Swap Data Recordkeeping and Reporting Requirements

Federal RegisterNov 25, 2020

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 45, 46, and 49

RIN 3038-AE31

Swap Data Recordkeeping and Reporting Requirements

AGENCY:

Commodity Futures Trading Commission.

ACTION:

Final rule.

SUMMARY:

The Commodity Futures Trading Commission (“Commission” or “CFTC”) is amending certain regulations setting forth the swap data recordkeeping and reporting requirements for swap data repositories (“SDRs”), derivatives clearing organizations (“DCOs”), swap execution facilities (“SEFs”), designated contract markets (“DCMs”), swap dealers (“SDs”), major swap participants (“MSPs”), and swap counterparties that are neither SDs nor MSPs. The amendments, among other things, streamline the requirements for reporting new swaps, define and adopt swap data elements that harmonize with international technical guidance, and reduce reporting burdens for reporting counterparties that are neither SDs nor MSPs.

DATES:

Effective Date:

The effective date for this final rule is January 25, 2021.

Compliance Date:

SDRs, SEFs, DCMs, reporting counterparties, and non-reporting counterparties must comply with the amendments to the rules by May 25, 2022.

FOR FURTHER INFORMATION CONTACT:

Richard Mo, Special Counsel, (202) 418-7637,

rmo@cftc.gov;

Benjamin DeMaria, Special Counsel, (202) 418-5988,

bdemaria@cftc.gov;

Thomas Guerin, Special Counsel, (202) 734-4194,

tguerin@cftc.gov;

Meghan Tente,

Acting Deputy Director, (202) 418-5785,

mtente@cftc.gov;

Division of Market Oversight, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW, Washington, DC 20581; Kristin Liegel, Surveillance Analyst, (312) 596-0671,

kliegel@cftc.gov,

Division of Market Oversight, Commodity Futures Trading Commission, 525 West Monroe Street, Suite 1100, Chicago, Illinois 60661; Kate Mitchel, Business Analyst, (202) 418-5871,

kmitchel@cftc.gov,

Office of Data and Technology; Nancy Doyle, Senior Special Counsel, (202) 418-5136,

ndoyle@cftc.gov,

Office of International Affairs; John Coughlan, Research Economist, (202) 418-5944,

jcoughlan@cftc.gov,

Office of the Chief Economist, in each case at the Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW, Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background

II. Amendments to Part 45

A. § 45.1—Definitions

B. § 45.2—Swap Recordkeeping

C. § 45.3—Swap Data Reporting: Creation Data

D. § 45.4—Swap Data Reporting: Continuation Data

E. § 45.5—Unique Transaction Identifiers

F. § 45.6—Legal Entity Identifiers

G. § 45.8—Determination of Which Counterparty Shall Report

H. § 45.10—Reporting to a Single Swap Data Repository

I. § 45.11—Data Reporting for Swaps in a Swap Asset Class Not Accepted by Any Swap Data Repository

J. § 45.12—Voluntary Supplemental Reporting

K. § 45.13—Required Data Standards

L. § 45.15—Delegation of Authority

III. Amendments to Part 46

A. § 46.1—Definitions

B. § 46.3—Data Reporting for Pre-Enactment Swaps and Transition Swaps

C. § 46.10—Required Data Standards

D. § 46.11—Reporting of Errors and Omissions in Previously Reported Data

IV. Amendments to part 49

A. § 49.2—Definitions

B. § 49.4—Withdrawal from Registration

C. § 49.10—Acceptance and Validation of Data

V. Swap Data Elements Reported to Swap Data Repositories

A. Proposal

B. Comments on the Proposal and Commission Determination

VI. Compliance Date

VII. Related Matters

A. Regulatory Flexibility Act

B. Paperwork Reduction Act

C. Cost-Benefit Considerations

D. Antitrust Considerations

I. Background

Pursuant to section 2(a)(13)(G) of the Commodity Exchange Act (“CEA”), all swaps, whether cleared or uncleared, must be reported to SDRs.

CEA section 21(b) directs the Commission to prescribe standards for swap data recordkeeping and reporting.

Part 45 of the Commission's regulations implements the swap data reporting rules.

The part 45 regulations require SEFs, DCMs, and reporting counterparties to report swap data to SDRs. SDRs collect and maintain data related to swap transactions, keeping such data electronically available for regulators or the public.

7 U.S.C. 2(a)(13)(G) (2020).

See

7 U.S.C. 24a(b)(1)-(3).

Commission regulations referred to herein are found at 17 CFR chapter I.

The term “swap data repository” means any person that collects and maintains information or records with respect to transactions or positions in, or the terms and conditions of, swaps entered into by third parties for the purpose of providing a centralized recordkeeping facility for swaps.

See

7 U.S.C. 1a(48). Regulations governing core principles and registration requirements for, and duties of, SDRs are in part 49.

See generally

17 CFR part 49.

Since the Commission adopted the part 45 regulations, Commission staff has worked with SDRs, SEFs, DCMs, reporting counterparties, and non-reporting counterparties to interpret and implement of the requirements established in the regulations. Several years ago, the Division of Market Oversight (“DMO”) announced

its Roadmap to Achieve High Quality Swaps Data (“Roadmap”),

consisting of a comprehensive review to, among other things: (i) ensure the CFTC receives accurate, complete, and high-quality data on swap transactions for its regulatory oversight role; and (ii) streamline reporting, reduce messages that must be reported, and right-size the number of data elements reported to meet the agency's priority use-cases for swap data.

See

Commission Letter 17-33, Division of Market Oversight Announces Review of Swap Reporting Rules in parts 43, 45, and 49 of Commission Regulations (July 10, 2017),

available at https://www.cftc.gov/idc/groups/public/@lrlettergeneral/documents/letter/17-33.pdf.

The Roadmap is available at

https://www.cftc.gov/sites/default/files/idc/groups/public/@newsroom/documents/file/dmo_swapdataplan071017.pdf.

Comment letters related to the Roadmap are available at

https://comments.cftc.gov/PublicComments/CommentList.aspx?id=1824.

See

Commission Letter 17-33,

supra

at n.5; Roadmap,

supra

at n.6.

In February 2020, the Commission proposed certain changes to its parts 45, 46, and 49 regulations (“Proposal”)

to simplify the requirements for reporting swaps, require SDRs to validate swap reports, permit the transfer of swap data between SDRs, alleviate reporting burdens for non-SD/MSP reporting counterparties, and harmonize the swap data elements counterparties report to SDRs with international technical guidance.

See

Swap Data Recordkeeping and Reporting Requirements, 85 FR 21578 (Apr. 17, 2020).

The Commission received 26 comment letters on the Proposal.

After considering the comments, the Commission is adopting parts of the rules as proposed, although there are proposed changes the Commission has determined to either revise or decline to adopt. The Commission believes the rules it is adopting herein will provide clarity and lead to more effective swap data reporting by SEFs, DCMs, and reporting counterparties.

The following entities submitted comment letters: American Public Gas Association (“APGA”); BP Energy Company (“BP”); Chatham Financial (“Chatham”); Chris Barnard; CME Group (“CME”); Coalition of Physical Energy Companies (“COPE”); Commercial Energy Working Group (“CEWG”); Credit Suisse (“CS”); The Data Coalition (“Data Coalition”); DTCC Data Repository (U.S.) LLC (“DTCC”); Edison Electric Institute (“EEI”) and Electric Power Supply Association (“EPSA”) (collectively, “EEI-EPSA”); Eurex Clearing AG (“Eurex”); Foreign Exchange Professionals Association (“FXPA”); Futures Industry Association (“FIA”); Global Foreign Exchange Division of the Global Financial Markets Association (collectively, “GFXD”); Global Legal Entity Identifier Foundation (“GLEIF”); ICE Clear Credit LLC and ICE Clear Europe Limited (“ICE DCOs”); ICE Trade Vault, LLC (“ICE SDR”); IHS Markit (“Markit”); International Energy Credit Association (“IECA”); International Swaps and Derivatives Association, Inc. (“ISDA”) and Securities Industry and Financial Markets Association (“SIFMA”) (collectively, “ISDA-SIFMA”); Japanese Bankers Association (“JBA”); Japan Securities Clearing Corporation (“JSCC”); LCH Ltd and LCH SA (collectively, “LCH”); National Rural Electric Cooperative Association and American Public Power Association (“NRECA-APPA”); and XBRL US, Inc. (“XBRL”).

Before discussing the changes to the regulations, the Commission highlights the important role international data harmonization efforts have played in this rulemaking. As discussed in the Proposal, since November 2014, regulators across major derivatives jurisdictions, including the CFTC, have come together through the Committee on Payments and Market Infrastructures (“CPMI”) and the International Organization of Securities Commissions (“IOSCO”) working group for the harmonization of key over-the-counter (“OTC”) derivatives data elements (“Harmonisation Group”) to develop global guidance regarding the definition, format, and usage of key OTC derivatives data elements reported to trade repositories (“TRs”), including the Unique Transaction Identifier (“UTI”), the Unique Product Identifier (“UPI”), and critical data elements other than UTI and UPI (“CDE”).

In February 2017 and September 2017, respectively, the Harmonisation Group published

Guidance on the Harmonisation of the Unique Transaction Identifier

(“UTI Technical Guidance”) and

Technical Guidance on the Harmonisation of

the Unique Product Identifier

(“UPI Technical Guidance”). In April 2018, the Harmonisation Group published

Technical Guidance on the Harmonisation of Critical OTC Derivatives Data Elements (other than UTI and UPI)

(“CDE Technical Guidance”).

The Commission has played an active role in the development and publication of each of the Harmonisation Group's technical guidance documents. For the CDE Technical Guidance in particular, as part of the Harmonisation Group, Commission staff worked alongside representatives from Canada, France, Germany, Hong Kong, Japan, Singapore, and the United Kingdom, among others, to provide feedback regarding the data elements, taking into account the Commission's experience with swap data reporting thus far. Commission staff also participated in the solicitation of responses to three public consultations on the CDE Technical Guidance, along with related industry workshops and conference calls.

See

CDE Technical Guidance at 9.

The Commission's sustained, active role in the Harmonisation Group in developing global guidance on key OTC derivatives data elements reported to TRs is part of the Commission's broader, long-range goal of continued efforts to achieve international harmony in the area of swaps reporting. The Commission has co-led efforts to design ongoing international regulatory oversight of these standards in the Financial Stability Board (“FSB”) Working Group on UPI and UTI Governance (“GUUG”) and the Commission's efforts to achieve international harmonization in the entire clearing ecosystem, including swap data reporting, will continue.

In particular, the Commission continues to be open to further ways to cooperate with our foreign regulatory counterparts in the supervision of TRs. An example is the consideration of when and how the Commission should grant swap data reporting substituted compliance determinations for SDs and DCOs domiciled in non-U.S. jurisdictions with similar swap data reporting requirements, permitting reporting of swap data to a foreign TR to satisfy Commission swap data requirements under appropriate circumstances. Efficiencies in cross-border reporting are critical to the smooth operation of transatlantic clearing and trading. To the degree the Commission can work with its international counterparts to thus increase interoperability between jurisdictions, this will enhance cross-border trading efficiency. Moreover, with appropriate tailoring and protections, and due access to foreign TR data, deference to foreign jurisdictions will reduce expensive redundancies in trade reporting.

II. Amendments to Part 45

A. § 45.1—Definitions

The paragraph of existing § 45.1 is not lettered. The Commission is lettering the existing paragraph as “(a)” and adding (b) to § 45.1. Paragraph (a) will contain all of the definitions in existing § 45.1, as the Commission is modifying them. New paragraph (b) provides the terms not defined in part 45 have the meanings assigned to the terms in Commission regulation § 1.3, which was implied in the existing regulation but will now be explicit.

17 CFR 1.3.

The Commission is adding new definitions, amending certain existing definitions, and removing certain existing definitions. Within each of these categories, the Commission discusses the changes in alphabetical order, except as otherwise noted.

1. New Definitions

The Commission is adding a definition of “allocation” to § 45.1(a). “Allocation” means the process by which an agent, having facilitated a single swap transaction on behalf of clients, allocates a portion of the executed swap to the clients. Existing § 45.3(f) contains regulations for reporting allocations without defining the term. The definition will help market participants comply with the regulations for reporting allocations in § 45.3.

The Commission is adding a definition of “as soon as technologically practicable” (“ASATP”) to § 45.1(a). “As soon as technologically practicable” means as soon as possible, taking into consideration the prevalence, implementation, and use of technology by comparable market participants. The phrase “as soon as technologically practicable” is currently undefined but used throughout part 45. The Commission is adopting the same definition of “as soon as technologically practicable” as is defined in § 43.2 for swap transaction and pricing data.

See

17 CFR 43.2 (definition of “as soon as technologically practicable”).

The Commission is adding a definition of “collateral data” to § 45.1(a). “Collateral data” means the data elements necessary to report information about the money, securities, or other property posted or received by a swap counterparty to margin, guarantee, or secure a swap, as specified in appendix 1 to part 45. The Commission explains this definition in a discussion of collateral data reporting in section II.D.4 below.

The Commission is adding definitions of “execution” and “execution date” to § 45.1(a). “Execution” means an agreement by the parties, by any method, to the terms of a swap that legally binds the parties to such swap terms under applicable law.

In the Proposal, the Commission proposed “execution date” to mean the date, determined by reference to Eastern Time, on which swap execution has occurred. The execution date for a clearing swap that replaces an original swap would be the date, determined by reference to Eastern Time, on which the DCO accepts the original swap for clearing. The term “execution” is currently undefined but used throughout part 45, and the Commission is adding regulations referencing “execution date.”

The definition of “execution” is functionally identical to the part 23 definition of execution.

See

17 CFR 23.200(e) (definition of “execution”).

See

§ 45.3(a) and (b), discussed in sections II.C.2.a and II.C.2.b, respectively, below.

The Commission received three comments supporting the definition of “execution date.”

In particular, ISDA-SIFMA believe the definition is more practical than the referencing the “day of execution,” because the latter would require a more complex build for industry participants, including requiring reporting counterparties to compare against the non-reporting counterparty to determine the party with the calendar day that ends latest, on a swap-by-swap basis.

GXFD at 21; Eurex at 2; ISDA-SIFMA at 5.

ISDA-SIFMA at 5.

The Commission received three comments opposing the reference to Eastern Time in the proposed definition of “execution date.” CME and Chatham both believe the definition should use a coordinated universal time (“UTC”) standard.

CME notes Eastern Time could make the reporting entity convert data between three time zones— local time zone, Eastern Time, and UTC—and also account for daylight savings time.

Chatham notes reporting counterparties build systems using UTC and it would be time-consuming and costly to convert to Eastern Time, as well as inconsistent with other regulatory reporting frameworks.

JBA suggests the Commission use UTC to globally harmonize and follow the CDE Technical Guidance, and points out the January 2020 CPMI-IOSCO “Clock

Synchronization” report recommends business clocks synchronize to UTC.

CME at 12; Chatham at 1.

CME at 12.

Chatham at 1.

JBA at 4.

The Commission agrees the reference to Eastern Time in “execution date” would create unnecessary operational complexities and be inconsistent with the approach taken by other regulators. In addition, the Commission's updated swap data elements in appendix 1 reference UTC. In response, the Commission is removing the references to Eastern Time in the definition of “execution date,” and the swap data elements in appendix 1 will clarify that SEFs, DCMs, and reporting counterparties should report the specific data elements using UTC. As such, the new definition of “execution date” means the date of execution of a particular swap. The execution date for a clearing swap that replaces an original swap is the date on which the original swap has been accepted for clearing.

The Commission is adding the following three definitions to § 45.1(a): “Global Legal Entity Identifier System,” “legal entity identifier” or “LEI,” and “Legal Entity Identifier Regulatory Oversight Committee” (“LEI ROC”). “Global Legal Entity Identifier System” means the system established and overseen by the LEI ROC for the unique identification of legal entities and individuals. “Legal entity identifier” or “LEI” means a unique code assigned to swap counterparties and entities in accordance with the standards set by the Global Legal Entity Identifier System. “Legal Entity Identifier Regulatory Oversight Committee” means the group charged with the oversight of the Global Legal Entity Identifier System that was established by the finance ministers and the central bank governors of the Group of Twenty nations and the FSB, under the Charter of the Regulatory Oversight Committee for the Global Legal Entity Identifier System dated November 5, 2012, or any successor thereof.

