# Real-Time Public Reporting Requirements and Swap Data Recordkeeping and Reporting Requirements > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2023-28350 ## Record - **Collection:** Federal Register - **Document type:** Proposed Rule - **Published:** December 28, 2023 - **Citation:** 88 FR 90046 ## Text COMMODITY FUTURES TRADING COMMISSION 17 CFR Parts 43 and 45 RIN 3038-AF26 Real-Time Public Reporting Requirements and Swap Data Recordkeeping and Reporting Requirements AGENCY: Commodity Futures Trading Commission. ACTION: Notice of proposed rulemaking. SUMMARY: The Commodity Futures Trading Commission (the “Commission” or the “CFTC”) is proposing revisions to part 43 and part 45 of the Commission's regulations to: allow for continued geographic masking after the designation of the unique product identifier and product classification system (“UPI”) for swaps in the other commodity asset class; implement conforming changes in connection with the geographic masking requirement; add reportable data fields to appendix A to part 43 and appendix 1 to part 45 that promote international harmonization and further the Commission's surveillance and analysis activities; and implement non-substantive revisions to the descriptions of the existing reportable data elements in such appendices. DATES: Comments must be submitted on or before February 26, 2024. ADDRESSES: You may submit comments, identified by “Real-Time Public Reporting Requirements and Swap Data Recordkeeping and Reporting Requirements, RIN 3038-AF26,” by any of the following methods: • CFTC Comments Portal: https://comments.cftc.gov. Select the “Submit Comments” link for this rulemaking and follow the instructions on the Public Comment Form. • Mail: Send to Christopher Kirkpatrick, Secretary of the Commission, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW, Washington, DC 20581. • Hand Delivery/Courier: Follow the same instructions as for Mail above. Please submit your comments using only one of these methods. To avoid possible delays with mail or in-person deliveries, submissions through the CFTC Comments Portal are encouraged. All comments must be submitted in English, or if not, accompanied by an English translation. Comments will be posted as received to https://comments.cftc.gov. You should submit only information that you wish to make available publicly. If you wish the Commission to consider information that you believe is exempt from disclosure under the Freedom of Information Act (“FOIA”), a petition for confidential treatment of the exempt information may be submitted according to the procedures established in § 145.9 of the Commission's regulations. 1 1 17 CFR 145.9. The Commission reserves the right, but shall have no obligation, to review, pre-screen, filter, redact, refuse, or remove any or all submissions from https://www.comments.cftc.gov that it may deem to be inappropriate for publication, such as obscene language. All submissions that have been redacted or removed that contain comments on the merits of the rulemaking will be retained in the public comment file and will be considered as required under the Administrative Procedure Act and other applicable laws, and may be accessible under FOIA. FOR FURTHER INFORMATION CONTACT: Owen J. Kopon, Associate Chief Counsel, at (202) 418-5360 or okopon@cftc.gov, Division of Market Oversight (“DMO”); Alicia Viguri, Assistant Chief Counsel, at (202) 418-5219 or aviguri@cftc.gov, DMO; Isabella Bergstein, Assistant Chief Counsel, at (202) 418-5182 or ibergstein@cftc.gov, DMO; Chase Lindsey, Assistant Chief Counsel, at (202) 418-5231 or clindsey@cftc.gov, DMO; Kate Mitchel, Associate Director, at (202) 418-5871 or kmitchel@cftc.gov, Division of Data (“DOD”); Robert Stowsky, IT Specialist, at (202) 418-5104 or rstowsky@cftc.gov, DOD; John Roberts, Research Analyst, at (202) 418-5943 or jroberts@cftc.gov, Office of the Chief Economist (“OCE”); Lee Baker, Research Economist at (202) 418-5175 or lbaker@cftc.gov, OCE; in each case at the Commodity Futures Trading Commission, 1155 21st Street NW, Washington, DC 20581. SUPPLEMENTARY INFORMATION: I. Background A. Introduction The Commission's real-time public reporting and swap data reporting regulations were first adopted in 2012, and are located in parts 43 and 45 of the Commission's regulations. 2 The 2012 Real-Time Public Reporting of Swap Transaction Data Final Rule (the “2012 RTR Final Rule”) set forth regulations that require swap counterparties, swap execution facilities (“SEFs”), and designated contract markets (“DCMs”) to report publicly reportable swap transactions (“PRST”) to swap data repositories (“SDRs”). 3 Additionally, the 2012 RTR Final Rule set forth regulations that require SDRs to publicly disseminate swap transaction and pricing data (“STAPD”) in real-time, subject to certain exceptions. 4 2 See 17 CFR parts 43, 45; Final Rule, Real-Time Public Reporting of Swap Transaction Data, 77 FR 1182 (Jan. 9, 2012); Final Rule, Swap Data Recordkeeping and Reporting Requirements, 77 FR 2136 (Jan. 13, 2012). 3 See 2012 RTR Final Rule, 77 FR 1182; 17 CFR 43.3(a). 4 See 2012 RTR Final Rule, 77 FR 1182; 17 CFR 43.3(b), 43.4(c) and (d). In the 2012 Swap Data Recordkeeping and Reporting Requirements Final Rule (“2012 SDRR Final Rule”), the Commission implemented the swap data reporting rules. The part 45 regulations require SEFs, DCMs, and reporting counterparties (“RCPs”) (collectively, “Reporting Entities”) to report swap data to SDRs. 5 SDRs collect and maintain data related to swap transactions, making such data electronically available for regulators or the public. 5 See 2012 SDRR Final Rule, 77 FR 2136; 17 CFR 45.3, 45.4. In 2013, the Commission adopted a block trade rule 6 to implement the statutory requirements of Commodity Exchange Act (“CEA”) section 2(a)(13)(E)(i)-(iv). 7 In 2016, the Commission amended part 45 to set forth swap data reporting obligations with respect to cleared swaps. 8 6 Procedures to Establish Appropriate Minimum Block Sizes for Large Notional Off-Facility Swaps and Block Trades, 78 FR 32866 (May 31, 2013) (the “Block Trade Final Rule”). 7 These CEA sections contain provisions ( e.g., time delays) that the Commission must include in its required rulemakings governing public reporting of STAPD for the categories of swaps set forth in CEA sections 2(a)(13)(C)(i) and (ii), 7 U.S.C. 2(a)(13)(C)(i) and (ii). See Notice of Proposed Rulemaking, Real-Time Public Reporting Requirements, 85 FR 21516 n.5 (Apr. 17, 2020) (the “2020 RTR NPRM”). 8 Amendments to Swap Data Recordkeeping and Reporting Requirements for Cleared Swaps, 81 FR 41736 (June 27, 2016). In 2020, the Commission amended part 43 and part 45 by issuing a new Real-Time Public Reporting Requirements final rule (the “2020 RTR Final Rule”) 9 and Swap Data Recordkeeping and Reporting Requirements final rule (the “2020 SDRR Final Rule”) 10 (collectively the “2020 Final Rules”). The 2020 RTR Final Rule revised the method and timing for real-time reporting and public dissemination, generally and for specific types of swaps; the delay and anonymization of the public dissemination of block trades and large notional trades; the standardization and validation of real-time reporting fields; the delegation of specific authority to Commission staff; and the clarification of specific real-time reporting questions and common issues. 11 9 Real-Time Public Reporting Requirements, 85 FR 75422 (Nov. 25, 2020) (the “2020 RTR Final Rule”). 10 Swap Data Recordkeeping and Reporting Requirements, 85 FR 75503 (Nov. 25, 2020) (the “2020 SDRR Final Rule”). 11 See 2020 RTR Final Rule, 85 FR at 75422. The 2020 SDRR Final Rule generally revised the reporting regulations to: streamline the requirements for reporting swaps; require SDRs to validate swap reports; permit the transfer of swap data between SDRs; alleviate reporting burdens for non-swap dealer (“SD”)/major swap participant (“MSP”) reporting counterparties; and harmonize with international technical guidance the swap data elements that counterparties are required to report to SDRs. 12 12 See 2020 SDRR Final Rule, 85 FR at 75503, 75504. To ensure that the Commission continues to receive accurate and high-quality data on swap transactions for its regulatory oversight role, as well as address international swap reporting developments, the Commission proposes revisions to parts 43 and 45 to: allow for geographic masking after designation of the UPI for swaps falling within the other commodity asset class; 13 implement conforming changes in connection with the geographic masking requirement; add reportable data fields to appendix A to part 43 and appendix 1 to part 45; and implement non-substantive revisions to the descriptions of the existing reportable data elements in such appendices. 13 Other commodity, as used in this notice of proposed rulemaking, shall have the meaning ascribed to such term in § 43.2 ( i.e., any commodity that is not categorized in the interest rate, credit, foreign exchange or other asset classes as may be determined by the Commission). B. International Harmonization Since November 2014, regulators overseeing major derivatives jurisdictions and markets, including the CFTC, have come together through the Bank for International Settlements Committee on Payments and Market Infrastructures (“CPMI”) and the International Organization of Securities Commissions (“IOSCO”) working group for the harmonization of key over-the-counter (“OTC”) derivatives data elements (“Harmonisation Group”) to develop global guidance regarding the definition, format, and usage of key OTC derivatives data elements reported to trade repositories (“TRs”), including the unique transaction identifier (“UTI”), the UPI, and other critical data elements (“CDE”). 14 The Harmonisation Group published Guidance on the Harmonisation of Unique Transaction Identifier (“UTI Technical Guidance”) 15 and Technical Guidance on the Harmonisation of the Unique Product Identifier (“UPI Technical Guidance”) 16 in February and September 2017, respectively. 17 In April 2018, the Harmonisation Group published Technical Guidance on the Harmonisation of Critical OTC Derivatives Data Elements (other than UTI and UPI) (“CDE Technical Guidance”). 18 14 2020 SDRR NPRM, 85 FR at 21579. 15 CPMI-IOSCO, Technical Guidance, Harmonisation of the Unique Transaction Identifier (Feb. 2017), available at https://www.iosco.org/library/pubdocs/pdf/IOSCOPD557.pdf (“UTI Technical Guidance”). 16 CPMI and IOSCO, Technical Guidance: Harmonisation of the Unique Product Identifier, (Sept. 2017), available at https://www.iosco.org/library/pubdocs/pdf/IOSCOPD580.pdf (“UPI Technical Guidance”). 17 2020 SDRR NPRM, 85 FR at 21579-21580. 18 The CDE Technical Guidance was finalized following consultative reports in September 2015, October 2016, and June 2017. See CPMI-IOSCO, Technical Guidance, Harmonisation of Critical OTC Derivatives Data Elements (other than UTI and UPI) (Apr. 2018), available at https://www.bis.org/cpmi/publ/d175.pdf. In the UPI Technical Guidance, CPMI and IOSCO specify the requirements necessary for a product identifier to facilitate the reporting of swap data to TRs and the aggregation of such data by authorities. 19 CPMI and IOSCO concluded that semantically meaningless codes should be assigned to each unique product, with the product attributes associated with each code discoverable by reference to standardized tables (“Reference Data Library” or “UPI Taxonomy”). 20 The UPI Technical Guidance also requires that the Reference Data Library contain specific reference data elements that vary by asset class. These required reference data elements detail the asset class, asset class sub-types, underlying asset, and other swap product attributes. 21 The UPI Technical Guidance concluded that a UPI should satisfy fifteen distinct technical principles, 22 and appointed the Financial Stability Board (“FSB”) 23 to designate one or more service providers to issue product codes and operate and maintain the Reference Data Library. In May 2019, the FSB designated the Derivatives Service Bureau Limited (“DSB”) as the UPI service provider. 24 19 See Order Designating the Unique Product Identifier and Product Classification System to be Used in Recordkeeping and Swap Data Reporting, 88 FR 11790, 11791 (Feb. 24, 2023) (the “February 2023 UPI Order”); UPI Technical Guidance at 3. 20 February 2023 UPI Order at 11791; UPI Technical Guidance at 21. 21 February 2023 UPI Order at 11791. 22 Id. The fifteen technical principles identified by CPMI and IOSCO are: jurisdiction neutrality, uniqueness, consistency, persistence, adaptability, clarity, ease of assignment/retrieval/query, long-term viability, scope neutrality, compatibility, comprehensiveness, extensibility, precision, public dissemination, and representation. 23 Id. The FSB is an international body that monitors and makes recommendations about the global financial system. The Commission, though not an FSB member, is a member of IOSCO. 24 February 2023 UPI Order at 11791; FSB, Press Release: FSB designates DSB as Unique Product Identifier Service Provider (May 2, 2019), available at https://www.fsb.org/2019/05/fsb-designates-dsb-as-unique-product-identifier-upi-service-provider/. The CDE Technical Guidance provides technical guidance on the definition, format, and allowable values of critical data elements that are reported to TRs and important to facilitate aggregation by authorities. 25 A second version of the CDE Technical Guidance was published in September 2021 and included corrections to the April 2018 CDE Technical Guidance to facilitate the jurisdictional implementations of the CDE Technical Guidance. 26 The third version of the CDE Technical Guidance (the “2023 CDE Technical Guidance”) was published in September 2023 and includes certain revisions and new data elements deemed necessary to further improve standardization and understanding of swap data. 27 25 2020 SDRR NPRM, 85 FR at 21580. 26 CPMI-IOSCO, Harmonisation of Critical OTC Derivatives Data Elements (other than UTI and UPI), Revised CDE Technical Guidance—Version 2 (“Revised CDE Technical Guidance”), at 11 (Sept. 2021), available at https://www.leiroc.org/publications/gls/roc_20210922.pdf. 27 CPMI-IOSCO, Harmonisation of Critical OTC Derivatives Data Elements (other than UTI and UPI), Revised CDE Technical Guidance—Version 3, (Oct. 2023), available at https://www.leiroc.org/publications/gls/roc_20230929.pdf. The Commission is part of the CDE Technical Guidance Harmonisation Group. In this role, Commission staff works alongside representatives from several countries to provide feedback regarding the data elements, as well as participate in CDE Technical Guidance public consultations, related industry workshops, and conference calls. 