Certain Swap Data Repository and Data Reporting Requirements

Federal RegisterNov 25, 2020

Ask Donna

What actually matters in this document.

Text

COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 43, 45, and 49

RIN 3038-AE32

Certain Swap Data Repository and Data Reporting Requirements

AGENCY:

Commodity Futures Trading Commission.

ACTION:

Final rule.

SUMMARY:

The Commodity Futures Trading Commission (“Commission” or “CFTC”) is amending its regulations to improve the accuracy of data reported to, and maintained by, swap data repositories (“SDRs”), and to provide enhanced and streamlined oversight over SDRs and data reporting generally. Among other changes, the amendments

modify existing requirements for SDRs to establish policies and procedures to confirm the accuracy of swap data with both counterparties to a swap and require reporting counterparties to verify the accuracy of swap data pursuant to those SDR procedures. The amendments also update existing requirements related to corrections for data errors and certain provisions related to SDR governance.

DATES:

Effective date:

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

Compliance date:

The compliance date for all amendments and additions under this final rule is May 25, 2022.

FOR FURTHER INFORMATION CONTACT:

Benjamin DeMaria, Special Counsel, Division of Market Oversight, (202) 418-5988,

bdemaria@cftc.gov;

Eliezer Mishory, Special Counsel, Division of Market Oversight, (202) 418-5609,

emishory@cftc.gov;

Israel Goodman, Special Counsel, Division of Market Oversight, (202) 418-6715,

igoodman@cftc.gov;

Mark Fajfar, Assistant General Counsel, Office of the General Counsel, (202) 418-6636,

mfajfar@cftc.gov;

and Gloria Clement, Senior Special Counsel, Office of the Chief Economist, (202) 418-5122,

gclement@cftc.gov;

Commodity Futures Trading Commission, Three Lafayette Centre, 1151 21st Street NW, Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background

II. Amendments to Part 49

A. § 49.2—Definitions

B. § 49.3—Procedures for Registration

C. § 49.5—Equity Interest Transfers

D. § 49.6—Request for Transfer of Registration

E. § 49.9—Open Swaps Reports Provided to the Commission

F. § 49.10—Acceptance of Data

G. § 49.11—Verification of Swap Data Accuracy

H. § 49.12—Swap Data Repository Recordkeeping Requirements

I. § 49.13—Monitoring, Screening, and Analyzing Data

J. § 49.15—Real-Time Public Reporting by Swap Data Repositories

K. § 49.16—Privacy and Confidentiality Requirements of Swap Data Repositories

L. § 49.17—Access to SDR Data

M. § 49.18—Confidentiality Arrangement

N. § 49.20—Governance Arrangements (Core Principle 2)

O. § 49.22—Chief Compliance Officer

P. § 49.24—System Safeguards

Q. § 49.25—Financial Resources

R. § 49.26—Disclosure Requirements of Swap Data Repositories

S. § 49.28—Operating Hours of Swap Data Repositories

T. § 49.29—Information Relating to Swap Data Repository Compliance

U. § 49.30—Form and Manner of Reporting and Submitting Information to the Commission

V. § 49.31—Delegation of Authority to the Director of the Division of Market Oversight Relating to Certain Part 49 Matters

III. Amendments to Part 45

A. § 45.1—Definitions

B. § 45.2—Swap Recordkeeping

C. § 45.14—Correcting Errors in Swap Data and Verification of Swap Data Accuracy

IV. Amendments to Part 43

§ 43.3—Method and Timing for Real-Time Public Reporting

A. § 43.3(e)—Correction of Errors

B. Removal of § 43.3(f) and (g)

V. Amendments to Part 23

§ 23.204—Reports to Swap Data Repositories, and § 23.205—Real-Time Public Reporting

VI. Compliance Date

VII. Related Matters

A. Regulatory Flexibility Act

B. Paperwork Reduction Act

C. Cost-Benefit Considerations

D. Antitrust Considerations

I. Background

Section 727 of the Dodd-Frank Act added section 2(a)(13)(G) to the Commodity Exchange Act (“CEA” or “Act”), which requires each swap—whether cleared or uncleared—to be reported to an SDR,

a type of registered entity created by section 728 of the Dodd-Frank Act.

CEA section 21

requires each SDR to register with the Commission and directs the Commission to adopt rules governing SDRs.

Section 721 of the Dodd-Frank Act amended section 1a of the CEA to add the definition of SDR.

See

Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 (2010),

available at https://www.gpo.gov/fdsys/pkg/PLAW-111publ203/pdf/PLAW-111publ203.pdf.

Pursuant to CEA section 1a(48), the term SDR 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. 7 U.S.C. 1a(48).

The Commission notes that there are currently three SDRs provisionally registered with the Commission: CME Inc., DTCC Data Repository (U.S.) LLC (“DDR”), and ICE Trade Vault, LLC (“ICE”).

7 U.S.C. 24a.

To register and maintain registration with the Commission, an SDR must comply with specific duties and core principles enumerated in CEA section 21 as well as other requirements that the Commission may prescribe by rule. In particular, CEA section 21(c) mandates that an SDR: (1) Accept data; (2) confirm with both counterparties the accuracy of submitted data; (3) maintain data according to standards prescribed by the Commission; (4) provide direct electronic access to the Commission or any designee of the Commission (including another registered entity); (5) provide public reporting of data in the form and frequency required by the Commission; (6) establish automated systems for monitoring, screening, and analyzing data (including the use of end-user clearing exemptions) at the direction of the Commission; (7) maintain data privacy; (8) make data available to other specified regulators, on a confidential basis, pursuant to CEA section 8,

upon request and after notifying the Commission; and (9) establish and maintain emergency and business continuity-disaster recovery (“BC-DR”) procedures. CEA section 21(f)(4)(C) further requires the Commission to establish additional duties for SDRs to minimize conflicts of interest, protect data, ensure compliance, and guarantee the safety and security of the SDR.

CEA section 21(b) also directs the Commission to prescribe standards for data recordkeeping and reporting that apply to both registered entities and reporting counterparties.

7 U.S.C. 12(e).

Pursuant to this provision, the Commission may develop one or more additional duties applicable to SDRs. 7 U.S.C. 24a(f)(4).

See

7 U.S.C. 24a(b)(1)(B).

Part 49 of the Commission's regulations implements the requirements of CEA section 21.

Part 49 sets forth the specific duties an SDR must comply with to be registered and maintain registration as an SDR, including requirements under § 49.11 for an SDR to confirm the accuracy of data reported to the SDR.

Swap Data Repositories: Registration Standards, Duties and Core Principles, 76 FR 54538 (Sept. 1, 2011) (“Part 49 Adopting Release”).

Since the Commission adopted its part 49 regulations in 2011, Commission staff has led many efforts to evaluate and improve the reporting of swap data and its accuracy. Commission staff leads or participates in several international regulatory working groups concentrating on harmonization of data reporting. Commission staff's efforts have also included the formation of an interdivisional staff working group to identify, and make recommendations to resolve, reporting challenges associated with certain swap data recordkeeping and reporting provisions.

The Commission has also requested comments from the public on reporting issues.

See

Press Release, CFTC to Form an Interdivisional Working Group to Review Regulatory Reporting (Jan. 21, 2014),

available at http://www.cftc.gov/PressRoom/PressReleases/pr6837-14.

See, e.g.,

Review of Swap Data Recordkeeping and Reporting Requirements, Request for Comment, 79 FR 16689 (Mar. 26, 2014).

Based on its efforts, the Commission determined that three conditions work in concert to achieve a higher degree of data accuracy: (i) SDR processes confirming the accuracy of data submitted; (ii) data reconciliation exercises by entities that reported data; and (iii) the prompt reporting of errors and omissions when discovered.

With the goal of advancing in these three areas to improve data accuracy, Commission staff conducted a comprehensive review of swap reporting regulations and released the Roadmap to Achieve High Quality Swap Data (“Roadmap”).

The Roadmap's overall goals were to improve the quality, accuracy, and completeness of swap data reported to the Commission, streamline swap data reporting, and clarify obligations for market participants.

Within these overall goals, the Roadmap's SDR Operations Review aimed to assure a high degree of accuracy of swap data and swap transaction and pricing data,

improve the clarity and consistency of regulations governing SDRs, and bolster the Commission's oversight of SDRs.

See id.

at 16695.

See

CFTC 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/csl/17-33/download;

Roadmap to Achieve High Quality Swap Data,

available at http://www.cftc.gov/idc/groups/public/@newsroom/documents/file/dmo_swapdataplan071017.pdf.

See id.

at 3 (describing the Commission's goals for the review of reporting regulations).

See

Roadmap at 6 (stating the Commission's intent to “Identify the most efficient and effective solution for swap counterparty(ies) to confirm the accuracy and completeness of data held in an SDR.”).

The Roadmap solicited public comment on how to improve data reporting and achieve the Commission's regulatory goals without imposing unnecessary burdens on market participants. Commission staff received numerous comments in response to the Roadmap that addressed data accuracy and confirmation of data reported to SDRs, among other subjects.

These comment letters are available at

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

Based in part on these public comments and the Commission staff's review of these issues, the Commission issued a notice of proposed rulemaking (“Proposal”) on May 13, 2019 to address the Roadmap's SDR Operations Review goals.

The Proposal was the first of three Roadmap rulemakings that together aim to achieve the Roadmap's overall goals.

Certain Swap Data Repository and Data Reporting Requirements, 84 FR 21044 (May 13, 2019).

The other two notices of proposed rulemakings are Amendments to the Real-Time Public Reporting Requirements, 85 FR 21516 (April 17, 2020) and Swap Data Recordkeeping and Reporting Requirements, 85 FR 21578 (April 17, 2020).

In the Proposal, the Commission set forth a new swap data verification regime to replace existing requirements for swap data confirmation and proposed amendments to error correction requirements in parts 43, 45, and 49 of the Commission's regulations. The primary components of the proposed verification regime included: A requirement for an SDR to regularly distribute to reporting counterparties an open swaps report containing the data maintained by the SDR for a relevant reporting counterparty's open swaps; a requirement that a reporting counterparty reconcile the data in the open swaps reports with the reporting counterparty's own data; a requirement that a reporting counterparty provide the SDR with a verification of the data's accuracy or a notice of discrepancy; and a requirement that, in the event of a discrepancy, a reporting counterparty submit corrected data to the SDR within a specified time frame or, if it is unable to do so, inform Commission staff of the error, its scope, and the reporting counterparty's initial remediation plan.

In this final rulemaking, the Commission has determined to adopt the amendments as proposed, with certain exceptions. The Commission has determined, based, in part, on public comments,

not to adopt, or to adopt with modifications, certain elements of the Proposal relating to data verification and error correction. More specifically, the final rule eliminates the proposed requirement for an SDR to distribute open swaps reports to a reporting counterparty, and the requirement for a counterparty to submit notices of verification or discrepancy in response.

The Commission received 25 responsive comment letters addressing the Proposal from the following entities: American Public Power Association/Edison Electric Institute/National Rural Electric Cooperative Association (“Joint Associations”), Chatham Financial (“Chatham”), Chris Barnard, CME Group Inc. (“CME”), CME Group Inc./DTCC Data Repository (U.S.) LLC/ICE Trade Vault LLC (“Joint SDR”), Coalition of Physical Energy Companies (“COPE”), Commercial Energy Working Group (“CEWG”), Credit Suisse (“CS”), Data Coalition, DTCC Data Repository (U.S.) LLC (“DDR”), Eurex Clearing AG (“Eurex”), Federal Home Loan Mortgage Corporation (“Freddie Mac”), Futures Industry Association August 2019 letter (“FIA August”), Futures Industry Association May 2020 letter (“FIA May”), Global Financial Markets Association (“GFMA”), Global Legal Entity Identifier Foundation (“GLEIF”), ICE Clear Credit LLC/ICE Clear Europe Limited (“ICE Clear”), ICE Trade Vault (“ICE TV”), IHS Markit (“Markit”), Institute for Agriculture and Trade Policy (“IATP”), International Swaps and Derivatives Association, Inc./Securities Industry and Financial Markets Association (“ISDA/SIFMA”), Investment Company Institute (“ICI”), LCH Ltd/LCH SA (“LCH”), Natural Gas Supply Association (“NGSA”), and Prudential Global Funding LLC (“Prudential”).

Instead, under the final rules, an SDR must provide a mechanism for a reporting counterparty to access swap data maintained by the SDR for the reporting counterparty's open swaps. Further, the final rules require a reporting counterparty to verify the SDR's data by using the mechanism provided by the SDR to compare the swap data for open swaps maintained by the SDR with the reporting counterparty's own books and records for the swap data, and to submit corrected swap data, if necessary, to the SDR. The reporting counterparty must perform the verification at specified intervals and maintain a verification log that sets forth any errors discovered and corrections made by the reporting counterparty. The final rule also extends the time frame within which a reporting counterparty must correct an error or notify the Commission.

The Proposal also included various amendments and new regulations aimed at eliminating unduly burdensome requirements, streamlining and consolidating the provisions of part 49 and other Commission regulations applicable to SDRs, and enhancing the Commission's ability to fulfill its oversight obligations with respect to SDRs. The Commission is generally adopting those rules as proposed, with limited modifications in some cases to address public comments. Additionally, for the reasons discussed below, the Commission has determined not to finalize at this time its proposed amendments to § 49.13 and § 49.22 and its proposed additions to part 23.

Where possible, in developing the Proposal and in adopting final rules as set forth herein, the Commission has taken into consideration certain pertinent rules adopted by other regulators, including the European Securities and Markets Authority and the U.S. Securities and Exchange Commission (“SEC”). This is particularly the case for the SEC's regulations relating to the registration requirements, duties, and core principles applicable to security-based swap data repositories (“SBSDRs”)

and reporting requirements for security-based swaps (“SBSs”) set forth in Regulation SBSR (“Regulation

SBSR”).

