Time-Limited No-Action Relief from the Reporting of Certain Non-Reporting Counterparty Information Pursuant to Parts 45 and 46

Summary: Time-Limited No-Action Relief from the Reporting of Certain Non-Reporting Counterparty Information Pursuant to Parts 45 and 46

U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre

1155 21st Street, NW, Washington, DC 20581

Telephone: (202) 418-5260

Facsimile: (202) 418-5527

Division of

Market Oversight

CFTC Letter No. 12-65

No-Action

December 21, 2012

Division of Market Oversight

Robert Pickel

Chief Executive Officer

International Swaps and Derivatives Association, Inc.

1001 Pennsylvania Avenue, NW

Suite 600

Washington, DC 20004

Time-Limited No-Action Relief from the Reporting of Certain Non-Reporting

Counterparty Information Pursuant to Parts 45 and 46

Dear Mr. Pickel,

This letter is in response to your letter on behalf of International Swaps and Derivatives

Association, Inc. (“ISDA”) dated December 7, 2012 (“Letter”), to the Division of Market

Oversight (“DMO” or the “Division”) of the Commodity Futures Trading Commission (“CFTC”

or “Commission”). In the Letter, you requested time-limited no-action relief for trade

participants1 with respect to certain reporting requirements promulgated by the Commission

pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank

Act”) under Parts 452 and 463 of the Commission’s regulations.4 Specifically, ISDA identified

the reporting, of what ISDA terms “Counterparty Information”5 as an area in which full

compliance with the Parts 45 and 46 reporting requirements, as they pertain to reporting

1

In the Letter, ISDA defines trade participants as ISDA members and other similarly situated persons with

reporting obligations under Part 45 or Part 46 of the Regulations of the Commission.

2

See generally Swap Data Recordkeeping and Reporting Requirements, 77 FR 2136 (January 13, 2012)

(“Regulatory Reporting Rule”)

y pertain to reporting

1

In the Letter, ISDA defines trade participants as ISDA members and other similarly situated persons with

reporting obligations under Part 45 or Part 46 of the Regulations of the Commission.

2

See generally Swap Data Recordkeeping and Reporting Requirements, 77 FR 2136 (January 13, 2012)

(“Regulatory Reporting Rule”).

3

See generally Swap Data Recordkeeping and Reporting Requirements: Pre-Enactment and Transition

Swaps, 77 FR 35200 (June 12, 2012) (“Historical Swap Reporting Rule”).

3

Section 23.204 requires swap dealers and major swap participants to comply with Part 45 of the

Commission’s regulations. To that extent only, section 23.204 is incorporated by reference into the no-

action relief herein.

5

“Counterparty Information” refers to information that would otherwise be required to appear in one of the

data fields specified in the annex as attached to the Letter, submitted by ISDA.

2

counterparties, would not be possible as of the relevant compliance deadlines6 because some

reporting counterparties will be unable to obtain identifying information of non-reporting

counterparties in some instances.

The Division has reviewed your request and determined to grant the following relief:

The Division, in light of ISDA’s representation that reporting counterparties will be

unable to obtain certain identifying information of non-reporting counterparties in some

instances, is granting time-limited no-action relief to ISDA members, or similarly situated

persons, until April 10, 2013, from Parts 45 and 46 for reporting counterparties from reporting

the following non-reporting counterparty information, only to the extent that such information is

not provided by the non-reporting counterparty and is otherwise unavailable to the reporting

counterparty, after a good faith effort to obtain such information:

Part 45

 An indication of whether the non-reporting counterparty is a major swap

participan

reporting counterparties from reporting

the following non-reporting counterparty information, only to the extent that such information is

not provided by the non-reporting counterparty and is otherwise unavailable to the reporting

counterparty, after a good faith effort to obtain such information:

Part 45

 An indication of whether the non-reporting counterparty is a major swap

participant with respect to the swap;

 An indication of whether the non-reporting counterparty is a financial entity as

defined in the Commodity Exchange Act (“CEA”) section 2(h)(7)(C);

 An indication of whether the non-reporting counterparty is a U.S. person; and

 The identity of the counterparty electing the clearing requirement exception in

CEA section (2)(h)(7).

Part 46

 An indication of whether the non-reporting counterparty is a major swap

participant with respect to the swap;

 An indication of whether the non-reporting counterparty is a financial entity as

defined in the CEA section 2(h)(7)(C); and

 An indication of whether the non-reporting counterparty is a U.S. person.

Finally, the Division believes that, in light of ISDA’s representation that reporting

counterparties will be unable to obtain identifying information of non-reporting counterparties in

6

The earliest date upon which a swap dealer would be required to report swap transaction data for swaps in

the interest rate and credit asset classes (“Compliance Date 1 Swaps”) pursuant to Parts 43 and 45 is

December 31, 2012, if the swap dealer reaches the de minimis swap dealing threshold in October 2012.

See generally Staff No-Action Letter No. 12-32 (November 19, 2012) (establishing the reporting

compliance deadline for swap dealers under Parts 43 and 45 as the applicable registration deadline,

regardless of whether the swap dealer chooses to register prior to that deadline) (“November 19 Letter”)

mber 31, 2012, if the swap dealer reaches the de minimis swap dealing threshold in October 2012.

See generally Staff No-Action Letter No. 12-32 (November 19, 2012) (establishing the reporting

compliance deadline for swap dealers under Parts 43 and 45 as the applicable registration deadline,

regardless of whether the swap dealer chooses to register prior to that deadline) (“November 19 Letter”).