28 28 2020 SDRR Final Rule, 85 FR at 75505. The CDE Technical Guidance is global guidance addressed to authorities 29 that “takes account of relevant international technical standards where available and is jurisdiction-agnostic, thus enabling the consistent global aggregation of OTC derivatives transaction data.” 30 As emphasized in the 2020 SDRR Final Rule, the Commission believes the implementation of the CDE Technical Guidance will improve the harmonization of TRs data across FSB member jurisdictions. Wide implementation would allow market participants to report swap data to several jurisdictions in the same format, supporting data aggregation for the analysis of global systemic risk in swap markets. 31 29 Revised CDE Technical Guidance—Version 2 at 10. 30 See BIS, Harmonisation of Critical OTC Derivatives Data Elements (other that UTI and UPI)—Technical Guidance (Apr. 2018), available at https://www.bis.org/cpmi/publ/d175.htm. 31 2020 SDRR Final Rule, 85 FR at 75540. The amendments in this proposal demonstrate the Commission's commitment to the development of global guidance on key OTC derivatives data elements reported to TRs to achieve international harmony in the area of swaps reporting. C. Statutory and Regulatory Framework for Real-Time Public Reporting and Swap Data Recordkeeping and Reporting Section 2(a)(13) of the CEA authorizes and requires the Commission to promulgate rules that provide for the public availability of STAPD in real-time in such form and at such times as the Commission determines appropriate to enhance price discovery. 32 CEA sections 2(a)(13)(C) and (E) reflect Congress' intent that regulators “ensure that the public reporting of swap transactions and pricing data does not disclose the names or identities of the parties to the transactions.” 33 32 7 U.S.C. 2(a)(13); Notice of Proposed Rulemaking, Real-Time Public Reporting of Swap Transaction Data, 75 FR 76140, 76141 (Dec. 7, 2010). 33 See Notice of Proposed Rulemaking, Real-Time Public Reporting of Swap Transaction Data, 75 FR 76140, 76150 n.46 (Dec. 7, 2010).; 156 Cong. Rec. S5921 (daily ed. July 15, 2010) (statement of Sen. Blanche Lincoln). Specifically, section 2(a)(13)(C)(iii) of the CEA requires that the Commission prescribe rules that maintain the anonymity of business transactions and market positions of the counterparties to an uncleared swap. Section 2(a)(13)(E)(i) of the CEA directs the Commission to protect the identities of counterparties to swaps subject to the mandatory clearing requirement, swaps excepted from the mandatory clearing requirement, and voluntarily cleared swaps. 34 34 See Block Trade Final Rule, 78 FR at 32867. The Commission implemented the provisions of section 2(a)(13) of the CEA by adopting the 2012 RTR Final Rule on January 9, 2012. The real-time reporting regulations are located in part 43 and establish, inter alia: (1) the entities or persons responsible for reporting STAPD; (2) the entities or persons responsible for publicly disseminating such data; and (3) the data fields and guidance on the appropriate format and manner for STAPD to be reported to the public in real-time. 35 35 2012 RTR Final Rule, 77 FR at 1183. The 2012 RTR Final Rule required reporting parties, SEFs and DCMs to report the actual underlying asset(s) of PRSTs to an SDR. 36 The SDR, in turn, is required to publicly disseminate the actual underlying asset(s) of all publicly reportable swap transactions in the interest rate, credit, equity, and foreign exchange asset classes. 37 SDRs are similarly required to publicly disseminate the actual underlying asset(s) for certain swaps in the other commodity asset class, subject to the anonymity protections set out in § 43.4(c)(4). 38 36 This requirement was originally adopted as 17 CFR 43.4(d)(2), but has since been re-designated as 17 CFR 43.4(c)(2) in the 2020 RTR Final Rule. 37 17 CFR 43.4(c)(3). 38 17 CFR 43.4(c)(4). For all swaps in the interest rate, credit, foreign exchange and equity classes, the Commission determined that the actual underlying asset would be disseminated, regardless of whether a swap was executed on or pursuant to the rules of a SEF or DCM, or if it was an off-facility swap. 39 With respect to swaps in the other commodity asset class, § 43.4(d)(4)(ii) directed that, if the PRST referenced, or was economically related to, any of the “Enumerated Physical Commodity Contracts and Other Contracts” listed in appendix B to part 43, or if the swaps were executed on or pursuant to the rules of a SEF or DCM, the actual underlying physical commodity or referenced price or index must be publicly disseminated by the SDR. 40 39 2012 RTR Final Rule at 1209; 17 CFR 43.4(c)(3) and (4). 40 2012 RTR Final Rule at 1211-1212; 17 CFR 43.4(c)(4)(ii). Appendix B listed 28 “Enumerated Physical Commodity Contracts” as well as 1 additional contract—swaps referenced to Brent Crude Oil (ICE) or economically related to Brent Crude Oil (ICE)—under the “Other Contracts” section. The 2020 RTR Final Rule relocated § 43.4(d)(4) to § 43.4(c)(4). 85 FR at 75439. However, the Commission determined that all off-facility swaps in the other commodity asset class that did not fall under § 43.4(d)(4)(ii) would not be required to comply with the real-time reporting and public dissemination requirements under part 43 because of the increased likelihood that public dissemination of the underlying asset could disclose the identity, business transactions or market positions of a counterparty, until the adoption of special accommodations in a future Commission release to address these concerns. 41 41 2012 RTR Final Rule, 77 FR at 1211. The Block Trade Final Rule addressed the public dissemination of STAPD for the group of other commodity swaps that were not covered under § 43.4(d)(4)(ii) by adding § 43.4(d)(4)(iii) and appendix E to part 43. Section 43.4(d)(4)(iii) mandated that SDRs must publicly disseminate the details about the geographic location of the underlying assets of the other commodity swaps not described in § 43.4(d)(4)(ii) pursuant to appendix E to part 43. Appendix E provides top-coding for various geographic regions. 42 Hence, by complying with appendix E, the SDRs would mask or disguise the geographic details related to the underlying assets of a swap when publicly disseminating such STAPD. 43 In addition to appendix E, the Block Trade Final Rule added 13 contracts to appendix B for which an SDR would be required to publicly disseminate the actual underlying asset without geographic masking. 42 Block Trade Final Rule, 78 FR at 32910, 32938, 32941. 43 Id. at 32909. As previously mentioned, the Commission amended parts 43 and 45 in November 2020. Among other objectives, the 2020 Final Rules revised the method and timing for swap real-time reporting and public dissemination, the requirements for swap reporting, and defined and adopted swap data elements that harmonize with international technical guidance. 44 44 2020 RTR Final Rule, 85 FR at 75422; and 2020 SDRR Final Rule, 85 FR at 75503. In its 2020 Notice of Proposed Rulemaking: Real-Time Public Reporting Requirements (“2020 RTR NPRM”), the Commission proposed eliminating appendix B to part 43 and former § 43.4(d)(4)(ii), which required that SDRs publicly disseminate the actual underlying assets of certain swaps in the other commodity asset class that either (i) reference one of the contracts described in appendix B to part 43 or (ii) are economically related to such contracts. The rationale for the proposal was to extend the geographic masking for all of the underlying assets for the other commodity asset class, based on the Commission's belief that other commodity swaps referencing, or economically related to, the contracts in appendix B could be sufficiently bespoke to warrant the additional masking. 45 45 2020 RTR NPRM, 85 FR at 21530. After considering whether the proposed geographic masking expansion outweighed the associated reduction in transparency, the Commission declined to adopt the proposed revisions to the masking requirements. The Commission determined that the basis for adopting § 43.4(d)(4) in 2012 remained operative and, as such, left Appendices B and E the same as had been adopted in the 2012 RTR Final Rules and the Block Trade Final Rule, respectively. 46 46 The Commission did make minor technical edits and relocated § 43.4(d)(4) to § 43.4(c)(4). 2020 RTR Final Rule, 85 FR at 75439. Section 21(b) of the CEA directs the Commission to prescribe standards that specify the data elements for each swap that shall be collected and maintained by each registered SDR. 47 In furtherance of this mandate, in adopting the 2020 Final Rules the Commission reviewed the STAPD data fields in appendix A to part 43 and the swap data elements in appendix 1 to part 45 and determined that the STAPD data fields in appendix A to part 43 would be a subset of the part 45 swap data elements in appendix 1 to part 45. In an effort to harmonize both sets of data, the Commission also reviewed the CDE Technical Guidance to determine which data elements the Commission could adopt. 48 In addition to adopting and including the CDE Technical Guidance Data Elements in appendix A and appendix 1, the Commission, listed additional CFTC-specific data elements that support the Commission's regulatory responsibilities in both appendices. 49 47 7 U.S.C. 24a(b)(1). 48 2020 RTR Final Rule, 85 FR at 75457; 2020 SDRR Final Rule, 85 FR at 75540. 49 2020 SDRR Final Rule, 85 FR at 75540. Simultaneous with the adoption of the 2020 Final Rules, Commission staff published a technical specification setting forth the form and manner for reporting the required swap data elements under parts 43 and 45 (the “Technical Specification”). The Technical Specification provides technical guidance on the definition, format, allowable values and validation rules for those data elements required to be reported and publicly disseminated pursuant to part 43, as well as the reportable data elements required to be reported to SDRs under part 45. Commission staff revised the Technical Specification in September 2021, August 2022 and March 2023 (the “Revised Technical Specification”). 50 50 CFTC, Parts 43 and 45 Technical Specification (March 2023), available at https://www.cftc.gov/LawRegulation/DoddFrankAct/Rulemakings/DF_18_RealTimeReporting/index.htm and https://www.cftc.gov/LawRegulation/DoddFrankAct/Rulemakings/DF_17_Recordkeeping/index.htm. As discussed above, the Commission has been heavily involved in the international harmonization efforts of swap data reporting. In particular, with respect to unique identifiers, the Commission included the UPI in the 2012 RTR Final Rule 51 and the 2012 SDRR Final Rule, as well as the Data Element Appendices. 52 In the 2020 RTR Final Rule, the Commission included the UPI in the revised Data Element Appendices. The Commission also removed § 43.4(e), which gave SDRs discretion regarding what fields to publicly disseminate after a UPI exists, as the fields required to be publicly disseminated are included in appendix A to part 43, as modified by the 2020 RTR Final Rule. 53 The requirement to report and disseminate the UPI is set out through the inclusion of the UPI in appendix A to part 43. 54 51 2012 RTR Final Rule, 77 FR at 1212. 52 2012 SDRR Final Rule, 77 FR at 2166. 53 See 85 FR at 75439. 54 The use of the UPI in real-time public reporting is also referenced in § 45.7 of the Commission's regulations. Section 45.7 provides that each swap must be identified in all recordkeeping and all swap data reporting pursuant to part 45 by means of a UPI and product classification system acceptable to the Commission, when such an identifier and classification system has been designated by the Commission. The UPI and product classification system are required to identify and describe the swap asset class and the sub-type within that asset class to which the swap belongs, and the underlying product for the swap, with sufficient distinctiveness and specificity to enable the Commission and other financial regulators to fulfill their regulatory responsibilities and to assist in real time reporting of swaps in part 43. 55 55 17 CFR 45.7 Section 45.7 further provides that, once the Commission determines that a UPI and product classification system is available for use, the Commission shall designate the UPI and product classification system by means of an order published in the Federal Register and on the Commission's website. The designation order will include the notice of the designation, the contact information of the issuer of such unique product identifiers, and information concerning the procedure and requirements to obtain UPIs and use the product classification system. Finally, § 45.7 directs that each registered entity and swap counterparty use the UPI and product classification system in all recordkeeping and swap data reporting once designated by the Commission. Prior to such designations, the regulation provisionally mandates use of the internal product identifier or product description used by the SDR to which a swap is reported in all recordkeeping and swap data reporting pursuant to part 45. 56 56 Id. On February 16, 2023, the Commission issued the February 2023 UPI Order designating the UPIs issued by the DSB (“DSB UPIs”) for swaps in the credit, equity, foreign exchange, and interest rate asset classes as the UPI and product classification system to be used in recordkeeping and swap data reporting pursuant to the Commission's regulations, pursuant to section 21(b) of the Act and Commission regulation § 45.7. 57 57 See the February 2023 UPI Order, 88 FR at 11790. The Commission determined that the DSB UPIs are acceptable and satisfy the criteria mandated by § 45.7, as they identify and describe the swap products with sufficient distinctiveness and specificity to: (i) enable the Commission and other regulators to fulfill their regulatory responsibilities, and (ii) assist in real-time public reporting of swap transaction and pricing data. 58 58 Id. at 11792. As prescribed in the February 2023 UPI Order, registered entities and swap counterparties shall use the DSB UPIs for swaps in the interest rate, credit, foreign exchange and equity classes in all recordkeeping and swap data reporting pursuant to part 45, as well as in real-time public reporting as required by part 43. The Commission expects registered entities and swap counterparties to use DSB UPIs in the aforementioned swap asset classes for part 45 recordkeeping and swap data reporting and part 43 real-time public reporting purposes by no later than January 29, 2024. 