Amendments to Part 45 Cleared Swap Data Reporting Proposed by CFTC | Practical Law

Amendments to Part 45 Cleared Swap Data Reporting Proposed by CFTC | Practical Law

The CFTC announced proposed amendments to regulatory ("SDR") swap data reporting rules under Part 45 of the CFTC’s regulations. The proposals are intended to remove uncertainty surrounding data reporting for cleared swaps.

Amendments to Part 45 Cleared Swap Data Reporting Proposed by CFTC

Practical Law Legal Update 2-618-3399 (Approx. 4 pages)

Amendments to Part 45 Cleared Swap Data Reporting Proposed by CFTC

by Practical Law Finance
Published on 27 Aug 2015 • USA (National/Federal)
The CFTC announced proposed amendments to regulatory ("SDR") swap data reporting rules under Part 45 of the CFTC’s regulations. The proposals are intended to remove uncertainty surrounding data reporting for cleared swaps.
On August 19, 2015, the CFTC announced proposed amendments to regulatory "SDR" swap data reporting rules under Part 45 of the CFTC's regulations, implemented under Title VII of the Dodd-Frank Act. The proposed amendments are intended to remove uncertainty surrounding data reporting for cleared swaps.
The final SDR rules, originally adopted in December 2011 and currently elective for most swaps, established the framework and requirements for the reporting of swap data to swap data repositories (SDRs) for regulatory purposes both at the time the swap is executed (creation data) and over the course of life of the swap (continuation data).
Specifically, these Part 45 amendments would:
  • Reconcile Part 45 with Part 39 of the CFTC's regulations, which include provisions relating to derivative clearings organizations (DCOs), by:
    • modifying Part 45 to explicitly state the responsibilities of the DCO as the reporting party for each swap involved in a cleared swap transaction, to the extent this was not already clear under Part 45, to better bring it in line with DCO obligations under Part 39.
    • creating the defined terms "original swaps" (swaps accepted by a DCO for clearing, commonly known as "alpha" swaps) and "clearing swaps" (swaps created during the clearing process to which the DCO is a counterparty, commonly known as beta or gamma swaps, or any other swap to which the DCO is a counterparty -- whether the swap replaced an original swap pursuant to DCO mechanics or otherwise). For details on clearinghouse mechanics, see Practice Note, Mechanics of Derivatives Clearing.
    • clarifying that the DCO is the reporting counterparty for clearing swaps, and requiring DCOs to submit creation data for each clearing swap. Original swaps would continue to be reported as currently required under CEA § 45.3(a)-(d).
  • Obligate a swap execution facility (SEF) or designated contract market (DCM) to choose the SDR to which they would submit creation data.
  • Amend CEA sections 45.3(a), (b), (c)(1)(iii), (c)(2)(iii), and (d)(2) to remove certain existing transaction confirmation data reporting requirements. Under the proposed amendments, SEFs/DCMs and swap data reporting counterparties would continue to be required to report primary economic terms (PET) data as part of their creation data reporting obligations, but would not be required to report confirmation data for swaps that are intended to be submitted to a DCO for clearing at the time of execution. Instead, under proposed section 45.3(e), the DCO would be required to report confirmation data for clearing swaps.
  • Add new section 45.3(j) for swaps executed on or pursuant to the rules of a SEF or DCM (including swaps that become original swaps) under which the SEF or DCM would have the obligation to choose the SDR for such swaps; for all other swaps (including clearing swaps and off-facility swaps not executed on a SEF or DCM) the reporting counterparty (as determined under CEA section 45.8) would have the obligation to choose the SDR.
  • Remove confirmation data reporting requirements for swaps intended to be submitted to a DCO at the time of execution (but continue to require reporting PET as part of its creation data reporting).
  • Require DCOs to report all continuation data (including termination of the swap) to the SDR that the original swap was reported to. The data reported must include:
    • the Legal Entity Identifier (LEI) of the SDR where the clearing swap that replaced the original swap was reported to;
    • the Unique Swap Identifier (USI) of the original swap that was replaced by the clearing swap; and
    • the USIs for the clearing swaps that replaced that original swap.
  • Modify existing requirements so the DCO is the only counterparty required to report continuation data for clearing swaps. Note that this would remove the requirement that swap dealers (SDs) and major swap participants (MSPs) report daily valuation data for clearing swaps. Valuation data reporting for SDs and MSPs is not yet effective (see Legal Update, Dodd-Frank Valuation Data Reporting Relief for Swap Dealers Further Extended by CFTC).
  • Clarify that all data reported by a DCO for a particular clearing swap or original swap should be to the same SDR, to better trace the history of a given swap.
  • Require DCOs to create a USI for each swap that they clear.
  • Modify existing PET data fields and explanatory notes in Appendix 1 to Part 45 to reflect these changes above (see The Dodd-Frank Act: CFTC Swap Data Reporting Required Data Fields Checklist).
The proposed amendments have been published in the Federal Register, and the CFTC is requesting that public comment be submitted on or before October 30, 2015. Comments may be submitted online on the CFTC website (http://comments.cftc.gov) or the Federal eRulemaking Portal (http://www.regulations.gov). Comments submitted via mail should be addressed to Christopher Kirkpatrick, Secretary of the Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581.