The Commission notes that there are similarities between the regulatory framework for SBSDRs and the SDR regulations that are the subject of this final rulemaking. Finally, the Commission notes that this final rulemaking incorporates lessons learned from the undertakings described above and the best practices of the international regulatory community.

See generally

Security-Based Swap Data Repository Registration, Duties and Core Principles, 80 FR 11438 (Mar. 19, 2015). The SEC adopted Rules 13n-1 through 13n-12 (17 CFR 240.13n-1 through 240.13n-12) under the Securities Exchange Act of 1934 (“Exchange Act”) relating to the registration and operation of SBSDRs.

See generally

Regulation SBSR—Reporting and Dissemination of Security-Based Swap Information, 80 FR 14740 (Mar. 19, 2015). The SEC adopted Regulation SBSR (Rules 900 through 909, 17 CFR 242.900 through 909) to create a reporting framework for SBSs. The SEC has also adopted additional regulations regarding the reporting and dissemination of certain information related to SBSs.

See generally

81 FR 53546 (Aug. 12, 2016).

II. Amendments to Part 49

A. § 49.2—Definitions

1. General Formatting Changes

The Commission proposed a general formatting change to the definitions in § 49.2(a). The defined terms in § 49.2(a) currently are numbered and arranged in alphabetical order. The Commission proposed to remove the numbering while still arranging the terms in § 49.2(a) in alphabetical order. Eliminating the numbering of defined terms in § 49.2(a) will reduce the need for the Commission to make conforming amendments to § 49.2(a) and other regulations when it amends § 49.2(a) in future rulemaking by adding or removing defined terms.

The Office of the Federal Register prefers the solely alphabetical approach to definitions sections.

See

Office of the Federal Register, Document Drafting Handbook May 2017 Update, Revision 5, 2-31 (2017) (“

Definitions.

In sections or paragraphs containing only definitions, we recommend that you do not use paragraph designations if you list the terms in alphabetical order.”).

The Commission did not receive any comments on the proposed formatting changes to § 49.2(a). The Commission is adopting the formatting amendments to § 49.2(a) as proposed, with non-substantive editorial changes to conform the format to the current style conventions.

2. Non-Substantive Amendments to Definitions

The Commission proposed non-substantive editorial and conforming amendments to certain definitions to provide clarity and for consistency with other Commission regulations.

The Commission believes the proposed amendments are non-substantive and will increase clarity and consistency across the Commission's regulations. The comments were generally supportive of the Commission's efforts to streamline definitions and increase consistency.

The Commission did not receive comments opposed to the proposed amendments described above. The Commission accordingly adopts these amended definitions as proposed.

Other than removing subsection numbering as discussed above in section II.A.1, the Commission did not propose any substantive changes to the definitions of “affiliate,” “control,” “foreign regulator,” “independent perspective,” “position,” or “section 8 material,” as those terms are defined in current § 49.2(a).

See, e.g.,

IATP at 4-5.

Specifically, the Commission adopts the following amendments to definitions in § 49.2(a):

• Asset class: Modify the definition to conform the wording to the definition of “asset class” used in part 43.

See

17 CFR 43.2. Asset class means a broad category of commodities including, without limitation, any “excluded commodity” as defined in section 1a(19) of the Act, with common characteristics underlying a swap. The asset classes include interest rate, foreign exchange, credit, equity, other commodity and such other asset classes as may be determined by the Commission.

• Commercial use: Modify the definition to use active instead of passive voice, and to change “use of swap data for regulatory purposes and/or responsibilities” to “use of SDR data for regulatory purposes and/or to perform its regulatory responsibilities.”

• Market participant: Change the term “swaps execution facilities” to “swap execution facilities,” to conform to CEA section 5h and other Commission regulations, and make the word “counterparties” singular.

• Non-affiliated third party: Clarify paragraph (3) to identify “a person jointly employed” by an SDR and any affiliate.

• Person associated with a swap data repository: Clarify that paragraph (3) includes a “jointly employed person.”

• Swap data: Modify the definition to more closely match the related definitions of “SDR data” and “swap transaction and pricing data” that are being added to § 49.2(a) and to incorporate the requirements to provide swap data to the Commission pursuant to part 49.

The Commission also is removing the word “capitalized” from § 49.2(b), to reflect that most defined terms used in part 49 are not capitalized in the text of part 49.

The Commission is also removing the term “registered swap data repository” from the definitions in § 49.2. In the Proposal, the Commission explained that the term “registered swap data repository” is not needed in part 49 because the defined term “swap data repository” already exists in § 1.3.

The definition of “swap data repository” in § 1.3 is identical to the definition contained in CEA section 1a(48).

This definition of “swap data repository” therefore already applies, and would continue to apply, to part 49 and all other Commission regulations and, when combined with § 49.1,

removes the need for a separate defined term for “registered swap data repository.”

See

17 CFR 1.3. Swap data repository is defined as 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). 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

17 CFR 49.1. The provisions of part 49 apply to any swap data repository as defined under section 1a(48) of the CEA which is registered or is required to register as such with the Commission pursuant to Section 21(a) of the CEA.

The Commission further explained that the inclusion of the word “registered” in “registered swap data repository” and the definition of the term

also may create doubt whether the requirements of part 49 apply to entities that are in the process of registering as SDRs or are provisionally registered as SDRs under the requirements of § 49.3(b).

The requirements of part 49 apply to provisionally-registered SDRs and any entity seeking to become an SDR must comply with the same requirements in order to become a provisionally-registered or fully-registered SDR. Finally, the removal of the term “registered swap data repository” would increase consistency in terms within part 49 and would also increase consistency between part 49 and other Commission regulations, which overwhelmingly use the term “swap data repository.” The Commission emphasized that removing the defined term “registered swap data repository” is a non-substantive amendment that would not in any way modify the requirements applicable to current or future SDRs.

See

17 CFR 49.2(a)(11). Registered swap data repository means a swap data repository that is registered under section 21 of the CEA.

See

17 CFR 49.3(b) (creating standards for granting provisional registration to an SDR).

3. Additions and Substantive Amendments

a. Definition of As Soon as Technologically Practicable

The Commission proposed to add the term “as soon as technologically practicable” as a defined term in § 49.2. The Proposal defined the term to mean “as soon as possible, taking into consideration the prevalence,

implementation, and use of technology by comparable market participants.” This addition would standardize the meaning and use of this term across the Commission's swap reporting regulations and is intended to be identical to the term as it is used in parts 43 and 45 of the Commission's regulations.

See

17 CFR 43.2 (defining of as soon as technologically practicable). Part 45 of the Commission's regulations also uses the term “as soon as technologically practicable” in the same way as part 43 and as defined in proposed § 49.2.

The Commission received several comments on the proposed definition. One comment generally supported standardizing definitions across the Commission's regulations.

One comment recommended that the definition should be expanded to clarify what are considered comparable market participants.

The Commission declines to adopt this recommendation. The Commission proposed to add the term “as soon as technologically practicable” merely to create consistency in defined terms across the swap reporting regulations, not to modify or interpret the term. The Commission also does not believe this final rulemaking is the appropriate venue to provide guidance on the parameters of comparable market participants, as any guidance would need to evaluate and impose standards for many different market participants and scenarios, without the opportunity for the affected market participants to comment on the guidance. The Commission also notes that the defined term has been in use through the application of the Commission's swap reporting regulations since the inception of swap reporting, without the need for additional guidance.

ISDA/SIFMA at 38.

IATP at 4.

The Commission is adopting the addition of “as soon as technologically practicable” as a defined term as proposed. The Commission notes that concomitant with adopting these final rules, the Commission is adopting final rules for § 43.2 and § 45.1, which both include the identical definition for this term.

b. Definition of Non-Swap Dealer/Major Swap Participant/Derivatives Clearing Organization Reporting Counterparty

The Commission proposed to add the term “non-swap dealer/major swap participant/derivatives clearing organization reporting counterparty” as a defined term in § 49.2. The Commission is not adopting this proposed definition.

This defined term was intended to clarify the meaning of the term in part 49, specifically in proposed § 49.11(b)(3). As discussed below in section II.G, the Commission is not finalizing proposed § 49.11(b)(3) and this term does not otherwise appear in part 49. Accordingly, the inclusion of the defined term is not necessary and Commission is not adopting this proposed definition.

The Proposal defined the term to mean a reporting counterparty that is not a swap dealer (“SD”), major swap participant (“MSP”), derivatives clearing organization (“DCO”), or exempt derivatives clearing organization.

c. Definition of Open Swap

The Commission proposed to add the term “open swap” as a defined term in § 49.2. The Proposal defined the term to mean an executed swap transaction that has not reached maturity or the final contractual settlement date, and has not been exercised, closed out, or terminated. Under this definition, the term “open swap” refers to swaps that are often colloquially called “alive.” The Commission noted in the Proposal that the definition is intended to have the same function as the definitions of “open swap”

and “closed swap”

in part 20.

See

17 CFR 20.1. An open swap or swaption means a swap or swaption that has not been closed.

See

17 CFR 20.1. A closed swap or closed swaption means a swap or swaption that has been settled, exercised, closed out, or terminated.

The Commission received several comments on the proposed definition. One comment supported standardizing definitions across the Commission's rules, and supported the proposed definition for “open swap.”

One comment noted that there is no market practice of reporting a “final contractual settlement date.”

Instead, the comment stated, market practice is to report expiration, maturity date, or termination date. The comment further recommended that the definition be amended to allow for events to affect parts of a trade. The commenter recommended that the Commission define “open swap” to mean “an executed swap transaction that has not reached maturity or expiration date, and has not been fully exercised, closed out, or terminated.”

The Commission agrees with this comment and is adopting the recommended changes to the definition, with a slight modification for grammar. Accordingly, final § 49.2 includes the term “open swap” as a defined term, which means an executed swap transaction that has not reached maturity or expiration, and has not been fully exercised, closed out, or terminated.

The Commission notes that, as with the definition in the Proposal, the final definition of “open swap” is intended to mean swaps, or the remaining portion of a swap, that would be commonly thought of as “alive.”

DDR at 2.

ISDA/SIFMA at 38.

Id.

As discussed below in section III.A, the Commission is also adding an identical definition for “open swap” to part 45 of this chapter, in order to create consistency between parts 45 and 49 of the Commission's regulations and to accommodate the use of the term “open swap” in part 45.

d. Definition of Reporting Counterparty and the Removal of Reporting Entity

The Commission proposed to add the term “reporting counterparty” as a defined term to § 49.2. This term would mean the counterparty responsible for reporting SDR data to an SDR pursuant to part 43, 45, or 46 of the Commission's regulations. The Proposal explained that this would standardize its meaning and use across the Commission's swap reporting regulations. The Commission also proposed to remove the term “reporting entity” from the definitions in § 49.2 because it is no longer necessary with the addition of “reporting counterparty” as a defined term.

See

17 CFR 49.2(a)(12) (defining reporting entity as entities that are required to report swap data to a registered swap data repository, which includes derivatives clearing organizations, swap dealers, major swap participants and certain non-swap dealer/non-major swap participant counterparties).

Concomitant with the adoption of these final rules, the Commission also is adopting final rules amending § 43.2 and § 45.1. Those final rules both include a definition for the term “reporting counterparty” specific to part 43 and part 45, respectively. Current § 46.1 also includes a definition for the term.

The definitions of the term “reporting counterparty” in §§ 43.2, 45.1, and 46.1 are more narrow than the proposed definition in § 49.2. While the definitions do not have identical wording, the defined terms have a standardized meaning that follows a consistent format and is appropriate for each context.

17 CFR 46.1.

The Commission notes that the reporting counterparty may not always be the entity reporting SDR data to the SDR, particularly for transactions executed on a swap execution facility (“SEF”) or designated contract market (“DCM”), but it is the counterparty responsible for the initial and/or subsequent SDR data reporting, pursuant to part 43, 45, or 46 of the Commission's regulations, as applicable to a particular swap. SEFs and DCMs are

the only entities not included in the proposed definition of “reporting counterparty” that may have a responsibility to report data.

The Commission did not receive any comments on the proposed definition of the term “reporting counterparty” and the related removal of the defined term “reporting entity.” The Commission is adopting these amendments as proposed, with minor, non-substantive editorial changes to conform the definition of “reporting counterparty” in § 49.2 to the definitions in §§ 43.2, 45.1, and 46.1, as discussed above. Accordingly, final § 49.2 includes the term “reporting counterparty” as a defined term, which means the counterparty required to report SDR data pursuant to part 43, 45, or 46 of 17 CFR chapter I. Final § 49.2 no longer includes the term “reporting entity” as a defined term.

e. Definition of SDR Data

The Commission proposed to add the term “SDR data” as a defined term in § 49.2. The Proposal defined the term to mean the specific data elements and information required to be reported to an SDR or disseminated by an SDR, pursuant to two or more of parts 43, 45, 46, and/or 49, as applicable in the context. The Commission noted that in this context, “disseminated” would include an SDR making swap data available to the Commission as required by part 49.

In the Proposal, the Commission noted that the proposed definition of “SDR data” would include multiple sources of data reported to the SDR or disseminated by the SDR. For example, “SDR data” could refer to all data reported or disseminated pursuant to parts 43, 45, and 46. It may also refer to data reported or disseminated pursuant to parts 45 and 46, depending on the context in which the term is used. This is in contrast with the proposed term “swap transaction and pricing data,” which, as defined in the Proposal, would only refer to data reported to an SDR or publicly disseminated by an SDR pursuant to part 43. It is also in contrast with the term “swap data,” which, as defined in the Proposal, would only refer to data reported to an SDR or made available to the Commission pursuant to part 45. In the Proposal, the Commission explained that consolidating references to the different types of data that must be reported to an SDR or disseminated by an SDR to the public or to the Commission into a single term would provide clarity throughout part 49.