59 59 Id. at 11793. A designation of a UPI for swap products in the other commodity asset classes 60 was not made contemporaneously with the other asset classes. This delay has allowed additional time to ensure that appropriate anonymity protections continue to be in place for the swaps in the other commodity asset class once UPI is implemented in that asset class. Specifically, the Commission's regulations balance the CEA's mandate to provide for the public dissemination of STAPD, while maintaining the anonymity of business transactions and market positions of the counterparties to a swap. Geographic locations, such as delivery points, are often key product characteristics of the other commodity asset class swap products. The designation of a UPI code for other commodity asset class swaps would trigger the obligation under parts 43 and 45 that such UPI be included in each public dissemination and confidential swap report. 61 Without modifications to part 43, this could result in RCPs reporting to SDRs a UPI that contains detailed geographic information in contravention of § 43.4(c)(4)(iii) and appendix E to part 43, as explained further in section II.A. below. 60 The other commodity swap asset class includes all swaps not contained in the credit, equity, foreign exchange, and interest rate asset classes. See 17 CFR 45.1. 61 2012 SDRR Final Rule, 77 FR at 2166; 17 CFR 45.7(c)(1). To achieve international swap data standardization and promote post-trade transparency and price discovery, 62 the Commission proposes the following modifications to parts 43 and 45 of the Commission's regulations: (i) amend § 43.4(c) to allow for geographic masking after the designation of the UPI for the other commodity asset classes, (ii) implement conforming changes to § 43.4(c) and appendix E to part 43 in connection with the geographic masking requirement, (iii) implement modifications to § 45.7(b) with regards to the Commission's authority to subject a UPI designation order to conditions as deemed appropriate, and to limit, suspend, or withdraw such designation order after appropriate notice and opportunity to respond; and (iv) implement conforming and technical revisions to the title of § 45.7 and the text of § 45.7(c)(2). 62 2012 RTR Final Rule, 77 FR at 1182, 1185. Additionally, the Commission proposes modifications to appendix A to part 43 and appendix 1 to part 45 (the “Data Element Appendices”) to (v) add additional data elements, and (vi) modify the descriptions of the existing reportable data elements to harmonize with changes done at the international level and to remove form and manner detail from the Data Element Appendices that is set out in the Technical Specification. II. Proposed Amendments to Part 43 and Part 45 The adoption and implementation of the UPI and product classification system for swaps in the other commodity asset class requires certain modifications to part 43. As such, the Commission hereby proposes modifications to § 43.4(c) to allow for geographic masking after the designation of the UPI and product classification system for swaps in the other commodity asset class. In addition, the Commission is proposing modifications to § 45.7(b) with regards to the Commission's authority to subject a UPI designation order to conditions as deemed appropriate, and to limit, suspend, or withdraw such designation order. Finally, the Commission is proposing certain conforming and technical changes to § 43.4(c), appendix E to part 43, § 45.7, and § 45.7(c)(2). A. Proposed Addition of New § 43.4(c)(5) Prior to the implementation of the UPI and product classification system for swaps in the other commodity asset class, the regulatory structure must be in place to satisfy the CEA mandate to require real-time reporting that will enhance price discovery while also ensuring the anonymity of the swap counterparties and the confidentiality of business transactions and market positions. 63 The Commission is proposing to further implement this mandate by requiring Reporting Entities to submit to the SDRs a UPI that limits the geographic detail of the underlying asset pursuant to appendix E to part 43, for certain swap transactions in the other commodity asset class, when a UPI and product classification system has been designated by the Commission pursuant to regulation 45.7. The Commission is also proposing to require SDRs to disseminate the appropriately geographically limited UPI that the Reporting Entities report to the SDRs. 63 Id. at 1209. As previously discussed, CEA section 2(a)(13) directs the Commission to prescribe regulations providing for the public availability of transaction and pricing data for certain swaps. However, CEA sections 2(a)(13)(C) and (E) limits this direction by mandating the protection of the anonymity of swap counterparties, business transactions and market positions to swap transactions. The Commission implemented the statutory mandates through the adoption of the 2012 RTR Final Rule and the Block Trade Final Rule in 2012 and 2013, respectively. Notwithstanding the requirement to publicly disseminate data that discloses the underlying asset(s) of PRSTs, the 2012 RTR Final Rule prohibited an SDR from publicly disseminating STAPD in a manner that discloses or otherwise facilitates the identification of a swap counterparty. The Block Trade Final Rule required the public dissemination of certain swaps in the other commodity asset class to limit the geographic detail of the underlying asset pursuant to appendix E to part 43. The designation of the UPI for swaps in the other commodity asset class highlight operational complexities arising from the statutory requirements to both provide for the public availability of STAPD and also ensure the anonymity of the parties to a PRST. The implementation of a UPI code for other commodity asset class swaps pursuant to regulation 45.7 would trigger the obligation under parts 43 and 45 that the same UPI be included in each public dissemination and confidential swap report. 64 However, an anonymity issue arises because geographic locations, such as delivery points, are often key product characteristics of certain other commodity asset class swap products and, consequently, included in the underlying UPI reference data library elements. This would mean that key characteristics of each product, such as geographic locations, would be potentially publicly accessible, creating a risk that public dissemination of a UPI code pursuant to part 43 could inadvertently allow for the identification of the counterparties to the specific other commodity swap transactions. 64 17 CFR 45.7(c)(1); 17 CFR part 43, appendix A and 17 CFR part 45, appendix 1, (Data Element # 87 (Unique Product Identifier UPI) (noting that the Commission will designate a UPI pursuant to § 45.7). Without modifications to part 43, Reporting Entities would report to SDRs a UPI that contains detailed geographic information, dissemination of which could be contrary to § 43.4(c)(4)(iii) and appendix E. Without a rule amendment, SDRs would not be permitted to publicly disseminate a UPI for certain swaps in the other commodity asset class that require geographic masking under the Commission's current regulations, as such dissemination would violate § 43.4(c)(4)(iii). Therefore, an extension of the UPI mandate to the other commodity asset class must provide for the geographic masking requirement mandated by § 43.4(c)(4)(iii). Under proposed § 43.4(c)(5)(ii), Reporting Entities would be obligated to comply with the requirement to provide, and SDRs with their requirement to disseminate, a description of the underlying asset(s) that limits geographic detail pursuant to paragraph (c)(4)(iii) of § 43.4 by providing or disseminating, as applicable, STAPD that includes a UPI that identifies any specific delivery point or pricing point pursuant to appendix E to part 43. The proposed rule amendment harmonizes the competing obligations under § 43.4(c)(4)(iii) related to limiting geographic detail in public dissemination of certain swaps in the other commodity asset class and those under appendix A to disseminate a UPI, which may contain information that is not adequately geographically masked. However, the geographically limited UPI will not satisfy part 45 reporting obligations. Existing part 45 requires specific delivery and pricing point details to be reported, which would not be included in UPIs that disclose a more generic geographic location to comply with § 43.4(c)(4)(iii). Therefore, Reporting Entities will also need to report a UPI that contains those details in order to comply with the part 45 reporting requirements. Accordingly, proposed § 43.4(c)(5)(iii) provides that, notwithstanding the requirement under § 43.4(c)(5)(ii) to provide and disseminate a geographically-masked UPI pursuant to appendix E to part 43, Reporting Entities shall comply with part 45 reporting obligations by providing to SDRs a separate UPI that does not limit the geographic detail of the underlying assets. Finally, proposed § 43.4(c)(5)(i) provides that, for swaps in the interest rate, credit, equity, and foreign exchange asset classes, as well as swaps in the other commodity asset class described in § 43.3(c)(4)(ii), Reporting Entities shall comply with their requirement to provide an actual description of the underlying asset(s) by providing STAPD that includes a UPI system, once such identifier has been designated by the Commission to be used in recordkeeping and swap data reporting pursuant to regulation 45.7. Proposed § 43.3(c)(5)(i) also provides that an SDR will be deemed to have complied with the requirement to disseminate an actual description of the underlying asset(s) by disseminating STAPD that includes a UPI that has been designated by the Commission. B. Conforming Changes to § 43.4(c) and Appendix E The Commission is proposing to make additional conforming and technical changes to § 43.4(c) and appendix E to align with the proposed modifications discussed above. Existing § 43.4(c)(2) requires Reporting Entities to provide an SDR with STAPD that includes an actual description of the underlying asset. Because, as discussed above, the requirement to provide a UPI and, if applicable, a UPI that limits geographic information, is being proposed in § 43.4(c)(5), the proposal implements a conforming revision to indicate that the requirement in § 43.4(c)(2) to provide an actual description of the underlying asset applies to PRST in the interest rate, credit, equity, and foreign exchange asset classes. Similarly, the Commission is proposing to address the requirement that Reporting Entities provide the underlying asset to an SDR in § 43.4(c)(4), as modified. This change is not meant to be substantive, but rather is intended as a technical revision to group requirements that are specific to an asset class within the same paragraph. The Commission is proposing technical revisions to the title and text of § 43.4(c)(4) to clarify and conform to the amendments proposed in section II.A above. As such, the revision to the title clarifies that the section addresses both the reporting and public dissemination of the underlying asset(s) for certain swaps in the other commodity asset class. The technical revision to § 43.4(c)(4) and § 43.4(c)(4)(i) identifies the Reporting Entities obligated to provide the SDRs with certain STAPD. Additionally, the proposed technical revisions to § 43.4(c)(4)(ii) and (iii) address the obligation to provide the underlying asset(s) of swaps in the other commodity asset class as stipulated in each of these sections, to conform with the rest of the regulatory text in the section. Appendix E to part 43 includes tables E1 and E2 which must be used by SDRs to disseminate any specific delivery points or pricing points for PRSTs in the other commodity asset class as required by § 43.4(c)(4)(iii). The Commission proposes to add introductory language for consistency with the proposed amendments to § 43.4(c) described above and proposed new § 43.4(c)(5)(ii). C. Proposed Amendments to § 45.7(b) In addition to the changes to part 43 discussed above, the Commission is also proposing modifications to § 45.7(b) with regards to the Commission's authority to condition or revoke a UPI designation order. As stated above, § 45.7 provides that when the Commission determines that a UPI and product classification system is available for use and meets the requirements of § 45.7, the Commission shall designate the unique product identifier and product classification system to be used in recordkeeping and swap data reporting by means of a Commission order published in the Federal Register and on the website of the Commission. Section 45.7(a) establishes the requirements that the UPI and product classification system must meet to enable the Commission and other financial regulators to fulfill their regulatory responsibilities and to assist in real time reporting of swaps as provided in the CEA and part 43. The Commission is proposing to modify § 45.7 to address the Commission's authority to condition a designation of a UPI and product classification system. For example, the Commission may determine that it is appropriate to condition the designation of a UPI and product classification system on such an identifier continuing to meet certain international standards related to distinctiveness and specificity. As another example, the Commission may include as a condition of designation an implementation date for use of such UPI and product classification system. The Commission proposes adding the following language at the end of § 45.7(b)(2); The Commission may subject such designation order to conditions to ensure the unique product identifier and product classification system continue to meet the requirements set out in paragraph (a) above. The Commission may also set, in such designation order, a date on which such designation shall be effective. The Commission is also proposing to address the Commission's authority to limit, suspend, or revoke a designation order previously issued by the Commission. The Commission proposes to add § 45.7(b)(3), to direct that if the Commission determines that a unique product identifier and product classification system, subject to a designation order pursuant to paragraph (b) of this section, no longer satisfies the requirements set forth in this section, the Commission may limit, suspend, or withdraw the designation order consistent with the Act after appropriate notice and opportunity to respond. This amendment seeks to address the unlikely scenario where a previously designated UPI and product classification system fails to meet the requirements set out in § 45.7. Finally, the Commission proposes conforming and technical revisions to § 45.7. The Commission proposes adding “and Product Classification System” to the title of § 45.7 for consistency with the rest of the regulatory text. The Commission also proposes a revision to the language in § 45.7(c)(2) to conform to new proposed § 45.7(b)(3), which provides for the withdrawal of a previously issued designation order. Commission regulation 45.7(c)(2) is meant to set out obligations that are applicable in the absence of a designated UPI and product classification system. The proposed modifications are meant to address both a situation where a UPI and product classification system has not yet been designated by the Commission, and, now, a situation where a UPI and product classification system was previously designated but is no longer in effect, as contemplated by new, proposed § 45.7(b)(3). III. Additional Swap Data Elements Reported to the Commission and to Swap Data Repositories A. Background The Commission is proposing to add and further standardize the required data elements and definitions set out in the Data Element Appendices. The Data Element Appendices specify the current requirements for data elements reporting; 65 the Revised Technical Specification, published on the Commission's website pursuant to delegated authority, provides the form and manner specifications for reporting the required data elements. 