Swap Data Regulation - Swap Data Repositories - Comment Letters

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Gavel.png FINAL RULE: This page refers to the proposed rules on swap data repositories. The final rules were approved at the CFTC Open Meeting.
Dodd-Frank Timeline, Registration and Regulation of Swap Data Repositories
Proposal Date Final Rule Issue Effective Date*
December 23, 2010 September 1, 2011 October 31, 2011
Dodd-Frank Timeline, Swap Data Repository Registration, Duties and Core Principles Regulation, SEC
Reopened Comment Period Deadline Final Rule Issue Effective Date
July 22, 2013 March 19, 2015 May 18, 2015

Among the provisions of the Dodd-Frank Act are requrements that the CFTC and SEC create a framework for a newly created entity, the "swap data repository" (SDR). According to Dodd-Frank, the SEC has jurisdiction over "security-based swaps" and the CFTC has jurisdiction over all others. On November 10, 2010, the CFTC issued a proposed rule which included:

  • registration requirements will include the adoption of a new registration form—Form SDR;
  • SDR duties will include data acceptance; confirmation recordkeeping; real-time reporting, monitoring, screening and analyzing of data; maintenance of data privacy; regulator access; and adoption of emergency procedure requirements; and
  • SDR core principles will include considerations for antitrust, governance, and conflicts of interest.

The SEC issued its proposed rules regarding security-based swap data repositories at theSEC Open Meeting, November 19, 2010. The proposal centers on Regulation SBSR which will "provide for the reporting of security-based swap information to registered security-based swap data repositories or the Commission and the public dissemination of security-based swap transaction, volume, and pricing information."

The CFTC and SEC letters can be found below.

CFTC Comment Letters[edit]

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.

Note: The letters were in response the CME Proposed Rule 1001. The rule generated numerous comment letters submitted on both sides of the issue. These letters can be found HERE.

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European Securities and Markets Authority - January 17, 2011[edit]

Swap Data Repositories
January 17, 2011

From the comment letter:

  • "In the case of foreign SDRs, our concerns stem from the fact that in the proposed rulemakings on SDRs we have not identified any reference to equivalency of regulatory regimes or cooperation with the authorities of the country of establishment of the foreign SDRs."
  • "We believe that it would be preferable to aim at cooperating with foreign authorities to ensure the application and enforcement of equivalent rules and to guarantee access to the information needed for regulatory purposes and not necessarily to all data and records held by a foreign SDR."
  • "...we strongly encourage you to consider a different regime than the one described in your proposed rulemakings. Accordingly, you may want to contemplate a regime where foreign SDRs can register with the CFTC if the laws and regulations in a foreign jurisdiction are equivalent to the US ones and if a Memorandum of Understanding (MoU) between the CFTC and the relevant foreign authorities has been signed."
  • "We believe that ensuring confidentiality is essential for exchanging information among regulators and [the Dodd-Frank Act's] indemnification agreement undermines the key principle of trust according to which exchange of information should occur."
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Securities Industry and Financial Markets Authority - February 7, 2011[edit]

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

Regarding swap data repositories:

  • The “reporting counterparty” should always be the swap dealer or MSP, whether or not it is a U.S. person.
  • “Unique Counterparty Identifiers” should be assigned at the fund or account level as opposed to the trust level.
  • The regulatory community should seek to adopt a single, cohesive LEI system that would apply to all regulators.
  • Reporting of “corporate affiliations” should only be required in situations of majority ownership.
  • The terms of a swap should never be changed as a result of confirming or reporting the swap.
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MarkitSERV - February 7, 2011[edit]

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

"MarkitSERV believes that:

