data
February 7, 2011 The comment letter explains BlackRock's perspective on transparency, block trades, risk reporting, and trade reporting, and includes four graphic tables and flow charts explaining:

  • Risk Reporting and Trade Reporting for SEFs, DCOs and bilateral uncleared trades;
  • Timeline of data availability; and
  • Block trade and large notional swap liquidity for interest rate products and credit default swaps.
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Depository Trust & Clearing Corporation - February 7, 2011[edit]

Real Time Public Reporting of Swap Transaction and Pricing Data
February 7, 2011

Summary points from the comment letter:

  • "DTCC urges the Commission and the Securities and Exchange Commission (“SEC”) to harmonize their respective regulatory regimes establishing reporting processes for credit and equity derivatives."
  • "The Commission should set and apply consistent thresholds for block trades in public dissemination by both SDRs and any market operators who directly disseminate information."
  • "DTCC questions whether an unregulated entity should be fulfilling the Commission’s dissemination requirements, when SDRs are created by the statute to collect the very same data for regulatory and reporting purposes."
  • "After the final rules are adopted, market participants must be given adequate time to develop and implement appropriate reporting and compliance systems and procedures."
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FINRA - February 17, 2011[edit]

Real Time Public Reporting of Swap Transaction and Pricing Data
February 17, 2011

FINRA comments reflect its experience with the Trade Reporting and Compliance Engine ("TRACE"), in which rules already require real-time reporting of corporate and agency debt securities transactions and "provide for the immediate dissemination of such information to the market." TRACE has "significantly increased transparency in these sectors of the bond markets and improved pricing in such markets." FINRA "applauds the commission's efforts" and adds that "there has been no observed loss of liquidity since the launch of TRACE or after the dissemination of last-sale information was adopted as the general policy..."

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