66 Commission staff published the Revised Technical Specification on March 1, 2023. 67 The Revised Technical Specification organizes each data element from the Data Element Appendices by category and provides for the corresponding definition, format, allowable values, and validation rules for each data element. 68 65 2020 SDRR Final Rule at 75540 (highlighting the differences between swap data elements required to be reported to SDRs pursuant to part 45 in appendix 1 to part 45 and swap transaction and pricing data elements required to be reported to, and then publicly disseminated by, SDRs pursuant to part 43 in appendix A to part 43. Both the appendices are harmonized such that the swap transaction and pricing data elements are a subset of the swap data elements in appendix 1 to part 45). 66 17 CFR 43.7(a)(1); 17 CFR 45.15(b). 67 CFTC Technical Specification, Version 3.2 (Mar. 1, 2023), available at https://www.cftc.gov/media/8261/Part43_45TechnicalSpecification03012023CLEAN/download. 68 Id. Prior to the implementation of the 2020 Final Rules, SDRs had some discretion over what swap data was reported, which led to a lack of standardization across SDRs. 69 This lack of standardization warranted the introduction of the revised Data Element Appendices and the Technical Specification. The Commission's adoption of the 2020 Final Rules standardized a significant number of data elements reported to the Commission and to the public. 69 2020 SDRR Final Rule, 85 FR at 75539. When the Commission adopted the Data Element Appendices in 2020, it noted that those appendices did not address the standardization of data elements specific to swap product terms. 70 The Commission noted its expectation that a UPI would be available in two years, and that until the Commission designated a UPI pursuant to § 45.7, SDRs would continue to accept, and reporting entities would continue to report the unstandardized product-related data elements unique to each SDR. 71 As discussed above, subsequent to its 2020 Final Rules' adoption, the Commission has designated DSB as the UPI service provider and expects reporting of DSB UPIs for the interest rate, credit, foreign exchange, and equity classes to begin no later than January 29, 2024. 70 Id. at 75540; 2020 RTR Final Rule, 85 FR at 75458 (highlighting the Commission's belief that this temporary solution will benefit SDRs such that they will only have to change their systems once when a UPI becomes available, instead of twice if the Commission created standardized product data elements before UPIs were available and then later when UPIs were designated). 71 2020 SDRR Final Rule, 85 FR at 75540. The Commission is proposing to update the Data Element Appendices 72 to include additional data elements. These additional data elements (1) supplement the UPI Reference Data Library with additional data elements from the 2023 CDE Technical Guidance; (2) add necessary information and address reporting quality issues; and (3) further facilitate the standardization of data elements. At the same time as the Commission is proposing to update the Data Element Appendices, staff is publishing draft updated technical specifications for reporting the swap data elements in the Data Element Appendices. Commission staff is publishing a draft updated technical specification (“Technical Specification 3.3”), 73 when this notice is published so commenters can comment on both the NPRM and the technical standards and validation conditions. Commenters are encouraged to comment on the NPRM, as well as provide feedback on the Technical Specification 3.3 that highlights the form and manner of the required fields within the Data Element Appendices pursuant to delegated authority. Commission staff is involved in international efforts for the harmonization of data elements, and the Commission welcomes comments related to the 2023 CDE Technical Guidance in accordance with the CDE Governance Arrangements 74 procedures. To simplify the organization of comments received, the additional data elements discussed below are divided into two categories: (1) fields that are included in the 2023 CDE Technical Guidance (“CDE Fields”); and (2) fields that are not included in the CDE Technical Guidance (“CFTC Fields”). 72 Staff note the proposed data elements that are not proposed to be publicly disseminated and are for regulatory reporting purposes under part 45 only will be referenced to as additions to appendix 1 of part 45. The proposed data elements that SDRs are to publicly disseminate will be referenced as additions to the Data Element Appendices. 73 CFTC Technical Specification 3.3 will be published on the Commission's website alongside the publication of this NPRM, available at https://www.cftc.gov/LawRegulation/DoddFrankAct/Rulemakings/DF_18_RealTimeReporting/index.htm and https://www.cftc.gov/LawRegulation/DoddFrankAct/Rulemakings/DF_17_Recordkeeping/index.htm. 74 CPMI-IOSCO, Governance Arrangements for Critical OTC Derivatives Data Elements (other than UTI and UPI) (October 2019), available at https://www.bis.org/cpmi/publ/d186.htm (“CDE Governance Arrangements”). B. Proposed Data Elements From the CDE Technical Guidance The Commission previously noted its intent to adopt the CDE Technical Guidance data elements to the extent possible. 75 The Commission also anticipated the need to update the Data Element Appendices to adopt any changes to the CDE Technical Guidance. 76 The Commission is proposing the addition of certain data elements that are internationally harmonized in the 2023 CDE Technical Guidance. The Commission believes including certain 2023 CDE Technical Guidance data elements will create significant efficiencies for reporting entities and the Commission. 75 2020 RTR NPRM, 85 FR at 21542; 2020 RTR Final Rule, 85 FR at 75539-40. 76 2020 RTR Final Rule, 85 FR at 75539-40. The Commission is proposing to add nineteen data elements from the 2023 CDE Technical Guidance to the Data Element Appendices. These data elements are related to the following categories: Custom Baskets, Price, Product, and Notional Amounts and Quantities. These proposed fields provide additional swap market transparency and separate data elements for various quantity, amount, and schedule date periods. This allows the Commission to access and query the data in a streamlined manner while also enabling analysis of schedule date periods with the corresponding valuations. The Commission invites comments on any of the data elements listed below. Custom Baskets. The Commission is proposing to add five CDE data elements 77 related to custom baskets to proactively address exposure risks and to allow for the linking of constituents of a custom basket for cross-basket analysis, among other analyses. These proposed data elements would not be publicly disseminated to ensure the anonymity of the swap counterparties and the confidentiality of business transactions and market positions. The Commission currently requires reporting entities to report only one data element 78 related to custom baskets that is publicly disseminated. 79 Existing data element Custom Basket Indicator 80 only provides information pertaining to whether a transaction is associated with a custom basket. The Commission is proposing to add data elements to appendix 1 of part 45 because it believes that the visibility and reporting accuracy of holdings in custom baskets provides critical information. 81 For example, in order to conduct adequate market surveillance, including insider trading investigations, it is necessary to identify the constituents of a custom basket. Without this information, the Commission would be unable to determine the underlying positions that a swap counterparty maintained. The Commission is therefore proposing to adopt these internationally harmonized, 82 custom basket data elements. 77 These proposed data elements are Custom basket code (34), Basket constituent identifier (35), Basket constituent unit of measure (37), Basket constituent number of units (38), and Basket constituent identifier source (36), which would be added to appendix 1 to part 45. 78 See CFTC Technical Specification, Version 3.2 (March 1, 2023), available at https://www.cftc.gov/media/8261/Part43_45TechnicalSpecification03012023CLEAN/download. 79 2020 RTR Final Rule, 85 FR at 75458. 80 See CFTC Technical Specification, supra note 50, for data element Custom Basket Indicator (25). 81 This view is shared by other financial regulators. See, e.g., Frequently Asked Questions on Regulation SBSR, U.S. Securities and Exchange Commission (Aug. 11, 2022), available at https://www.sec.gov/tm/faqs-reg-sbs (clarifying Rule 901(c)(1) requires the reporting of specific underlying reference assets); See also CPMI and IOSCO, Technical Guidance: Harmonisation of the Unique Product Identifier (Sept. 2017) at 20, available at https://www.iosco.org/library/pubdocs/pdf/IOSCOPD580.pdf (explaining that authorities have an interest in data related to any custom basket of assets underlying an OTC derivative product in order to understand the economics of the product). 82 In addition, the European Securities and Markets Authority (ESMA) and Ontario Securities Commission (OSC), respectively, are planning to implement or have proposed to implement certain identifying information related to the frequency, creator, and underlier related information of basket creation, among other items, from the CDE Technical Guidance. See, generally, July 10, 2022 O.J. (L 262), available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32022R1855&from=EN; Proposed Amendments to OSC Rule 91-507 Trade Repositories and Derivatives Data Reporting and Proposed Changes to OSC Companion Policy 91-507CP and Proposed Changes to OSC Companion Policy 91-506CP, R.R.O. 2022—45 (OSC) (highlighting fields 120-124), available at https://www.osc.ca/sites/default/files/2022-06/cp_20220609_91-507_trade-repositories-derivatives-data-reporting.pdf. Prices. The Commission is proposing to add six CDE data elements to the Data Element Appendices related to price schedules. 83 The Commission currently requires SDRs to publicly disseminate certain non-schedule related information within the price category. 84 The Data Element Appendices do not currently contain elements related to price schedules. As such, SDRs currently receive and disseminate several data elements related to price schedules as unstandardized product-related fields. The proposed price schedule data elements are critical for the Commission to receive because it is common for swap transactions to have price-related terms that vary over the duration of the swap, particularly for the equity and other commodity asset classes. These terms impact the transaction value over time. Without the reporting of these price related schedule data elements, the value of the swap transaction over time that is implied from the swap data would be misleading. The proposed fields have been internationally harmonized and are expected to be implemented across multiple jurisdictions. 85 The Commission believes that the inclusion of these data elements in the Data Element Appendices will not only further international harmonization efforts but also increase the accuracy and utility of the swap data reported to, and disseminated by, SDRs. 83 These proposed data elements are Price schedule-unadjusted effective date of the price (99), Price schedule-unadjusted end date of the price (100), Price schedule-price (101), Strike price schedule-Unadjusted effective date of the strike price (108), Strike price schedule-unadjusted end date of the strike price (109), and Strike price-schedule-strike price (110). These proposed data elements will be added to the Data Element Appendices. 84 Currently, SDRs publicly disseminate nine data elements uniquely related to the commodity asset class and eight data elements uniquely related to the equity asset class in the price category. Data Field Option Premium Payment Date (#81) is not publicly disseminated. 85 See, e.g. July 10, 2022 O.J. (L 262) (highlighting fields 50-52 and 135-137), available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32022R1855&from=EN. Product. As discussed above, there are certain proposed data elements related to underlier information that capture data not included in the UPI Taxonomy but are within the CDE Technical Guidance. Additionally, there are certain proposed data elements that are not captured in either the UPI Taxonomy or the CDE Technical Guidance. The Commission will first discuss the proposed CDE Fields specific to the product underlier, and then will discuss the proposed CFTC fields that are supplemental to the CDE Fields and the UPI Taxonomy in section III.C below. The UPI includes granular product-level information, such as underlier and identifier information. 86 When a reporting entity submits a request for a UPI Code to the unique product identifier service provider, the reporting entity submits a set of product reference data elements. 87 When an underlier is not recognized by a unique product identifier service provider, the reporting entity will submit the value “other” for the Underlier ID and Underlier ID Source fields to the UPI service provider. If approved by the UPI service provider, the corresponding issued UPI Reference Data Library would not include detailed underlier information that would allow the Commission to determine the underlying product of the swap transaction. Without this granular information, the Commission would not have sufficient understanding of the financial product and would be unable to distinguish between different products that are represented by the same “other” underlier type. Proposed fields “Underlier ID (Other)” and “Underlier ID (Other) source” would allow for this granular information to be reported and allow the Commission to understand the characteristics of the non-standard underliers across asset classes at a level of granularity not provided in the UPI Taxonomy that resolves to the “other” underlier type. 88 86 See UPI Technical Guidance supra note 16 at 6. 