The Commission received several comments on the proposed addition of the defined term “SDR data” and the proposed definition in § 49.2. One comment generally supported the proposed amendment.

One comment stated that the proposed definition limited “SDR Data” to information that is required to be reported or disseminated pursuant to “two or more of parts 43, 45, 46 and/or 49,” which would exclude information that is required to be reported or disseminated pursuant to one of those parts. The Commenter recommended that the Commission define the term “SDR Data” to include information that is required to be reported or disseminated by

one

or more of parts 43, 45, 46, and/or 49. The Commission disagrees with this comment and its interpretation of the term “SDR data.” By definition, “SDR data” will always include at least two sets of data or information that is required reported to an SDR or disseminated by an SDR. The definition is inclusive of all data being referenced, based on the context of the use of the term. When the Commission intends to refer to data that is reported or disseminated pursuant to only one of part 43, 45, 46, or 49, it uses the term or reference that corresponds to that specific set of data, for example “swap transaction and pricing data” for part 43-related data and “swap data” for part 45-related data.

ISDA/SIFMA at 41.

The Commission is adopting the addition of the defined term “SDR data” to final § 49.2, as proposed. Accordingly, final § 49.2 includes the defined term “SDR data,” which is defined to mean the specific data elements and information required to be reported to a swap data repository or disseminated by a swap data repository pursuant to two or more of parts 43, 45, 46, and/or 49 of 17 CFR chapter I, as applicable in the context.

f. Definition of SDR Information

The Commission proposed to amend the existing definition of “SDR information” in § 49.2 to add the clause “related to the business of the swap data repository that is not SDR data” to the end of the definition. This change clarifies that the scope of SDR information is limited to information that the SDR receives or maintains related to its business that is not the SDR data reported to or disseminated by the SDR. SDR information would include, for example, SDR policies and procedures created pursuant to part 49.

The Commission did not receive comments on the proposed amendment and the Commission adopts the amendment as proposed.

This clarification is particularly relevant for the SDR recordkeeping obligations in the proposed amendments to § 49.12, discussed below in section II.H.

g. Definition of Swap Transaction and Pricing Data

The Commission proposed to add “swap transaction and pricing data” as a defined term in § 49.2 to increase consistency in terminology used in the Commission's swap reporting regulations. The Proposal defined the term to mean the specific data elements and information required to be reported to a swap data repository or publicly disseminated by a swap data repository pursuant to part 43 of this chapter, as applicable. Concomitant with adopting these final rules, the Commission is adopting final rules in § 43.2 that add “swap transaction and pricing data” as a defined term. As defined in final § 43.2, the term means all data elements for a swap in appendix A of this part that are required to be reported or publicly disseminated pursuant to this part. In order to increase consistency throughout its rules, the Commission adopts the addition of the defined term “swap transaction and pricing data” and the definition in § 49.2 as proposed.

One commenter stated that the definition of the term in § 49.2 should not include the clause “or publicly disseminated by a swap data repository.”

The Commission does not agree with this comment because dissemination is included in the definition of the same term in final § 43.2, and the term is being included in final § 49.2 to increase consistency between Commission regulations. Moreover, to not include the public dissemination requirements would frustrate the purpose of adding the defined term by not allowing the term to be used in reference to an SDR's public dissemination responsibilities. The Commission believes that the specific context in which the term is used will make clear whether the Commission is referring to the requirements to report the data to an SDR, for an SDR to disseminate the data to the public, or both. Accordingly, final § 49.2 includes “swap transaction and pricing data” as a defined term that means the specific data elements and information required to be reported to a swap data repository or publicly disseminated by a swap data repository pursuant to part 43 of 17 CFR chapter I, as applicable.

DDR at 2.

B. § 49.3—Procedures for Registration

Section 49.3 sets forth the procedures and standard of approval for registration

as an SDR.

Current § 49.3(a)(1) requires a person seeking SDR registration to file an application on Form SDR.

Form SDR consists of instructions, general questions and a list of exhibits required by the Commission in order to determine whether an applicant for SDR registration is able to comply with the SDR core principles and Commission regulations thereunder.

17 CFR 49.3. Form SDR is set forth in Appendix A to part 49.

17 CFR 49.3(a)(1).

17 CFR 49.3(a)(2).

Existing § 49.3(a)(5) requires an SDR to promptly file an amended Form SDR to update any information that becomes inaccurate before or after the SDR's application for registration is granted. In addition, the regulation requires an SDR to annually file an amendment on Form SDR within 60 days after the end of its fiscal year.

17 CFR 49.3(a)(5).

The Commission proposed to amend § 49.3(a)(5) to eliminate the requirements for an SDR that has been granted registration under § 49.3(a) to: (i) file an amended Form SDR if any of the information therein becomes inaccurate, and (ii) annually file an amended Form SDR.

Thus, proposed § 49.3(a)(5) would only require an SDR to file an amended Form SDR to update information before the Commission grants it registration under § 49.3(a). The Commission also proposed to make conforming amendments to the Form SDR and § 49.22(f)(2)

to eliminate references to the annual filing of Form SDR.

Proposal at 84 FR 21048 (May 13, 2019).

17 CFR 49.22(f)(2).

Proposal at 84 FR 21048 (May 13, 2019).

The Commission is adopting the amendments to § 49.3(a)(5) and the conforming amendments to Form SDR and § 49.22(f)(2) as proposed in part and not adopting the amendments as proposed in part. The Commission is adopting the removal of the requirement to file an annual amendment to Form SDR because the Commission believes the annual Form SDR filing requirement is unnecessary and is duplicative of the requirement to file an amended Form SDR if any of the information in the Form SDR becomes inaccurate.

The Commission has, however, reconsidered the proposed removal of the requirement to file an amended Form SDR if any of the information in the Form SDR (including the Form SDR exhibits) becomes inaccurate and has determined not to finalize the proposed removal of this requirement. SDRs will continue to be required to file amendments to Form SDR as necessary after being granted registration under § 49.3(a). While the Commission stated in the Proposal that the Commission would have access to the information that would be updated in an amended Form SDR because an SDR would be required to file updates for some of the information with the Commission as a rule change under part 40 of the Commission's regulations and that, under proposed § 49.29, the Commission could require an SDR to file information demonstrating the SDR's compliance with its obligations under the CEA and Commission regulations,

the Commission no longer believes these methods of obtaining access to updated Form SDR information are the most efficient or practicable methods.

Id.

Instead, the Commission believes that Commission staff would be more effectively alerted to changes to the information in Form SDR for compliance monitoring purposes by maintaining the existing requirement for SDRs to update any Form SDR information that is or that becomes inaccurate. The Commission also believes it would be more efficient for SDRs to continue to send the updated Form SDR information to the Commission as currently required, as opposed to the Commission requesting the SDRs to demonstrate compliance whenever the Commission needs to check whether the Form SDR information remains current. Under the proposed approach, for example, the Commission may need to require SDRs to provide an all-encompassing demonstration of compliance for all of the Form SDR information under § 49.29, as opposed to the SDRs only updating Form SDR information that has changed, as the SDRs regularly do under the existing requirement, because the Commission will not be aware of what information may or may not have changed. The Commission is therefore not adopting the proposed removal of the requirement for an SDR that is registered under § 49.3(a) to file an updated Form SDR when the information in its Form SDR is inaccurate or becomes inaccurate, and this existing requirement in § 49.3(a)(5) remains in effect.

The Commission requested comment on all aspects of the proposed changes to § 49.3(a)(5). Two comments supported the proposed amendments to § 49.3(a)(5).

One comment also suggested the Commission further amend the text of proposed § 49.3(a)(5) to clarify that the requirement to file an amended Form SDR to update inaccurate information does not apply to an SDR provisionally registered under § 49.3(b).

Existing § 49.3(b)

provides that, upon request, the Commission may grant an applicant provisional registration as an SDR if, among other things, the applicant is in “substantial compliance” with the standard for approval for full SDR registration set forth in § 49.3(a)(4). If granted, provisional registration expires on the earlier of: (i) The date the Commission grants or denies full registration of the SDR; or (ii) the date the Commission rescinds the SDR's provisional registration.

CME at 2 (“[T]he addition of Part 49.29 is a much more effective and efficient approach for the Commission to ensure it has the information it needs to ensure an SDR's compliance with the regulations”); DDR at 3.

DDR at 3.

17 CFR 49.3(b).

Id.

One comment suggested that the Commission add the legal entity identifier (“LEI”) of the applicant into the Form SDR, stating that incorporating an applicant's LEI record in the form would make various information fields unnecessary, while making the information provided more standardized and accurate.

GLEIF at 1.

As explained above, the Commission agrees with the comments that supported the removal of the annual Form SDR update requirement and the Commission disagrees with the comments supporting the removal of the requirement to update Form SDR when the information is inaccurate. The Commission also disagrees with the suggestion regarding provisionally-registered SDRs. Final § 49.3(a)(5), as adopted, requires a provisionally-registered SDR to file an amended Form SDR if information in the form becomes inaccurate. The Commission notes that provisional registration is an interim status for applicants for registration, and the accuracy of information in the Form SDR of a provisionally-registered SDR is necessary for the Commission to make a determination regarding the SDR's application for full registration.

The Commission is also declining to adopt the suggestion to use the LEI of the applicant instead of various data fields in the Form SDR. While there may be benefits to doing so, the Commission believes the current format is more useful to Commission staff in reviewing applications for registration by providing the relevant entity names directly, without the need to reference the information underlying an LEI.

C. § 49.5—Equity Interest Transfers

Section 49.5 sets forth requirements for an SDR that enters into an agreement involving the transfer of an equity interest of ten percent or more in the SDR.

The Commission proposed various amendments to § 49.5 to simplify and streamline the requirements of the regulation. The Commission is adopting the amendments to § 49.5 as proposed. The Commission continues to believe, as stated in the Proposal, that the amendments to § 49.5 will simplify and streamline the requirements of the regulation, and remove unnecessary burdens on SDRs while preserving the Commission's ability to obtain information regarding transfers of SDR equity interests.

17 CFR 49.5.

Current § 49.5(a) requires an SDR to (i) notify the Commission of the agreement no later than the business day following the date of the agreement and; (ii) amend any information that is no longer accurate on Form SDR.

Current § 49.5(b) sets forth various agreements, associated documents and information, and representations an SDR must provide the Commission in advance of the equity interest transfer.

Current 49.5(c) provides that within two business days following the equity interest transfer, an SDR must file with the Commission a certification stating that the SDR is in compliance with CEA section 21 and Commission regulations adopted thereunder, stating whether any changes were made to the SDR's operations as a result of the transfer, and, if so, identifying such changes.

17 CFR 49.5(a).

17 CFR 49.5(b).

17 CFR 49.5(c).

The Commission is amending § 49.5 to specify that the regulation applies to both direct and indirect transfers of ten percent or more of an equity interest in an SDR. As the Commission explained in the Proposal, indirect transfers of equity ownership (

e.g.,

the transfer of an equity interest in a parent company of an SDR) also require Commission oversight of the SDR to address any compliance concerns that may arise.

The Commission is also replacing the documentation and informational requirements in current § 49.5(b) with a provision in § 49.5(a) stating that the Commission may, upon receiving an equity transfer notification, request that the SDR provide supporting documentation for the transaction. The Commission believes reserving the authority to request supporting documentation rather than compelling specific production satisfies the Commission's need for information without placing unnecessary burdens on an SDR.

Proposal at 84 FR 21048 (May 13, 2019).

In addition, the Commission is amending § 49.5 to extend the deadline by which an SDR must file an equity transfer notification and to specify that the SDR shall file the notice with the Secretary of the Commission and the Director of the Division of Market Oversight (“DMO”) via email. The Commission believes an SDR may need additional time to file the necessary documents, and ten business days provides greater flexibility without sacrificing the availability of information the Commission needs to conduct effective oversight of the SDR. The Commission also is removing the requirement for an SDR to amend information that is no longer accurate on Form SDR due to the equity interest transfer because the requirement is duplicative of other requirements.

Finally, the Commission is amending § 49.5(c) to simplify the certification and information requirements in the filing an SDR is required to make with the Commission following an equity interest transfer. The Commission believes these amendments provide the Commission with the pertinent information it needs to assess the impact of an equity interest transfer on the SDR's operations.

The Commission requested public comment on all aspects of proposed § 49.5. One comment supported the Commission's proposal to simplify § 49.5, stating that current requirements of the regulation are overly burdensome, and reserving authority for the Commission to request supporting documentation, rather than compelling specific document production, would satisfy the Commission's need for information.

The Commission agrees with this comment and is finalizing § 49.5 as described.

CME at 2-3.

D. § 49.6—Request for Transfer of Registration

The Commission proposed to amend § 49.6

to clarify and streamline the process and procedures for the transfer of an SDR registration to a successor entity.

The amendments include re-titling the section “Request for transfer of registration,” to more accurately reflect the subject of the regulation.

The Commission has determined to adopt the amendments to § 49.6 as proposed. The Commission believes the amendments to § 49.6 will simplify the process for requesting a transfer of SDR registration by providing procedures that focus on informing the Commission of changes relevant to the Commission's oversight responsibilities, as opposed to requiring the successor entity to file a Form SDR, which would likely duplicate most of the transferor's existing Form SDR. Further, the amendments to § 49.6 provide the Commission with the information it needs in order to determine whether to approve a request for a transfer of an SDR registration.

17 CFR 49.6.

Proposal at 84 FR 21049 (May 13, 2019).

Id.

Current § 49.6(a) provides that, in the event of a corporate transaction that creates a new entity as which an SDR operates, the SDR must request a transfer of its registration no later than 30 days after the succession.