These definitions are all associated with, and further explained in the context of, the § 45.6 regulations for LEI, in section II.F below.

See

Charter of the Regulatory Oversight Committee For the Global Legal Entity Identifier System,

available at https://www.leiroc.org/publications/gls/roc_20190130-1.pdf.

GLEIF supports adding these definitions, but also suggests moving definitions to § 45.1(a) from § 45.6(a) for “local operating unit” and “legal entity reference data.” The Commission is declining to adopt this suggestion, as the definitions in § 45.6(a) are only used in § 45.6.

The Commission is adding a definition of “non-SD/MSP/DCO reporting counterparty” to § 45.1(a). “Non-SD/MSP/DCO reporting counterparty” means a reporting counterparty that is not an SD, MSP, or DCO. The existing definition of “non-SD/MSP reporting counterparty” does not explicitly include DCOs. This creates problems when, for instance, the Commission did not intend DCOs follow the required swap creation data reporting regulations in § 45.3(d) for off-facility swaps not subject to the clearing requirement with a non-SD/MSP reporting counterparty, even though DCOs are technically reporting counterparties that are neither SDs nor MSPs. Instead, DCOs follow § 45.3(e) for clearing swaps. The definition of “non-SD/MSP/DCO reporting counterparty” addresses this unintended gap.

The Commission is adding a definition of “novation” to § 45.1(a). “Novation” means the process by which a party to a swap legally transfers all or part of its rights, liabilities, duties, and obligations under the swap to a new legal party other than the counterparty to the swap under applicable law. The term “novation” is currently undefined but used in the definition of “life cycle event,” as well as the existing § 45.8(g) regulations for determining which counterparty must report.

The Commission is adding a definition of “swap” to § 45.1(a). “Swap” means any swap, as defined by § 1.3, as well as any foreign exchange forward, as defined by CEA section 1a(24), or foreign exchange swap, as defined by CEA section 1a(25).

The term “swap” is currently undefined but used throughout part 45 and the definition codifies the meaning of the term as it is currently used throughout part 45.

While foreign exchange forwards and foreign exchange swaps are excluded from the definition of “swap,” such transactions are nevertheless required to be reported to an SDR.

See

7 U.S.C. 1a(47)(E)(iii) (definition of “swap”).

NRECA-APPA believe the Commission should incorporate the “swap” definition in CEA section 1a into its interpretations, exemptions, and other guidance, as well as remove from the definition: guarantees of a swap, commodity options meeting the conditions in § 32.3, and other types of agreements, contracts, and transactions the Commission has determined Congress did not intend to regulate as “swaps.” NRECA-APPA at 5. The Commission notes its interpretations, exemptions, and guidance are outside of the scope of this rulemaking, as is removing certain types of agreements, contracts, and transactions from the CEA definition of “swap.” The Commission emphasizes the definition of “swap” in § 45.1 is for swap data reporting purposes only, and does not impact any regulations outside of part 45.

The Commission is adding definitions of “swap data” and “swap transaction and pricing data” to § 45.1(a). In the Proposal, the Commission proposed “swap data” to mean the specific data elements and information in appendix 1 to part 45 required to be reported to an SDR pursuant to part 45 or made available to the Commission pursuant to part 49, as applicable. The Commission received a comment from DTCC suggesting deleting the phrase “and information” from the definition of “swap data,” because it is unclear to what “and information” refers.

The Commission agrees and is modifying the definition to remove “and information.”

The Commission is adopting the rest of the definition of “swap data” as proposed.

DTCC at 4.

The Commission notes certain swap-related information may be required to be reported to a SDR pursuant to other CFTC regulations which are not included in the definition of “swap data.” Market participants should be aware of other applicable reporting requirements. For example, counterparties electing an exception to or exemption from the swap clearing requirement under § 50.4 are required to report specific information to a SDR, or if no SDR is available to receive the information, to the Commission, under § 50.50(b).

Separately, the Commission is adopting the definition of “swap transaction and pricing data,” with minor changes from the proposed definition. “Swap transaction and pricing data” will mean all data elements for a swap in appendix A

to part 43 that are required to be reported or publicly disseminated pursuant to part 43. Having “swap data” apply to part 45 data, and “swap transaction and pricing data” apply to part 43 data, will provide clarity across the reporting regulations.

The Commission is changing the reference to appendix C in the proposed definition of “swap transaction and pricing data” to appendix A due to changes to the part 43 appendices the Commission is adopting in a separate release.

The Commission is adding a definition of “swap data validation procedures” to § 45.1(a). “Swap data validation procedures” means procedures established by an SDR pursuant to § 49.10 to accept, validate, and process swap data reported to an SDR pursuant to part 45. The Commission discusses this definition in section IV.C.3 below.

The Commission is adding a definition of “unique transaction identifier” to § 45.1(a). “Unique transaction identifier” means a unique alphanumeric identifier with a maximum of 52 characters constructed solely from the upper-case alphabetic characters A to Z or the digits 0 to 9, inclusive in both cases, generated for each swap pursuant to § 45.5. The Commission received a comment from DTCC supporting the definition because it is consistent with UTI Technical Guidance.

The Commission explains this definition in a discussion of the regulations to transition from using

unique swap identifiers (“USIs”) to UTIs in section II.E below.

DTCC at 4, 5.

2. Changes to Existing Definitions

CEWG comments the “financial entity” definition, which the Commission did not propose changing, is overinclusive for financial energy firms because if a central treasury unit (“CTU”) enters into a swap for purposes other than hedging, the CTU cannot qualify for the relief in CEA section 2(h)(7)(D). CEWG at 9. The existing “financial entity” definition in § 45.1 simply references the CEA section 2(h)(7)(C) definition of financial entity. The Commission does not see a connection between the clearing rules in CEA section 2(h)(7)(D) to the reporting rules, and thus declines to adopt CEWG's change to the existing definition.

The Commission is making non-substantive technical changes to the existing definitions of “asset class,” “derivatives clearing organization,” and “swap execution facility.”

The Commission is changing the definition of “business day” in § 45.1. Existing § 45.1 defines “business day” to mean the twenty-four hour day, on all days except Saturdays, Sundays, and legal holidays, in the location of the reporting counterparty or registered entity reporting data for the swap.

In the Proposal, the Commission proposed replacing “the twenty-four hour day” with “each twenty-four-hour day,” and “legal holidays, in the location of the reporting counterparty” with “Federal holidays” to simplify the definition by no longer requiring the determination of different legal holidays depending on the reporting counterparty's location.

17 CFR 45.1 (definition of “business day”).

The Commission received four comments raising concerns with the changes to “business day.” CME believes the proposed changes could result in firms keeping some staff in the office on local holidays or reporting before the deadline.

JSCC believes the proposed changes would force non-U.S. reporting counterparties to report valuation, margin, and collateral data on local holidays even though the data would be unchanged because their markets would be closed.

ISDA-SIFMA request clarification that “federal holidays” include legal holidays in the reporting counterparty's principal place of business so a reporting counterparty located outside the U.S. can take into account legal holidays that are not U.S. federal holidays.

DTCC suggests using the same definitions for parts 43 and 45.

CME at 12-13.

JSCC at 1, 2.

ISDA-SIFMA at 5.

DTCC at 4.

The Commission seeks to avoid firms keeping staff in the office on local holidays, as commenters pointed out the changes suggest. As such, the Commission is keeping the current definition of “business day” with one modification: “registered entity” refers to SEFs and DCMs. Therefore, the “business day” will mean the twenty-four-hour day, on all days except Saturdays, Sundays, and legal holidays, in the location of SEF, DCM, or reporting counterparty reporting data for the swap.

The Commission is changing the definition of “life cycle event” in § 45.1. Existing § 45.1 defines “life cycle event” to mean any event that would result in either a change to a primary economic term (“PET”) of a swap or to any PET data (“PET data”) previously reported to an SDR in connection with a swap.

The Commission is replacing the reference to PET data with required swap creation data to reflect the Commission's removal of the concept of PET data reporting from § 45.3.

The Commission is also replacing a reference to a counterparty being identified in swap data by “name” with “other identifiers” to be more precise in when counterparties are identified by other means.

The Commission is not changing the examples the existing definition provides: A counterparty change resulting from an assignment or novation; a partial or full termination of the swap; a change to the end date for the swap; a change in the cash flows or rates originally reported; availability of an LEI for a swap counterparty previously identified by name or by some other identifier; or a corporate action affecting a security or securities on which the swap is based (

e.g.,

a merger, dividend, stock split, or bankruptcy).

The Commission discusses this change to § 45.3 in section II.C below.

The Commission is changing the definition of “non-SD/MSP counterparty” in § 45.1. Existing § 45.1 defines “non-SD/MSP counterparty” to mean a swap counterparty that is neither an SD nor an MSP. The Commission is changing the defined term to “non-SD/MSP/DCO counterparty.”

“Non-SD/MSP/DCO counterparty” means a swap counterparty that is not an SD, MSP, or DCO. This change conforms to the changes to the term “non-SD/MSP/DCO reporting counterparty” explained in section II.A.1 above.

The Commission is updating all references to “non-SD/MSP counterparty” to “non-SD/MSP/DCO counterparty” throughout part 45. To limit repetition, the Commission will not discuss each update of the phrase throughout this release.

The Commission is changing the definition of “required swap continuation data” in § 45.1. Existing § 45.1 defines “required swap continuation data” to mean all of the data elements that must be reported during the existence of a swap to ensure that all data concerning the swap in the SDR remains current and accurate, and includes all changes to the PET terms of the swap occurring during the existence of the swap. The definition further specifies that required swap continuation data includes: (i) All life-cycle-event data for the swap if the swap is reported using the life cycle reporting method, or all state data for the swap if the swap is reported using the snapshot reporting method; and (ii) all valuation data for the swap.

First, the Commission is removing the reference to “[PET] of the swap.”

Second, the Commission is removing the reference to snapshot reporting to reflect the removal of the concept of snapshot reporting from § 45.4.

Third, the Commission is adding a reference to margin and collateral data.

As amended, “required swap continuation data” means all of the data elements that must be reported during the existence of a swap to ensure that all swap data concerning the swap in the SDR remains current and accurate, and includes all changes to the required swap creation data occurring during the existence of the swap. For this purpose, required swap continuation data includes: (i) All life-cycle-event data for the swap; and (ii) all swap valuation, margin, and collateral data for the swap.

As explained above, the Commission is removing the concept of PET data reporting from § 45.3.

The Commission discusses the changes to § 45.4 in section II.D below.

The Commission discussed new margin and collateral data reporting in section II.D below.

The Commission is changing the definition of “required swap creation data” in § 45.1. Existing § 45.1 defines “required swap creation data” to mean all PET data for a swap in the swap asset class in question and all confirmation data for the swap. The Commission is replacing the reference to PET data and confirmation data with a reference to the swap data elements in appendix 1 to part 45, to reflect the Commission's update of the swap data elements in existing appendix 1.

The Commission discusses the changes to appendix 1 in section V below.

The Commission is changing the definition of “valuation data” in § 45.1(a). Existing § 45.1 defines “valuation data” to mean all of the data elements necessary to fully describe the daily mark of the transaction, pursuant to CEA section 4s(h)(3)(B)(iii),

and § 23.431 of the Commission's regulations, if applicable. The Commission is adding a reference to the swap data elements in appendix 1 to part 45 to link the definition and the data elements.

7 U.S.C. 6s(h)(3)(B)(iii).

3. Removed Definitions

The Commission is removing the following definitions from § 45.1: “credit swap;” “designated contract market;” “foreign exchange forward;” “foreign exchange instrument;” “foreign exchange swap;” “interest rate swap;” “major swap participant;” “other commodity swap;” “state data;” “swap data repository;” and “swap dealer.” The Commission wants market participants to use the terms as they are already defined in Commission regulation § 1.3 or in CEA section 1a.

7 U.S.C. 1a.

The Commission is removing the following definitions from § 45.1: “confirmation;” “confirmation data;” “electronic confirmation;” “non-electronic confirmation;” “primary economic terms;” and “primary economic terms data.” The definitions are unnecessary due to the Commission combining PET data and confirmation data into a single data report in § 45.3.

The Commission discusses the changes to § 45.3 in section II.C below.

The Commission is removing the definition of “quarterly reporting” from § 45.1 because the Commission is removing the quarterly reporting requirement for non-SD/MSP reporting counterparties from § 45.4(d)(2)(ii).

The Commission discusses the changes to § 45.4 in section II.D below.

The Commission is removing the definitions of “electronic verification,” “non-electronic verification,” and “verification” from § 45.1 because the Commission is changing the deadlines for reporting counterparties to report required swap creation data in § 45.3 to no longer depend on verification.

The Commission discusses the changes to § 45.3 in section II.C below.

The Commission is removing the definition of “international swap” from § 45.1. Existing § 45.1 defines “international swap” to mean a swap required by U.S. law and the law of another jurisdiction to be reported both to an SDR and to a different TR registered with the other jurisdiction. The Commission is removing the definition because the Commission is removing the international swap regulations in § 45.3(i).

The Commission discusses the changes to § 45.3(i) in section II.C.6 below.

B. § 45.2—Swap Recordkeeping

The Commission is adopting technical changes to the § 45.2 swap recordkeeping regulations.

For instance, the Commission is removing the phrase “subject to the jurisdiction of the Commission” from § 45.2. The Commission is also removing this phrase from all of part 45.

The phrase is unnecessary, as the Commission's regulations apply to all swaps or entities within the Commission's jurisdiction, regardless of whether the regulation states the fact.

In a separate release, the Commission is relocating the recordkeeping requirements for SDRs from § 45.2(f) and (g) to § 49.12. 84 FR at 21103 (May 13, 2019).

To limit repetition, the Commission will not discuss each removal in this release.

The Commission received three comments on § 45.2 unrelated to the technical changes. COPE requests the Commission confirm recordkeeping requirements for physical energy companies that use swaps for hedging purposes are limited to recordkeeping in the normal course of business, as is customary for the hedger's particular industry.

As the requirement does not specify records outside of the normal course of business, the Commission is unsure of what else the regulation could require.

COPE at 2.

EEI-EPSA request the Commission clarify no additional recordkeeping is mandated to avoid injecting regulatory uncertainty into recordkeeping requirements.

The Commission confirms its changes to § 45.2 in this release are technical and do not create new requirements. Chris Barnard opposes retaining the current substantive requirement of keeping records for “at least five years,” following the final termination of the swap.

The Commission declines to substantively amend the five-year requirement as requested by Chris Barnard. The Commission believes five years is reasonable for the Commission to access records if it has concerns about particular swaps.

EEI-EPSA at 3.

Chris Barnard at 2.

The Commission did not receive any comments on the non-substantive changes to § 45.2. For the reasons discussed above, the Commission is adopting the changes as proposed.

C. § 45.3—Swap Data Reporting: Creation Data

Existing § 45.3 requires SEFs, DCMs, and reporting counterparties to report swap data to SDRs upon swap execution. As discussed in the sections below, the Commission is adopting four significant changes to the regulations for reporting new swaps: (i) Requiring a single data report at execution instead of two separate reports; (ii) extending the time SEFs, DCMs, and reporting counterparties have to report new swaps to SDRs; (iii) removing the requirement for SDRs to map allocations; and (iv) removing the regulations for international swaps. The remaining changes to § 45.3 discussed below are non-substantive clarifying, cleanup, or technical changes.

1. Introductory Text

The Commission is removing the introductory text to § 45.3. The existing introductory text to § 45.3 provides a broad overview of the swap data reporting regulations for registered entities and swap counterparties. The Commission believes the introductory text is superfluous because the scope of § 45.3 is clear from the operative provisions of § 45.3.

Removing the introductory text does not impact any regulatory requirements, including those referenced in the existing introductory text.

The Commission is moving the reference in the introductory text to required data standards for SDRs in § 45.13(b) to the regulatory text of § 45.3(a) and (b) and renumbering § 45.13(b) as § 45.13(a).

The Commission did not receive any comments on the proposal to remove the introductory text to § 45.3.