87 Id. at 13-18. (highlighting that the UPI Reference Data include attributes such as “Asset Class”, “Instrument Type”, “Delivery Type”, “UPI Code”, “CFI Code”, “Underlier Name”, “Underlying Asset Type”, “Underlier ID Source”, “Underlying ID”, among others). 88 These proposed data elements are Underlier ID (Other) (126) and Underlier ID (Other) source (127). These proposed data elements would be added to appendix 1 to part 45. The Commission is proposing two additional CDE product-related fields that are necessary to understand specific product information related to the source of the price of an underlier. The UPI Taxonomy does not include the trading venue of an underlier. For example, in the case of an equity swap, although the underlier would be part of the UPI Taxonomy, if that underlier were traded on a venue in a non-U.S. jurisdiction, that venue would not be included in the UPI Taxonomy. For those transactions that occur off-venue, the source of the price of the underlier is also not included in the UPI Taxonomy. Without that source being reported, the Commission would be unable to consistently determine the benchmark value of the source of the underlier. Proposed CDE data elements “Underlying asset trading platform identifier” and “Underlying asset price source” will enable the Commission to receive critical pricing information in a consistent manner across various sources. 89 Moreover, receiving information specifying the underlying asset price source is critical to the Commission's benchmark manipulation surveillance efforts. In order to adequately conduct such surveillance efforts, the Commission must be able to reliably understand what source is being used to price the underlier of the swap transaction. 89 These proposed data elements are Underlying asset trading platform identifier (129) and Underlying asset price source (128), which would be added to appendix 1 to part 45. Finally, the proposed “Crypto asset underlying indicator” data element 90 provides for the identification of derivative transaction underliers that include crypto assets. This data element is particularly important given the quickly-evolving market for crypto assets and the current lack of standardization in the representation of swap transactions with crypto asset underliers. 91 The submission of this indicator will allow the Commission and the public to more easily identify those transactions that have crypto asset underliers, regardless of the underlying product. This indicator is internationally harmonized and expected to be implemented across multiple jurisdictions. 92 90 The proposed data element is Crypto asset underlying indicator (130). This proposed data element will be added to the Data Element Appendices. 91 For example, crypto asset transactions are often reported differently across transactions. However, there is currently no ISO currency code corresponding to crypto assets. See Kath Lockett, The down-low on digital currency, ISO focus: The New Wave of Finance (Jan. 9, 2020), available at https://www.iso.org/files/live/sites/isoorg/files/news/magazine/ISOfocus%20(2013-NOW)/en/2020/ISOfocus_138/ISOfocus_138_en.pdf. 92 See, e.g., July 10, 2022 O.J. (L 262) (highlighting field 12), available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32022R1855&from=EN; See Proposed Amendments to OSC Rule 91-507 Trade Repositories and Derivatives Data Reporting and Proposed Changes to OSC Companion Policy 91-507CP and Proposed Changes to OSC Companion Policy 91-506CP, R.R.O. 2022—45 (OSC) (highlighting field 119), available at https://www.osc.ca/sites/default/files/2022-06/cp_20220609_91-507_trade-repositories-derivatives-data-reporting.pdf. Notional Amounts and Quantities. The Commission is proposing to add three data elements related to notional quantity schedules to the Data Element Appendices. 93 These data elements would be applicable to the other commodity asset class, where notional is often stated as a quantity rather than a dollar amount. While the Data Element Appendices include certain data elements related to schedules, data elements addressing the non-monetary quantities for these types of instruments are currently not included in the Data Element Appendices. 94 Similar to the discussion of the price-related schedule fields above, the notional quantity fields being proposed are necessary in order to understand the economics and value of a swap transaction changing over time. These notional quantity schedule fields are a part of the CDE Technical Guidance and expected to be adopted across multiple jurisdictions. 95 93 These proposed data elements, which would be added to the Data Element Appendices, are: Notional quantity schedule—unadjusted date on which the associated notional quantity becomes effective (57), Notional quantity schedule—unadjusted end date of the notional quantity (58), and Notional quantity schedule—notional quantity (59). 94 Existing Data Element Appendices currently include the following data elements related to Notional Amount and Quantity schedules: Notional amount schedule—notional amount in effect on associated effective date (33); Notional amount schedule—unadjusted effective date of the notional amount (34); and Notional amount schedule—unadjusted end date of the notional amount (35). 95 See, e.g., July 10, 2022 O.J. (L 262), available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32022R1855&from=EN; See Proposed Amendments to OSC Rule 91-507 Trade Repositories and Derivatives Data Reporting and Proposed Changes to OSC Companion Policy 91-507CP and Proposed Changes to OSC Companion Policy 91-506CP, R.R.O. 2022—45 (OSC) (highlighting field 37-39), available at https://www.osc.ca/sites/default/files/2022-06/cp_20220609_91-507_trade-repositories-derivatives-data-reporting.pdf. C. Proposed CFTC Data Elements The Commission is proposing to supplement the Data Element Appendices with data fields sourced beyond the UPI Reference Data Library and CDE Technical Guidance by adding Commission-related data elements to further standardization efforts and address data quality concerns. As discussed below, these proposed data elements will ensure the Commission has access to data needed to facilitate market oversight through surveillance and compliance review. Primarily, the UPI system is comprised of a UPI code and associated UPI reference data. The UPI reference data elements include three levels of information: instrument type ( e.g., forwards, options, swaps), instrument characteristics ( e.g., physical delivery, Bermudan exercise), and certain information about the product ( e.g., elements of underliers such as identifiers). The UPI system is not designed to identify contract- or transaction-level information. The proposed data elements are intended to facilitate the reporting of information not discernable through the reporting of the UPI. As discussed below, in cases where the underlier product-level information has been assigned the value of “other”—as may be the case for certain bespoke or basket transactions—additional information will be needed to adequately identify the transaction. In addition to the proposed UPI-related fields, the Commission is proposing to add additional fields to the Data Element Appendices that will enhance data quality and standardization. The Commission noted the significant effort that must be done to standardize swap data. 96 Periodic review of internal processes, market transparency efforts, and proactively addressing the market's use of new technology is consistent with the Commission's mission to promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation. 96 See 2020 SDRR Final Rule, 85 FR at 75539. Thus, the Commission is proposing to add thirty data elements related to the following categories: Clearing, Counterparty, Notional Amounts and Quantities, Price, Product, and Transaction Categories. The Commission invites comments on any of the data elements listed below; additionally, Commission staff invite separate comment on the draft Technical Specification 3.3 now published on the Commission website that is intended, upon finalization, to provide technical instructions on the acceptable form and manner for transmitting required data elements to an SDR. Clearing. The Commission is proposing to add two clearing-related fields to appendix 1 to part 45: “Mandatory clearing indicator” and “Clearing member identifier source.” 97 The current Data Element Appendices contain a number of clearing related data elements. 98 These data elements provide significant information regarding the clearing-related attributes of a given transaction, however, the currently required clearing-related data elements do not provide an indication as to whether a swap transaction is subject to mandatory clearing. For example, currently the “Cleared” field, which is populated with either yes, no, or intent to clear, does not enable the Commission to determine whether a trade is required to be cleared or voluntarily cleared. Although the Commission previously noted that it may be able to determine this information through a separate analysis based on underlying product fields, it also noted the difficulties in obtaining such information. 99 The Commission believes that the provision of this data element will allow staff to efficiently monitor compliance with the clearing mandate. In addition, the Commission believes market participants already engage in determinations as to whether a specific transaction is subject to mandatory clearing and as such collection of this indicator should not present a significant burden to market participants. 97 These proposed data elements are Mandatory clearing indicator (14) and Clearing member identifier source (5). Data Element Mandatory clearing indicator (14) will be added to the Data Element Appendices. Data Element Clearing member identifier source (5) will be added to appendix 1 of part 45. 98 Appendix A of part 43 contains one clearing-related data element, Cleared (1). Appendix 1 of part 45 contains the following clearing-related data elements: Central counterparty (2), Clearing account origin (3), Clearing member (4), Clearing swap USIs (5), Clearing swap UTIs (6), Original swap USI (7), Original swap UTI (8), Original Swap SDR identifier (9), Clearing receipt timestamp (10), Clearing exceptions and exemptions—Counterparty 1 (11), and Clearing exceptions and exemptions—Counterparty 2 (12). 99 2020 SDRR Final Rule, 85 FR at 75541 n.315. In addition to the “Mandatory clearing indicator” data element, the Commission is proposing to include a “Clearing member identifier source” data element in appendix 1 to part 45. This data element would provide significant data quality benefits. In order for the SDRs to be able to validate values that are submitted in the “Clearing member” data element, the swap data repositories must know what the source of the identifier is. Because Legal Entity Identifiers (“LEIs”), natural person identifiers, and Privacy Law Identifiers (“PLIs”) have different characteristics, without knowing the relevant source for the value submitted in the “Clearing member” data element, adequate validations cannot be applied to that data element. This results in data quality that is lower than it would otherwise be with the implementation of the “Clearing member identifier source.” Counterparty. The Commission is proposing to add four counterparty-related data elements to appendix 1 to part 45 that will enhance data quality in various ways. 100 Similar to the “Clearing member identifier source” data element discussed above, the proposed addition of a “Counterparty 1 identifier source” will provide significant data quality benefits because it will more readily allow for adequate data validation of the Counterparty 1 data element. 101 100 These proposed data elements are Counterparty 1 Identifier Source (16), Counterparty 1 Designation (28), Counterparty 2 Designation (29), and Counterparty 2 Special Entity (30). These proposed data elements will be added to appendix 1 to part 45. 101 In addition, the inclusion of this field will align the Counterparty 1 elements with the Counterparty 2 elements, as “Counterparty 2 identifier source” is included in the existing Appendix 1 to part 45 (#15). The Commission is also proposing to add three data elements that indicate the entity designations of counterparties to a transaction. “Counterparty 1 designation” and “Counterparty 2 designation” will indicate if a counterparty is a SD, MSP, derivatives clearing organization (“DCO”), or non-SD/MSP/DCO. Similarly, “Counterparty 2 special entity” will indicate if Counterparty 2 is a special entity. These entity designation fields are important for the Commission because many of the Commission's regulations apply based on entity designation. For example, certain business conduct standards are applicable specifically to transactions entered into with a special entity. 102 The proposed “Counterparty 2 special entity” data element is necessary for the Commission to be able to determine whether a special entity is a party to a given transaction. Similarly, the “Counterparty 1 designation” and “Counterparty 2 designation” data elements are necessary to determine whether, for example, a SD is a party to a transaction, which is critical to understanding both regulatory obligations as well as market dynamics. 102 See, e.g., 17 CFR 23.450. Notional Amounts and Quantities. The Commission is proposing to add ten data 103 elements related to Notional Amounts and Quantities to appendix 1 to part 45. Nine of these data elements are specific to the other commodity asset class. These nine data elements would provide information that is necessary to understand the characteristics of the commodity transaction. These data elements provide additional information that is not included in the UPI Reference Data Library and, without adoption of these proposed elements, would not be reported once a unique product identifier and classification system is designated for the other commodity asset class. Specifically, these data elements provide information related to the load profile type, applicable hours, and days of the week for the delivery of power. This information is not included in the UPI Reference Data Library and is necessary to understand the economics of a transaction for the delivery of power. 103 These proposed data elements are Notional quantity schedule—days of week (60), Notional quantity schedule—hours from thru (63), Notional quantity schedule -load profile type (66), USD equivalent regulatory notional amount (42), Notional quantity schedule—unadjusted effective date of days of week (61), Notional quantity schedule—unadjusted end date of days of week (62), Notional quantity schedule—unadjusted effective date of hours from thru (64), Notional quantity schedule—unadjusted end date of hours from thru (65), Notional quantity schedule -unadjusted effective date of load profile type (67), and Notional quantity schedule-unadjusted end date of load profile type (68). These proposed data elements will be added to appendix 1 of part 45. Finally, the Commission is proposing to add the data element “USD equivalent regulatory notional amount” to appendix 1 to part 45. 