CFTC Proposes Change to "Material Terms" Definition for Swap Portfolio Reconciliation | Practical Law

CFTC Proposes Change to "Material Terms" Definition for Swap Portfolio Reconciliation | Practical Law

The CFTC issued a proposed rule that would change the definition of "Material Terms" under CFTC Regulation 23.5000(g) for swap portfolio reconciliation purposes to explicitly exclude certain data fields that are collected under Part 45 of the CFTC's regulations.

CFTC Proposes Change to "Material Terms" Definition for Swap Portfolio Reconciliation

by Practical Law Finance
Published on 17 Sep 2015 • USA (National/Federal)
The CFTC issued a proposed rule that would change the definition of "Material Terms" under CFTC Regulation 23.5000(g) for swap portfolio reconciliation purposes to explicitly exclude certain data fields that are collected under Part 45 of the CFTC's regulations.
On September 15, 2015, the CFTC issued a proposed rule that would change the definition of "Material Terms" under CFTC Regulation 23.5000(g) (17 CFR 23.500(g)) for swap portfolio reconciliation purposes under CFTC Regulation 23.502 (17 CFR 23.502). Portfolio reconciliation involves any process in which two parties to multiple swaps exchange the terms and the valuations of all swaps in their portfolio and resolve any discrepancies.
The proposal would define "Material Terms" to include all data collected under Part 45 of the CFTC regulations, but would explicitly exclude from that definition certain data fields, including:
  • An indication that the swap will be allocated.
  • If the swap will be allocated, or is a post-allocation swap, the legal entity identifier (LEI) of the agent.
  • An indication that the swap is a post-allocation swap.
  • If the swap is a post-allocation swap, the unique swap identifier (USI).
  • Block trade indicator.
  • With respect to a cleared swap, execution timestamp.
  • With respect to a cleared swap, timestamp for submission to a swap data repository.
  • Clearing indicator.
  • Clearing venue.
The proposed rule, if adopted, would supersede CFTC Staff Letter 13-31, which is similar but not identical to this proposed rule (see CFTC Issues No-action Letters Giving Swap Dealers More Time to Comply with Dodd-Frank Rules).
Comments are due on or before November 23, 2015. Comments should be addressed to Christopher Kirkpatrick, Secretary of the Commission, Commodity and Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581. Comments may also be submitted via the Federal eRulemaking Portal. All comments should be identified by RIN 3038-AE17 and Proposal to Amend the Definition of "Material Terms" for Purposes of Swap Portfolio Reconciliation. For details on CFTC Part 45 swap data reporting, see Practice Note, US Derivatives Regulation: CFTC Swap Data Reporting and Recordkeeping Rules.
For information on swap portfolio reconciliation requirements under Title VII of the Dodd-Frank Act, see Practice Note, The Dodd-Frank Act: Final Internal Business Conduct (IBC) Rules on Documentation, Confirmation, Reconciliation and Compression for Swap Dealers and MSPs.