2. § 45.3(a) through (e)—Swap Data Reporting: Creation Data

a. § 45.3(a)—Swaps Executed on or Pursuant to the Rules of a SEF or DCM

The Commission is adopting several changes to the § 45.3(a) required swap creation data reporting regulations for swaps executed on or pursuant to the rules of a SEF or DCM. Existing § 45.3(a) requires that SEFs and DCMs report all PET data

for swaps ASATP after execution. If the swap is not intended to be cleared at a DCO, existing § 45.3(a) requires the SEF or DCM also report confirmation data

for the swap ASATP after execution.

PET data reporting includes the reporting of approximately sixty swap data elements, varying by asset class, enumerated in appendix 1 to part 45.

See

17 CFR 45.1 (definition of “primary economic terms”). The Commission discusses the removal of the definition of “primary economic terms” from § 45.1 in section II.A.3 above.

Confirmation data reporting includes reporting all of the terms of a swap matched and agreed upon by the counterparties in confirming a swap.

See

17 CFR 45.1 (definition of “confirmation data”). The Commission discusses removing the definition of “confirmation data” from § 45.1 in section II.A.3 above.

First, the Commission is changing § 45.3(a) to require SEFs and DCMs to report a single required swap creation data report, regardless of whether the swap is intended to be cleared. While the Commission intended the initial PET report would ensure SDRs have sufficient data on each swap for the Commission to perform its regulatory functions while the more complete confirmation data is not yet available,

the Commission is concerned the separate reports may be encouraging the reporting of duplicative information to SDRs. The Commission believes this will streamline reporting, remove uncertainty, and reduce instances of duplicative required swap creation data reports.

See

77 FR at 2142, 2148 (Jan. 13, 2012).

One of the PET data elements in existing appendix 1 to part 45 is any other term(s) matched or affirmed by the counterparties in verifying the swap.

The Commission believes this catchall has obscured the difference between PET data and confirmation data. The Commission is concerned reporting counterparties, SEFs, and DCMs are submitting duplicative reports to meet the distinct, yet seemingly indistinguishable, regulatory requirements at the expense of data quality.

The comment associated with this “catch-all” data element in existing appendix 1 to part 45 instructs reporting counterparties, SEFs, DCMs, and DCOs to use as many data elements as required to report each such term. 17 CFR part 45 appendix 1.

Other regulators have taken different approaches to required swap creation data reporting. The Securities and Exchange Commission (“SEC”) does not have rules for reporting separate confirmation data reports.

See

17 CFR 242.901. The European Market Infrastructure Regulation (“EMIR”) requires reporting of the details of any derivative contract counterparties have concluded and of any modification or termination of the contract. European Securities and Markets Authority (“ESMA”) then develops the specific technical standards and requirements for the implementation of reporting.

See

Regulation (EU) No. 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories, Article 9(1) (July 4, 2012) (requiring reporting after execution without reference to separate reports); Commission Implementing Regulation (EU) No. 1247/2012 laying down implementing technical standards with regard to the format and frequency of trade reports to trade repositories according to Regulation (EU) No. 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories, Article 1 (Dec. 19, 2012) (referencing “single” reports under Article 9 of Regulation (EU) No. 648/2012).

Second, the Commission is changing § 45.3(a) to extend the deadline for SEFs and DCMs to report required swap creation data until the end of the next business day following the execution date (sometimes referred to as “T+1”). Initially, the Commission believed reporting swap data immediately after execution ensured the ability of the Commission and other regulators to fulfill their systemic risk mitigation, market transparency, position limit monitoring, and market surveillance objectives,

but the Commission is concerned the ASATP deadline may be causing reporting counterparties to hastily report required swap creation data that has contributed to data quality issues. The Commission believes an extended reporting timeline will help improve data quality while encouraging alignment with reporting deadlines set by other regulators.

See

77 FR 2142 at 2149 (Jan. 13, 2012).

The SEC requires primary and secondary trade information be reported within 24 hours of execution on the next business day. 17 CFR 242.901(j). The SEC noted commenters raised concerns that unreasonably short reporting timeframes would result in the submission of inaccurate transaction information, and that the SEC's interim 24-hour reporting timeframe § 901(j) strikes an appropriate balance between the need for prompt reporting of security-based swap transaction information and allowing reporting entities sufficient time to develop fast and robust reporting capability.

See

Regulation SBSR—Reporting and Dissemination of Security-Based Swap Information, 80 FR 14564, 14623-64 (Mar. 19, 2015). ESMA requires reporting no later than the working day following execution. Regulation (EU) No. 648/2012 Article 9(1).

The Commission received four comments supporting a single report for PET data and confirmation data in § 45.3(a).

In particular, DTCC believes this will streamline reporting, reduce instances of duplicative reports, remove uncertainty regarding which data elements are required to be reported to the SDR, and reduce operational burdens for SDRs and market participants by reducing the number of message types and duplicative data.

CEWG believes the existing requirement is duplicative and costly.

The Commission agrees with commenters, and for the reasons discussed above, is adopting the changes proposed.

LCH at 2; FIA at 14; CEWG at 2; DTCC at 5.

DTCC at 5.

CEWG at 2.

The Commission received seven comments generally supporting extending the deadline for reporting required swap creation data in existing § 45.3(a).

In particular, DTCC believes the change will reduce the number of corrections being sent to SDRs because of better quality data, be consistent with the SEC and ESMA, and promote reporting structure consistency concerning timing that would, in turn, create processing efficiencies for SDRs and data submitters.

The Commission agrees with commenters, and for the reasons discussed above, is adopting the changes proposed, with one exception explained below.

GFXD at 21, 22; DTCC at 5; Eurex at 2; ISDA-SIFMA at 5; Chatham at 2; ICE DCOs at 3; LCH at 2.

DTCC at 5.

Markit opposes extending the deadline for reporting because it believes ASATP reporting is already possible and using experienced third-party service providers like Markit helps minimize errors.

The Commission understands ASATP reporting is possible and market participants have developed ways to minimize errors, and expects SEFs and DCMs have sophisticated reporting systems that will encourage them to continue reporting ASATP after execution. However, the Commission believes less-sophisticated reporting counterparties, especially for off-facility swaps, will benefit from having more time to report swap data to SDRs, and a single deadline for all reporting entities will be clearest for market participants.

Markit at 3-4.

The Commission discusses the extended deadline for off-facility swaps in section II.C.2.b below.

The Commission received three comments concerning the reference to Eastern Time in the proposed extended deadline. Eurex and Chatham believe the Commission should consider aligning with regulators that reference UTC for global harmonization.

ISDA-SIFMA believe a T+1 deadline for required swap creation data is similar to the deadline used by other jurisdictions, and that a specific cutoff time like 11:59 p.m. eastern time is less complex to build than T+24 hours.

The Commission agrees with Eurex and Chatham that referencing Eastern Time would be inconsistent with global regulators. The swap data elements in appendix 1 also reference UTC.

As a result, the Commission deems it appropriate to adopt a modification from the proposal to remove the reference to 11:59 p.m. eastern time. Instead, § 45.3(a) will extend the deadline for reporting to not later than the end of the next business day following the execution date. For the same reason, and to be consistent, the Commission is removing the reference to 11:59 p.m. eastern time from all of the proposed regulations in §§ 45.3 and 45.4.

While ISDA-SIFMA believe a specific cutoff time is less complex to build, the Commission views the complications the deadline would create for reporting counterparties, especially in other countries, as offsetting build-simplicity considerations.

Eurex at 2; Chatham at 2.

ISDA-SIFMA at 5-7.

The Commission discusses the changes to appendix 1 in section V below.

To limit repetition, the Commission will not discuss each removal in this release.

In summary, in light of the above changes, § 45.3(a) will require that for each swap executed on or pursuant to the rules of a SEF or DCM, the SEF or DCM shall report required swap creation data electronically to an SDR in the manner provided in § 45.13(a) not later than the end of the next business day following the execution date.

b. § 45.3(b) through (e)—Off-Facility Swaps

The Commission is making several changes to the § 45.3(b) through (e) required swap creation data reporting regulations for off-facility swaps. Most of these changes conform to the changes in § 45.3(a) because the regulations in § 45.3(b) through (e) for off-facility swaps are analogous to the regulations in § 45.3(a) for swaps executed on SEFs and DCMs.

In general, for off-facility swaps subject to the Commission's clearing requirement, existing § 45.3(b) requires that SD/MSP reporting counterparties report PET data ASATP after execution, with a 15-minute deadline, while non-SD/MSP reporting counterparties report PET data ASATP after execution with a one-business-hour deadline.

For off-facility swaps not subject to the clearing requirement but have an SD/MSP reporting counterparty, existing § 45.3(c)(1) generally requires that SD/MSP reporting counterparties report PET data ASATP after execution with a 30-minute deadline, and confirmation data for swaps that are not intended to be cleared ASATP with a 30-minute deadline if confirmation is electronic, or ASATP with a 24-business-hour deadline if not electronic, for credit, equity, foreign exchange, and interest rate swaps.

17 CFR 45.3(b)(1)(i), (ii).

17 CFR 45.3(c)(1)(i), (ii).

Existing § 45.3(c)(2) requires that for swaps in the other commodity asset class, SD/MSP reporting counterparties report PET data ASATP after execution, with a two-hour deadline, and confirmation data for swaps that are not intended to be cleared ASATP after confirmation with a 30-minute deadline if confirmation is electronic, or a 24-business-hour deadline if confirmation is not electronic.

For off-facility swaps that are not subject to the clearing requirement but have a non-SD/MSP reporting counterparty, existing § 45.3(d) requires reporting counterparties report PET data ASATP after execution with a 24-business-hour deadline, and confirmation data ASATP with a 24-business-hour deadline, if the swap is not intended to be cleared.

17 CFR 45.3(c)(2)(i), (ii).

17 CFR 45.3(d).

Finally, existing § 45.3(e) requires that ASATP after a DCO accepts an original swap for clearing, or ASATP after execution of a clearing swap that does not replace an original swap, the DCO report all required swap creation data for the clearing swap, which includes all confirmation data and all PET data.

First, the Commission is replacing existing § 45.3(b) through (e) with § 45.3(b), titled “Off-facility swaps,” to restructure the regulations.

Second, the Commission is changing the existing § 45.3(b) through (e) requirements for reporting counterparties to submit separate PET data and confirmation data reports for all off-facility swaps that are not intended to be cleared at a DCO to report a single required swap creation data report. The Commission discusses its reasoning for this change in section II.C.2.a above. As with swaps executed on SEFs and DCMs, the Commission believes a single report would align with the approach taken by other regulators and improve data quality.

The Commission is replacing § 45.3(c) through (d) with provisions for allocations and multi-asset swaps, respectively, as discussed in the following sections. As part of this change, the Commission is moving the requirements for reporting required swap creation data for clearing swaps from § 45.3(e) to § 45.3(b).

The Commission did not receive any comments beyond those discussed in section II.C.2.a above.

The Commission is adopting the new requirement for reporting counterparties to report a single required swap creation data report as proposed.

See

comments from DTCC, LCH, FIA, and CEWG.

Third, the Commission is changing the existing § 45.3(b) through (e) requirements for reporting counterparties to report required swap creation data ASATP after execution with different deadlines for off-facility swaps in § 45.3(b)(1) and (2). New § 45.3(b)(1) requires SD/MSP/DCO reporting counterparties report swap creation data to an SDR by T+1 following the execution date. New § 45.3(b)(2) requires non-SD/MSP/DCO reporting counterparties report swap creation data to an SDR not later than T+2 following the execution date.

The Commission discusses the background to these changes in section II.C.2.a above. The Commission discusses several comments beyond those discussed in section II.C.2.a in this section. CEWG believes a T+2 deadline for non-SD/MSP/DCO reporting counterparties strikes an appropriate balance between giving end-users enough time to report, incurring a limited compliance burden, and providing the Commission with swap data in a timely manner.

The Commission agrees with CEWG and believes the extended deadline reflects the Commission's interest in avoiding placing unnecessary burdens on non-SD/MSP/DCO reporting counterparties.

CEWG at 2.

The Commission received two comments raising issues with the new deadlines for reporting required swap creation data in § 45.3(b). ICE SDR believes including a set time of no later than 11:59 p.m. on T+1 or T+2 could impede the SDR's ability to update its reporting system during its maintenance window.

As the Commission discusses in section II.C.2.a above, the Commission is removing 11:59 p.m. eastern time from § 45.3(b)(1) and (2). The Commission believes this addresses ICE SDR's timing concern.

ICE SDR at 7.

CME believes the reporting deadline should be T+1 or T+2 for all entities to avoid a sequencing issue with non-SD/MSP/DCO reporting counterparties that have a T+2 deadline, and the § 45.4(b) deadline for DCOs to report original swap terminations, which would result in DCO terminations being rejected until original swaps are reported.

The Commission does not share CME's concern, as it expects SEFs, DCMs, and DCOs will continue to report original swaps and clearing swaps ASATP, which will avoid sequencing issues for original swap terminations. The Commission expects to monitor the data for implementation issues, however, and to work with SDRs in case the deadlines need to be modified.

CME at 14-15.

In summary, § 45.3(b) will require that for each off-facility swap, the reporting counterparty shall report required swap creation data electronically to an SDR as provided by § 45.3(b)(1) or (2), as applicable. If the reporting counterparty is an SD, MSP, or DCO, § 45.3(b)(1) will require the reporting counterparty report required swap creation data electronically to an SDR in the manner provided in § 45.13(a) not later than the end of the next business day following the execution date. If the reporting counterparty is a non-SD/MSP/DCO counterparty, the reporting counterparty shall report required swap creation data electronically to an SDR in the manner provided in § 45.13(a) not later than the end of the second business day following the execution date.

3. § 45.3(f)—Allocations

The Commission is re-designating existing § 45.3(f) as § 45.3(c) to reflect the consolidation of § 45.3(b) through (e) into § 45.3(b).

The Commission is making several changes to the existing § 45.3(f) regulations for reporting allocations, re-designated as § 45.3(c). The Commission is making most of the changes to § 45.3(f) to conform to the changes in § 45.3(a) through (e). Existing § 45.3(f)(1) provides that the reporting counterparty to an initial swap with an allocation agent reports required swap creation

data for the initial swap, including a USI. For the post-allocation swaps, existing § 45.3(f)(2)(i) provides that the agent tells the reporting counterparty the identities of the actual counterparties ASATP after execution, with a deadline of eight business hours. Existing § 45.3(f)(2)(ii) provides that the reporting counterparty must create USIs for the swaps and report all required swap creation data for each post-allocation swap ASATP after learning the identities of the counterparties. Existing § 45.3(f)(2)(iii) provides that the SDR to which the initial and post-allocation swaps were reported must map together the USIs of the initial swap and each post-allocation swap.

First, the Commission is making non-substantive changes, including specifying required swap creation data for allocations must be reported “electronically” to SDRs in § 45.3(c), (c)(1), and (c)(2)(ii), and replacing the reference in existing § 45.3(f)(1) (re-designated as § 45.3(c)(1)) to “§ 45.3(a) through (d)” with a reference to paragraph (a) or (b) of § 45.3, to reflect the structural revisions to § 45.3(a) through (e). However, because the Commission is extending the time to report required swap creation data in § 45.3(a) and (b), reporting counterparties will have additional time to report required swap creation data for the initial swaps for allocations as well.

Second, the Commission is changing existing § 45.3(f)(2)(ii) (re-designated as § 45.3(c)(2)(ii))

to replace the requirement to report required swap creation data for post-allocation swaps ASATP after learning the identities of the actual counterparties with a cross-reference to § 45.3(b). This gives reporting counterparties until T+1 or T+2, depending on their status, to report required swap creation data for the allocated swaps. Failing to extend the deadline for allocations would result in reporting counterparties unnecessarily reporting allocations faster than creation and continuation data swap reports.

The Commission is not changing the § 45.3(f)(2)(i) requirement (re-designated as § 45.3(c)(2)(i)) for the agent to inform the reporting counterparty of the identities of the reporting counterparty's actual counterparties ASATP after execution, with an eight business hour deadline. Reporting counterparties would still need to know their actual counterparties, and the eight-hour deadline is consistent with other regulations for allocations.

See

17 CFR 1.35(b)(5)(iv).

Finally,

the Commission is removing § 45.3(f)(2)(iii) without re-designation. The Commission is requiring an event data element in appendix 1.