104 This data element will allow for the consistent reporting of notional amounts for transactions denominated in U.S. dollars. The reporting of USD notional amount will allow Commission staff to more efficiently monitor swap market activity, specifically for swap dealer de minimis monitoring, part 43 market transparency calculations, and for risk surveillance purposes. 104 The proposed data element is USD equivalent regulatory notional amount (42). Price. The Commission is proposing to add six price-related data elements to the Data Element Appendices, three of which specifically relate to option-type instruments. 105 The proposed data elements “Option exercise end date”, “Option exercise frequency period”, and “Option exercise frequency period multiplier” will provide information that is critical to understanding the economics of a particular swap transaction. In particular, these data elements will provide key dates and schedules of the option contract, which is necessary to conduct market surveillance and identify potential cases of market manipulation. 105 These proposed data elements are Option exercise end date (113), Option exercise frequency period (114), and Option exercise frequency period multiplier (115). These proposed data elements will be added to the Data Element Appendices. In addition to these three price-related elements, the Commission is proposing to add three data elements related to settlement price analysis to appendix A to part 45. 106 Similar to the three proposed fields above, these fields will further market surveillance. For example, proposed “Swap pricing method” and “Pricing date schedule of the swap” fields will facilitate market surveillance and identification of situations where the value of a derivative position impacts the value of the underlying asset on the settlement day in a way that benefits the position. 106 These proposed data elements are Swap pricing method (116), Pricing date schedule of the swap (117), and Start and end time of the settlement window for the floating leg(s) (118). These proposed data elements will be added to appendix 1 of part 45. Product. The Commission is proposing to add two product-related data elements to the Data Element Appendices 107 and three product-related data elements to appendix 1 to part 45. 108 The proposed “Pricing index location” and “Physical delivery location” fields would allow the Commission to receive critical pricing and delivery location information in the case where the UPI is reported with an underlier of “other” or other instances where the pricing or delivery locations could not be derived from the Underlier ID. Proposed “Physical commodity contract indicator” provides critical information related to whether a swap in the other commodity asset class is related to or references one of the contracts in appendix B to part 43. This information is important to perform cross-market analysis and surveillance. The UPI Reference Data Library does not provide for the reporting of the product grade for swaps in the other commodity asset class. The proposed “Product grade” field would aid in the analysis of an entities' exposure, which can vary based on the grade of the commodity. Finally, the proposed “Maturity date of the underlier” field would provide information about the underlier that is relevant for swaption and swap products referencing exchange traded derivative products. This data element is expected to be implemented across jurisdictions. 109 107 These data elements are Physical commodity contract indicator (131) and Maturity date of the underlier (133). 108 These proposed data elements are Physical delivery location (124), Pricing index location (125), and Product grade (132). 109 See, generally, July 10, 2022 O.J. (L 262), available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32022R1855&from=EN; See Proposed Amendments to OSC Rule 91-507 Trade Repositories and Derivatives Data Reporting and Proposed Changes to OSC Companion Policy 91-507CP and Proposed Changes to OSC Companion Policy 91-506CP, R.R.O. 2022—45 (OSC) (highlighting field 37-39), available at https://www.osc.ca/sites/default/files/2022-06/cp_20220609_91-507_trade-repositories-derivatives-data-reporting.pdf. Transaction Related. The Commission is proposing to add two transaction-related data elements to the Data Element Appendices 110 and one additional transaction-related data element to appendix 1 to part 45. 111 These elements are intended to facilitate an SDR's ability to meet its regulatory obligations under parts 43 and 49 of the Commission's regulations. Commission regulation 43.5(d) requires an SDR to disseminate swap transaction and pricing data for transactions executed on or pursuant to the rules of a SEF or DCM subject to a specified time delay. The proposed “SEF or DCM indicator” data element would provide an SDR with information necessary to indicate when its obligations under Commission regulation 43.5(d) apply. In addition to dissemination delay requirements specifically related to SEFs and DCMs, § 43.5 generally sets out required time delays for block trades and large notional swap transactions. Proposed data element “Large notional off-facility swap election indicator” would provide an SDR with information necessary to indicate when a time delay is applicable to a large notional off-facility swap transaction. This proposed data element is analogous to the “Block trade election indicator” that is already included in the Data Element Appendices. Finally, the Commission is proposing to add the data element “SEF or DCM anonymous execution indicator” to provide SDRs with information necessary to comply with § 49.17(f)(2), which requires SDRs to make a swap transaction accessible to either counterparty to the swap. In providing this access, § 49.17(f)(2) requires an SDR to not identify one counterparty to another in instances where the swap is executed anonymously on a SEF or DCM and cleared in accordance with §§ 1.74, 23.610, and 39.12(b)(7) of the Commission's regulations. This proposed data element will provide an SDR with information that is necessary to satisfy the requirements of § 49.17(f)(2). 110 These proposed data elements are Large notional off-facility swap election indicator (140) and SEF or DCM indicator (146). These proposed data elements will be added to the Data Element Appendices. 111 The proposed data element is SEF or DCM anonymous execution indicator (147). This proposed data element will be added to the Data Element Appendices. Request for Comment The Commission invites comments on any of the data elements listed above; additionally, Commission staff invite separate comment on the draft Technical Specification 3.3 now published on the Commission website that is intended, upon finalization, to provide technical instructions on the acceptable form and manner for transmitting required data elements to an SDR. The Commission also requests specific comment on the following: (1) Are there any data elements not included in the proposed Data Element Appendices that commenters believe are necessary to facilitate further standardization of reporting? (2) For proposed data element #30 Counterparty 2 special entity, are there any impediments that reporting entities would experience in providing additional information related to special entities, such as whether counterparty 2 is a “utility special entity”? (3) For proposed data element #116 Swap pricing method, are there additional allowable values other than those published in the Technical Specification that reporting entities believe may be applicable for this data element? (4) For proposed data element #42 USD equivalent regulatory notional amount, are there impediments that reporting entities would experience in calculating and reporting USD equivalent notional amount? The Commission also seeks comment on the cited calculation methodology and the utility of the notional values calculated according to the methodology. The Commission requests comment on the following questions related to swap transactions that reference the delivery of power. Specifically, the Commission requests comments on any burden or obstacles for reporting entities in reporting data elements related to these questions. 112 112 At least one other jurisdiction intends to collect data elements related to these questions. See July 10, 2022 O.J. (L 262) (Fields 121 Load Type; 122 Delivery interval start time; 123 Delivery interval end time; 124 Delivery start date; 125 Delivery end date; and 127 Days of the week). (5) Days of week: Are there scenarios where the “Days of Week” for delivery vary over the duration of a transaction that necessitates the reporting of multiple “Days of Week” occurrences for a single transaction? Alternatively, is the reporting of a single occurrence of “Days of the Week” sufficient, and can this value be derived from commonly known and available data related to the referenced hub? (6) Hours from Thru: Are there scenarios where the “Hours from Thru” for delivery vary over the duration of a transaction that necessitates the reporting of multiple “Hours from Thru” occurrences for a single transaction? Alternatively, is the reporting of a single occurrence of “Hours from Thru” sufficient, and can this value be derived from commonly known and available data related to the referenced hub? (7) Load Profile Type: Are there scenarios where the “Load Profile Type” ( e.g., Peak, Off-Peak) for delivery varies over the duration of a transaction that necessitates the reporting of multiple “Load Profile Type” occurrences for a single transaction? Alternatively, is the reporting of a single occurrence of “Load Profile Type” sufficient, and can this value be derived from commonly known and available data related to the referenced hub? IV. Proposed Revisions to the Descriptions of Existing Data Elements in Appendix A to Part 43 and Appendix 1 to Part 45 The Commission is proposing several modifications to the existing field descriptions in the Data Element Appendices. Some of these modifications are being proposed to harmonize the descriptions contained in the Data Element Appendices with the descriptions adopted at the international level by the Regulatory Oversight Committee and related subcommittees. 113 For example, “Reporting timestamp” in appendix 1 to part 45 is proposed to be modified to add “as reported” to the data element description so that it reads, “Data and time of the submission of the report as reported to the trade repository” to align the description with the CDE Technical Guidance. 113 The following existing data elements in appendix 1 to part 45 are proposed to be modified in this way, “Action type” (26); “Event type” (27); “Event identifier” (29); “Event timestamp” (30); “Reporting timestamp” (97); “Delta” (109); “Valuation amount” (110). In addition, the descriptions contained in the appendices would be revised to eliminate detail that describes the form and manner of reporting the data element. 114 The form and manner detail proposed to be removed from the Data Element Appendices would be incorporated in the Technical Specification 3.3. The Commission believes setting out the form and manner in one location, namely the Technical Specification, simplifies the requirements. Moreover, removing such form and manner detail from the Data Element Appendices would avoid inconsistent form and manner instructions in those appendices and the Technical Specification, in the case where such form and manner instruction is modified in a revised Technical Specification. For example, data element #56 “Floating rate reset frequency multiplier” represents the number of time units, as expressed by data element #55 “Floating rate reset frequency period,” that determines the frequency at which periodic payment dates for reset occur. In the Data Element Appendices, the description of data element #56 includes an example of a transaction with reset payments occurring every two months. The Data Element Appendices state that in such case data element #55 should be populated with “MNTH” and data element #56 should be populated with “2.” As another example, data element #77 “Strike price currency/currency pair” currently states, in part, that for foreign exchange (“FX”) options, the manner in which the field should be expressed is as unit currency/quoted currency. In the Commission's proposed modifications, these types of form and manner instructions would be removed from the Data Element Appendices and incorporated in the Technical Specification. 114 Nearly all of the data elements in the Data Element Appendices contain such changes. Similar to the proposed modifications above, the Commission is also proposing to remove the asset class references in the Data Element Appendices. The removal of the asset class information will provide more clarity to reporting entities as the Technical Specification contains more specific information related to asset classes. For example, currently the Data Element Appendices merely indicate, with a checkmark, whether a data element is applicable for a specific asset class. The Technical Specification, however, provides more specific information related to when a particular data element is applicable to a transaction. This specificity provides more information about when and how to report a certain data element. Eliminating the asset class reference from the appendices will avoid any confusion that the more generic indicator in the appendices may create when read in conjunction with the more specific information provided in the Technical Specification. This proposed modification would impact each of the data elements in the Data Element Appendices. V. Compliance Date The Commission understands that market participants would need sufficient time to adjust reporting systems to account for the proposed modifications to parts 43 and 45 of the Commission's regulations, including the reporting of additional data elements not currently required by parts 43 and 45. In order to provide market participants with sufficient time, the Commission is proposing that the compliance date for the rules proposed herein be 365 days following publication of a final rule in the Federal Register . Request for Comment The Commission requests comment on all aspects of the proposed compliance date. The Commission also requests specific comment on the following: (8) Is the proposed compliance date of 365 days after publication of a final rule in the Federal Register an adequate amount of time for compliance with respect to the additional data elements in the Data Element Appendices? If not, please propose an alternative timeline and provide reasons supporting that alternative timeline. VI. Related Matters A. Cost-Benefit Considerations 1. Introduction Section 15(a) of the CEA requires the Commission to “consider the costs and benefits” of its actions before promulgating a regulation or issuing certain orders under the CEA. 115 Section 15(a) further specifies that the costs and benefits shall be evaluated in light of five broad areas of market and public concern: (1) protection of market participants and the public; (2) efficiency, competitiveness, and financial integrity of futures markets; (3) price discovery; (4) sound risk management practices; and (5) other public interest considerations. The Commission considers the costs and benefits resulting from its discretionary determinations with respect to the section 15(a) factors. 