Current § 49.6(a) also specifies that the SDR registration shall be deemed to remain effective as the registration of the successor if the successor, within 30 days after such succession, files a Form SDR application for registration, and the predecessor files a request for vacation. Further, the SDR registration ceases to be effective 90 days after the application for registration on Form SDR is filed by the successor SDR.

17 CFR 49.6(a).

Final § 49.6(a) instead requires an SDR seeking to transfer its registration to a new legal entity as a result of a corporate change to file a request for approval of the transfer with the Secretary of the Commission in the form and manner specified by the Commission. Examples of such corporate changes may include, but are not limited to, re-organizations, mergers, acquisitions, bankruptcy, or other similar events that result in the creation of a new legal entity for the SDR.

Final § 49.6(b) specifies that an SDR shall file a request for transfer of registration as soon as practicable prior to the anticipated corporate change.

Final § 49.6(c) sets forth the information that must be included in a request for transfer of registration, including, among other things, the underlying documentation that governs the corporate change, a description of the corporate change and its impact on the SDR and on the rights and obligations of market participants, governance documents of the transferee, and various representations by the transferee related to its ability to operate the SDR and comply with the Act and Commission regulations.

Final § 49.6(d) specifies that upon review of a request for transfer of registration, the Commission, as soon as practicable, shall issue an order either

approving or denying the request for transfer of registration.

The Commission requested public comment on all aspects of proposed § 49.6. One comment opposed the proposed amendments to § 49.6, asserting that the amendments will add uncertainty into the transfer process by making a transfer contingent upon obtaining prior Commission approval without specifying a deadline by which the Commission must approve or deny a request for transfer.

CME at 3.

The Commission has determined to adopt the amendments to § 49.6 as proposed. With respect to the comment, the Commission recognizes that corporation transactions and reorganizations that involve the transfer of an SDR registration may arise without significant notice, and require certainty and prompt action by regulators. The Commission similarly has an interest in facilitating such transfers in order to maintain the operation of SDRs while also ensuring compliance with the applicable statutory and regulatory requirements. To that end, the Commission believes it is important to apply the information and procedural requirements set forth in § 49.6, as proposed and adopted, in order to enable the Commission and its staff to promptly address requests for transfer and to ensure that the transferee entity is fully capable of complying with the Commission's regulations for SDRs.

E. § 49.9—Open Swaps Reports Provided to the Commission

The Commission proposed to remove the text of existing § 49.9

and replace it with new requirements for SDRs to provide open swaps reports to the Commission.

Existing § 49.9 lists and briefly summarizes the duties of SDRs, with references to where those duties are found in other sections of part 49.

The Commission believes existing § 49.9 is superfluous because all of the SDR duties listed in § 49.9 are also contained, in much greater detail, in the other sections of part 49. Removing existing § 49.9 is a non-substantive amendment that does not affect the requirements for SDRs.

17 CFR 49.9.

Proposal at 84 FR 21050 (May 13, 2019).

17 CFR 49.9. As discussed below in section II.Q, the Commission proposed conforming amendments to § 49.25 to remove references to current § 49.9.

As part of the Commission's proposed new requirements in § 49.9 for SDRs to provide open swaps reports to the Commission,

the Commission proposed renaming § 49.9 “Open swaps reports provided to the Commission” and, as discussed above, proposed to add a new definition in § 49.2 for the term “open swap.”

The Commission received several comments on the proposed new requirements for open swaps reports under § 49.9, as discussed below. The Commission has determined to adopt the amendments to § 49.9 as proposed.

Section 49.2, as proposed and as adopted in this final rulemaking, defines the term “open swap” to mean an executed swap transaction that has not reached maturity or expiration, and has not been fully exercised, closed out, or terminated.

See section II.A above for a discussion of the definitions in final § 49.2.

Final § 49.9(a) requires each SDR to provide the Commission with open swaps reports that contain an accurate reflection of the swap data maintained by the SDR for every swap data field required to be reported under part 45 of the Commission's regulations for every open swap, as of the time the SDR compiles the report. Open swaps reports must be organized by the unique identifier created pursuant to § 45.5 of the Commission's regulations that is associated with each open swap.

SDRs currently send reports that are similar to the proposed open swaps reports to the Commission on a regular basis. The Commission currently uses these reports to produce a weekly swaps report that is made available to the public

and for entity-netted notional calculations.

The Commission also uses these reports to perform market risk and position calculations, and for additional market research projects. However, in formulating these reports, SDRs employ a variety of calculation approaches and differing formats, which reduces the utility of the data for the Commission. The Commission therefore proposed requiring each SDR to regularly provide the Commission with standardized open swaps reports containing accurate and up-to-date information. The Commission continues to believe it is necessary to require SDRs to provide open swaps reports and to require such reports to be standardized, in order to maximize their utility to the Commission and enhance the Commission's ability to perform its regulatory functions.

The Commission's various public reports, including the weekly swaps reports, are available at

http://www.cftc.gov/MarketReports/index.htm.

See generally

“Introducing ENNs: A Measure of the Size of Interest Rate Swaps Markets,” Jan. 2018,

available at https://www.cftc.gov/sites/default/files/idc/groups/public/@economicanalysis/documents/file/oce_enns0118.pdf.

Final § 49.9(b) requires an SDR to transmit all open swaps reports to the Commission as instructed by the Commission. Such instructions may include, but are not limited to, the method, timing, and frequency of transmission, as well as the format of the swap data to be transmitted.

Retaining the flexibility to determine these requirements, and the ability to modify them over time as necessary, allows the Commission to tailor the information that is required to be in the reports to meet the Commission's needs without imposing undue burdens on SDRs. As stated in the Proposal, the Commission intends to work with SDRs in formulating instructions pursuant to final § 49.9(b) and expects to provide a reasonable amount of time for SDRs to adjust their systems before any instructions regarding open swaps reports take effect. This collaborative process will allow the Commission's current practice of working with SDRs to implement changes to swaps reports to continue, which provides SDRs time to update their systems as needed.

As discussed below in section II.V, proposed § 49.31 delegates to the Director of DMO the Commission's authority in proposed § 49.9, including the authority to create instructions for transmitting open swaps reports to the Commission.

The Commission requested comment on all aspects of proposed § 49.9. One comment generally supported standardizing the open swaps reports.

Several comments addressed the Commission's discretion with respect to the transmission of open swaps reports under proposed § 49.9(b). One comment stated that any revisions the Commission makes to the requirements for transmitting open swaps reports should not require revisions to reports provided by the SDR to reporting counterparties, which would increase costs for reporting counterparties.

Likewise, the requirements should not result in reporting counterparties having to submit additional data, or to submit previously reported data in a different data format.

One comment stated that the Commission should modify the proposed rule to include “reasonable constraints” on the instruction process by amending the text of proposed § 49.9(b) to include “as soon as practicable, given the nature of the instructions and the swap data repository's circumstances” at the end of the first sentence.

DDR at 3.

ISDA/SIFMA at 39.

Id.

DDR at 3.

The Commission is adopting § 49.9 as proposed, with non-substantive editorial changes for clarity. With regard to the comments on open swaps reports provided by SDRs to reporting counterparties, the Commission notes that, as described in section II.G below, final § 49.11 will not require SDRs to

provide open swaps reports to reporting counterparties as part of the swap data verification process, and therefore the comments are moot.

The Commission declines to adopt the suggested revisions related to constraints, which would unnecessarily restrict the Commission's discretion to issue transmission instructions. The Commission reiterates its intent to work with the SDRs before creating or modifying any instructions pursuant to § 49.9 and to provide a reasonable amount of time for SDRs to adjust their systems before any instructions take effect. The Commission's existing practice of collaborating with SDRs stems from the recognition that such collaboration will ultimately improve SDRs' ability to comply with their regulatory obligations and further the Commission's regulatory objectives.

F. § 49.10—Acceptance of Data

The Commission is adopting new § 49.10(e) generally as proposed, with modifications and textual clarifications in response to the comments received. Final § 49.10(e) complements the error correction requirements in other Commission regulations, including final §§ 43.3(e) and 45.14(b), that apply to the entities that report SDR data to the SDRs. Each SEF, DCM, and reporting counterparty must correct errors in their SDR data by submitting complete and accurate SDR data to the relevant SDR.

Final § 49.10(e) is intended to ensure that SDRs correct errors in SDR data and disseminate corrected data as soon as possible.

See

section IV below for a discussion of final § 43.3(e) (regarding swap transaction and pricing data) and section III.C below for a discussion of final § 45.14 (regarding swap data).

As it stated in the Proposal, the Commission believes that clearly delineating an SDR's obligations to receive and make corrections to SDR data, and to disseminate the corrected SDR data to the public and the Commission, as applicable, will further the Commission's goal of more accurate and complete SDR data being made available to the public and the Commission. The Commission believes that the steps required by § 49.10(e) will also facilitate, and therefore encourage, compliance by SEFs, DCMs, and reporting counterparties with their regulatory obligation to correct SDR data. The Commission further believes proposed § 49.10(e) is consistent with the current statutory and regulatory requirements for SDRs to correct errors and omissions.

Final § 49.10(e)(1) requires an SDR to accept corrections of errors and omissions

reported to the SDR pursuant to part 43, 45, or 46 of the Commission's regulations. Final § 49.10(e) specifies that the requirements of § 49.10(e) apply to SDR data regardless of the state of the swap that is the subject such data, unless the record retention period for the SDR data under final § 49.12(b)(2) has expired. Thus, final § 49.10(e) requires an SDR to correct and disseminate SDR data for swaps that have matured or were otherwise terminated and are no longer open swaps, if such swaps are still within the required SDR data retention period. Final § 49.10(e)(2) requires an SDR to record corrections as soon as technologically practicable after the SDR accepts the corrections. Final § 49.10(e)(3) requires an SDR to disseminate the corrected SDR data to the public and the Commission, as applicable, as soon as technologically practicable after the SDR records the correction to the SDR data. Lastly, final § 49.10(e)(4) requires each SDR to establish, maintain, and enforce policies and procedures designed for the SDR to fulfill its responsibilities under § 49.10(e).

The Commission notes that, as described below, final § 45.14 and final § 43.3(e) do not use the word “omission” in the error correction requirements. The word “omission” is not included in those sections because the term “error” is defined to include all omissions in final § 45.14(c) and final § 43.3(e)(4). The Commission is, however, using the word “omission” in final § 49.10(e), because “error” is not defined in final part 49. The Commission emphasizes that this difference between the three sections is merely semantic and does not in any way change the SDRs' data correction requirements. All omissions of required SDR data are errors, and an SDR is required to correct, in accordance with final § 49.10(e), all errors reported to the SDR, including errors that arise from omissions in SDR data reported to an SDR or the omission of all SDR data for a swap.

One comment suggested that the final rule should clarify that the only obligation on SDRs under § 49.10(e) is to accept, record, and disseminate corrections to SDR data.

The Commission notes that this is the scope of proposed § 49.10(e), and is the scope of final § 49.10(e).

Joint SDR at 9.

The comment also stated that applying the requirements of proposed § 49.10(e)(2) to SDR data “regardless of the state of the swap” will require SDRs to make SDR data available for corrections for an unlimited amount of time.

The comment suggested that the Commission should instead limit the requirements in the regulation with respect to “dead swaps” to the required SDR data recordkeeping retention period.

The Commission agrees with this comment and final § 49.10(e)(1) provides that the rules in § 49.10(e) apply only if “the record retention period under § 49.12(b)(2) of this part has not expired as of the time the error correction is reported.”

Id.

Finally, the comment stated that the Commission should make clear that an entity submitting SDR data corrections or previously omitted SDR data must comply with the then current technical specifications of the SDR and that an SDR is not required to make accommodations for data that is unable to comport with the then current technical specifications.

The Commission does not agree with the recommendation that the regulation be revised to require error corrections to be made using the prevailing validations and technical specifications of the SDR. The Commission notes that final § 49.10(e) provides discretion to SDRs to establish, maintain, and enforce policies and procedures designed for the SDRs to fulfill their responsibilities under final § 49.10(e), which includes the discretion to require error corrections to use prevailing validations and the SDR's technical specifications. Final §§ 43.3(e) and 45.14(a) contain companion requirements for market participants to conform to these SDR policies and procedures when correcting SDR data. The Commission believes that this discretion provides necessary flexibility to SDRs and market participants.

Id.

at 9-10.

G. § 49.11—Verification of Swap Data Accuracy

1. Background

Section 21(c)(2) of the CEA requires SDRs to confirm submitted swap data.

The Commission implemented this statutory requirement by promulgating current § 49.11.

Current § 49.11(a) requires an SDR to establish policies and procedures to ensure the accuracy of swap data and other regulatory information reported to the SDR. Current § 49.11(b) sets forth the general requirement that an SDR confirm the accuracy and completeness of all swap data submitted pursuant to part 45. The regulation then sets forth specific confirmation requirements for creation data in § 49.11(b)(1) and for continuation data in § 49.11(b)(2).

See

7 U.S.C. 24a(c)(2) (providing that, among other duties, a swap data repository shall confirm with both counterparties to the swap the accuracy of the data that was submitted).

See

Part 49 Adopting Release at 54547.

In both cases, the requirements vary depending on whether the SDR received the data directly from a counterparty or from a SEF, DCM, derivatives clearing organization (“DCO”), or third-party service provider acting on behalf of the swap counterparty.

For swap creation data, if the swap data was submitted directly by a swap counterparty, such as an SD, MSP, or non-SD/MSP counterparty, an SDR is required to notify both counterparties to the swap and to receive from both counterparties acknowledgement of the accuracy of the swap data and corrections for any errors.