One of the events in this data element is “allocation,” which requires reporting counterparties indicate whether a swap is associated with an allocation. The Commission believes this will simplify the current process involving SDRs mapping data elements by having reporting counterparties report the information about allocations themselves.

The Commission is adopting several non-substantive and technical language edits, but is limiting discussion in this section to substantive amendments.

The swap data elements required to be reported to SDRs are discussed in section V below.

The Commission received one question from two commenters on the proposed changes to § 45.3(f).

GFXD and ISDA-SIFMA request the Commission clarify for allocations, T+1 begins on receipt of the allocations, rather than on execution, given that allocations may not be provided for up to eight hours.

In response, the Commission clarifies T+1 begins on receipt of the allocation notification, rather than execution. However, the Commission notes it is retaining the requirement for the agent to inform the reporting counterparties of the allocation ASATP after execution, with an eight-business-hour deadline. As such, in the majority of cases, the Commission expects the deadline to effectively remain T+1 following execution.

GFXD separately responded to a request for comment on whether the changes create issues for SDRs stating it believes the changes do not create issues for SDRs. GXFD at 21.

GFXD at 21; ISDA-SIFMA at 6-7.

The Commission did not receive additional comments on the proposed changes to § 45.3(f), re-designated as § 45.3(c). For the reasons discussed above, the Commission is adopting the changes to § 45.3(f).

4. § 45.3(g)—Multi-Asset Swaps

The Commission is re-designating § 45.3(g) as § 45.3(d) to reflect: The consolidation of § 45.3(b) through (e) into § 45.3(b); and re-designating § 45.3(f) as § 45.3(c).

The Commission is making non-substantive changes to the § 45.3(g) regulations for reporting multi-asset swaps to conform to the changes in § 45.3(a) through (f). Existing § 45.3(g) provides that for each multi-asset swap, required swap creation data and required swap continuation data must be reported to a single SDR that accepts swaps in the asset class treated as the primary asset class involved in the swap by the SEF, DCM, or reporting counterparty making the first report of required swap creation data pursuant to § 45.3. Existing § 45.3(g) also provides that the registered entity or reporting counterparty making the first report of required swap creation data report all PET data for each asset class involved in the swap.

First, the Commission is replacing “making the first report” of required swap creation data with “reporting” required swap creation data to reflect the single report for required swap creation data, instead of separate PET data and confirmation data reports. Second, the Commission is removing the last sentence of the regulation concerning all PET data for each asset class involved in the swap. The Commission believes this sentence is unnecessary and no longer relevant with the Commission's removal of PET data from the regulations.

The Commission did not receive any comments on the amendments to § 45.3(g). The Commission is adopting the amendments to § 45.3(g), re-designated as § 45.3(d), as proposed.

5. § 45.3(h)—Mixed Swaps

The Commission is re-designating § 45.3(h) as § 45.3(e) to reflect: The consolidation of § 45.3(b) through (e) into § 45.3(b); re-designating § 45.3(f) as § 45.3(c); and re-designating § 45.3(g) as § 45.3(d).

The Commission is making several non-substantive changes to the § 45.3(h) regulations for mixed swaps to conform to the changes in § 45.3(a) through (g). Existing § 45.3(h)(1) requires that for each mixed swap, required swap creation data and required swap continuation data shall be reported to an SDR registered with the Commission and to a security-based SDR (“SBSDR”) registered with the SEC. This requirement may be satisfied by reporting the mixed swap to an SDR or SBSDR registered with both Commissions. Existing § 45.3(h)(2) requires that the registered entity or reporting counterparty making the first report of required swap creation data under § 45.3(h) ensure that the same USI is recorded for the swap in both the SDR and the SBSDR.

The Commission is replacing “making the first report” of required swap creation data with “reporting” required swap creation data, among other non-substantive changes. The Commission did not receive any comments on the changes to § 45.3(h), re-designated as § 45.3(e). The Commission is adopting the changes as proposed.

6. § 45.3(i)—International Swaps

The Commission is removing the § 45.3(i) regulations for international swaps. Existing § 45.3(i) requires that for each international swap, the reporting counterparty report to an SDR the identity of the non-U.S. TR to which the swap is also reported and the swap identifier used by the non-U.S. TR.

Existing § 45.1 defines “international swaps” to mean swaps required to be reported by U.S. law and

the law of another jurisdiction to be reported to both an SDR and to a different TR registered with the other jurisdiction. The Commission discusses removing the definition of “international swap” from § 45.1 in section II.A above.

When § 45.3(i) was adopted, the Commission believed the regulations for international swaps were necessary to provide an accurate picture of the swaps market to regulators to further the purposes of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).

However, if the same swap is reported to different jurisdictions, the USI or UTI

should be the same. If the transaction identifier is the same for the swap, there is no need for the counterparties to send the identifier to other jurisdictions. In addition, in the future, regulators should have access to each other's TRs, if necessary, further obviating the need for reporting counterparties sending identifiers to multiple jurisdictions. As a result, the Commission believes § 45.3(i) is unnecessary and is removing § 45.3(i) from its regulations. The Commission did not receive any comments on the removal of § 45.3(i).

Swap Data Recordkeeping and Reporting Requirements, 77 FR 2136, 2151 (Jan. 13, 2012).

The Commission discusses USIs and UTIs in section II.E below.

7. § 45.3(j)—Choice of SDR

The Commission is re-designating § 45.3(j) as § 45.3(f) to reflect: The consolidation of § 45.3(b) through (e) into § 45.3(b); re-designating § 45.3(f) as § 45.3(c); re-designating § 45.3(g) as § 45.3(d); re-designating § 45.3(h) as § 45.3(d); and removing § 45.3(i).

The Commission is making non-substantive changes to the § 45.3(j) regulations for reporting counterparties in choosing their SDR. Existing § 45.3(j) requires that the entity with the obligation to choose the SDR to which all required swap creation data for a swap is reported be the entity to make the first report of all data pursuant to § 45.3, as follows: (i) For swaps executed on or pursuant to the rules of a SEF or DCM, the SEF or DCM choose the SDR; (ii) for all other swaps, the reporting counterparty, as determined in § 45.8, choose the SDR.

The Commission is changing the heading of re-designated § 45.3(f) from “Choice of SDR” to “Choice of swap data repository,” to be consistent with other headings throughout part 45, among other technical changes. The Commission did not receive any comments on the proposed changes to § 45.3(j), re-designated as § 45.3(f). The Commission is adopting the changes to § 45.3(j) as proposed.

D. § 45.4—Swap Data Reporting: Continuation Data

Existing § 45.4 requires reporting counterparties to report updates to existing swap data and swap valuations to SDRs. As discussed in the sections below, the Commission is adopting four significant changes to these regulations: (i) Removing the option for state data reporting; (ii) extending the deadline for reporting required swap continuation data to T+1 or T+2; (iii) removing the requirement for non-SD/MSP/DCO reporting counterparties to report valuation data quarterly; and (iv) requiring SD/MSP reporting counterparties to report margin and collateral data daily. The remaining changes to § 45.4 discussed below are non-substantive clarifying, cleanup, or technical changes.

1. Introductory Text

The Commission is removing the introductory text to existing § 45.4.

The existing introductory text to § 45.4 provides a broad overview of the swap continuation data reporting regulations for registered entities and swap counterparties. The Commission believes the introductory text is superfluous because the scope of § 45.4 is clear from the operative provisions of § 45.4. Removing the introductory text would not impact any regulatory requirements, including those referenced in the introductory text.

The introductory text to § 45.4 references: The existing § 45.13(b) regulations for required data standards for reporting swap data to SDRs; the existing § 49.10 regulations for SDRs to accept swap data; the existing part 46 regulations for reporting pre-enactment swaps and transition swaps; the existing § 45.3 regulations for reporting required swap creation data; the existing § 45.6 regulations for the use of LEIs; the real-time public reporting requirements in existing part 43; and the parts 17 and 18 regulations for large trader reporting.

The Commission did not receive any comments on the proposal to remove the introductory text to § 45.4.

2. § 45.4(a)—Continuation Data Reporting Method Generally

The Commission is making several changes to the § 45.4(a) regulations for required swap continuation data reporting. Existing § 45.4(a) requires reporting counterparties and DCOs

report required swap continuation data in a manner sufficient to ensure that all data in the SDR for a swap remains current and accurate, and includes all changes to the PET data of the swap occurring during the existence of the swap. Existing § 45.4(a) further specifies reporting entities and counterparties fulfill their obligations by reporting, within the applicable deadlines outlined in § 45.4, the following: (i) Life-cycle-event data to an SDR that accepts only life-cycle-event data reporting; (ii) state data to an SDR that accepts only state data reporting; or (iii) either life-cycle-event data or state data to an SDR that accepts both life-cycle-event data and state data reporting.

SEFs and DCMs do not have reporting obligations with respect to required swap continuation data. DCOs are reporting counterparties for clearing swaps, and are thus responsible for reporting required swap continuation data for these swaps. However, DCOs also have required swap continuation data obligations for original swaps, to which DCOs are not counterparties. As a result, § 45.4(a) must address reporting counterparties and DCOs separately.

First, the Commission is changing the first two sentences to state that for each swap, regardless of asset class, reporting counterparties and DCOs required to report required swap continuation data shall report, to improve readability without changing the regulatory requirement.

Second, the Commission is removing state data reporting as an option for reporting changes to swaps from § 45.4. State data reporting involves reporting counterparties re-reporting the PET terms of a swap every day, regardless of whether any changes have occurred to the terms of the swap since the last state data report.

In contrast, life-cycle-event data reporting involves reporting counterparties re-submitting the PET terms of a swap when an event has taken place that results in a change to the previously reported terms of the swap.

17 CFR 45.1 (definition of “state data”). The Commission discusses removing the definition of “state data” from § 45.1 in section II.A.3 above.

17 CFR 45.1 (definition of “life cycle event”). The Commission discusses amending the definition of “life-cycle-event data” in § 45.1 in section II.A.2 above.

In adopting part 45, the Commission gave reporting counterparties the option of reporting changes to swaps by either the state data reporting method or life cycle event method to provide flexibility.

However, the Commission believes state data reporting may be contributing to data quality issues by filling SDRs with unnecessary swap messages. As noted in the Proposal, the Commission estimates that state data reporting messages represent the vast majority of swap reports maintained by SDRs and the Commission.

The Commission believes eliminating state

data reporting will improve data quality without impeding the Commission's ability to fulfill systemic risk mitigation, market transparency, position limit monitoring, and market surveillance objectives.

See

77 FR at 2153.

For instance, an analysis of part 45 data showed that during January 2018, SDRs received approximately 30 million state data reporting messages, which included over 77% of all interest rate swap reports submitted to SDRs during that time period. Since reporting began, the Commission estimates SDRs have received and made available to the Commission over a billion state data reporting messages.

CME opposes removing state data reporting from § 45.4(a). CME believes the Commission should instead require the reporting of final-state life cycle event changes per swap on the day in question to reduce further submission of unnecessary data, noting that this requirement would be consistent with the requirements of other international regulators.

100

The Commission agrees with CME updates should be limited to final-state life cycle event changes per swap on a day in question, but believes the Commission can clarify this without continuing to permit state data reporting. As a result, the Commission declines to keep state data reporting, but does clarify life cycle updates should be limited to end of day updates where multiple take place on a day.

100

CME at 15.

For the reasons discussed above, the Commission is adopting the changes to § 45.4(a) as proposed. Therefore, § 45.4(a) will require that for each swap, regardless of asset class, reporting counterparties and DCOs required to report required swap continuation data shall report life-cycle-event data for the swap electronically to an SDR in the manner provided in § 45.13(a) within the applicable deadlines outlined in § 45.4.

3. § 45.4(b)—Continuation Data Reporting for Clearing Swaps

The Commission is making several changes to the existing § 45.4(b) regulations for required swap continuation data reporting for clearing swaps. The Commission is moving the § 45.4(b) required swap continuation data reporting regulations for clearing swaps to § 45.4(c) as part of structural changes to the regulations.

101

The Commission is re-designating existing § 45.4(c) as § 45.4(b). Existing § 45.4(c) contains the continuation data reporting regulations for original swaps. Re-designated § 45.4(b) will be titled “Continuation data reporting for original swaps.”

101

The Commission discusses the revisions to the continuation data requirements for clearing swaps and uncleared swaps in section II.D.4 below.

The Commission is also making several changes to the continuation data reporting regulations for original swaps in re-designated § 45.4(b). Existing § 45.4(c) requires required swap continuation data, including terminations, must be reported to the SDR to which the original swap that was accepted for clearing was reported pursuant to § 45.3(a) through (d).

102

For continuation data, existing § 45.4(c)(1) requires: (i) Life-cycle-event data or state data reporting either on the same day that any life cycle event occurs with respect to the swap, or daily for state data reporting; and (ii) daily valuation data. In addition, existing § 45.4(c)(2) requires the reporting of: (i) The LEI of the SDR to which all required swap creation data for each clearing swap was reported by the DCO under § 45.3(e); (ii) the USI of the original swap that was replaced by the clearing swaps; and (iii) the USI of each clearing swap that replaces a particular original swap.

102

The regulation also specifies the information must be reported in the manner provided in § 45.13(b) and in § 45.4, and must be accepted and recorded by such SDR as provided in § 49.10. 17 CFR 45.4(c).

First, the Commission is extending the deadline for reporting swap continuation data for original swaps in § 45.4(c)(1) to either T+1 or T+2, depending on the reporting counterparty, to be consistent with the new deadlines for reporting required swap creation data in § 45.3.

103

As the Commission discusses in section II.C.2.a above, though, the Commission is removing the references to 11:59 p.m. eastern time that were in the Proposal. The Commission is thus changing the reference from 11:59 p.m. eastern time to the end of the next business day or the second business day that any life cycle event occurs for the swap. Second, the Commission is removing the references to state data reporting

104

in § 45.4(b) and clarifying that required swap continuation data must be reported “electronically,” among other non-substantive changes.

103

The Commission discusses these changes in sections II.C.2 above. The Commission also considered the deadlines set by other regulators. The SEC requires that any events that would result in a change in the information reported to a SBSDR be reported within 24 hours of the event taking place. 17 CFR 242.900(g); 17 CFR 242.901(e). EMIR requires that contract modifications be reported no later than the working day following the modification. Reg. 648/2012 Art. 9(1).

104

The Commission discusses removing state data reporting in section II.D.2 above.

The Commission received three comments supporting extending the deadline for reporting required swap continuation data in § 45.4(b).

105

In particular, GFXD believes T+1 will create a more harmonized global regulatory framework.

106

The Commission agrees with commenters that the proposal extending the deadline for reporting required swap continuation data will streamline reporting and be consistent with the deadlines set by other regulators.

105

GFXD at 22; Chatham at 2; ISDA-SIFMA at 5.

106

GFXD at 22.

DTCC requests clarification on when “each business day” begins for § 45.4(b) reporting.

107

The Commission believes the definitions of “required swap creation data” and “required swap continuation data” explain that § 45.4 required swap continuation data reporting begins when reporting counterparties need to update information for a swap reported to an SDR under § 45.3. As such, reporting data required by § 45.4 would begin on the “business day” on which a reporting counterparty needs to begin reporting according to § 45.4.

107

DTCC at 5.

Eurex proposes removing the DCO obligation to report terminations of original swaps for “off facility swaps.”

108

Eurex states that in Europe clearing members have no automated reporting line to Eurex and not all multilateral trading facilities (“MTFs”) or Approved Trade Sources (“ATSs”) transmit USI namespaces and LEIs of the SDR for “off-facility swaps” to the DCO.

109

Eurex states this would be burdensome as SDRs' USI namespaces and LEIs would have to be manually obtained from the MTFs and ATSs.

110

The Commission is not changing DCOs' obligations for reporting original swap terminations, as the Commission does not want to disrupt the reporting workflows for original and clearing swaps the Commission established in a 2016 rulemaking extensively analyzing the process.

111

The Commission declines to adopt Eurex's suggestion at this time.

108

Eurex 2-3.

109

Id.

110

Id.

111

See

Amendments to Swap Data Recordkeeping and Reporting Requirements for Cleared Swaps, 81 FR 41736 (June 27, 2016).