115 7 U.S.C. 19(a). While, as discussed previously and further below, the Commission preliminarily believes the proposed amendments—measured relative to the baseline of status quo conditions—would create meaningful benefits for market participants and the public, it also recognizes that they likely would result in some incremental costs. The Commission has endeavored to enumerate material costs and benefits and, when reasonably feasible, assign a quantitative value to them. Where it is not reasonably feasible to quantify costs and benefits of the proposed amendments, those costs and benefits are discussed qualitatively. This cost-benefit consideration proceeds by discussing the background; describing the status quo baseline; identifying and assessing costs and benefits attributable to proposed non-data element changes to part 43 and part 45; identifying and assessing costs and benefits attributable to the proposed expansion of the required data elements, separated into CDE and non-CDE data elements, the latter referred to as CFTC data elements; 116 and, assessing how the costs and benefits it has identified bear upon each CEA section 15(a) factors. 116 The cost analysis in section VI. C., as required by the Paperwork Reduction Act (PRA), is consistent, but not identical to the costs discussed in this section because for purposes of the PRA, estimated burden costs are divided between parts 43 and 45, whereas in this section, the cost and benefits discussions are divided between CDE data elements and CFTC data elements. Because of these methodological differences, the estimated costs might not be the same, but the underlying assumptions are the same. 2. Background As discussed above, the Commission has undertaken several rulemakings since 2012 related to real-time public reporting (part 43) and swap data reporting and recordkeeping (part 45). These rulemakings have common threads, including: the Commission's continued attention to uphold its CEA section 2(a)(13) obligations 117 and the Commission's continued progress toward harmonizing data element reporting across international jurisdictions as well as Commission registrants (of which use of a shared UPI and product classification system is a critical piece). 118 117 7 U.S.C. 2(a)(13) (requiring, among other things, that the Commission promulgate rules that provide for real-time public availability of STAPD for uncleared swaps in a form and manner to enhance price discovery while maintaining the anonymity of business transactions and market positions of the counterparties as well as ensuring that transaction participants remain anonymous); see also, e.g., 2012 RTR Final Rule, 77 FR at 1209 (“[T]he Commission is requiring real-time reporting that will enhance price discovery while ensuring the anonymity of the swap counterparties and the confidentiality of business transactions and market positions.”). 118 See, e.g., 2012 RTR Final Rule, 77 FR at 1212 (noting Commission work with prudential regulators to develop unique product identifiers for the industry); 2012 SDRR Final Rule, 77 FR at 2166 (adopting 17 CFR 45.7 providing that swaps be identified in recordkeeping and swap data reporting by means of a UPI and product classification system upon designation by the Commission of such an identifier and classification system for this purpose); 2020 SDRR Final Rule, 85 FR at 75540 (discussing expectation for UPI availability within two years and methods for interim reporting to SDRs until the Commission designates a UPI provider pursuant to 17 CFR 45.7). In the current proposed rulemaking, the Commission builds upon these prior rulemakings by, among other things, seeking to amend: (i) § 43.4(c) to allow for geographic masking after the designation of the UPI for the other commodity asset classes (along with conforming language amendments to related provisions); (ii) § 45.7(b) to explicitly state the Commission's authority to condition orders it issues pursuant to the section, and to limit, suspend or withdraw the designation of a designated UPI service provider and classification system; and (iii) the Data Element Appendices consistent with international harmonization and to provide additional necessary information, address reporting quality issues and make non-substantive conforming changes. Proposed Amendment to § 43.4(c). Since 2012, the Commission's regulations have incorporated the concept of UPIs for purposes of both part 43 real-time public reporting and part 45 swap data reporting and recordkeeping. 119 In order to fully implement the use of UPIs in SDR swap data reporting and recordkeeping as well as real-time public reporting, two challenges must be addressed. First, at least one UPI service provider capable of providing Reporting Entities with product codes and operating a corresponding product classification system needed to exist, be deemed by the Commission to meet the requirements set out in § 45.7(a) and be designated under § 45.7(b) for use for swap data reporting and recordkeeping purposes. 120 Second, the Commission's regulations must ensure that CEA section 2(a)(13) anonymity requirements are satisfied for PRSTs—a necessity that remains operative upon the Commission's designation of a UPI service provider under § 45.7 and Reporting Entities' undertaking to report UPI product information data elements to SDRs for transactions subject to real-time reporting of PRST. Current § 43.4(c)(4) and appendix E reflect the Commission's rulemaking efforts up to the present in this regard. 121 Summarized through its cumulative rulemakings, the Commission has determined that with one exception— i.e., off-facility swaps in the other commodity asset class for which the PRST is not referenced or not economically related to any of the “Enumerated Physical Commodity Contracts and Other Contracts” listed in appendix B to part 43—compliance with part 43's real-time reporting and public dissemination requirements is required given the relatively low risk of revealing counterparty identity, business transactions or market positions. 122 As to the certain other commodity asset class swap exception, § 43.4(c)(4)(iii) now mandates that SDRs publicly disseminate the geographic location detail in a top-coded ( i.e., masked) manner as provided in appendix E to part 43. 123 119 See 2012 RTR Final Rule, 77 CFR at 1212; 2012 SDRR Final Rule, 77 FR at 2165, 2166. 120 17 CFR 45.7. Paragraph (c)(2) of the current rule provides that prior to the Commission's designation of a UPI and product classification system, Reporting Entities are to use SDRs' internal product identification or description systems for their swap data reporting and recordkeeping. Id. 45.7(c)(2). 121 17 CFR 43.4(c)(4); id. part 43 appendix E; see also 2012 RTR Final Rule, 77 CFR at 1208-1212 (determining that all off-facility swaps in the other commodity asset class that did not fall under § 43.4(d)(4)(ii) would not be required to comply with the real-time reporting and public dissemination requirements under part 43 because of the increased likelihood that public dissemination of the underlying asset could disclose the identity, business transactions or market positions of a counterparty, until the adoption of special accommodations in a future Commission release to address these concerns); Block Trade Final Rule, 78 FR at 32910, 32938, 32941 (adding § 43.4(d)(4)(iii), which mandated that SDRs must publicly disseminate the details about the geographic location of the underlying assets of the other commodity swaps not described in § 43.4(d)(4)(ii) pursuant to the newly added appendix E to part 43, which allowed for top-coding various geographic regions); 2020 RTR Final Rule, 85 FR at 75439 (declining to adopt proposed revisions to the masking requirements); discussion in section I.C., above. 122 See 2012 RTR Final Rule at 1209-1212. 123 Block Trade Final Rule, 78 FR at 32910, 32938, 32941. By designating a UPI and product classification system for swaps in the credit, equity, foreign exchange, and interest rate asset classes, the UPI February 2023 UPI Order significantly advanced the Commission's progress towards fully implementing UPI data reporting. However, the Commission remains concerned that its current regulations fall short of what is necessary to address the eventuality of designating a UPI and product classification system under § 45.7 for swap contracts in the other commodity asset class. More specifically, SDRs could face an operational dilemma after the designation of a UPI code for other commodity asset class swaps because such designation would trigger the obligation under parts 43 and 45 that such UPI be included in each public dissemination and confidential swap report, 124 yet the UPI may reference data library elements that reveal key, unmasked geographic locations such as delivery points. In some circumstances, it may be impossible for them to meet their general § 43.4(a) obligation to provide real-time price transparency by publicly disseminating the data specified in appendix A that Reporting Entities submit to them for other commodity asset class transactions ( i.e., unmasked UPI data elements) without violating § 43.4(c)(4)(iii)'s requirement that publicly disseminated geographical information be masked in accordance with appendix E. Proposed § 43.4(c)(5) is intended to resolve this problem and allow for full UPI reporting implementation. 124 2012 SDRR Final Rule, 77 FR at 2166; 17 CFR 45.7(c)(1). Proposed Amendment to § 45.7(b). The Commission also proposes to amend § 45.7(b) to expressly state its authority to issue UPI designation orders subject to conditions and to amend, suspend, or withdraw any such designation order after appropriate notice and opportunity to respond. Proposed Amendment to Data Element Appendices This rulemaking also seeks to amend the Data Element Appendices by adding data elements, including product-related data elements it refrained from including in the 2020 Final Rules out of concern that they would become redundant with the implementation of the UPI. 125 Since the 2020 Final Rules, the Commission has identified product-level data elements important for effective market oversight, but that are not determinable through the UPI and associated data library. The proposed new data elements broadly fall into two categories: CDE fields and CFTC fields. The proposed CDE data elements will further harmonize reported swaps data across jurisdictions, and the proposed CFTC fields will improve the Commission's ability to oversee its registrants. With respect to the latter, for example, the current Commission regulations do not consider that certain power swaps have associated schedules specific to the delivery process or specific details of the underlying option exercise—a shortcoming that limits transparency into information that can be revelatory and important for oversight purposes. 125 Besides the UPI, the current list of data elements required pursuant to appendix 1 of part 45 includes four other product-related fields; two of these are also included in appendix A of part 43. In the 2020 SDRR Final Rule, the Commission noted that SDRS would continue to accept, and reporting counterparties would continue to report, the product-related data elements unique to each SDR until the Commission designated a UPI. See 85 FR at 75540; 17 CFR 45.7(c)(2). 3. Baseline The Commission identifies and considers costs and benefits relative to a status quo baseline. In this case that baseline is defined by three components: (1) the Commission's existing requirements under its part 43, part 45 and part 49 regulations; (2) its February 2023 UPI Order; and (3) non-US jurisdictions' movement to implement harmonized swap data reporting regimes that incorporate a UPI and product classification system operated and maintained by a FSB-designated entity, i.e., DSB, in the near future to the extent that they have not done so already. Current regulations require Reporting Entities to report STAPD, along with swap creation and continuation data, to an SDR as information specified in the Data Element Appendices. 126 As discussed above, the Data Element Appendices currently include UPI data elements, some data elements that are internationally harmonized and included in the CDE Technical Guidance, and some data elements that are specific to the CFTC. SDRs are required to accept these defined data elements from the Reporting Entities and maintain systems to validate the swap data they receive. 127 If a swap is a PRST, an SDR generally must disseminate the data elements listed in appendix A to part 43 to the general public, 128 and, for certain other commodity swaps, must do so in the manner prescribed in appendix E to part 43 to geographically mask the underlying asset. 129 The February 2023 UPI Order requires Reporting Entities to use UPIs issued by DSB for swaps in the credit, equity, foreign exchange, and interest rate asset classes in all recordkeeping and swap data reporting pursuant to part 45 and to facilitate real-time public reporting as required by part 43. 130 Finally, the Commission's movement towards implementation of UPI usage in swap reporting, as reflected in its past rulemakings, the February 2023 UPI Order and these proposed amendments, is part of a larger global movement by international derivatives regulators, discussed in detail above, to adopt and implement harmonized global swap reporting around commonly accepted criteria, of which UPI is a key component. 131 126 See 17 CFR 43.3(d)(1), 45.13(a)(1). The Commission assumes for purposes of this cost-benefit consideration that Reporting Entities report this data in the form and manner provided in the technical specification published by staff on its website ( see 17 CFR 43.7(a)(1), 45.15(b)(1)). The current Technical Specification is Version 3.2 (as revised in March 2023), available at https://www.cftc.gov/media/8261/Part43_45TechnicalSpecification03012023CLEAN/download. 127 See 17 CFR 49.10(a), (c)(1). 128 See 17 CFR 43.4(a) and 17 CFR 49.15(b). 