However, because counterparties do not currently have a corollary obligation to respond to an SDR's notifications, SDRs have adopted rules based on the concept of negative affirmation: Reported swap data is presumed accurate and confirmed if a counterparty does not inform the SDR of errors or omissions or otherwise make modifications to a trade record for a certain period of time.

See

§ 49.11(b)(1)(i) (providing that an SDR has confirmed the accuracy of swap creation data that was submitted directly by a counterparty if the swap data repository has notified both counterparties of the data that was submitted and received from both counterparties acknowledgement of the accuracy of the swap data and corrections for any errors) and § 49.11(b)(2)(i).

See

DTCC Data Repository (U.S.) LLC Rule 3.3.3.3 and ICE Trade Vault Rules 4.6 and 4.7.

If the swap data was instead submitted by a SEF, DCM, DCO, or third-party service provider acting on behalf of a swap counterparty, the SDR must, among other things, provide both counterparties with a 48-hour correction period after which a counterparty is assumed to have acknowledged the accuracy of the swap data.

For swap continuation data, an SDR may rely on a 48-hour correction period regardless of the type of entity that submitted the swap data.

Additional requirements include the following: (i) The SDR must have formed a reasonable belief that the swap data is accurate; and the swap data that was submitted, or any accompanying information, evidences that both counterparties agreed to the data.

See

17 CFR 49.11(b)(1)(ii).

See

17 CFR 49.11(b)(2)(ii).

These provisions in existing § 49.11 reflect the Commission's view in adopting the regulation that an SDR need not always affirmatively communicate with both counterparties to in order to confirm the accuracy of swap data.

In the Proposal, the Commission stated that, based on the its experience with swap data submitted by SEFs, DCMs, DCOs, and third-party service providers, the current requirements of § 49.11 have failed to ensure swap data accuracy and consistency, which has hampered the Commission's ability to carry out its regulatory responsibilities.

See

Part 49 Adopting Release at 54547 (describing the requirements of § 49.11).

See

Proposal at 84 FR 21052 (May 13, 2019).

As noted in the Proposal, the Commission previously raised these issues in the Roadmap and received many comments in response.

As discussed in the Proposal, commenters generally held the view that SDRs are not able to confirm swap data with non-reporting counterparties;

the obligation to confirm data accuracy should generally reside with the parties to the swap, not SDRs;

and confirmation requirements for non-reporting counterparties are generally unnecessary and will not improve data accuracy.

See id.

Id.

Based on its experience with swap data reporting and the comments it received in response to the Roadmap, the Proposal set forth a new swap verification scheme for swap data.

2. Summary of the Final Rule

The Commission is modifying its approach to verification in final § 49.11, based on comments received on proposed § 49.11. The Commission believes the verification process required by final § 49.11 is less burdensome and more flexible than the verification process set forth in the proposed regulation. As described in detail below, in order for SDRs to verify the accuracy and completeness of swap data, final § 49.11 requires each SDR to provide reporting counterparties that are users of the SDR with a mechanism that allows a reporting counterparty to access the current swap data for all open swaps for which the reporting counterparty is serving as the reporting counterparty, in such a manner that allows the reporting counterparty to fulfill its own verification obligations under final § 45.14.

See

section III.C below for a discussion of final § 45.14.

This approach is similar to the requirements in proposed § 49.11 in many respects, particularly in that under final § 49.11, SDRs are required to facilitate verification by reporting counterparties of all swap data for all open swaps on a regular basis. However, the Commission believes final § 49.11 provides a less prescriptive and less burdensome method to achieve the Commission's goals related to swap data verification. In particular, final § 49.11 will not require the SDRs to create and send open swaps reports to reporting counterparties as proposed.

100

Also, in place of the requirement that SDRs establish, maintain, and enforce policies and procedures reasonably designed for the SDR to successfully receive replies to open swaps reports from reporting counterparties in the form of a verification of data accuracy or notice of discrepancy, the SDR's policies and procedures will be required to address how the SDR will fulfill all of the requirements of § 49.11, including how reporting counterparties and third-party service providers may successfully use the verification mechanism to fulfill the reporting counterparties' responsibilities under § 45.14. Final § 49.11 will also require reporting counterparties to perform verification on a less frequent basis than proposed, meaning that SDRs will likewise not be required to facilitate verification on as frequent a basis as proposed.

100

The Commission is requiring SDRs to create and send open swaps reports to the Commission under final § 49.9.

See

section II.E above for a discussion of final § 49.9.

a. § 49.11(a)

The Commission adopts final § 49.11(a) largely as proposed, with some non-substantive rearrangement of proposed § 49.11(a) into final paragraphs § 49.11(a) and (c). The first sentence of proposed § 49.11(a) is being finalized as final § 49.11(a). Final § 49.11(a) reiterates each SDR's statutory duty to verify the accuracy of swap data pursuant to CEA section 21(c)(2). The second sentence of proposed § 49.11(a) is now included in final § 49.11(c)(1), with non-substantive rewording to more clearly articulate the requirement for SDRs to establish, maintain, and enforce policies and procedures related to verification and the content requirements for the policies and procedures.

b. § 49.11(b)(1)

Final § 49.11(b)(1) requires each SDR to provide a mechanism through which each reporting counterparty that is a user of the SDR can access all swap data the SDR maintains for each open swap for which the reporting counterparty serves as the reporting counterparty. The mechanism must allow sufficient access, provide sufficient information, and be in a form and manner to enable each reporting counterparty to perform swap data verification as required under § 45.14 of this chapter. The Commission believes that, together with final § 45.14(b), final § 49.11(b)(1) will create an effective verification process to help ensure that swap data maintained by SDRs is complete and accurate.

The Commission notes that, similar to the communication requirements in proposed § 49.11, it is not prescribing the form of mechanism that SDRs must provide in final § 49.11(b)(1), beyond the data access, data scope, frequency, and confidentiality requirements contained in final § 49.11(b). The Commission expects that SDRs and

reporting counterparties will be able to work together to devise the most effective and efficient verification mechanism, with particular attention to accommodating non-SD/MSP/DCO reporting counterparties that may have fewer resources to perform verification than their SD/MSP/DCO counterparts. The Commission is also aware that at least one SDR already offers a mechanism that allows counterparties to access their own swap data, which may be readily modified to meet the requirements of final § 49.11(b).

c. § 49.11(b)(2)

The Commission adopts the substance of the Proposal in final § 49.11(b)(2) in regards to the scope of data that the SDRs must make available to reporting counterparties for verification. Final § 49.11(b)(2) provides that the swap data accessible through the mechanism must accurately reflect the most current swap data maintained by the SDR, as of the time the reporting counterparty accesses the swap data using the mechanism, for each data field that the reporting counterparty was required to report under part 45 for each of the reporting counterparty's open swaps for which it is serving as the reporting counterparty. Final § 49.11(b)(2) only requires the mechanism to make available the then-current swap data for each of the data fields that the SDR maintains for the relevant open swaps. There is no requirement to include swap data contained in any particular messages from the reporting counterparty or any outdated swap data.

The Commission notes again that it is not prescribing the particular method by which the mechanism grants access to all of the swap data as required, as long as the mechanism satisfies the requirements in final § 49.11(b)(2), including the general requirement that the swap data accessible through the mechanism provides sufficient information to allow the reporting counterparties utilizing the mechanism to successfully perform their swap data verification responsibilities as required under final § 45.14. The Commission expects that SDRs will work with reporting counterparties to devise the most efficient and effective method by which the mechanism will provide access to all of the required swap data, with particular attention to accommodating non-SD/MSP/DCO reporting counterparties.

The Commission also notes that final § 49.11(b)(2) references the limits on providing access to swap data that must be kept confidential under final § 49.11(b)(3). The swap data access provided under final § 49.11(b)(2) must not allow access to data that is required to be kept confidential, as described further below in the discussion of § 49.11(b)(3).

d. 49.11(b)(3)

Final § 49.11(b)(3) adopts the proposed limits on access to swap data as part of verification for swap data that is required to be kept confidential from reporting counterparties under the Act or other Commission regulations. Notwithstanding the other requirements of final § 49.11(b), final § 49.11(b)(3) explicitly prohibits SDRs from allowing access to swap data that a reporting counterparty is otherwise prohibited to access. The Commission notes that the same confidential swap data is also excluded from the reporting counterparties' corresponding verification requirements in final § 45.14(b).

This confidentiality requirement is particularly relevant for counterparty identity information that is required to be kept confidential under final § 49.17.

101

Existing and final § 49.17(f) prohibit SDRs from allowing access to counterparty identifying information for certain anonymously-executed cleared swaps. Under the provisions of final § 49.11(b)(3), nothing in final § 49.11 overrides the confidentiality requirements of § 49.17, or any other confidentiality requirements of the Act or other Commission regulations. This information is also excluded from the verification requirements in the corresponding verification obligation rules in final § 45.14(b).

101

The Commission is finalizing a technical correction to § 49.17(f) in this rulemaking, as described below in section II.L.

e. § 49.11(b)(4)

Final § 49.11(b)(4) provides that the mechanism each SDR adopts under final § 49.11(b) must allow sufficiently frequent access for reporting counterparties to perform the required swap data verification under § 45.14(b). This minimum frequency is necessary so that reporting counterparties are able to access all of their relevant swap data every time they are required to perform verification under § 45.14(b), in order to help ensure that reporting counterparties perform a robust verification of all swap data for their relevant open swaps. Final § 45.14(b) requires SD/MSP/DCO reporting counterparties to verify every 30 calendar days and requires non-SD/MSP/DCO reporting counterparties to verify once every calendar quarter, with at least two months between verifications.

102

See section III.C below for a discussion of the verification requirements for reporting counterparties under final § 45.14(b).

The Commission notes that the frequency requirement in final § 49.11(b)(4) is a minimum frequency standard. Nothing prohibits SDRs from allowing reporting counterparties to access swap data through the mechanism more frequently than required and nothing prohibits reporting counterparties from utilizing the mechanism to access their own swap data more frequently than is required.

f. § 49.11(b)(5)

Final § 49.11(b)(5) provides requirements related to SDRs making swap data available to third-party service providers for verification purposes. As with other Commission regulations, reporting counterparties are permitted to utilize third-party service providers to perform verification, and the Commission believes that accommodating the use of diligent third-party services providers may increase the efficiency and effectiveness of the verification process.

Accordingly, in order to accommodate the reporting counterparties' use of third-party service providers, final § 49.11(b)(5) provides that an SDR will satisfy its verification requirements under final § 49.11 by, after a reporting counterparty informs the SDR that the reporting counterparty will utilize a particular third-party service provider for verification purposes, providing the third-party service provider with the same access to the mechanism and the relevant swap data as the SDR is required to provide to the reporting counterparty.

As part of this third-party service provider access, final § 49.11(b)(5) also provides that the third-party service provider access is in addition to (

i.e.,

not instead of) the access for the relevant reporting counterparty. Each SDR must still grant the same required level of access to the mechanism and the relevant swap data to the reporting counterparty, regardless of whether a reporting counterparty utilizes a third-party service provider. The third-party service provider's access under final § 49.11(b)(5) must also continue until the reporting counterparty informs the SDR that the third-party service provider should no longer have access to the mechanism and relevant swap data on the reporting counterparty's behalf. This requirement is necessary to ensure that the third-party service provider can provide services to the

reporting counterparty without interruption.

Finally, § 49.11(b)(5) requires the verification policies and procedures an SDR must create pursuant to final § 49.11(c) to include instructions detailing how each reporting counterparty can successfully inform the SDR so that the SDR will grant or discontinue access for a third-party service provider at the reporting counterparty's instruction. This requirement is necessary to ensure that third-party service provider access for verification purposes is as efficient and seamless as possible. The Commission notes that these SDR policies and procedures are required to be publicly disclosed under final § 49.26(j).

103

See

section II.R below for a discussion of final § 49.26(j).

g. § 49.11(c)

The Commission made several non-substantive organizational and editorial modifications in final § 49.11(c), as compared to the Proposal. For example, as described above, the SDR verification policies and procedures requirement from proposed § 49.11(a) is included in final § 49.11(c). The wording in final § 49.11(c)(1) is changed slightly from proposed § 49.11(a) for clarity purposes, but similarly requires SDRs to establish, maintain, and enforce policies and procedures that address how the swap data repository will fulfill all of the applicable requirements of final § 49.11. The policies and procedures must also include instructions on how each reporting counterparty, or third-party service provider acting on behalf of a reporting counterparty, can successfully utilize the mechanism to access swap data in order to perform the reporting counterparty's verification responsibilities under final § 45.14(b). This requirement is necessary to ensure that reporting counterparties are clearly instructed on how to access the verification mechanism and their relevant swap data, in order to ensure that verification is as efficient and seamless as possible. The Commission notes that the companion verification requirements for reporting counterparties in final § 45.14(b) require reporting counterparties to follow the relevant SDR policies and procedures when performing verification.

104

See section III.C for a discussion of the verification requirements for reporting counterparties under final § 45.14(b).

Final § 49.11(c)(2) sets forth the requirements for an SDR that amends its verification policies and procedures, which were previously set forth in proposed § 49.11(d). Final § 49.11(c)(2), like proposed § 49.11(d), requires each SDR to comply with the requirements of part 40 of the Commission's regulations in adopting or amending the verification policies and procedures required under final § 49.11(c)(1). The Commission notes that SDRs would be required to comply with part 40 when adopting or amending the verification policies and procedures regardless of whether this requirement is included in § 49.11(c)(2).

3. Comments on the Proposed Rule

The Commission received many comments on the verification approach in proposed § 49.11. Many commenters did not distinguish their comments between the verification requirements proposed for SDRs under proposed § 49.11 and the verification requirements proposed for reporting counterparties under proposed § 45.14, but the Commission has organized the discussion between the two different final rules based on its best estimation of whether particular comments applied to one or both of the proposed sections. The discussion of comments relevant to final § 49.11 is contained in this section, while the discussion of comments that pertain to the verification requirements for reporting counterparties is contained in the discussion of final § 45.14(b), unless otherwise noted below.