The earliest date upon which the same swap dealer would be required to report historical Compliance Date

1 Swaps under Part 46 is January 30, 2013. See id. (establishing the reporting compliance deadline for

historical swaps under Part 46 as 30 days after the date upon which the swap dealer is required to begin

reporting swap transaction data pursuant to Parts 43 and 45 for the asset class to which the historical swap

belongs). For purposes of the discussion herein, DMO assumes that the ISDA members anticipate having

to register as swap dealers by December 31, 2012, and thus begin reporting Compliance Date 1 Swaps

under Parts 43 and 45 as of December 31, 2012, and historical Compliance Date 1 Swaps under Part 46 as

of January 30, 2013.

3

some instances, the Division will not recommend that the Commission commence an

enforcement action against reporting counterparties for failure to report such identifying

information, pursuant to Parts 45 and 46, only to the extent that such information is not provided

by the non-reporting counterparty and is otherwise unavailable to the reporting counterparty,

until as soon as such previously omitted identifying information becomes available to the

reporting counterparty or April 10, 2013, whichever occurs first. DMO believes that a three-

month timeframe should be sufficient for ISDA members, and other similarly situated persons to

come into compliance with the reporting requirements under Parts 45 and 46

unavailable to the reporting counterparty,

until as soon as such previously omitted identifying information becomes available to the

reporting counterparty or April 10, 2013, whichever occurs first. DMO believes that a three-

month timeframe should be sufficient for ISDA members, and other similarly situated persons to

come into compliance with the reporting requirements under Parts 45 and 46. 7

The following conditions apply to each no-action position taken above:

1) Despite staff no-action position taken herein expiring upon a certain future date, any

reporting counterparty relying upon this relief is required to begin reporting in full

compliance with the CEA and Commission’s regulations as soon as the previously

omitted identifying information becomes available to the reporting counterparty, even

if such resolution occurs prior to the applicable no-action position expiration date;

2) Should the Commission promulgate additional swap data reporting rules applicable to

the subject matter covered herein during the pendency of this no-action relief period,

such rules could supersede the no-action relief granted herein;

3) During the pendency of remediation efforts, and prior to completing or correcting all

required swap transaction data records in the applicable SDR(s), the reporting

counterparty must retain records with respect to all transactions covered by the relief

in this response and make such records available to the Commission for inspection

and production immediately upon request;

4) Any reporting counterparty relying upon this relief must complete the SDR reporting

records with respect to the identifying non-reporting counterparty data not reported

pursuant to this no-action position as soon as the previously omitted identifying

information becomes available to the reporting counterparty , but in no case later than

April 30, 20138; and

7

The Division is not expressing an opinion on the merits of the relief that

h respect to the identifying non-reporting counterparty data not reported

pursuant to this no-action position as soon as the previously omitted identifying

information becomes available to the reporting counterparty , but in no case later than

April 30, 20138; and

7

The Division is not expressing an opinion on the merits of the relief that was requested but not granted

herein.

8

The no-action relief for reporting identifying counterparty information provided herein expires no later than

April 10, 2013. However, in order to allow the reporting counterparties sufficient time to update their SDR

reporting records with respect to the non-reporting counterparty identifying data not reported pursuant to

this no-action position, the Commission is allowing for the backloading of the unreported data to the

applicable SDR(s) until April 30, 2013.

4

5) If any representation made by ISDA in the Letter ceases to be true or materially

changes with respect to any no-action position contained in this response, that no-

action position is void.

This letter, and the no-action positions taken herein, represent the views of the Division

only, and do not necessarily represent the position or views of the Commission or of any other

division or office of the Commission’s staff. The no-action positions taken herein do not excuse

affected persons from compliance with any other applicable requirements of the CEA or

Commission regulations thereunder, and applies only to the ISDA members and similarly

situated parties in their capacity as the requestor of this relief

ent the position or views of the Commission or of any other

division or office of the Commission’s staff. The no-action positions taken herein do not excuse

affected persons from compliance with any other applicable requirements of the CEA or

Commission regulations thereunder, and applies only to the ISDA members and similarly

situated parties in their capacity as the requestor of this relief. Further, despite each staff no-

action position taken herein expiring upon a certain future date, market participants are required

to begin reporting in full compliance with the CEA and Commission’s regulations as soon as the

previously omitted identifying information becomes available to the reporting counterparty ,

even if such resolution occurs prior to the applicable no-action position expiration date. As with

all no-action letters, the Division retains the authority to condition further, modify, suspend,

terminate, or otherwise restrict the terms of the no-action relief provided herein, in its discretion.

The no-action relief provided herein contains a collection of information, as that term is

defined in the Paperwork Reduction Act. Therefore, a control number for the collection must be

obtained from the Office of Management and Budget (“OMB”). In accordance with 44 U.S.C.

§ 3507(d) and 5 C.F.R. §§ 1320.8 and 1320.10, the Division will, by separate action, prepare an

information collection request for review and approval by OMB, and will publish in the Federal

Register a notice and request for public comments on the collection burdens associated with the

no-action relief. If approved, an agent may not rely on the Division’s determination not to

recommend enforcement action to the Commission unless it provides the information the

Division has determined is essential to the provision of no-action relief.

If you have any questions regarding the content of this staff no-action letter, please

contact Roger Smith, Attorney-Advisor, at 202-418-5344 or RSmith@CFTC.gov

If approved, an agent may not rely on the Division’s determination not to

recommend enforcement action to the Commission unless it provides the information the

Division has determined is essential to the provision of no-action relief.

If you have any questions regarding the content of this staff no-action letter, please

contact Roger Smith, Attorney-Advisor, at 202-418-5344 or RSmith@CFTC.gov.

Sincerely,

Richard A. Shilts

Acting Director

Division of Market Oversight