129 See 17 CFR 43.4(c)(4)(iii); id. part 43 appendix A. SDRs are additionally required to retain the swap creation and continuation data and make it available to the Commission. See 17 CFR 49.17(c). 130 Order Designating the Unique Product Identifier and Product Classification System to be Used in Recordkeeping and Swap Data Reporting, 88 FR 11790, 11791 (Feb. 24, 2023). 131 See discussion at section I.B., above. The Commission notes that this cost-benefit consideration is based on its understanding that the derivatives market regulated by the Commission functions internationally with: (1) transactions that involve U.S. entities occurring across different international jurisdictions; (2) some entities organized outside of the United States that are registered with the Commission; and (3) some entities that typically operate both within and outside the United States and that follow substantially similar business practices wherever located. Where the Commission does not specifically refer to matters of location, that discussion of costs and benefits below refers to the effects of the proposed regulations on all relevant derivatives activity, whether based on their actual occurrence in the United States or on their connection with activities in, or effect on, U.S. commerce. The Commission requests comment on the baseline outlined in this section, including any of its components and what, if any, additional factors that should be considered. 4. Proposed Non-Data Element Amendments to Part 43 and Part 45 Costs and Benefits First, the proposed addition of § 43.4(c)(5) would require Reporting Entities to report a geographically masked UPI to SDRs once a UPI and product classification system has been designated under § 45.7. This proposed change would shift the responsibility to limit the geographic information that is publicly disseminated for certain swaps in the other commodity asset class from SDRs, as currently set out in § 43.4(c)(4), to Reporting Entities. The Commission expects that Reporting Entities will incur minimal costs to implement this proposed modification. The Commission understands that currently, in most instances, in order to facilitate the geographic masking now required in § 43.4(c)(4), Reporting Entities already submit underlier information that limits geographic information for those swaps described in § 43.4(c)(iii). In addition, the Commission believes that Reporting Parties are in the best position to determine, and currently do determine, whether a swap transaction meets the criteria set out in § 43.4(c)(iii). Furthermore, the Commission believes Reporting Entities have developed systems to send required data elements to an SDR that can accommodate reporting specific to part 43. With respect to the SDRs, if Reporting Entities report a UPI that limits the geographic information according to Appendix E to part 43 to an SDR, the SDR will be able to disseminate that UPI without incurring additional costs that would otherwise be required to appropriately mask the geographic information in the reported UPI. For these reasons, the Commission believes costs to Reporting Entities and SDRs will be minimal. The Commission expects market participants and the general public to benefit from this modification since it provides the necessary regulatory groundwork for the Commission to designate a UPI and product classification system in the other commodity asset class designed to assure the real-time public dissemination of those swaps occurs with the requisite anonymity protection. The use of UPI in the other commodity asset class would significantly increase data quality and standardization in the data that is publicly disseminated and the part 45 swap data received by the Commission. The reporting of a UPI that limits the geographic detail would ensure that geographic masking is done in a consistent manner and help to eliminate reporting errors. Second, further proposed modifications to part 43 include implementing conforming and technical changes to § 43.4(c) and appendix E in connection with the geographic masking requirement, as described in section II.B above. Preliminarily, the Commission does not anticipate any material costs or benefits resulting from this proposal. Third, the Commission proposes modifications to § 45.7(b) to expressly articulate its authority to condition a designation of a UPI and product classification system and to limit, suspend or withdraw a designation order after appropriate notice and opportunity to respond. Preliminarily, the Commission does not anticipate any material costs or benefits resulting from this proposal. 132 132 The Commission recognizes that limiting, suspending or withdrawing a designation order potentially could pose costs to an impacted designee if the Commission were to have cause to exercise this expressly-stated amended § 45.7(b) authority. The Commission, consistent with its obligations under CEA section 15(a) and the Administrative Procedure Act, would consider any such potential costs, along with potential benefits, at the time of deciding whether to exercise its authority in any particular case. 7 U.S.C. 19(a); 5 U.S.C. 706. Request for Comments The Commission requests comment on the above assessment of benefits and costs. Are there additional costs or benefits that the Commission should consider? Is there data or other information that the Commission should consider to assist its efforts to quantify costs and benefits? Is there an alternative approach to what the Commission is proposing that would be preferable on cost/benefit grounds and, if so, what is it and why would it be preferable? Commenters are encouraged to include both qualitative and quantitative assessments of these costs and/or benefits and to provide substantiating data, statistics, and any other supportive information for positions they may posit. 5. Additional Swap Data Elements Reported to the Commission and to Swap Data Repositories: Proposed CDE Data Elements 133 133 Besides the proposed data element additions considered in this section and section 6 below, the proposed rulemaking also includes several non-substantive changes to the Data Element Appendices. Specifically, the Commission proposes to remove language setting out the form and manner for reporting specific data elements from the Data Element Appendices, as that language is generally duplicative of the technical specifications published separately for the purpose of addressing the form and manner for reporting. The Commission preliminarily foresees no significant costs or benefits attendant to these non-substantive changes. Introduction This section considers the costs and benefits of the nineteen new data elements that are currently included in the recommended list of CDE data elements. As previously discussed in the 2020 Final Rules, the Commission believes that new data elements selected from the CDE Technical Guidance will further improve the harmonization of SDR data across FSB-member jurisdictions. 134 And, as the Commission and regulators in other FSB-member jurisdictions define data elements reflecting the CDE Guidance, standardization across SDRs and TRs internationally will support data aggregation for the analysis of global systemic risk in swaps markets. 135 134 See, e.g., Final Rule, Swap Data Reporting and Recordkeeping, 85 FR 75503, 75539-40 (Nov. 25, 2020) (“As a general matter, the Commission believes the implementation of the CDE Technical Guidance will further improve the harmonization of SDR data across FSB jurisdictions.”). 135 See, e.g., Final Rule, Swap Data Reporting and Recordkeeping, 85 FR 75540 (Nov. 25, 2020) (“This harmonization, when widely implemented, would also allow the Commission to potentially receive more standardized information regarding swaps reported to TRs regulated by other authorities. For instance, such standardization across SDRs and TRs could support data aggregation for the analysis of global systemic risk in swaps markets.”). These new data elements are related to four data categories: custom basket, prices, notional amount and quantities, and product. A subset of these new data elements (ten) are set to also become required under part 43 real-time swap transaction reporting. There are five data elements in the custom basket category: [1] custom basket code, [2] basket constituent identifier, [3] basket constituent unit of measure, [4] basket constituent number of units, and [5] basket constituent identifier source. The Commission believes these fields are essential to capture the underlying products that determine the value of the swap. This category of swaps can be especially important to monitor risk and used to aggregate swaps that have similar risk and reward characteristics. The Commission expects Reporting Entities to have easy access to these details as they represent a key feature of the negotiated swap. There are six data elements in the price category: [1] price schedule—unadjusted effective date of the price, [2] price schedule—unadjusted end date of the price, [3] price schedule—price, [4] strike price schedule—unadjusted effective date of the strike price, [4] strike price schedule—unadjusted end date of the strike price, and [6] strike price schedule—strike. All six data elements will be reported under part 43. The Commission is aware of many examples of equity and other commodity swaps that contain a well-defined price schedule, which determines the risk/reward profile of the swap. Similarly, swaptions can be structured to have strike prices that change over the life of the swap according to a well-defined schedule determined at the time of trade. By adding the strike price schedule data elements, Commission staff would be able to determine if the change was due to an error or part of the normal lifecycle of the swap. There are five data elements in the product category: [1] underlier ID (other), [2] underlier ID (other) source, [3] underlying asset price source, [4] underlying asset trading platform identifier, and [5] crypto asset underlying indicator. Only the last data element here (crypto asset underlying indicator) will be reported under part 43. The Commission believes the first two data elements are now necessary following the introduction of the UPI. As Reporting Entities send information about the underlier to the UPI provider, it is possible that the information will be new and not on a pre-defined list of underliers maintained by the UPI provider, in which case the provided UPI will simply note the underlier of “other.” Requiring Reporting Entities to submit this information would ensure it is retained and sent to the SDR. This will allow for updates to the reference list of underliers maintained by the UPI provider and will allow the Commission to identify the necessary information to understand the swap. The Commission expects the underlying asset price source field will be necessary to monitor possible manipulation attempts of benchmarks, for example from an oil price reporting agency or index publisher. The Commission is aware that equity and other commodity swaps might trade on a foreign trading venue and thus the new underlying asset trading platform identifier is required to note if the swap is valued in a non-US currency. Finally, considering the increase in trading in cryptocurrency derivatives, the Commission believes that receiving additional information with respect to cryptocurrency swap transactions will assist with identification of swaps that reference a cryptocurrency asset as the underlier. There are three data elements in the notional amounts and quantities category: [1] notional quantity schedule—unadjusted date on which the associated notional quantity becomes effective, [2] notional quantity schedule—unadjusted end date of the notional quantity, and [3] notional quantity schedule—notional quantity. All three data elements will be reported under part 43. These fields are similar to existing data elements in the Data Element Appendices, but with a key difference. That key difference is that the proposed fields point to “non-monetary amounts.” The new fields are being proposed to capture swaps in the other commodity asset class, which specify, for example, a quantity of oil or wheat. The Commission believes these new fields are essential to capture details of the swap not captured by the UPI or other currently required fields. Benefits The Commission believes including certain CDE Technical Guidance 3.0 data elements will create significant efficiencies for the Commission and Reporting Entities. By including certain CDE fields, the Commission believes it will receive more cohesive, more standardized, and, ultimately, more accurate data without sacrificing the ability to oversee the markets robustly. Higher-quality swap data will improve the Commission's oversight capabilities of registrants, and, in turn, will aid in protecting markets, participants, and the public in general. The Commission proposes adding CDE fields related to custom baskets because it believes that the visibility and reporting accuracy of holdings in custom baskets provides critical information required to ensure robust oversight of registrants. The proposed additional fields related to product are necessary to understand the characteristics of the non-standard underliers across asset classes at a level of granularity not provided in the UPI Taxonomy. A more complete identification of certain underliers will allow the Commission to distinguish between positions in different contracts that may not currently be distinguishable, allowing better oversight of registrants and thereby protecting the financial integrity of the swaps market. Moreover, receiving information specifying the underlying asset price source is critical to the Commission's benchmark manipulation surveillance efforts, thereby enhancing the protections afforded to the markets generally. Since some of these proposed CDE data elements will be publicly disseminated pursuant to part 43, the Commission believes this proposal will provide additional swap market transparency to market participants and to the general public. For example, the Commission is aware of swaps that contain price and/or notional amounts that vary according to a defined schedule. Certain aspects of these defined schedules are not currently disseminated on the real-time ticker. The proposed fields address this problem and will allow for more accurate and complete information, thereby allowing market participants to better analyze STAPD. The Commission believes that proposing additional CDE fields will benefit cross-jurisdictional Reporting Entities by reducing compliance and reporting costs. As standards are adopted across various jurisdictions, these Reporting Entities can develop a single reporting system that can send the standardized information regardless of d [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2023-28350. Public record. Not legal advice.