105

Id.

Many comments on specific requirements of proposed § 49.11 are now moot, because the Commission is not adopting the proposed requirements. For example, some commenters addressed particular aspects and mechanics of the proposed verification of open swaps reports and the messages the Proposal would require reporting counterparties to send to SDRs related to verification results.

106

These comments are no longer applicable, because the Commission is not adopting the proposed requirement that SDRs provide open swaps reports to reporting counterparties or the companion requirement that reporting counterparties verify the data in such reports and send messages to SDRs related to verification results. The Commission acknowledges these comments on specific proposed requirements and thanks the commenters for submitting these comments, but these requirements are not included in the final rule.

106

See, e.g.,

GFMA at 4; IATP at 5; ICE TV at 3-4; ISDA/SIFMA at 40, 43-44; Joint SDR at 2-7.

Many comments were generally supportive of the Commission's efforts to improve the accuracy of data reported to and maintained by SDRs.

107

The Commission agrees with the many commenters and market participants who support the Roadmap rulemakings to improve the quality of swap data, and reiterates the importance of improved data accuracy and completeness.

107

See

Freddie Mac at 1, 2; IATP at 1-5; Joint SDR at 1; Markit at 2.

Along with the comments of general support, the Commission received many comments supporting specific requirements in proposed § 49.11. Comments in particular supported limiting data verification to swap data,

108

and excluding non-reporting counterparties from data verification requirements.

109

The Commission agrees with these comments and is finalizing § 49.11 with requirements that only apply verification to swap data and only require verification for reporting counterparties.

108

ISDA/SIFMA at 39-41, 44.

109

GFMA at 4, ISDA/SIFMA at 39, Joint SDR at 2.

Commenters also suggested alternatives for the proposed approach to verification, including alternatives that helped form the basis of the revised verification requirements in final § 49.11. Multiple comments suggested that the Commission adopt a more “principles based” approach to verification.

110

As part of a more principles-based approach, one comment suggested monthly verification for SDs and quarterly for non-SDs, while also recommending that SDRs or the Commission should be able to request evidence that verification was conducted as required.

111

Another comment advocated for requiring reporting counterparties to implement procedures to periodically reconcile swaps data reported to SDRs.

112

The Commission also received one comment related to alternatives to verification of accuracy and notice of discrepancy messaging, which recommended an obligation on reporting counterparties to maintain, and make available to the Commission upon request, evidence that verification was conducted and any necessary corrections were submitted to the SDR.

113

110

CS at 3, FIA at 7-8, ISDA/SIFMA at 45.

111

ISDA/SIFMA at 45.

112

CS at 3.

113

Joint SDR at 6-8.

The Commission recognizes the comments that provided robust alternatives to the proposed verification requirements that also met the Commission need for swap data to be verified in a thorough and timely manner. The Commission is finalizing § 49.11 with more principles-based requirements that incorporate each of these suggestions, including that reporting counterparties periodically

reconcile the open swap data maintained by SDRs with the open swap data in their own books and records; that verification occur on a monthly basis for SD reporting counterparties (though the Commission will also require monthly verification for MSPs and DCOs) and quarterly for other reporting counterparties; and that reporting counterparties maintain and make available to the Commission evidence that verification was conducted properly and any discovered corrections submitted to the relevant SDR(s).

114

See section III.C for a more thorough discussion of the verification requirements for reporting counterparties under final § 45.14(b).

The Commission also received other comments addressing issues that have been incorporated into the final verification requirements. Though largely included with comments related to the proposed open swaps reports, multiple comments advocated for flexibility in the form and manner that SDRs and reporting counterparties perform verification, as these entities already have established methods for communicating swap data and other information.

115

These comments on the proposed open swaps reports also recommended that verification only be required for swap data as current at the time of verification, as opposed to verification on every data message.

116

Another comment also requested clarification that the required distribution of open swaps reports is a minimum, not a maximum, and that SDRs are able to provide open swaps reports more frequently than the minimum.

117

115

GFMA at 5, ISDA/SIFMA at 40, Joint SDR at 6.

116

ISDA/SIFMA at 40, Joint SDR at 6.

117

Joint SDR at 6-7.

The Commission recognizes the suggestions included with these comments and agrees with the comments. The Commission originally proposed, and is also now adopting, verification requirements that provide SDRs with flexibility in implementing the verification requirements. Thus, final § 49.11(b) intentionally does not prescribe the form and manner of the verification mechanism and allows SDRs to determine the means for reporting counterparties access to their relevant swap data. The Commission expects that SDRs and reporting counterparties will work together to devise the most efficient and effective mechanism that meets the specific verification requirements in final §§ 49.11 and 45.14. The Commission also proposed, and is now adopting, requirements that only require the verification of up-to-date swap data, as opposed to verification of all messages. Final § 49.11(b)(2) only requires SDRs to make the relevant “most current” swap data available to reporting counterparties, as opposed to every message regarding swap data. Though no longer related to open swaps reports, the Commission is also adopting verification timing requirements in § 45.14(b) that serve as a minimum frequency requirement, not a maximum. As the Commission detailed above in the discussion of final § 49.11(b)(4), the SDRs must make the verification mechanism available to the reporting counterparties at least as often as needed for the reporting counterparties to perform their verification responsibilities under final § 45.14(b), but that nothing prevents the SDRs from providing proper access more frequently. The Commission anticipates that some SDRs may choose to provide access to the mechanism on a more-frequent, even potentially continuous, basis.

The Commission also received a comment related to open swaps reports that observed that SDRs would not be able perform verification with reporting counterparties or third-party service providers that are not members of the SDR. The comment suggested that the Commission modify the verification requirement to limit an SDR's verification responsibilities to reporting counterparties and third-party service providers that are members of the SDR.

118

The Commission agrees with this comment and notes that it would not be practical for an SDR to perform verification with reporting counterparties or third-party service providers that are not connected to the SDR. To address this, the Commission is adopting final § 49.11(b)(1), which specifically requires an SDR to provide a verification mechanism that grants swap data access to each “reporting counterparty that is a user of the swap data repository,” as required under final § 49.11(b). The Commission notes that final § 49.11(b)(5) contains provisions related to access for a third-party service provider working on behalf of a reporting counterparty and that final § 49.11(c) requires SDR verification policies and procedures to address how a third-party service provider can successfully utilize the SDR verification mechanism on behalf of a reporting counterparty.

118

Joint SDR at 4-5.

The Commission also received a number of comments that made suggestions that are not being accepted. In the context of open swaps reports, one comment suggested that the Commission should specify that verification timing requirements be clarified as “business days” and “business hours,” as this would facilitate the SDRs including the date and time that an open swap report was sent.

119

The Commission is including verification timing requirements for reporting counterparties in final § 45.14(b), but these timing requirements are stated in terms of calendar days, calendar months, and calendar quarters. The Commission notes that the comment is now moot, as there will be no open swaps reports from SDRs to the reporting counterparties that would necessitate a timestamp, but the Commission also believes that the final use of calendar timing instead of business timing will not cause any issues in regards to reporting counterparties and SDRs performing verification and will provide consistent parameters for when verification must be performed. The use of calendar time allows the reporting counterparties to choose the date most convenient for them to accomplish regular verification without the potential confusion arising from business days shifting based on weekends and holidays.

119

ISDA/SIFMA at 40.

One comment suggested that the Commission should remove the requirement in proposed § 49.11(d) that SDRs make a filing under part 40 of the Commission's regulations when changing their verification policies and procedures, asserting that such a requirement is unnecessary because reporting counterparties will be required to follow SDR verification procedures.

120

The Commission disagrees and is adopting the requirement in final § 49.11(c)(2). The Commission notes that the requirements of part 40 of the Commission's regulations would apply to the SDR verification policies and procedures regardless of whether this provision is included in final § 49.11(c)(2), because the verification policies and procedures are “rules” for the purposes of part 40 of the Commission's regulations.

121

The Commission also believes that requiring SDRs to comply with part 40 to update verification policies and procedures will help alert reporting counterparties and other market participants to when an SDR seeks to change its policies and procedures, which will help ensure compliance with the verification

policies and procedures and help prevent errors in the verification process.

120

Joint SDR at 7.

121

See

17 CFR 40.1(i) (defining “rule” for the purposes of part 40 of the Commission's regulations).

The Commission also received multiple comments suggesting changes that would narrow the data fields subject to verification. One comment recommended that verification be limited to data fields related to the “economic terms” of the trade only, with the Commission identifying which fields are included in the economic terms.

122

Comments also recommended limiting the reported information to information that would improve the Commission's market surveillance capabilities and promote price transparency, while also limiting optional fields and fields that do not apply to the relevant swaps.

123

One comment suggested the Commission clarify the duties relating to static data elements.

124

Other comments also suggested streamlining data fields to only those necessary for the Commission's work and to harmonize data fields with foreign regulators, if possible,

125

and clarifying the data fields.

126

122

GFMA at 10-11, 13-14.

123

Joint Associations at 4-10, NGSA at 4.

124

Markit at 2-3.

125

Eurex at 1-2, GFMA at 14, Joint Associations at 4-10.

126

CEWG at 2-3.

As described in more detail in the discussion of verification requirements under final § 45.14(b),

127

the Commission disagrees with comments suggesting that the Commission adopt any verification requirement that would allow reporting counterparties to verify anything less than all swap data fields for all of the reporting counterparty's relevant open swaps. All swap data fields are important and are necessary for the Commission to successfully fulfill its regulatory responsibilities, which extend beyond performing robust market surveillance and promoting price transparency. The Commission is adopting verification requirements that require the reporting counterparties to verify every swap data field for all swap data for every one of a reporting counterparty's relevant open swaps, and is adopting the requirements in final § 49.11(b) that will facilitate this by requiring SDRs to provide a mechanism that allows the reporting counterparties to verify every data field for all relevant swap data. This requirement includes all static data elements, as errors are still possible in swap data maintained by SDRs, even if it is intended to be static. The Commission also notes that streamlining, clarifying, and harmonizing data fields is one of the express purposes of the Roadmap rulemakings, and that this work on data fields is accomplished in a separate Roadmap rulemaking.

128

127

See section III.C for a more thorough discussion of the verification requirements for reporting counterparties under final § 45.14(b).

128

See generally

85 FR 21578,

et seq.

(Apr. 17, 2020).

The Commission received several comments suggesting that verification is unnecessary and that the Commission can instead rely on SDR swap data validation, standardized and harmonized swap data fields, and/or the swap data error corrections requirements to improve data quality.

129

CEWG at 2-3, Chatham at 3, Eurex at 2, NGSA at 4, Joint Associations at 6-10, Joint SDR at 7-8.

As described in more detail in the discussion of verification requirements under final § 45.14(b), the Commission disagrees with the suggestions that verification is unnecessary and that swap data validation, standardized swap data fields, and error correction would be sufficient to meet the Commission's data quality goals. While swap data validation and standardized data fields are valuable tools to prevent certain types of swap data errors, such as swap data being reported without required data, they do not address the same errors that swap data verification is intended to address. Swap data verification, which is designed to inform and trigger the swap data error correction process, is intended to address plausible but incorrect swap data that would not be identified by validation because the incorrect data meets the technical standards for the standardized fields, such as a swap being reported with a notional value of $1,000,000 instead of the correct $10,000,000. These errors would only be found, and the error correction requirement triggered, by a party to the swap reviewing the data after it has been reported and discovering the error(s), such as through the verification process. The Commission also notes that swap data validation and standardized data fields can only prevent errors in swap data that have not yet been reported, as opposed to swap data verification, which will be useful for finding undiscovered errors in swap data for open swaps that have already been reported.

Through its experience administering the data reporting regulations, the Commission is also aware of many examples of significant swap data errors that would not have been prevented by swap data validations, and that, in the absence of an adequate verification requirement, persisted for long periods of time before being discovered and corrected. Based on this experience, the Commission determined that swap data validation, standardized data fields, and the error correction requirements are not sufficient to meet the Commission's data quality goals without the addition of swap data verification. As a result, the Commission is adopting final § 49.11, and the companion requirements in final § 45.14(b), in order to require a robust and effective verification process for SDRs and reporting counterparties that the Commission expects will help ensure significant improvements in swap data quality.

H. § 49.12—Swap Data Repository Recordkeeping Requirements

Section 49.12 sets forth recordkeeping requirements for SDRs.

130

The Commission proposed to amend § 49.12 to incorporate the recordkeeping requirements for SDRs in current § 45.2(f) and (g)

131

into final § 49.12, and to resolve ambiguities and potential inconsistencies between the regulations.

132

The Commission has determined to adopt the amendments to §§ 49.12 and 45.2 as proposed, except for a technical change discussed below.

130

17 CFR 49.12. Current § 49.12 sets forth specific recordkeeping requirements and references the public reporting requirements and recordkeeping requirements for SDRs included in parts 43 and 45.

131

17 CFR 45.2(f) and (g).

132

Proposal at 84 FR 21055 (May, 13, 2019). Consolidating these regulations in part 49 will reduce confusion that may arise from having separate SDR recordkeeping requirements in two different rules.

Current § 49.12(a) requires an SDR to maintain its books and records in accordance with the recordkeeping requirements of part 45. The Commission proposed to amend § 49.12(a) to incorporate the provisions of current § 45.2(f) and to clarify that the requirement in final § 49.12(a) that an SDR keep records applies to records of all activities relating to the business of the SDR, not just records of swap data reported to the SDR.