In summary, § 45.4(b) will require that for each original swap, the DCO shall report required swap continuation data, including terminations, electronically to the SDR to which the swap that was accepted for clearing was reported pursuant to § 45.3 in the manner provided in § 45.13(a), and such required swap continuation data shall be accepted and recorded by such SDR as provided in § 49.10. New § 45.4(b)(1) will provide that the DCO that accepted the swap for clearing shall report all life-cycle-event data electronically to an SDR in the manner provided in § 45.13(a) not later than the end of the next business day following the day that any life cycle event occurs with respect to the swap. New § 45.4(b)(2) will require that, in addition to all other required swap continuation data, life-

cycle-event data shall include the LEI of the SDR to which all required swap creation data for each clearing swap was reported by the DCO pursuant to § 45.3(b); the UTI of the original swap that was replaced by the clearing swaps; and the UTI of each clearing swap that replaces a particular original swap.

4. § 45.4(c)—Continuation Data for Original Swaps

The Commission is making several changes to the § 45.4(c) regulations for reporting required swap continuation data for original swaps. The Commission is moving the required swap continuation data reporting requirements for original swaps from existing § 45.4(c) to § 45.4(b) as part of structural changes.

112

The Commission is also moving the continuation data reporting requirements for clearing swaps from existing § 45.4(b) to § 45.4(c), and combining them with the continuation data reporting requirements for uncleared swaps in existing § 45.4(d). The Commission is retitling § 45.4(c) “Continuation data reporting for swaps other than original swaps” to reflect the combination.

112

The Commission discusses changes to continuation data requirements for original swaps in section II.D.3 above.

The Commission is making several changes to the continuation data reporting regulations for clearing swaps and uncleared swaps in § 45.4(b) and (d), respectively, proposed to be re-designated as § 45.4(c). Existing § 45.4(b) requires that for all clearing swaps, DCOs report: (i) Life-cycle-event data or state data reporting either on the same day that any life cycle event occurs with respect to the swap, or daily for state data reporting; and (ii) daily valuation data. Existing § 45.4(d) requires that for all uncleared swaps, including swaps executed on a SEF or DCM, the reporting counterparty report: (i) All life-cycle-event data on the same day for SD/MSP reporting counterparties, or the second business day if it relates to a corporate event of the non-reporting counterparty, or state data daily; (ii) all life-cycle-event data on the next business day for non-SD/MSP reporting counterparties, or the end of the second business day if it relates to a corporate event of the non-reporting counterparty, or state data daily; (iii) daily valuation data for SD/MSP reporting counterparties; and (iv) the current daily mark of the transaction as of the last day of each fiscal quarter, within 30 calendar days of the end of each fiscal quarter for non-SD/MSP reporting counterparties.

113

If a daily mark of the transaction is not available for the swap, the reporting counterparty satisfies the requirement by reporting the current valuation of the swap recorded on its books in accordance with applicable accounting standards. 17 CFR 45.4(d)(2)(ii).

First, the Commission is changing the life cycle event reporting deadlines for these swaps to match other T+1 and T+2 deadlines.

114

The Commission is changing the life cycle event reporting deadline for SD/MSP/DCO reporting counterparties from the same day to T+1 following any life cycle event.

115

The Commission is changing the exception for corporate events of the non-reporting counterparty to T+2. For non-SD/MSP/DCO reporting counterparties, the Commission is changing the life cycle event reporting deadline to T+2 following the life cycle event. As explained in section II.C.2.a above, though, the Commission is removing the references to 11:59 p.m. eastern time from the proposal. As a result, the deadlines will be either the end of the next business day or the second business day following the events.

114

The Commission discusses the T+1 and T+2 deadlines in § 45.3(b) and § 45.4(b) in sections II.C.2.b and II.D.3, respectively, above.

115

The Commission is not extending the valuation data reporting deadline for SD/MSP/DCO reporting counterparties. The Commission believes SDs, MSPs, and DCOs are already creating daily valuations and tracking margin and collateral for reasons independent of their swap reporting obligations.

Second, the Commission is removing the references to state data reporting in new § 45.4(c).

116

Third, the Commission is clarifying that required swap continuation data must be reported “electronically,” among other non-substantive edits to improve readability and update cross-references.

116

The Commission discusses the removal of state data reporting in section II.D.2 above.

Fourth, the Commission is changing the swap valuation data reporting requirements for all reporting counterparties. DCOs, SDs, and MSPs report valuation data daily, while non-SD/MSP reporting counterparties report the daily mark of transactions quarterly.

117

For DCO, SD, and MSP reporting counterparties, the Commission is keeping the daily reporting requirement. However, the Commission is expanding the requirement to include margin and collateral data.

118

Conversely, the Commission is eliminating the requirement for non-SD/MSP/DCO reporting counterparties to report valuation data and is not requiring them to report margin and collateral data.

117

17 CFR 45.4(b)(2) and (d)(2).

118

The Commission is adding a definition of “collateral data” to § 45.1(a), as discussed in section II.A.1 above. “Collateral data” means the data elements necessary to report information about the money, securities, or other property posted or received by a swap counterparty to margin, guarantee, or secure a swap, as specified in appendix 1 to part 45.

The Commission decided against requiring collateral data reporting when it adopted part 45 in 2012. At the time, both the Commission and industry understood collateral data was important for systemic risk management, but was not yet possible to include in transaction-based reporting since it was calculated at the portfolio level.

119

In light of this limitation, the Commission required the daily mark be reported for swaps as valuation data, but not collateral.

120

However, the Commission noted while the industry had not yet developed data elements suitable for representing the terms required to report collateral, the Commission could revisit the issue in the future if and when industry and SDRs develop ways to represent electronically the terms required for reporting collateral.

121

119

See

77 FR 2136, 2153.

120

17 CFR 45.1 (definition of “valuation data”). The Commission proposed amending the definition of “valuation data” in § 45.1(a), as discussed in section II.A.2 above. As amended, “valuation data” would mean the data elements necessary to report information about the daily mark of the transaction, pursuant to CEA section 4s(h)(3)(B)(iii), and to § 23.431 if applicable, as specified in appendix 1 to part 45.

121

See

77 FR 2136, 2154 (Jan. 13, 2012).

The Commission is concerned not having margin and collateral data at SDRs impedes its ability to fulfill systemic risk mitigation objectives. As a result, the Commission revisited this issue in the Proposal to determine whether it is now feasible.

122

The Commission believes margin and collateral data is necessary to monitor risk in the swaps market. Given that ESMA is already requiring margin and collateral reporting, and that the Commission is requiring many of the data elements that ESMA requires, the Commission believes certain market participants are ready to report this data to SDRs.

122

Other regulators have taken different approaches to margin and collateral data reporting. ESMA, for instance, requires the reporting of many of the same collateral and margin swap data elements the Commission proposed requiring, either on a portfolio basis or by transaction. Reg. 148/2013 Art. 3(5). With respect to valuation data, ESMA requires central counterparties to report valuations for cleared swaps as the Commission does. Reg. 148/2013 Art. 3(4); Reg. 648/2012 Art. 10. EMIR provides an exemption from valuation reporting, as well as reporting margin and collateral data, for non-financial counterparties, unless they exceed a threshold of derivatives activity.

However, the Commission is concerned valuation, margin, and collateral data reporting could create a significant burden for non-SD/MSP/DCO reporting counterparties. These entities include those market

participants that, by virtue of size and extent of activity in the swap market, may have fewer resources to devote to reporting this complex data. The Commission also recognizes the quarterly valuation data these counterparties report is not integral to the Commission's ability to monitor systemic risk in the swaps market and may not justify the cost to these entities to report it.

The Commission received 11 comments on expanding daily valuation data reporting to include margin and collateral data reporting in § 45.4(c) for SD/MSP/DCO reporting counterparties. Three commenters support the proposal.

123

In particular, Markit believes it is more efficient for reporting counterparties to submit both cleared and uncleared margin and collateral data together to SDRs, and states that when it comes to valuation or collateral reporting valuation, some systems may have limited information (

e.g.,

trade reference identification but not clearing status), and therefore it is more complex to split valuation or collateral reporting into cleared versus uncleared categories.

123

Chris Barnard at 1; Markit at 6; LCH at 2.

Eight commenters oppose the proposal.

124

CME, Eurex, ISDA-SIFMA, and FIA note collateral and margin reporting for DCOs pursuant to part 45 would be redundant for DCOs that have to report similar data to the Commission pursuant to part 39 of the Commission's regulations, which could result in burdens on DCOs with questionable benefits to the Commission.

125

In particular, CME believes the Commission should consider consolidating its collateral reporting obligations for DCOs under part 39.

126

124

CME at 15-16; CEWG at 8; Eurex at 3; ICE DCOs at 3-4; ISDA-SIFMA at 8; BP at 3; FXPA at 4-5; FIA at 12.

125

CME at 15-16; Eurex at 3; ICE DCOs at 3-4; ISDA-SIFMA at 8; FIA at 12.

126

CME at 15-16.

The Commission received nine comments supporting excluding non-SD/MSP/DCO reporting counterparties from reporting valuation, margin, and collateral data in § 45.4(c).

127

In particular, IECA notes reporting counterparties contract for third-party services to perform quarterly valuations of transactions, and the valuation analysis does not mitigate systemic risk, and offers only tangential value, at best, to the two parties.

128

Similarly, ISDA-SIFMA strongly support the proposal because ISDA-SIFMA do not believe the 2% of swaps reported by non-SD/MSP/DCO reporting counterparties represent systemic risk.

129

127

IECA at 3; Chatham at 2-3; Eurex at 3; JBA at 4; NRECA-APPA at 5; ISDA-SIFMA at 8; FIA at 14; CEWG at 2; COPE at 2.

128

IECA at 3.

129

ISDA-SIFMA at 8.

The Commission acknowledges the concerns raised by CME, Eurex, ICE DCOs, ISDA-SIFMA, and FIA about duplicative reporting for DCOs regarding cleared swaps. While collateral and margin data is reported pursuant to part 39 using a different set of data elements than those contained in appendix 1, and collateral and margin data is reported for end-of-day positions pursuant to part 39 as opposed to a more granular transaction-by-transaction basis pursuant to part 45, the Commission believes the collateral and margin data reported by DCOs pursuant to part 39 is sufficiently similar to data reported pursuant to part 45 to meet the Commission's current needs.

However, the Commission is also open to requiring DCO reporting counterparties to report collateral and margin data on a transaction-by-transaction basis pursuant to part 45 at a future date if a Commission need for more granular data emerges in its monitoring of systemic risk or if granular data is needed as a condition for global jurisdictions to grant substituted compliance and TR access to one another. The Commission notes any added costs to DCO reporting counterparties to comply with any such future Commission requirement would be substantially mitigated by DCOs' existing and future systems for transaction-by-transaction reporting of collateral and margin data developed to comply with the requirements of other jurisdictions, including Europe.

The Commission received one comment on reporting corporate events. FIA suggests that for the reporting of corporate events of non-reporting counterparties, the Commission measure the reporting deadline from the day the non-reporting counterparty informs the reporting counterparty of the corporate event.

130

The Commission believes corporate events need to be reported in a timely manner, and is concerned FIA's suggestion of leaving the decision of when to inform the reporting counterparty could delay the notification for extended periods of time, resulting in inaccurate or stale data. As such, the Commission declines to adopt FIA's suggestion.

130

FIA at 11.

For the reasons discussed above, the Commission is adopting the changes to § 45.4(c) as proposed, except the Commission is excluding DCO reporting counterparties from the requirement to report collateral data. In summary, § 45.4(c) will require that for each swap that is not an original swap, including clearing swaps and swaps not cleared by DCOs, the reporting counterparty shall report all required swap continuation data electronically to an SDR in the manner provided in § 45.13(a) as provided in § 45.4(c). New § 45.4(c)(1) will require that: (i) If the reporting counterparty is a SD, MSP, or DCO, the reporting counterparty shall report life-cycle-event data electronically to an SDR in the manner provided in § 45.13(a) not later than the end of the next business day following the day that any life cycle event occurred, with the sole exception that life-cycle-event data relating to a corporate event of the non-reporting counterparty shall be reported in the manner provided in § 45.13(a) not later than the end of the second business day following the day that such corporate event occurred; (ii) if the reporting counterparty is a non-SD/MSP/DCO counterparty, the reporting counterparty shall report life-cycle-event data electronically to an SDR in the manner provided in § 45.13(a) not later than the end of the second business day following the day that any life cycle event occurred. New § 45.4(c)(2)(i) will require that if the reporting counterparty is a SD, MSP, or DCO, swap valuation data shall be reported electronically to an SDR in the manner provided in § 45.13(b) each business day. New § 45.4(c)(2)(ii) will require that if the reporting counterparty is a SD or MSP, collateral data shall be reported electronically to an SDR in the manner provided in § 45.13(b) each business day.

E. § 45.5—Unique Transaction Identifiers

The Commission is amending § 45.5 to adopt requirements for UTIs, the globally accepted transaction identifier, replacing USIs in existing § 45.5. In general, the Commission is amending existing § 45.5(a) through (f) to require each swap to be identified with a UTI in all recordkeeping and all swap data reporting, and to require the UTI be comprised of the LEI of the generating entity and a unique alphanumeric code. Before discussing the specific changes to § 45.5(a) through (f) in sections II.E.1 to II.E.7 below, the Commission explains the policy behind adopting UTIs.

In general, existing § 45.5 requires: (i) Each swap be identified with a USI in all recordkeeping and all swap data reporting, and (ii) the USI be comprised of a unique alphanumeric code and an identifier the Commission assigns to the generating entity. Each swap retains its USI from execution until, for instance,

the swap reaches maturity or the counterparties terminate the contract. USIs allow the Commission to identify new swaps in SDR data and track changes to swaps by reviewing all reports associated with a USI.

The Commission implemented the existing USI regulations before global consensus was reached on the structure and format for a common swap identifier. For entities reporting swap data to multiple jurisdictions, this has resulting in conflicting or ambiguous generation and transmission requirements across jurisdictions. Practically, the Commission is concerned this has resulted in: (i) Conflicting responsibilities for generating identifiers and (ii) entities reporting different identifiers identifying the same swap to different SDRs and TRs.

The Commission believes amending § 45.5 to require each swap be identified with a UTI in all recordkeeping and all swap data reporting, and to require that the UTI be comprised of the LEI of the generating entity and a unique alphanumeric code, will result in the structure and format for the swap identifier being consistent with the UTI Technical Guidance, which will reduce cross-border reporting complexity and encourage global swap data aggregation.

1. Title and Introductory Text

The Commission proposed several conforming amendments to the § 45.5 title and the introductory text. Existing § 45.5 is titled “Unique swap identifiers.” The existing introductory text states that each swap subject to the jurisdiction of the Commission shall be identified in all recordkeeping and all swap data reporting pursuant to part 45 by the use of a USI, which shall be created, transmitted, and used for each swap as provided in § 45.5(a) through (f).

The Commission proposed replacing “swap” in the title with “transaction” to reflect the Commission's proposed adoption of the UTI. Accordingly, the Commission proposed updating the reference to USI with UTI in the introductory text.

The Commission also proposed updating the reference to paragraphs (a) through (f) of existing § 45.5 to (a) through (h) of proposed § 45.5. This would reflect the Commission's addition of proposed § 45.5(g) and (h), discussed in sections II.E.8 and II.E.9 below.

The Commission received eight general comments on adopting UTIs in § 45.5. Four commenters generally support adopting UTIs in § 45.5.

131

In particular, BP also supports using the same UTI across jurisdictions and recommends SDRs manage UTI generation and identify and coordinate the use of the earliest regulatory reporting deadline among jurisdictions.

132

131

Chatham at 3; LCH at 3; GLEIF at 3; BP at 5.

132

BP at 5.

GFXD supports implementing global UTI standards but is concerned the Commission will conflict with the global harmonized generation hierarchy or run on a timeframe that is not coordinated with other jurisdictions, negating the purpose and benefits of a universal UTI standard and creating significant extra cost and complexity, as well as the need to separate UTI systems and logic for each jurisdiction.

133

GFXD at 22-23.

Eurex supports harmonizing the UTI and believes it would significantly relieve reporting counterparties. Eurex recommends the Commission align UTI requirements with ESMA and other global regulators on the effective date of UTI and phase in UTI to handle existing open swap positions.

