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No-action Relief for Bespoke Swap Data Reporting Issued by CFTC
Practical Law Legal Update 3-522-8553 (Approx. 4 pages)
No-action Relief for Bespoke Swap Data Reporting Issued by CFTC
by PLC Finance
| Published on 06 Dec 2012 • USA (National/Federal) |
On November 30, 2012, the CFTC's Division of Market Oversight issued temporary no-action relief for bespoke (complex, non-standardized) swaps from certain reporting obligations under the CFTC's final SDR data reporting rules (Part 45 of the CFTC's Regulations) and final real-time reporting rules (Part 43).
On November 30, 2012, the CFTC's Division of Market Oversight issued No-action Letter 12-39 providing temporary relief for bespoke or complex, non-standardized, uncleared swaps from certain reporting obligations under the CFTC's final SDR data reporting rules (Part 45 of the CFTC's Regulations) and final real-time reporting rules (Part 43). The relief is necessary because required data elements cannot currently be electronically represented in the commonly used data standardization language known as Financial products Markup Language (FpML), which is used to share swap data electronically. Therefore, reporting parties to these swaps are currently unable to:
- Submit specific data elements required by Parts 43 and 45 for bespoke and complex products.
- Report certain confirmation data for bespoke or complex products in swaps between affiliates that are not submitted for clearing since reporting parties do not generate paper confirmations of these swaps.
The relief expires on the earlier of June 30, 2013 or the date that relevant data elements can be electronically represented in FpML.
For the purposes of the no-action letter, bespoke or complex swaps are defined as swaps that are not:
- Listed for trading on a designated contract market (DCM), which is a registered swap exchange.
- Available to be traded on a swap execution facility (SEF), a registered swap-trading platform.
- Eligible to be cleared by a derivatives clearing organization (DCO), a registered derivatives clearinghouse.
- Eligible to be confirmed through an electronic matching confirmation system.
- Able to be reported in FpML.
Part 43 of the CFTC's Regulations, added by the Dodd-Frank Act, provides for the real-time public reporting of swap transaction data. Part 45, also added by Dodd-Frank, provides for swap data recordkeeping and swap data repository (SDR) reporting requirements (referred to as final SDR rules). Many reporting parties plan to report data required by Parts 43 and 45 to SDRs using FpML. However, FpML does not currently support bespoke or complex products for all the data fields required by Parts 43 and 45.
The no-action relief therefore states that the Division will not recommend that the CFTC enforce the requirement of a reporting party to report the fields that are not currently supported by FpML. The no-action letter contains a detailed list of fields required by Parts 43 and 45 for bespoke or complex products that are not yet supported by FpML (see Unrepresented Fields). For more information on the data fields required under Parts 43 and 45, see The Dodd-Frank Act: CFTC Swap Data Reporting Required Data Fields Checklist
This relief applies to all swap data reporting parties (see Practice Note, US Derivatives Regulation: Practical Guide to Over-the-Counter (OTC) Swap Data Reporting: Box, Which Is the Reporting Party?) but applies only:
- To bespoke or complex swaps.
- For the unrepresented Part 43 and 45 fields and to confirmation data for uncleared inter-affiliate swaps. This means that the remaining data fields must be submitted as per the applicable data reporting rules.
The relief expires on the earlier of June 30, 2013 or the date that relevant data elements can be electronically represented in FpML.
For more information on swap data reporting, see:
Unrepresented Fields
The following data fields are required by Part 43 but are still unrepresented by FpML; therefore, the no-action relief applies to these data elements for all asset classes of swaps:
- Day count convention.
- Unique product identifier.
- Payment frequency.
- Option strike price.
- Option family
- Option lockout period.The following fields are required by Part 45 but are still unrepresented by FpML; therefore, the no-action relief applies to these data elements:Credit and equity swaps:
- Unique product identifier.
- Payment frequency of the reporting counterparty.
- Payment frequency of the non-reporting counterparty.
- Any other terms of the swap matched or affirmed by the counterparties in verifying the swap.
Foreign exchange transactions (other than cross-currency swaps):
- Unique product identifier.
- Delivery time.
- Any other terms of the swap matched or affirmed by the counterparties in verifying the swap.
Interest rate swaps (including cross-currency swaps):
- Unique product identifier.
- Day count convention.
- Payer (fixed rate).
- Payer (floating rate leg 1).
- Payer (floating rate leg 2).
- Direction.
- Fixed day count fraction.
- Floating rate payment frequency.
- Floating rate reset frequency.
- Any other terms of the swap matched or affirmed by the counterparties in verifying the swap.
Other commodity swaps:
- Unique product identifier.
- Quantity.
- Quantity frequency.
- Total quantity.
- Settlement method.
- Buyer pay index.
- Buyer pay averaging method.
- Seller pay index.
- Seller pay averaging method.
- Option style.
- Hours from through.
- Hours from through time zone.
- Days of week.
- Load type.
- Any other terms of the swap matched or affirmed by the counterparties in verifying the swap.