133

Accordingly, as amended, final § 49.12(a) requires an SDR to keep full, complete, and systematic records, together with all pertinent data and memoranda, of all activities relating to the business of the SDR, including, but not limited to, all SDR information and all SDR data that is reported to the SDR. The amendments to § 49.12(a) do not impose new requirements on an SDR; rather, the amendments incorporate the currently-applicable requirements of § 45.2(f).

133

Id.

Current § 49.12(a) applies to swap data required to be reported to the SDR, whereas § 45.2(g) applies to records of all activities relating to the business of the SDR and all swap data reported to the SDR.

Current § 49.12(b) requires an SDR to maintain swap data (including all historical positions) throughout the existence of the swap and for five years following the final termination of the swap, during which time the records must be readily accessible by the SDR, and available to the Commission via real-time electronic access; and in archival storage from which the data is retrievable by the SDR within three business days.

134

17 CFR 49.12(b).

The Commission is amending § 49.12(b) by incorporating the requirements of § 45.2(g) into final § 49.12(b). Thus, as amended, final § 49.12(b) will: (i) Clarify that the requirements of the regulation apply to all records required to be kept by an SDR, not just swap data reported to an SDR,

135

and (ii) incorporate the additional ten-year retention period set forth in current § 45.2(g)(2).

136

135

Proposal at 84 FR 21055 (May 13, 2019). Current § 49.12(b) applies to swap data, whereas § 45.2(g) applies to all records required to be kept by an SDR.

136

Section 45.2(g)(2) provides that all records required to be kept by an SDR must be kept in archival storage for ten years after the initial 5-year retention period under § 45.2(g)(1). Current § 49.12(b) only sets forth the initial 5-year retention period.

Final § 49.12(b) sets forth separate recordkeeping requirements for SDR information in final § 49.12(b)(1) and SDR data reported to the SDR in final § 49.12(b)(2). Section 49.12(b)(1) requires an SDR to maintain all SDR information, including, but not limited to, all documents, policies, and procedures required to be kept by the Act and the Commission's regulations, correspondence, memoranda, papers, books, notices, accounts, and other such records made or received by the SDR in the course of its business. An SDR must maintain such information in accordance with § 1.31 of the Commission's regulations.

137

Section 1.31 of the Commission's regulations is the Commission's general recordkeeping provision, which requires, among other things, that any regulatory records that do not pertain to specific transactions and are not retained oral communications be kept for no less than five years from their creation date.

See

17 CFR 1.31(b)(3). As noted in the Proposal, current § 49.12(b) and § 45.2 use the existence of the swap as the basis for the record retention timeframes specified therein, but this offers no guidance on how long to keep a record of SDR information, such as SDR policies and procedures.

See

Proposal at 21056. Therefore, the Commission is clarify in § 49.12(b)(1) that the record retention period for such records is the generally applicable retention period under § 1.31 of the Commission's regulations.

As amended, final § 49.12(b)(2) requires an SDR to maintain all SDR data and timestamps reported to or created by the SDR, and all messages related to such reporting, throughout the existence of the swap that is the subject of the SDR data and for five years following final termination of the swap, during which time the records must be readily accessible by the SDR and available to the Commission via real-time electronic access, and for a period of at least ten additional years in archival storage from which such records are retrievable by the SDR within three business days.

138

The retention period under § 49.12(b)(2) is the current requirement for SDR records retention under § 45.2(g).

The amendments to § 49.12(b) are also intended to help harmonize the Commission's regulations with the SEC's regulations.

139

The SDR information listed in final § 49.12(b)(1) largely matches the SEC's requirement for SBSDR recordkeeping

140

and the retention provisions of § 1.31 largely match the requirement for SBSDRs.

141

Any SDR that also registers with the SEC as an SBSDR will have to comply with both final § 49.12 and § 240.13n-7, and therefore consistency between the recordkeeping provisions is particularly beneficial to such SDRs.

139

The concept of separate recordkeeping requirements for information similar to SDR information and for SDR data reported to an SDR has already been adopted by the SEC in its regulations governing SBSDRs.

See

17 CFR 240.13n-7(b) (listing recordkeeping requirements for SBSDRs); 17 CFR 240.13n-7(d) (excluding “transaction data and positions” from the recordkeeping requirements and instead referring to 17 CFR 240.13n-5 for such recordkeeping).

140

See

17 CFR 240.13n-7(b)(1). This rule provides that every security-based swap data repository shall keep and preserve at least one copy of all documents, including all documents and policies and procedures required by the Securities Exchange Act and the rules and regulations thereunder, correspondence, memoranda, papers, books, notices, accounts, and other such records as shall be made or received by it in the course of its business as such.

141

Compare

17 CFR 1.31(b)(3) (providing that a records entity shall keep each regulatory record for a period of not less than five years from the date on which the record was created)

and

17 CFR 1.31(b)(4) (providing that a records entity shall keep regulatory records exclusively created and maintained on paper readily accessible for no less than two years, and shall keep electronic regulatory records readily accessible for the duration of the required record keeping period)

with

17 CFR 240.13n-7(b)(2) (providing that every SBSDR shall keep all such documents for a period of not less than five years, the first two years in a place that is immediately available to representative of the Securities and Exchange Commission for inspection and examination).

The Commission again notes that the amendments to § 49.12(b) do not change the requirements for SDRs; they merely consolidate existing requirements set forth in current § 45.2(f) and (g) into final § 49.12.

142

See

17 CFR 45.2(f) and (g). Though the term “swap data” is defined in § 49.2(a) to mean the specific data elements and information set forth in 17 CFR part 45, the Commission notes that the term “swap data” is not currently defined in part 45. Current § 45.2(f) requires the SDR to keep full, complete, and systematic records, together with all pertinent data and memoranda, of all activities related to the business of the swap data repository and all swap data reported to the swap data repository, as prescribed by the Commission. This expansive requirement for all pertinent data and memoranda for all activities related to the business of the swap data repository and all swap data reported to the swap data repository reflects that § 45.2(f) requires an SDR to keep records of data from activities beyond reporting pursuant to part 45, including, for example, all of the required swap transaction and pricing data reporting pursuant to part 43. The “full, complete, and systematic records” that must be kept for “all activities related to the business” of the SDR also include all messages related to the reported data, including all messages sent from the SDR and to the SDR. This recordkeeping obligation on SDRs is analogous to recordkeeping obligations on DCMs, SEFs, and DCOs.

See

17 CFR 38.950, 37.1001, and 39.20(a).

The Commission is amending existing § 49.12(c) and renumbering it as § 49.12(d).

143

In place of existing § 49.12(c), final § 49.12(c) requires an SDR to create and maintain records of SDR validation errors and SDR data reporting errors and omissions. Final § 49.12(c)(1) requires an SDR to create and maintain an accurate record of all reported SDR data that fails to satisfy the SDR's data validation procedures. The records must include, but are not be limited to, records of all of the SDR data reported to the SDR that failed to satisfy the SDR data validation procedures, all SDR validation errors, and all related messages and timestamps.

143

As discussed below, as part of the amendments to § 49.12, the Commission is removing current § 49.12(d).

Final § 49.12(c)(2) requires an SDR to create and maintain an accurate record of all SDR data errors and omissions reported to the SDR and all corrections disseminated by the SDR pursuant to parts 43, 45, 46, and 49 of the Commission's regulations. Section 49.12(c)(2) also requires SDRs to make the records available to the Commission on request.

The Commission believes SDRs already receive the data validation information specified in final § 49.12(c) via regular interaction with SEFs, DCMs, and reporting counterparties. The Commission emphasizes that such data must be maintained in order to allow for assessments of reporting compliance, including the initial reporting and the correction of the SDR data.

The Commission notes that while final § 49.12(c) specifies recordkeeping requirements for SDR data validation errors and SDR data reporting errors, these requirements do not in any way limit the applicability of the recordkeeping requirements in final § 49.12 to these records. Thus, since the records specified in final § 49.12(c) are

comprised of, or relate to, SDR data reported to an SDR, all records created and maintained by an SDR pursuant to final § 49.12(c) are subject to the requirements of final § 49.12(b)(2).

Existing § 49.12(d) requires an SDR to comply with the real time public reporting and recordkeeping requirements of existing § 49.15 and part 43. The Commission believes that existing § 49.12(d)

144

is redundant because its requirements that an SDR comply with the real time public reporting and recordkeeping requirements set forth in § 49.15 and part 43 are also required by final § 49.12(b)(2) and § 49.15, as well as part 43.

144

See

17 CFR 49.12(d) (providing that a registered swap data repository shall comply with the real time public reporting and recordkeeping requirements prescribed in § 49.15 and in 17 CFR part 43).

Accordingly, the Commission is moving the text of existing § 49.12(c) to final § 49.12(d) and amending the regulation to provide that (i) all records required to be kept pursuant to part 49 must be open to inspection upon request by any representative of the Commission or any representative of the U.S. Department of Justice; and (ii) an SDR must produce any record required to be kept, created, or maintained by the SDR in accordance with § 1.31 of the Commission's regulations.

Finally, the Commission proposed a technical change to move the existing requirements of § 49.12(e) to proposed § 49.13.

145

However, as discussed below, the Commission is not adopting the proposed amendments to § 49.13 at this time. Therefore, the Commission is not moving existing § 49.12(e) to § 49.13.

145

Current § 49.12(e) requires an SDR to establish policies and procedures to calculate positions for position limits and for any other purpose as required by the Commission.

The Commission requested comment on all aspects of proposed § 49.12.

146

The Commission also invited specific comment on the archival storage requirements of current § 45.2(g)(2) and proposed § 49.12(b)(2).

See

Proposal at 21057.

One comment supported consolidating the SDR recordkeeping requirements in part 45 into part 49.

147

Another comment stated that the requirement in proposed § 49.12(b)(2) for an additional ten-year retention period following a five-year period after termination of a swap is excessive.

148

This comment recommended that the Commission replace the proposed requirements for record retention in proposed § 49.12 with a seven-year retention period following final termination of the swap, during which time the records would be readily accessible by the SDR and available to the Commission.

149

147

ISDA/SIFMA at 43.

148

Joint SDR at 11.

149

Id.

Joint SDR also stated the Commission “should harmonize the SDR retention periods with that of Europe and other Commission regulated entities such as [DCMs, DCOs and SEFs],” and that a 7-year retention period “gets closer to a harmonized global standard.”

Id.

The Commission has determined to adopt the amendments to §§ 49.12 and 45.2 as proposed, except the Commission is not adopting the technical change of moving § 49.12(e) to § 49.13, as discussed below in Section II.I.

With regard to record retention period comments, the Commission notes that retention period in final § 49.12(b)(2) is the current retention period applicable to SDRs, not a new requirement, and that SDRs currently have this unique ten-year retention period because they are the source of all SDR data for the public and the CFTC. Further, the Commission believes the existing 10-year retention period has functioned well and did not propose to amend the retention period. Accordingly, the Commission declines to shorten the retention period.

I. § 49.13—Monitoring, Screening, and Analyzing Data

Existing § 49.13 implements CEA section 21(c)(5), which requires SDRs to, at the direction of the Commission, establish automated systems for monitoring, screening, and analyzing swap data, including compliance and frequency of end-user clearing exemption claims by individuals and affiliated entities.

150

Existing § 49.13 requires SDRs to: (i) Monitor, screen, and analyze all swap data in their possession as the Commission may require, including for the purpose of any standing swap surveillance objectives that the Commission may establish as well as ad hoc requests; and (ii) develop systems and maintain sufficient resources as necessary to execute any monitoring, screening, or analyzing functions assigned by the Commission.

151

150

7 U.S.C. 24a(c)(5).

151

See generally

17 CFR 49.13.

The Commission proposed to amend § 49.13 to provide more detail on the monitoring, screening, and analyzing tasks that an SDR may be required to perform as directed by the Commission. The Commission also proposed to amend § 49.13 to make clear that the requirements of proposed § 49.13 apply to SDR data reported to the SDR pursuant to parts 43, 45, and 46. The Commission received a number of comments on the proposed rule, both supporting and recommending against its adoption.

152

IATP generally supported the proposed rule. IATP at 7. IATP further provided recommendations and support for adopting specific requirements for SDRs, such as a requirement to produce a report regarding “mortgage swaps risks of reporting counterparties” that would be relevant to assessing climate-related financial risks, and to calculate positions for market participants.

Id.

at 8-9. ISDA/SIFMA recommended adopting a requirement that SDRs produce rejection statistics reports. ISDA/SIFMA at 45. Joint SDR generally supported adopting rules that provide more detail about the tasks that the Commission may require an SDR to perform. Joint SDR at 12. However, Joint SDR recommended against adopting the proposed rule, stating that the requirements in the proposed rule exceed those authorized by the Act, would impermissibly require the SDRs to perform regulatory functions, and that it would be impracticable for the SDRs to fulfill the proposed requirements for lack of sufficient data. Joint SDR at 12-15.

The Commission has determined not to make any amendments to § 49.13 at this time. The Commission believes it may benefit from further consideration and experience with swap data following the implementation of the requirements of part 49, as amended in this final rule, as well as the implementation of the significantly amended rules in part 45 that the Commission is adopting as final along with this final rule. The Commission may consider the proposed amendments to § 49.13 in a future rulemaking.

As part of the Proposal, the Commission also proposed a technical change that would move existing § 49.15(c) to § 49.13.

153

The Commission also proposed to move the requirements of existing § 49.12(e) to § 49.13. While moving existing §§ 49.15(c) and 49.12(e) to § 49.13 is not a substantive amendment, the Commission has determined that it would be more efficient to defer these proposed amendments along with the other proposed changes to existing § 49.13, and is therefore not adopting these amendments as part of this final rulemaking. Thus, the current text of § 49.13 will remain in effect after this rulemaking.