  1. SDRs and their affiliates should be permitted to offer a range of Ancillary Services in addition to their core services of data acceptance and data storage;
  2. the Commission should allow for various acceptable fee models for SDRs, including the broadly established "sell-side pays" approach as one of them;
  3. SDRs should not be restricted in how the SDRs price their non-core, optional Ancillary Services that can be provided by unregulated Third–Party Service Providers;
  4. commercial use of participants’ data should be governed by agreements executed between participants and the SDRs;
  5. SDRs should be required to accept all formats and types of data from participants provided that SDRs are able to recoup their additional reasonable costs in processing the non-standard data;
  6. SDRs should be deemed to have fulfilled their statutory duty to confirm the accuracy of the swap data if the submitted transaction is legally confirmed by the counterparties;
  7. SDRs should be able to set minimum standards for accessing SDRs;
  8. only registered SDRs, or their affiliates, should be allowed to serve as real-time trade reporting disseminators;
  9. life-cycle events should be reported to the same SDR that received original swap transaction data (both for regulatory reporting purposes and for real-time reporting purposes as well);
  10. SDRs must be able to accept all swap instruments in a given swap asset class;
  11. the CFTC and the SEC should harmonize their rules on what parties should be required to report swap transactions;
  12. SDRs should have greater flexibility in determining on a going forward basis what swap data fields should be reported to the Commission and in real time to the public; and
  13. implementation of real-time reporting rules should be phased in over time in coordination between the CFTC and the SEC."
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Managed Funds Association - February 21, 2011[edit]

Swap Data Repositories
February 21, 2011

From the comment letter:

"MFA supports regulators having appropriate access to swap data maintained by SDRs, as well as the Commission’s proposal to limit such access only to a regulator that is acting clearly within the scope of the regulator’s authority. We are concerned, however, that in practice foreign regulators will have unlimited access to data maintained by an SDR because the Proposed Rule, as drafted, only requires an SDR to notify the Commission that a foreign regulator seeks access to the swaps data it maintains, but does not require the Commission to play an active role in verifying the validity of such request."

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CME Group - February 22, 2011[edit]

Swap Data Repositories
February 22, 2011

Summary of key points from the comment letter:

  • "The rules should feature explicit exemptions for DCOs complying with applicable core principles."
  • "The rules should provide for notice registration for DCOs."
  • "The term “market participant” in the current formulation of the rule is confusing. It should not be read to apply to only swap counterparties."
  • "Market-wide surveillance duties are best placed with a regulator or self-regulatory organization empowered with disciplinary powers and subject to concomitant responsibilities."
  • "The CFTC’s approach to receiving access to SDRs should be carefully considered."
  • "Allowing DCOs or DCO-SDRs to limit their acceptance of data to the transactions for which such DCO (or affiliated SDR) accepts for clearing is the quickest path to implementing reporting requirements for the majority of swap trades, that is, for reporting of standardized, cleared transactions."
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Depository Trust & Clearing Corporation - February 22, 2011[edit]

Swap Data Repositories
February 22, 2011

From the comment letter:

  • "The mandatory reporting regime creates an unintended opportunity for the SDR toimproperly commercialize the information received. As an aggregator and collector of swap data supporting regulatory oversight and supervisory functions, as well as regulator-mandated public reporting, it is critical that an SDR’s public utility function is separated from potential commercial uses of the received data. The principle of user control over the data for non-regulatory purposes must also be scrupulously honored, and care should be taken to assure that SDRs maintain an arms-length and nondiscriminatory relationship with other parts of the market infrastructure (i.e., clearing, confirmation, and execution facilities) and that these other parts of the infrastructure maintain similar relationships with SDRs."
  • "In order to assure that non-regulatory uses of mandatorily reported data remain in the hands of the counterparties, SDRs should be “user-governed.”
  • "SDR fee structures should reflect an at-cost operating budget."
  • "DTCC recommends that appropriate transitional arrangements be made to avoid market disruption by the implementation of the Proposed Rule.
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American Benefits Council/Committee on the Investment of Employee Benefit Assets - February 22, 2011[edit]

Swap Data Repositories
February 22, 2011

Summary of key points from the comment letter:

  • Any centralized recordkeeping facility for swaps should be a registered swap data repository.
  • A swap data repository should not alter the terms of any swap reported to it.
  • A swap data repository should provide open access to all market participants.
  • Both counterparties to a swap should be able to access data reported to an SDR on that swap.
  • Multiple SDRs should be allowed to accept the data for any particular swap for reporting.
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SEC Comment Letters[edit]

Security-Based Swap Data Repository Registration, Duties, and Core Principles[edit]

Managed Funds Association - March 24, 2011[edit]

Security-Based Swap Data Repository Registration, Duties, and Core Principles
Regulation SBSR - Reporting and Dissemination of Security-Based Swap Information
March 24, 2011

MFA believes that the first two priorities of the OTC derivatives market should be:

  1. "expanding the use of central clearing for liquid ("clearable") contracts; and
  2. having trade repositories receive data on both cleared and bilateral swaps."

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

  • "Framework for the Open Items List from Buy-Side Participants of Actions Required for Buy-Side Access to Clearing;" and
  • MFA's recommended timeline for adoption and implementation of reform rules, as well as milestones timeline.
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Depository Trust & Clearing Corporation - January 24, 2011[edit]

Security-Based Swap Data Repository Registration, Duties, and Core Principles
January 24, 2011

Summary of the comment letter:

  • SDRs should be "user-governed;"
  • SDRs should not commercialize received data while maintaining a strict unbias when exchanging data from any source, including providers associated with any SDR; and
  • SDR fee structures should be revised to include only "at-cost operating budgets."
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MarkitSERV - January 24, 2011[edit]

Security-Based Swap Data Repository Registration, Duties, and Core Principles
Regulation SBSR - Reporting and Dissemination of Security-Based Swap Information
January 24, 2011

In the letter, MarkitSERV offers the following comments:

  • "SDRs and their affiliates should be permitted to offer a range of ancillary services in addition to their core services of data acceptance and data storage.
  • The SEC should allow for various fee models for SDRs, including the broadly established 'sell-side pays' approach.
  • The initial data submitted to the SDR belongs to the market participants and can only be used for commercial purposes if allowed by those owners.
  • The submission of bilaterally-confirmed or verified data to the SDRs ensures accuracy and consistency, and should be strongly encouraged.
  • Data consolidation should be promoted by:
  1. mandating that all life-cycle events of a swap be reported to the same SDR;
  2. mandating that SDRs accept all swaps in the asset class in which they are active; and
  3. the Commission designating a single 'consolidator/aggregator' SDR per asset class or for all SBSs.
  • Only registered SDRs, or their affiliates, should be allowed to serve as real-time data disseminators.
  • The SEC’s approach of assigning reporting obligations to one of the counterparties, while allowing delegation to Third-Party Service Providers is preferable to the approach proposed by the CFTC.
  • The SEC’s imposition of the 15-minute outer boundary for reporting real-time swap transaction data may be overly prescriptive in some cases, while the CFTC’s 'as soon as technologically practicable' approach seems to afford appropriate flexibility.
  • SDRs themselves should be tasked with determining the set of specific reportable fields, although the Commission should establish a minimum set of reportable fields and appropriate data standards.
  • SDRs should be able to set reasonable standards for reportable SBS data and to recoup their reasonable costs in verifying and accepting highly-customized and non-standard data.
  • The implementation of the SDR Regulation and other rules should be phased in over time and in coordination with the G-20 international commitments and the timelines adopted in other jurisdictions, such as the E.U."
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BNY Mellon - December 7, 2010[edit]

Security-Based Swap Data Repository Registration, Duties, and Core Principles
December 7, 2010

In the comment letter, BNY Mellon requests that the SEC clarify its interpretation of "processing of Swaps" in its proposed rules, as this clarification is needed in order for market participants to remain compliant with Dodd-Frank.

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