134

LCH recommends the Commission apply the factors provided in Table 1 of the UTI Technical Guidance, which contains specific factors authorities should consider for allocating responsibility for UTI generation.

135

134

Eurex suggests, for example, continuing use of the old identifier for open swaps until positions are modified. Eurex at 3-4.

135

LCH at 3.

JBA believes not adopting the UTI Technical Guidance precisely could lead to confusion for the UTI generation responsibility for cross-border transactions. JBA asks the Commission consider designing easy-to-implement and flexible rules, such as allowing a change to the UTI generation responsibility in accordance with a bilateral agreement or adopting tiebreaker logic similar to the existing ISDA Tie-Breaker Logic that easily determines the UTI generation responsibility.

136

JBA at 2-3.

The Commission did not receive any comments on the proposals to retitle § 45.5 “Unique Transaction Identifiers,” to update the reference to paragraphs (a) through (f) of § 45.5 to (a) through (h) of § 45.5, or to update the reference to USI with UTI in the introductory text and for reasons articulated in the Proposal and reiterated above, is adopting the changes to those portions of the introductory text as proposed. For the reasons articulated in the Proposal and the additional reasons discussed below, the Commission is adopting the changes to the remainder of the introductory text to § 45.5 as proposed.

The Commission acknowledges the comments supportive of the Commission's proposal to adopt UTIs. The Commission agrees with Eurex and GFXD that the promise of UTIs can only be realized if jurisdictions worldwide adopt the UTI, but the Commission shares the FSB's belief that it is not feasible for jurisdictions to have one coordinated global implementation date due to differences in the legislative and regulatory process across jurisdictions.

137

However, as discussed in section VI below, the Commission is adopting an 18-month compliance date for UTIs in an effort to be closer aligned with the estimated implementation dates of other jurisdictions and recommends that other jurisdictions adopt UTIs as expeditiously as possible.

137

FSB, Governance arrangements for the unique transaction identifier (UTI) (Dec. 29, 2017) at 16 (“The FSB recognises the challenges in coordinating a synchronised regulatory and technological implementation across jurisdictions and registered entities. As a result, the FSB believes that the most realistic and feasible implementation plan is that jurisdictions globally implement the requirements to report UTIs as expeditiously as possible”).

As to the comments from LCH, GFXD, and JBA on the importance of following the UTI Technical Guidance for assigning UTI generation responsibilities, the Commission agrees and has cited the specific steps from the UTI Technical Guidance generation flowchart in sections II.E.2 to II.E.5 below to demonstrate the conformity of § 45.5(a) to (d) with the UTI Technical Guidance.

The Commission declines JBA's request for a rule affording flexibility in UTI generation responsibilities, such as allowing bilateral agreement between counterparties to override the UTI generation responsibilities in § 45.5, because it believes clear rules delineating UTI generation responsibilities provide the best assurance that only one unique UTI is generated for a trade, a necessity for swap data reporting integrity. Allowing UTIs to be generated according to bilateral agreement results in the need to reach agreement on a trade-by-trade or counterparty-by-counterparty basis, a scenario the Commission believes will increase the likelihood, due to miscommunication, that no UTI is generated for a swap if each entity believes the other agreed to generate or multiple UTIs are generated for a swap if each entity believes it agreed to generate.

2. § 45.5(a)—Swaps Executed on or Pursuant to the Rules of a SEF or DCM

The Commission proposed several conforming amendments to § 45.5(a) for the creation and transmission of UTIs for swaps executed on or pursuant to the rules of SEFs and DCMs. Existing § 45.5(a)(1) requires that for swaps executed on or pursuant to the rules of SEFs and DCMs, the SEFs and DCMs generate and assign USIs at or ASATP following execution, but prior to the reporting of required swap creation data, that consist of a single data field.

138

The single data field must contain: (i) The unique alphanumeric code assigned to the SEF or DCM by the Commission for the purpose of identifying the SEF or DCM with respect to the USI creation; and (ii) an alphanumeric code generated and assigned to that swap by the automated systems of the SEF or DCM, which is unique with respect to all such codes generated and assigned by that SEF or DCM. 17 CFR 45.5(a)(1)(i) and (ii).

Existing § 45.5(a)(2) requires that the SEF or DCM transmit the USI electronically (i) to the SDR to which the SEF or DCM reports required swap creation data for the swap, as part of that report; (ii) to each counterparty to the swap ASATP after execution of the swap; and (iii) to the DCO, if any, to which the swap is submitted for clearing, as part of the required swap creation data transmitted to the DCO for clearing purposes.

139

17 CFR 45.5(a)(2)(i) through (iii).

First, the Commission proposed amendments to conform to the Commission's proposed adoption of the UTI. The Commission proposed replacing all references to “USIs” with “UTIs” in proposed § 45.5(a)(1) and (2). In addition, the Commission proposed updating the phrase in existing § 45.5(a)(1) that requires the USI to consist of a single data “field” that contains two components to a single data “element with a maximum length of 52 characters” so that the length of the UTI is consistent with the UTI Technical Guidance.

140

UTI Technical Guidance, Section 3.6.

The Commission also proposed amending the § 45.5(a)(1)(i) description of the first component of the UTI's single data element to replace “unique alphanumeric code assigned to” the SEF or DCM with “legal entity identifier of” the SEF or DCM so that the identifier used to identify the UTI generating entity is consistent with the UTI Technical Guidance.

141

The Commission proposed to delete the phrase in the second half of the sentence statin that by the Commission for the purpose of identifying the SEF or DCM with respect to the USI creation, because, according to the UTI Technical Guidance, an LEI is used to identify the UTI generating entity instead of an identifier assigned by individual regulators.

141

UTI Technical Guidance, Section 3.5.

The Commission did not receive any comments on the proposed amendments to the requirements for the creation and transmission of UTIs for swaps executed on or pursuant to the rules of SEFs and DCMs in proposed § 45.5(a) and for reasons articulated in the Proposal and reiterated above, is adopting the changes as proposed. The Commission notes assigning UTI generation responsibilities for swaps executed on or pursuant to the rules of SEFs and DCMs to the SEF or DCM adheres to the generation flowchart in the UTI Technical Guidance.

142

UTI Technical Guidance at 12 (Step 3: “Was the transaction executed on a trading platform?” “If so, the trading platform”).

3. § 45.5(b)—Off-Facility Swaps With an SD or MSP Reporting Counterparty

The Commission proposed several amendments to existing § 45.5(b) for the creation and transmission of UTIs for off-facility swaps by SD/MSP reporting counterparties. Existing § 45.5(b)(1) requires that, for off-facility swaps with SD/MSP reporting counterparties, the reporting counterparty generate and assign a USI consisting of a single data field.

143

The required USI must be generated and assigned after execution of the swap and prior to the reporting of required swap creation data and the transmission of data to a DCO if the swap is to be cleared.

143

The single data field must contain: (i) The unique alphanumeric code assigned to the SD or MSP by the Commission at the time of its registration for the purpose of identifying the SD or MSP with respect to USI creation; and (ii) an alphanumeric code generated and assigned to that swap by the automated systems of the SD or MSP, which shall be unique with respect to all such codes generated and assigned by that SD or MSP. 17 CFR 45.5(b)(1).

Existing § 45.5(b)(2) requires that the reporting counterparty transmit the USI electronically: (i) To the SDR to which the reporting counterparty reports required swap creation data for the swap, as part of that report; and (ii) to the non-reporting counterparty to the swap, ASATP after execution of the swap; and (iii) to the DCO, if any, to which the swap is submitted for clearing, as part of the required swap creation data transmitted to the DCO for clearing purposes.

First, the Commission proposed expanding the UTI creation and transmission requirements for SD/MSP reporting counterparties to include reporting counterparties that are financial entities.

144

The Commission explained that it believed extending the responsibility for generating off-facility swap UTIs to reporting counterparties that are financial entities would reduce the UTI generation burden on non-financial entities. The Commission also proposed conforming changes. These changes replaced “swap dealer or major swap participant reporting counterparty” in the title to proposed § 45.5(b) with “financial entity reporting counterparty” and replaced “swap dealer or major swap participant” in the first sentence of § 45.5(b) with “financial entity.” As proposed, the new title of § 45.5(b) would be “Off-facility swaps with a financial entity reporting counterparty” and the first sentence of proposed § 45.5(b) would begin with “For each off-facility swap where the reporting counterparty is a financial entity. . . .”

145

The Commission similarly proposed to replace references to “swap dealer or major swap participant” in § 45.5(b)(1)(i) and (ii) with “reporting counterparty.”

146

144

17 CFR 45.1 (definition of “financial entity”).

145

See

row “45.5(b)” of the table in section VIII.3 below.

146

See

row “45.5(b)(1)(ii)” of the table in section VIII.3 below.

Second, the Commission proposed amendments to conform to the Commission's proposed adoption of the UTI. The Commission proposed replacing all references to “USIs” with “UTIs” in proposed § 45.5(b)(1) and (2). In addition, the Commission proposed updating the phrase in proposed § 45.5(b)(1) that requires the USI to consist of a single data “field” that contains two components to a single data “element with a maximum length of 52 characters” so that the length of the UTI is consistent with the UTI Technical Guidance.

147

UTI Technical Guidance, Section 3.6.

The Commission proposed amending § 45.5(b)(1)(i) to describe the first component of the UTI's single data element by replacing “unique alphanumeric code assigned to” the SD or MSP with “legal entity identifier of” the reporting counterparty so that the identifier used to identify the UTI generating entity is consistent with the UTI Technical Guidance.

148

The Commission also proposed deleting the phrase in the second half of the sentence stating “by the Commission at the time of its registration as such, for the purpose of identifying the [SD] or [MSP] with respect to the [USI] creation,” because, according to the UTI Technical Guidance, an LEI should be used to identify the UTI generating

entity instead of an identifier assigned by individual regulators.

148

UTI Technical Guidance, Section 3.5.

The Commission also believed this would more closely align the UTI generation hierarchy with the reporting counterparty determination hierarchy in § 45.8, which incorporates financial entities for purposes of determining the reporting counterparty.

149

For example, in an off-facility swap where neither counterparty is an SD nor an MSP and only one counterparty is a financial entity, the counterparty that is a financial entity would be the reporting counterparty,

150

yet the SDR would generate the USI under existing § 45.5(c).

151

The Commission explained that the proposed changes to § 45.5(b) would ensure that for such swap, the financial entity would be assigned to both the reporting counterparty and to generate the UTI and that the proposal would also reduce the number of swaps for which SDRs would be required to generate the UTI.

149

17 CFR 45.8.

150

17 CFR 45.8(c).

151

17 CFR 45.5(c).

The Commission received two comments on the proposed amendments to § 45.5(b). ISDA-SIFMA believe the Commission should delay the requirement to disseminate UTIs to non-reporting counterparties from ASATP to T+1, because the UTI transmission mechanisms generally align with the method of confirmation, such as electronic or paper. ISDA-SIFMA suggest the Commission replace the ASATP requirement for UTI transmission with a deadline of no later than T+1, to correspond with the proposed timeline for reporting creation data to the SDR.

152

DTCC agrees that the reporting counterparty should be responsible for generating off-facility swap UTIs.

153

152

ISDA-SIFMA at 10.

153

DTCC at 5.

The Commission did not receive any comments opposing the proposed amendments to § 45.5(b) expanding the UTI creation and transmission requirements for SD/MSP reporting counterparties to include reporting counterparties that are financial entities, and for reasons articulated in the Proposal and reiterated above, is adopting the proposal with one modification relating to transmission. The Commission agrees with ISDA-SIFMA and believes in light of the proposed changes in § 45.3(b) to the deadline for reporting required swap creation data, that transmission of the UTI to the non-reporting counterparty should be similarly delayed in order to not potentially provide two separate confirmations to the non-reporting counterparty. The Commission therefore is adopting the changes as proposed, except it replaces “To the non-reporting counterparty to the swap, as soon as technologically practicable after execution of the swap; and” with “To the non-reporting counterparty to the swap, no later than the applicable deadline in § 45.3(b) for reporting required swap creation data; and” in final § 45.5(b)(2)(ii).

The Commission notes assigning UTI generation responsibilities for off-facility swaps with a financial entity reporting counterparty to the reporting counterparty adheres to the generation flowchart in the UTI Technical Guidance.

154

UTI Technical Guidance at 12 (Step 7: “Does the jurisdiction employ a counterparty-status-based approach (

e.g.,

rule definition or registration status) for determining which entity should have responsibility for generating the UTI?” “If so, see step 8.” Step 8: “Do the counterparties have the same regulatory status for UTI generation purposes under the relevant jurisdiction?” “Otherwise, see step 9.” Step 9: “Do the applicable rules determine which entity should have responsibility for generating the UTI?” “If so, the assigned entity”).

4. § 45.5(c)—Off-Facility Swaps With a Non-SD/MSP Reporting Counterparty

The Commission proposed several amendments to existing § 45.5(c) for the creation and transmission of USIs for off-facility swaps by non-SD/MSP reporting counterparties. Existing § 45.5(c)(1) requires that, for off-facility swaps with non-SD/MSP reporting counterparties, the SDR generates and assigns the USI ASATP after receiving the first report of PET data, consisting of a single data field.

155

The single data field must contain: (i) The unique alphanumeric code assigned to the SDR by the Commission at the time of its registration for the purpose of identifying the SDR with respect to USI creation; and (ii) an alphanumeric code generated and assigned to that swap by the automated systems of the SDR, which must be unique with respect to all such codes generated and assigned by that SDR. 17 CFR 45.5(c)(1).

Existing § 45.5(c)(2) requires that the SDR transmit the USI electronically: (i) To the counterparties to the swap ASATP after creation of the USI, and (ii) to the DCO, if any, to which the swap is submitted for clearing ASATP after creation of the USI.

First, the Commission proposed replacing “non-SD/MSP reporting counterparty” in the title of proposed § 45.5(c) with “non-SD/MSP/DCO reporting counterparty that is not a financial entity” and replacing “reporting counterparty is a non-SD/MSP counterparty” in the first sentence of proposed § 45.5(c) with “reporting counterparty is a non-SD/MSP/DCO counterparty that is not a financial entity.” The new title of § 45.5(c) would be “Off-facility swaps with a non-SD/MSP/DCO reporting counterparty that is not a financial entity” and the first sentence of § 45.5(c) would begin with “For each off-facility swap for which the reporting counterparty is a non-SD/MSP/DCO counterparty that is not a financial entity. . . .” The Commission is expanding UTI generation responsibilities to financial entities,

156

and believes this amendment will clarify that § 45.5(c) will apply only where a reporting counterparty is a non-SD/MSP/DCO counterparty that is not a financial entity.

156

17 CFR 45.1 (definition of “financial entity”). The Commission discusses this change in section II.E.3 above.

Second, the Commission proposed amending existing § 45.5(c) to provide non-SD/MSP/DCO reporting counterparties that are not financial entities with the option to generate the UTI for an off-facility swap or to request the SDR to which required swap creation data will be reported to generate the UTI. If the non-SD/MSP/DCO reporting counterparty that is not a financial entity chooses to generate the UTI for an off-facility swap, the reporting counterparty would follow the creation and transmission requirements for financial entity reporting counterparties in final § 45.5(b)(1) and (2). If the non-SD/MSP/DCO reporting counterparty that is not a financial entity chooses to request the SDR generates the UTI, the SDR would follow the creation and transmission requirements for SDRs in proposed § 45.5(c)(1) and (2). The Commission proposed amendments to the requirements for SDRs in proposed § 45.5(c)(1), as discussed below.

The Commission participated in the preparation of the UTI Technical Guidance, which includes guidance to authorities for allocating responsibility for UTI generation, including a generation flowchart that places SDRs at the end.

157

The UTI Technical Guidance also notes “[n]ot all factors” in the flowchart for allocating responsibility for UTI generation “will be relevant for all jurisdictions.”

158

157

UTI Technical Guidance at 12-14.

158

UTI Technical Guidance at 12.