153

Existing § 49.15(c) provides that an SDR must notify the Commission of any swap transaction for which the real-time swap data was not received by the SDR in accordance with 17 CFR part 43. In addition to moving existing § 49.15(c) to § 49.13, the Commission proposed to amend the regulation to similarly require an SDR to notify the Commission with regard to data not received by the SDR pursuant to parts 45 and 46.

J. § 49.15—Real-Time Public Reporting by Swap Data Repositories

The Commission proposed to amend existing § 49.15 to conform the regulation to the proposed amended definitions in § 49.2. As discussed above, the Commission also proposed to

move existing § 49.15(c) to proposed § 49.13(c). Additionally, the Commission proposed to amend existing § 49.15(a) and § 49.15(b) to remove the term “swap data,” which is defined in § 49.2 as part 45 data, and replace it with text clarifying that § 49.15 pertains to swap transaction and pricing data submitted to an SDR pursuant to part 43. These non-substantive amendments do not affect the existing requirements of § 49.15.

The Commission did not receive any comments on the proposed amendments to § 49.15(b) and is adopting the amendments as proposed, with the exception of the proposed movement of existing § 49.15(c) to proposed § 49.13(c).

K. § 49.16—Privacy and Confidentiality Requirements of Swap Data Repositories

The Commission proposed to amend existing § 49.16 to conform the regulation to the proposed amendments to the definitions in § 49.2.

154

Specifically, the Commission proposed to amend § 49.16(a)(1) to clarify that the policy and procedure requirements of § 49.16 apply to SDR information and to any SDR data that is not swap transaction and pricing data disseminated under part 43.

155

The requirements include that an SDR have policies and procedures to protect the privacy and confidentiality of any and all SDR information and all SDR data (except for swap transaction and pricing data disseminated under part 43) that the SDR shares with affiliates and non-affiliated third parties. The proposed amendments also conform the text of § 49.16 with the removal of the term “reporting entity” and the amended definitions of “SDR data” and “swap data” in final § 49.2. The amendments are non-substantive and do not affect the existing requirements or applicability of § 49.16.

154

See

section II.A above.

155

Proposal at 21059.

The Commission did not receive any comments on the proposed conforming amendments to § 49.16 and is adopting the amendments as proposed.

L. § 49.17—Access to SDR Data

Section 49.17 sets forth the requirements and conditions for an SDR to provide access to SDR data to the Commission, foreign and domestic regulators, and swap counterparties, among others.

156

The Commission proposed to amend § 49.17 to clarify some of the requirements in the regulation with respect to the Commission's access to SDR data. One commenter recommended revisions to the proposed amendments to § 49.17, as discussed below. The Commission has determined to adopt the amendments to § 49.17 as proposed.

156

See generally

17 CFR 49.17.

As discussed in the Proposal, the Commission believes the amendments to the definition of “direct electronic access” in final § 49.17(b)(3) will provide additional flexibility to implement methods for data transfers from SDRs to the Commission, and may facilitate the use of advancing technology and more efficient means of direct electronic access for the Commission. The amendments also make clear that the Commission may decide to accept other methods of access, as long as the method is able to efficiently provide the Commission with real-time access to SDR data and scheduled SDR data transfers to the Commission.

1. Amendments to § 49.17(b)—Definition of Direct Electronic Access

Existing § 49.17(c)(1) requires an SDR to provide “direct electronic access,” a term defined in existing § 49.17(b)(3),

157

to the Commission or the Commission's designee, including another registered entity, in order for the Commission to carry out its legal and statutory responsibilities under the Act.

158

The Commission is amending the definition of “direct electronic access” in final § 49.17(b)(3) to mean an electronic system, platform, framework, or other technology that provides internet-based or other form of access to real-time SDR data that is acceptable to the Commission and also provides scheduled data transfers to Commission electronic systems. The amended definition expands the potential means by which an SDR may provide direct electronic access to include “other technology” and “other forms of access.”

159

The amendments are intended to provide greater flexibility to SDRs and the Commission by making clear that the Commission may accept other technology or other forms of access that are not internet-based, as long as the access to SDR data is real-time and provides for scheduled SDR data transfers to the Commission. The Commission believes innovation and advances in technology may provide alternative, more-efficient means for data transfer, and the amended regulation is intended to facilitate the use of such technology by SDRs and the Commission.

157

17 CFR 49.17(b)(3).

158

17 CFR 49.17(c)(1).

159

Current § 49.17(b)(3) defines direct electronic access as an electronic system, platform or framework that provides internet or Web-based access to real-time swap transaction data and also provides scheduled data transfers to Commission electronic systems.

The revised definition of direct electronic access also adds a condition that the technology or form of access be “acceptable to the Commission” in order to clarify that any form of direct electronic access, including any new technology, must be approved by the Commission. As discussed below, the Commission anticipates working with SDRs to determine acceptable forms of direct electronic access, consistent with the Commission's current practice of coordinating and collaborating with SDRs to facilitate transfers of, and real-time access to, SDR data.

Finally, the amended definition of “direct electronic access” replaces the phrase “real-time swap transaction data”

160

with “real-time SDR data,” to eliminate confusion and maintain consistency with the use of the term “SDR data” in other amended provisions in part 49.

161

This non-substantive amendment is not intended to change the existing requirements or current SDR practice for providing the Commission with direct electronic access to SDR data.

160

17 CFR 49.17(b)(3).

161

The Commission notes that the phrase “real-time” is often used to reference swap transaction and pricing data that is publicly reported pursuant to part 43. In this instance, the term refers to direct electronic access requiring that SDR data be available in real time to the entity granted direct electronic access (

i.e.,

the Commission or its designee).

2. Amendments to § 49.17(c)—Commission Access

The Commission is amending § 49.17(c) to incorporate the requirements of current § 45.13(a),

162

which relates to the requirements for an SDR to maintain and transmit data to the Commission, and to make additional clarifications in the regulation. The Commission is also making non-substantive edits to final § 49.17 to conform terms used in the section with the rest of the Commission's regulations (

e.g.,

replacing “swap data and SDR Information” with “SDR data and SDR Information”). The amendments are intended to consolidate other related requirements into final § 49.17(c) and to improve the regulation's clarity and

consistency with other Commission regulations.

162

While the amendments consolidate the requirements for Commission access to SDR data, the Commission did not propose to modify current § 45.13(a) in the Proposal.

See

Proposal at 21060, n. 132. The Commission subsequently proposed amendments to current § 45.13(a) that are consistent with final § 49.17(c) in a separate notice of proposed rulemaking related to the Roadmap.

See

85 FR at 21633.

Final § 49.17(c) adds introductory text that requires an SDR to provide the Commission with access to all SDR data maintained by the SDR.

163

Final § 49.17(c)(1) retains the requirements of current § 49.17(c)(1) and adds a provision to incorporate the requirements of current § 45.13(a), with modifications.

164

Specifically, final § 49.17(c)(1) requires an SDR to maintain all SDR data reported to the SDR in a format acceptable to the Commission, and to transmit all SDR data requested by the Commission to the Commission as instructed by the Commission. Section 49.17(c)(1) also includes a new provision not found in current § 45.13(a), stating that the Commission's instructions may include, but are not limited to, the method, timing, and frequency of transmission, as well as the format and scope of the SDR data to be transmitted. Final § 49.17(c)(1) also revises the requirement in existing § 45.13(a) that an SDR maintain and transmit “swap data” to “SDR data,” to make clear that an SDR must maintain all SDR data reported to the SDR in a format acceptable to the Commission and transmit all SDR data requested by the Commission.

165

163

See

17 CFR 49.17(c)(1) (providing that a registered swap data repository shall provide direct electronic access to the Commission or the Commission's designee, including another registered entity, in order for the Commission to carry out its legal and statutory responsibilities under the Act and related regulations).

164

Section 45.13(a) provides that an SDR shall maintain all swap data reported to it in a format acceptable to the Commission, and shall transmit all swap data requested by the Commission to the Commission in an electronic file in a format acceptable to the Commission.

165

The Commission believes this revision is consistent with current SDR practice.

3. § 49.17(f)(2)—Technical Correction

The Commission is amending existing § 49.17 to replace an incorrect reference to “§ 37.12(b)(7)” at the end of paragraph (f)(2) with the correct reference to “§ 39.12(b)(7).”

166

The Commission is also making non-substantive amendments to conform the terminology in final § 49.17(f)(2) with the terms listed in final § 49.2.

166

There is no § 37.12(b)(7) in the Commission's regulations.

See

17 CFR 37.12(b).

4. Delegation of Authority—§ 49.17(i)

The Commission is moving the delegation of authority provision in existing § 49.17(i)

167

to final § 49.31(a)(7). Existing § 49.17(i) delegates to the Director of DMO the authority reserved to the Commission in existing § 49.17. This includes the authority to instruct an SDR on how to transmit SDR data to the Commission. As discussed below, the Commission proposed to consolidate the delegation of authority provisions in part 49 in final new § 49.31. This amendment is not a substantive change, as all functions delegated to the Director of DMO under existing § 49.17(i) will continue to be delegated under final § 49.31.

167

17 CFR 49.17(i).

5. Comments

The Commission requested comment on all aspects of proposed § 49.17. The Commission also requested specific comment on a whether there is a need to further clarify any of the requirements of proposed § 49.17 and whether there are any aspects of existing or proposed § 49.17 that would inhibit or prevent the development of new technological approaches to SDR operations or the provision of SDR data to the Commission.

168

Proposal at 21061.

The Commission received one comment on the proposed rule. The comment agreed with the Commission that flexibility as to future technological advancements and innovations is an important consideration in an SDR's provision of direct electronic access to the Commission.

169

This comment also, however, recommended a number of textual revisions to proposed § 49.17 that would condition or limit the Commission's authority and discretion in making determinations regarding an SDR's maintenance and transfer of data pursuant to the regulation.

170

169

DDR at 4.

170

Id.

Specifically, the comment asserted that the amended definition of direct electronic access in proposed § 49.17(b)(3) is too broad because the term “SDR data” includes data reported pursuant to part 46 of this chapter, and the Commission should not have a time-sensitive need for such data.

171

The comment also recommended revising the text of the proposed definition to subject the Commission's determinations regarding methods of transmission to a reasonableness standard and require the Commission to work with SDRs in making such determinations.

172

171

Id.

(stating the Commission should replace the term “SDR data” which “swap data and swap transaction and pricing information”).

172

Id.

(recommending the Commission replace the phrase “that is acceptable to the Commission” with “that has been agreed to by the Commission, in its reasonable discretion, following consultation with the SDR”).

In addition, the comment recommended the Commission remove the phrase “in a format acceptable to the Commission” from the second sentence of proposed § 49.17(c)(1), asserting that the phrase deprives the SDRs of the flexibility and discretion needed with respect to the storage and maintenance of data without a clear regulatory purpose.

173

Similarly, the comment recommended amending the text of the second sentence of proposed § 49.17(c)(1) to provide “reasonable limitations” on the Commission's discretion to instruct an SDR on the transmission of SDR data to the Commission.”

174

173

Id.

174

DDR at 4 (stating that the Commission should add the phrase “as soon as practicable, given the nature of the instructions and the SDR's circumstances” at the end of the second sentence of proposed § 49.17(c)(1)).

6. Final Rule

The Commission has determined to adopt the amendments to 49.17 as proposed.

With regard to the comment that the definition of direct electronic access is too broad and provides the Commission with too much discretion, the Commission believes the amendments to the definition are appropriately tailored to help ensure that the Commission's direct electronic access, and the data provided through this access, serves the Commission needs to meet its regulatory obligations, and ensures that an SDR does not change the means of direct electronic access in a manner that impairs the Commission's regulatory functions. The Commission intends to be flexible, when possible, in regards to the methods and forms of direct electronic access an SDR may utilize, especially in the context of technological advancement, and believes that the definition ensures an appropriate level of discretion as to whether a method of direct electronic access is acceptable.

The Commission believes final § 49.17(b)(3) will not hinder or prevent an SDR from incorporating new technology for collecting or maintaining SDR data, as long as the SDR data is collected by the SDR and provided to the Commission as required. The Commission does, however, expect an SDR to provide SEFs, DCMs, and reporting counterparties with commonly-used methods for reporting SDR data and to not force SEFs, DCMs, and reporting counterparties to unnecessarily expend resources on technology upgrades by unreasonably limiting available reporting methods. The Commission also expects SDRs to be particularly accommodating of non-SD/MSP/DCO reporting counterparties

that may have limited resources to devote to technology changes.

Similarly, final § 49.17(c)(1) is intended to provide clarity and certainty to SDRs regarding their responsibilities and the Commission's authority with respect to how an SDR maintains and transmits data to the Commission.

175

The Commission believes it is critical that it has the ability to instruct SDRs regarding all aspects of SDR data transfers to the Commission, including, but not necessarily limited to, method of transmission (

e.g.,

electronic or non-electronic transmission and file types used for transmission), the timing of data transmission, the frequency of data transmission, the formatting of the data to be transmitted (

e.g.,

data feeds or batch transmission), and the actual SDR data to be transmitted. As noted above, innovation and advances in technology may provide alternative and more efficient means for data transfer, so this flexibility may facilitate the use of such technology by SDRs and the Commission. Also, the format, frequency, and related matters may well depend on the circumstances of a particular context, so an inflexible rule would not be appropriate.

175

While these revisions may appear to broaden the scope of the Commission's ability to define the terms of data transfer to the Commission, existing § 45.13 provides the Commission broad discretion in instructing SDRs on how to send data to the Commission to enable the Commission to perform its regulatory functions, increase market transparency, and mitigate systemic risk.

See

Swap Data Recordkeeping and Reporting Requirements 77 FR 2136, 2169 (Jan. 13, 2012) (requiring an SDR to maintain all swap data reported to it in a format acceptable to the Commission, and to transmit all swap data requested by the Commission to the Commission in an electronic file in a format acceptable to the Commission);