Because the UTI Technical Guidance was produced with the need to accommodate the different trading patterns and reporting rules in jurisdictions around the world, the Commission explained certain factors included in the UTI Technical Guidance generation flowchart are not applicable for the Commission (

e.g.,

factors relating to the principal clearing model

159

electronic confirmation platforms),

160

and that therefore the Commission was unable to adopt the UTI Technical Guidance without modification. However, the Commission explained in the Proposal that none of the provisions of proposed § 45.5 would conflict with the UTI Technical Guidance, including maintaining the existing obligations for SDRs to generate and transmit UTIs. While UTI generation and transmission responsibilities by SDRs remain in proposed § 45.5(c), the Commission also believed the proposed alignment of the UTI generation and reporting counterparty determination for financial entities in final § 45.5(b) and the proposed reporting option for reporting counterparties that are neither DCOs nor financial entities in proposed § 45.5(c) would result in reduced overall UTI generation and transmission burdens for SDRs.

159

UTI Technical Guidance at 12 (Step 2: “Is a counterparty to this transaction a clearing member

of a CCP, and if so is that clearing member acting in its clearing member capacity for this transaction?”).

160

UTI Technical Guidance at 12 (Step 6: “Has the transaction been electronically confirmed or will it be and, if so, is the confirmation platform able, willing and permitted to generate a UTI within the required time frame under the applicable rules?”).

The Commission explained in the Proposal that amending § 45.5(c) to provide the reporting counterparty with the option to generate the UTI for an off-facility swap where the reporting counterparty is neither a DCO nor financial entity or, if the reporting counterparty elects not to generate the UTI, to request the SDR to which required swap creation data will be reported generate the UTI would provide a reporting counterparty that is neither a DCO nor financial entity with the flexibility to generate the UTI should it choose to do so. Simultaneously, the Commission believed the proposal would reduce the number of swaps where an SDR is assigned UTI generation responsibilities, while also maintaining the existing SDR role as a guarantee that every off-facility swap will be identified with a UTI.

Third, the Commission proposed amendments to conform to the Commission's proposed adoption of the UTI.

161

The Commission also proposed deleting the phrase in the second half of the sentence stating “by the Commission at the time of its registration as such, for the purpose of identifying the [SDR] with respect to the [USI] creation,” because, according to the UTI Technical Guidance, an LEI should be used to identify the UTI generating entity instead of an identifier assigned by individual regulators.

161

The Commission proposed replacing all references to “USIs” with “UTIs” in proposed § 45.5(c)(1) and (2). In addition, the Commission proposed updating the phrase in proposed § 45.5(c)(1) that required the USI to consist of a single data “field” that contains two components to a single data “element with a maximum length of 52 characters” so that the length of the UTI is consistent with the UTI Technical Guidance. UTI Technical Guidance, Section 3.6. The Commission proposed amending the § 45.5(c)(1)(i) description of the first component of the UTI's single data element to replace “unique alphanumeric code assigned to” the SDR with “legal entity identifier of” the SDR so that the identifier used to identify the UTI generating entity is consistent with the UTI Technical Guidance. UTI Technical Guidance, Section 3.5.

The Commission received four comments supporting expansion of the ability to generate UTIs. CME supports expanding the ability to generate UTIs to non-SD/MSP/DCO reporting counterparties that are not financial entities, because the internal reference identifier used in bookkeeping systems is different than the transaction identifier used in swap data reporting.

162

DTCC agrees that the reporting counterparty should be responsible for generating off-facility swap UTIs, because reporting counterparties are in the best position to collect information from a non-reporting counterparty necessary to generate a UTI, such as LEI.

163

Chatham believes all non-SD/MSP/DCO reporting counterparties should have the option to have the SDR continue to generate the UTI for them, because it is efficient and requires the fewest changes to the current practice.

164

BP supports SDRs continuing to manage UTI generation.

165

162

CME at 15.

163

DTCC at 5.

164

Chatham at 3.

165

BP at 5.

The Commission received four comments opposing the requirement for SDRs to generate UTIs. CME believes the rule changes appear to require SDRs to offer separate parts 43 and 45 messages because of the different reporting deadlines, and that SDRs would not be able to link the parts 43 and 45 messages, necessitating the reporting counterparty to include the UTI from the first message in the second message. CME believes SDRs should not generate UTIs to avoid this situation. CME also notes some reporting counterparties who currently rely on SDRs to generate USIs have swaps with multiple USIs because of an issue when reporting counterparties submit swaps to the SDR in batches but the swaps fail some validations.

166

CME at 16-17.

DTCC opposes SDRs generating and transmitting UTIs because it would not enable early and automated generation in the transaction's life-cycle, which may be necessary for counterparties.

167

ICE SDR suggests the Commission instead let non-SD/MSP/DCO reporting counterparties choose which counterparty generates the UTI, and highlights that non-SD/MSP/DCOs may have more flexibility with extended reporting timelines by electing to have a third-party service provider or confirmation platform generate and assign the UTI. ICE SDR believes allowing a confirmation platform to assign UTIs aligns with the UTI Technical Guidance.

168

ICE SDR recommends that the Commission revise proposed § 45.5(c) to remove the requirement that the SDR transmit the UTI to both counterparties to a swap. ICE SDR contends that, if the reporting counterparty chooses to have the SDR generate the UTI, the SDR should be responsible only for transmitting the UTI to the reporting counterparty requesting UTI generation, because SDRs often has no relationship with the non-reporting counterparties who are not participants of the SDR.

169

167

DTCC at 5.

168

ICE SDR at 5.

169

ICE SDR at 5.

ISDA-SIFMA believe each jurisdiction must align to a global UTI waterfall to the maximum extent possible. ISDA-SIFMA also believe the Commission deviates from the UTI Technical Guidance by assigning SDRs the obligation to generate UTIs for non-SD/MSP/DCOs superior in the hierarchy than the UTI Technical Guidance. As non-SD reporting counterparties can conduct trade reporting and must transmit the UTI to their counterparties, ISDA-SIFMA question whether there is sufficient demand for UTI generation by the SDR to substantiate this deviation from the UTI Technical Guidance.

170

ISDA-SIFMA at 9.

For reasons articulated in the Proposal and informed by comments and analysis as further discussed below, the Commission is adopting the proposed changes to the § 45.5(c) regulations for the creation and transmission of UTIs for off-facility swaps with a non-SD/MSP/DCO reporting counterparty that is not a financial entity as proposed. The Commission notes SDRs have been required to generate USIs pursuant to existing § 45.5(c) since the adoption of part 45 in 2012 and further notes assigning UTI generation responsibility for off-facility swaps with a non-SD/MSP/DCO reporting counterparty that is not a financial entity to the SDR adheres

to the generation flowchart in the UTI Technical Guidance.

171

UTI Technical Guidance at 12-13 (Step 7: “Does the jurisdiction employ a counterparty-status-based approach . . . for determining which entity should have responsibility for generating the UTI?” “If so, see step 8.” Step 8: “Do the counterparties have the same regulatory status for UTI generation purposes[ ]?” “If so, see step 11.” Step 11: “Do the counterparties have an agreement governing which entity should have responsibility for generating the UTI for this transaction?” “Otherwise, see step 12.” Step 12 “Has the transaction been electronically confirmed or will it be and, if so, is the confirmation platform able, willing and permitted to generate a UTI within the required time frame under the applicable rules?” “Otherwise, see step 13.” Step 13: “Is there a single TR to which reports relating to the transaction have to be made, and is that TR able, willing and permitted to generate UTIs under the applicable rules?” “If so, the TR”).

In addition to adhering to the UTI Technical Guidance, the Commission also believes the adopted rule appropriately balances the burdens between reporting counterparties and SDRs by providing optionality to a non-SD/MSP/DCO reporting counterparty that is not a financial entity to elect to generate a UTI if it so chooses, and lowers costs for both SDRs and non-SD/MSP/DCO reporting counterparties. SDR costs would be lowered due to fewer transaction identifiers that SDRs would be required to generate under final § 45.5(c) compared to existing § 45.5(c). Costs on non-SD/MSP/DCO reporting counterparties who choose not to generate UTIs would be lowered due to their ability to leverage the existing transaction identifier generation infrastructure of SDRs rather than expenditures to develop their own UTI generation systems.

In response to the several comments indicating that the proposed amendments to § 45.5(c) do not follow the UTI Technical Guidance, the Commission notes Commission staff was heavily involved in the preparation of the UTI Technical Guidance generation flowchart, and disagrees that assigning UTI generation to SDRs contravenes the UTI Technical Guidance for the following reasons. Section 45.5(c) would apply only for off-facility trades where both counterparties are of equal status (

i.e.,

non-financial entities), and in this scenario, UTI Technical Guidance flowchart step 8 directs to step 11, which instructs inquiring about whether the counterparties have an agreement as to UTI generation. Since no agreement exists, the flowchart leads to step 12, which instructs inquiring about whether electronic confirmation platforms are able, willing, and permitted to generate UTIs, the step ICE SDR suggests the Commission set as the last step in assigning UTI generation responsibilities. However, the Commission is unable to assign electronic confirmation platforms with UTI generation responsibilities, as it has no jurisdiction over such platforms, nor does the Commission deem it desirable to require counterparties who do not use such platforms to specifically contract with platforms or other third parties solely for the purpose of UTI generation. As a result, step 12 is not applicable, leading to step 13 where the SDR is the entity responsible for generating UTIs. As demonstrated above, the Commission believes each step of the UTI Technical Guidance generation flowchart leading up to step 13 matches the conditions under which an SDR is required to generate UTIs pursuant to § 45.5(c).

While the optionality to generate UTIs for non-SD/MSP/DCO reporting counterparties that are not financial entities is not a step in the UTI Technical Guidance generation flowchart, the Commission does not believe the optionality conflicts with an SDR's responsibility for serving as UTI generator of last resort. Under the optionality, an SDR continues to be the entity that has legal responsibility for UTI generation for this type of off-facility trade should the non-SD/MSP/DCO reporting counterparty that is not a financial entity elect not to, and at no point would a non-SD/MSP/DCO reporting counterparty that is not a financial entity that is unwilling or unable to generate the UTI be forced to generate the UTI. Additionally, no commenters oppose providing non-SD/MSP/DCO reporting counterparties that are not financial entities with the ability to generate UTIs.

The Commission acknowledges ICE SDR's request to remove the requirement to transmit the UTI to the non-reporting counterparty due to a potential lack of relationship between an SDR and the non-reporting counterparty, but declines to adopt the suggestion for two reasons. First, the Commission notes the requirement for an SDR generator to transmit USIs to both counterparties has been in existing § 45.5(c)(2)(i) that SDRs have complied with since part 45 was adopted in 2012, and based on experience with compliance by SDRs since 2012, the Commission has seen no evidence that lack of relationship presents a problem in need of being addressed. In addition, the Commission is adopting three amendments to § 45.5 that will result in SDRs generating fewer UTIs than USIs and mitigate any burden placed on SDRs to transmit the UTIs they generate to non-reporting counterparties, including: (i) All financial entities, not just SD/MSPs, being required to generate UTIs pursuant to final § 45.5(b); (ii) the optionality provided to non-SD/MSP/DCO reporting counterparties that are not financial entities to generate UTIs in final § 45.5(c); and (iii) as described in section II.E.8 below, the requirement in final § 45.5(g) for entities using third-party service providers to ensure that the third-party service providers generate UTIs.

Finally, the Commission declines to adopt the SDRs' suggestion to end the UTI generation responsibilities with the reporting counterparty as the last step of the hierarchy, since this would result in incomplete UTI generation logic. A natural person reporting counterparty, who by definition is a non-SD/MSP/DCO reporting counterparty that is not a financial entity, will highly likely be unable to generate UTIs due to the inability of most natural persons to obtain an LEI

172

that is necessary to generate UTIs. As a result, the SDRs' suggestion would not ensure that an entity capable of generating UTIs is assigned with the responsibility to generate the UTI for every swap.

172

CME itself notes the inability of natural person reporting counterparties to obtain LEIs in a separate portion of its comment letter.

See

CME at 25 (“For individuals that qualify as an Eligible Contract Participant, they will not be able to obtain an LEI and hence will be unable to report if [counterparty 1] allowable value is an LEI”).

The Commission also acknowledges—but does not find persuasive—DTCC's comment that reporting counterparties should be the entity responsible for generating UTIs because they are in the best position to collect information such as LEI from a non-reporting counterparty necessary to generate a UTI. The Commission notes no information about the non-reporting counterparty is necessary for an entity to generate UTIs, as the UTI is composed using the LEI

of the UTI generating entity,

not the LEI

of the non-reporting counterparty.

Accordingly, because proposed § 45.5(c)(1)(i) requires the UTI to be composed of the “legal entity identifier of the swap data repository” and SDRs do not need the LEI of any other entity to generate the UTI, the Commission does not believe DTCC's reasoning supports its request for the Commission not to assign UTI generation responsibilities to SDRs.

5. § 45.5(d)—Clearing Swaps

The Commission proposed several amendments to the existing § 45.5(d) regulations for the creation and transmission of USIs for clearing swaps. Existing § 45.5(d) requires that for each clearing swap, the DCO that is a

reporting counterparty to such swap shall create and transmit a USI upon, or ASATP after, acceptance of an original swap for clearing, or execution of a clearing swap that does not replace an original swap, and prior to the reporting of required swap creation data for the clearing swap. Existing § 45.5(d)(1) requires that the USI consist of a single data field.

173

The single data field must contain: (i) The unique alphanumeric code assigned to the DCO by the Commission for the purpose of identifying the DCO with respect to USI creation; and (ii) an alphanumeric code generated and assigned to that clearing swap by the automated systems of the DCO, which shall be unique with respect to all such codes generated and assigned by that DCO. 17 CFR 45.5(d)(1).

Existing § 45.5(d)(2) requires that the DCO transmit the USI electronically to: (i) The SDR to which the DCO reports required swap creation data for the clearing swap; and (ii) to the counterparty to the clearing swap, ASATP after accepting the swap for clearing or executing the swap, if the swap does not replace an original swap.

First, the Commission proposed to retitle proposed § 45.5(d) as “Off-facility swaps with a [DCO] reporting counterparty.” The Commission also proposed rephrasing the introductory text in § 45.5(d) to reflect this shift in terminology.

Second, the Commission proposed amendments to conform to the Commission's proposed adoption of the UTI.

174

The Commission also proposed deleting the phrase in the second half of the sentence stating “by the Commission at the time of its registration as such, for the purpose of identifying the [DCO] with respect to the [USI] creation,” because, according to the UTI Technical Guidance, an LEI should be used to identify the UTI generating entity instead of an identifier assigned by individual regulators.

174

The Commission proposed replacing all references to “USIs” with “UTIs” in proposed § 45.5(d)(1) and (2). In addition, the Commission proposed updating the phrase in proposed § 45.5(d)(1) that requires that the USI shall consist of a single data “field” that contains two components to a single data “element with a maximum length of 52 characters,” so that the length of the UTI is consistent with the UTI Technical Guidance. UTI Technical Guidance, Section 3.6. The Commission proposed amending § 45.5(d)(1)(i) to describe the first component of the UTI's single data element to replace “unique alphanumeric code assigned” to the DCO reporting counterparty with “legal entity identifier of” the DCO reporting counterparty so that the identifier used to identify the UTI generating entity is consistent with the UTI Technical Guidance. UTI Technical Guidance, § 3.5.

The Commission received two comments regarding DCOs in § 45.5(d). LCH supports the proposal that DCOs generate the UTIs for cleared swaps, as it is in line with the UTI Technical Guidance.

175

ISDA-SIFMA suggest that the Commission cover exempt DCOs, SEFs, and DCMs in § 45.5, because it is unclear which entities have part 45 reporting obligations. ISDA-SIFMA recommend that parts 43 and 45 rules specify that the entities with individual exemptive orders assigning reporting obligations have the same reporting and UTI generation responsibilities as their non-exempt equivalents.

176

175

LCH at 3.

176

ISDA-SIFMA at 9.

The Commission received one supportive comment on the proposed amendments to the § 45.5(d) regulations for the creation and transmission of UTIs for clearing swaps and for reasons articulated in the Proposal and reiterated above, is adopting the changes as proposed. The Commission notes assigning UTI generation responsibilities for clearing swaps to the DCO adheres to the generation flowchart in the UTI Technical Guidance.

177

UTI Technical Guidance at 12 (Step 1: “Is a CCP a counterparty to this transaction?” “If so, the CCP”).

The Commission appreciates the comment from ISDA-SIFMA recommending that the Commission issue a clarification that exempt DCOs, SEFs, and DCMs have the same reporting and UTI generation responsibilities as their non-exempt equivalents. The Commission did not propose including exempt DCOs, SEFs, and DCMs in § 45.5 and has not had enough time to study the range of effects that any inclusion of these exempt entities in § 45.5 would have on other provisions of the Act and the Commission's regulations, and as a result, the Commission declines to adopt alternative amendments relating to UTI generation for exempt entities such as exempt DCOs, SEFs, and DCMs at this time. However, the Commission notes despite exempt DCOs, SEFs, and DCMs not being assigned with formal UTI generation responsibilities in § 45.5, exempt entities wishing to generate UTIs on behalf of their clients could do so voluntarily by entering into agreements with their clients to act as their third-party service provider pursuant to § 45.5(g).

6. § 45.5(e)—Allocations

The Commission proposed several amendments to the existing § 45.5(e) regulations for the creation and transmission of USIs for allocations. The Commission proposed replacing references to USIs with UTI throughout proposed § 45.5(e) to conform to the Commission's proposed adoption of the UTI. The Commission also proposed non-substantive technical and language edits to update cross-references and improve readability.

The Commission did not receive any comments on the proposed changes to existing § 45.5(e) is adopting the changes to § 45.5(e) as proposed.

7. § 45.5(f)—Use

The Commission proposed several amendments to the existing § 45.5(f) regulations for the use of UTIs by registered entities and swap counterparties. Existing § 45.5(f) requires that registered entities and swap counterparties subject to the jurisdiction of the Commission include the USI for a swap in all of their records and all of their swap data reporting concerning that swap, from the time they create or receive the USI, throughout the existence of the swap, and for as long as any records concerning the swap are required to be kept by the CEA or Commission regulations, regardless of any life cycle events or any changes to state data concerning the swap, including, without limitation, any changes with respect to the counterparties to or the ownership of the swap.

Existing § 45.5(f) also specifies that this requirement shall not prohibit the use by a registered entity or swap counterparty in its own records of any additional identifier or identifiers internally generated by the automated systems of the registered entity or swap counterparty, or the reporting to an SDR, the Commission, or another regulator of such internally generated identifiers in addition to the reporting of the USI.

First, the Commission proposed amendments to conform proposed § 45.5(f) to the Commission's proposed adoption of the UTI. The Commission proposed replacing all references to “USIs” with “UTIs” in proposed § 45.5(f). The Commission also proposed removing the reference to state data in part 45, and to make minor technical language edits, including removing reference to ownership of the swap, which is not needed given the reference to counterparties.

Second, the Commission proposed removing the existing § 45.5(f) provision permitting the reporting of any additional identifier or identifiers internally generated by the automated systems of the registered entity or swap counterparty to an SDR, the Commission, or another regulator. The Commission explained this amendment would improve consistency in the swap data reported to SDRs, and further the goal of harmonization of SDR data across FSB member jurisdictions.

Proposed § 45.5(f) would therefore require that registered entities and swap counterparties include the UTI for a swap in all of their records and all of their swap data reporting concerning that swap, from the time they create or receive the UTI, throughout the existence of the swap, and for as long as any records are required to be kept concerning the swap by the CEA or Commission regulations, regardless of any life cycle events concerning the swap, including, without limitation, any changes to the counterparties to the swap.

The Commission received one request for clarification on the proposal. ISDA-SIFMA believe, due to the requirement for a UTI to persist through “changes with respect to the counterparty,” the Commission should be clearer that these counterparty changes, when related to corporate events such as name change, are not considered novations or assignments, as current market practice is to create a new USI for a swap created through the novation process.

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The Commission declines to adopt the suggestion, as the Commission notes, in light of the Commission's adoption of the new definition of “novation” in § 45.1(a) described in section II.A above, market participants should refer to the newly adopted definition as to what constitutes a novation.

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ISDA-SIFMA at 7.

The Commission received no additional comments on proposed § 45.5(f) and for reasons articulated in the Proposal and reiterated above in this section, is adopting § 45.5(f) as proposed.

8. § 45.5(g)—Third-Party Service Provider

The Commission proposed adding new § 45.5(g) to its regulations, titled “Third-party service provider.” Proposed § 45.5(g) would create requirements for registered entities and reporting counterparties—when contracting with third-party service providers to facilitate reporting under § 45.9—to ensure that the third-party service providers create and transmit UTIs.

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See generally

17 CFR 45.9.

The Commission explained in the Proposal that it had encountered inconsistencies in the format and standard of USIs for swaps reported using third-party service providers, which is detrimental to the Commission's ability to use swap data for its regulatory purposes. The Commission believed proposed § 45.5(g) would help ensure consistency with the UTI Technical Guidance in the format and standard of UTIs for swaps reported by third-party service providers. The Commission further explained that proposed § 45.5(g) would also reinforce that a registered entity or reporting counterparty is responsible for the data reported on its behalf by a third-party service provider.

The Commission received one comment supporting the proposal. Markit supports § 45.5(g) UTI generation by third-party service providers and believes this is an important clarification, but advises the Commission to monitor SDRs' implementation of this requirement as some SDRs have struggled to capture third-party service provider LEIs as part of the transaction record, especially when reporting on behalf of SEFs.

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Markit at 3.

The Commission received no additional comments on proposed § 45.5(g) and for reasons articulated in the Proposal and reiterated above in this section, is adopting § 45.5(g) as proposed.

9. § 45.5(h)—Cross-Jurisdictional Swaps

The Commission proposed adding new § 45.5(h) to its regulations, titled “Cross-jurisdictional swaps.” Proposed § 45.5(h) would clarify that, notwithstanding §§ 45.5(a) through (g), if a swap is also reportable to one or more other jurisdictions with a regulatory reporting deadline earlier than the deadline set forth in § 45.3, the same UTI generated according to the rules of the jurisdiction with the earliest regulatory reporting deadline is to be transmitted pursuant to §§ 45.5(a) through (g) and used in all recordkeeping and all swap data reporting pursuant to part 45.

The Commission explained in the Proposal that the benefits resulting from global swap data aggregation and harmonization are realizable only if each swap is identified in all regulatory reporting worldwide with a single UTI to avoid double- or triple-counting of the swap. While the existing requirement in part 45 (for swap creation data to be reported ASATP after execution) results in the Commission having the earliest reporting deadline, changes to the reporting deadline in proposed amendments to § 45.3 may result in the reporting of a cross-jurisdictional swap to another jurisdiction earlier than to the Commission. Further, given the critical importance of a unique UTI used to identify each swap, the Commission proposed that, if a cross-jurisdictional swap is reportable to another jurisdiction earlier than required under part 45, the UTI for such swap reported pursuant to part 45 be generated according to the rules of the jurisdiction with the earliest regulatory reporting deadline.

The Commission explained in the Proposal that the new proposed provision would: (i) Ensure consistency with the UTI Technical Guidance;

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(ii) assist the Commission, SDRs, and swap counterparties to avoid potentially identifying a single cross-jurisdictional trade with multiple UTIs; and (iii) eliminate the potential for market participants to be faced with a situation of attempting to comply with conflicting UTI generation rules.

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UTI Technical Guidance at 13 (Step 10: “UTI generation rules of the jurisdiction with the sooner reporting deadline should be followed”).

The Commission received three comments on cross-jurisdictional swaps. Specifically, ISDA-SIFMA highlight several implementation issues.

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ISDA-SIFMA believe counterparties may not come to the same conclusions regarding each other's jurisdictions, which could cause differing conclusions about who generates the UTI. In this regard, ISDA-SIFMA believe each counterparty's jurisdictional hierarchy would need to readjust each time new reporting jurisdictions go live. Separately, ISDA-SIFMA state that the UTI generating party should be determined separately from any nexus obligations, because nexus reporting (

i.e.,

reporting requirements depending on the location of personnel) is treated differently according to jurisdiction, and it would be challenging for counterparties to communicate nexus obligations on a swap-by-swap basis.

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Lastly, ISDA-SIFMA note it is important for each reporting jurisdiction to follow a global UTI waterfall.

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ISDA-SIFMA at 10-11.

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Id.

184

Id.

JBA believes it would be difficult for a counterparty in a jurisdiction to generate a UTI if other jurisdictions with a regulatory reporting deadline earlier than the Commission's do not mandate the UTI or use an identifier different from the UTI required under Commission or global rules.

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In addition, BP supports imparting responsibility on SDRs to coordinate identification of the jurisdiction with the earliest regulatory reporting deadline and conform to that jurisdiction's UTI requirements.

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JBA at 2-3.

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BP at 5.

The Commission is adopting the proposed provisions relating to cross-jurisdictional swaps in § 45.5(h) as proposed, with one clarification relating

to the CFTC reporting deadlines to be considered for cross-jurisdictional swaps, as discussed below. In the technical specification, UTIs are required to be reported (but are not publicly disseminated) pursuant to parts 43 and 45 to allow the Commission to link and reconcile the two reports for each swap, requiring the deadline to be measured in terms of both parts 43 and 45. Therefore, the Commission is adopting, in § 45.5(h), the requirement that, notwithstanding §§ 45.5(a) through (g), if a swap is also reportable to one or more other jurisdictions with a regulatory reporting deadline earlier than the deadline set forth in § 45.3 or in part 43, the same UTI generated according to the rules of the jurisdiction with the earliest regulatory reporting deadline is to be transmitted pursuant to §§ 45.5(a) through (g) and used in all recordkeeping and all swap data reporting pursuant to part 45, a modification from the proposal's consideration of only the deadline outlined in § 45.3.

The Commission declines to adopt ISDA-SIFMA's suggestion regarding nexus obligations, as the Commission has no requirements for nexus reporting and how the jurisdictions requiring nexus reporting mandate UTI generation is outside of the Commission's jurisdiction. As discussed above, the Commission expects the vast majority of cross-jurisdictional swaps reportable to both the CFTC and one or more additional jurisdictions will result in the CFTC having the earliest regulatory reporting deadline due to the CFTC being one of the few jurisdictions with real-time reporting requirement and UTIs being required to be generated ASATP for part 43 reporting. However, the Commission recognizes the potential concern that market participants may have in complying with similar rules that other jurisdictions may adopt to ensure consistency with the UTI Technical Guidance, and recommends that market participants and the LEI ROC work collaboratively on additional guidance relating to cross-jurisdictional swaps. The Commission also recognizes that the UTI Technical Guidance did not address which jurisdiction's UTI generation rules to follow if two jurisdictions hypothetically have the same reporting deadline, and similarly recommends that market participants and the LEI ROC work collaboratively on guidance to address this scenario.

The Commission appreciates JBA's comment regarding the potential difficulties if other jurisdictions with a regulatory reporting deadline earlier than the Commission's do not mandate the UTI, but the Commission does not believe this hypothetical is likely to occur. As discussed above, the Commission's ASATP reporting deadline under part 43 will result in the UTIs for most, if not all, swaps reportable to the Commission and another jurisdiction being generated according to § 45.5. Furthermore, the Commission also acknowledges JBA's concern that other jurisdictions may require an identifier different from the UTI, but the Commission notes authorities in the major swap markets have all indicated through the FSB and CPMI-IOSCO harmonization initiatives of their intention to adopt the UTI and the other harmonized identifiers, and the Commission does not believe inaction by a holdout authority should hinder the Commission's fulfillment of its commitments on UTI.

The Commission also acknowledges BP's desire for SDRs to coordinate identification of the jurisdiction with the earliest regulatory reporting deadline and conform to that jurisdiction's UTI requirements, but the Commission declines to adopt the suggestion. SDRs lack information to determine on their own the jurisdiction(s) that a SEF, DCM, DCO, or counterparty for each swap is subject to, and therefore the Commission believes requiring entities without such information such as SDRs to serve as the entity responsible for determining the earliest regulatory reporting deadline would not serve the Commission's interest in seeing that each swap is identified in all regulatory reporting worldwide with a single UTI.

F. § 45.6—Legal Entity Identifiers

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The Commission is re-numbering the requirements of existing § 45.6 to correct extensive numbering errors.

Existing § 45.6 requires counterparties to be identified in all recordkeeping and swap data reporting under part 45 by an LEI. As discussed in the sections below, the Commission is revising the § 45.6 LEI regulations in two ways: (i) Cleanup changes removing unnecessary outdated regulatory text concerning LEIs and (ii) changes to the LEI regulations for SEFs, DCMs, DCOs, SDRs, and reporting and non-reporting counterparties.

1. Introductory Text

The Commission proposed amending the introductory text of the § 45.6 regulations for LEIs. The existing introductory text states that each counterparty to any swap subject to the jurisdiction of the Commission shall be identified in all recordkeeping and all swap data reporting under part 45 through a single LEI as specified in § 45.6.

First, to improve the section's precision, the Commission proposed replacing “each counterparty” with each SEF, DCM, DCO, SDR, entity reporting pursuant to § 45.9, and counterparty to any swap. Second, the Commission proposed revising the introductory text to require each relevant entity (SEF, DCM, DCO, SDR, entity reporting pursuant to § 45.9, and counterparty to any swap that is eligible to receive an LEI) to “obtain,” as well as be identified in, all recordkeeping and swap data reporting by a single LEI.

The Commission received two comments on proposed § 45.6. ISDA-SIFMA, while recognizing that SEF trades are not specifically addressed in § 45.6, suggest clarifying that SEFs must require any entity allowed to execute a trade on a SEF under part 45 to obtain an LEI prior to reporting by the SEF.

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The Commission appreciates ISDA-SIFMA's comment; however, the Commission did not propose substantive amendments to regulations relating to SEF trading and has not had enough time to study the range of effects that ISDA-SIFMA's proposal would have on SEF trading or market liquidity. Accordingly, it would be inappropriate to finalize such an amendment at this time.

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ISDA-SIFMA at 13.

XBRL agrees with the proposed requirement that counterparties must be identified, not only with their own LEI, but that they must obtain an LEI if they do not have one.

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The Commission agrees with XBRL. The Commission is aware of uncertainty as to whether the requirement to identify each counterparty with an LEI in existing § 45.6 also included a requirement for the counterparty to obtain an LEI, and the Commission believes clarifying in § 45.6 that a person or entity required to be identified with an LEI in recordkeeping and swap data reporting also has an associated affirmative requirement to obtain an LEI would clarify that identification using LEI necessarily requires the identified person or entity, if eligible to receive an LEI, to obtain an LEI.

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XBRL at 2.

The Commission believes extending the requirement for each counterparty to any swap to be identified in all recordkeeping and swap data reporting by a single LEI to all SEFs, DCMs, DCOs, entities reporting under § 45.9, and SDRs will ensure consistency with the CDE Technical Guidance, allow for standardization in the identification in recordkeeping and swap data reporting,

and encourage global swap data aggregation.

For reasons discussed above, the Commission is adopting the proposed changes to the introductory text of the § 45.6 regulations for LEIs as proposed, with one clarification relating to the maintenance of LEI reference data. As discussed in section II.F.8 below, the Commission is adding “maintain” to the introductory text of final § 45.6 to clarify that each SEF, DCM, DCO, SDR, entity reporting under § 45.9, and counterparty to any swap that is eligible to receive an LEI is required to “maintain,” as well as obtain and be identified in, all recordkeeping and swap data reporting by a single LEI.

2. § 45.6(a)—Definitions

a. Proposal

The Commission proposed several changes to the definitions for the LEI regulations in § 45.6(a). As background, existing § 45.6(a) provides definitions for “control,” “legal identifier system,” “level one reference data,” “level two reference data,” “parent,” “self-registration,” “third-party registration,” and “ultimate parent.”

The Commission proposed moving certain definitions pertaining to LEIs to § 45.1(a). The Commission explained in the Proposal these definitions should be in § 45.1(a) because they are used in regulations outside of § 45.6. These definitions were: “Global Legal Entity Identifier System,”

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“legal entity identifier” or “LEI,” and “Legal Entity Identifier Regulatory Oversight Committee.” These definitions are discussed in section II.A.1 above.

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“Global Legal Entity Identifier System” and “local operating unit” would be updated versions of the existing definition of “legal identifier system.”

The Commission proposed removing certain definitions pertaining to LEIs from § 45.6(a). The Commission explained that these definitions would no longer be necessary in light of the proposed amendments to the LEI r

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