CFTC Provides Additional Time-Limited Relief from OCR Reporting and Permits Masking Certain Reportable Information for Physical Commodity Swaps | Practical Law

CFTC Provides Additional Time-Limited Relief from OCR Reporting and Permits Masking Certain Reportable Information for Physical Commodity Swaps | Practical Law

The CFTC issued No-Action Letters 16-32 and 16-33, addressing data-masking requirements and providing additional time-limited relief from reporting certain data elements under the CFTC’s final ownership and control (OCR) reporting rules for physical commodity swaps.

CFTC Provides Additional Time-Limited Relief from OCR Reporting and Permits Masking Certain Reportable Information for Physical Commodity Swaps

by Practical Law Finance
Published on 21 Apr 2016 • USA (National/Federal)
The CFTC issued No-Action Letters 16-32 and 16-33, addressing data-masking requirements and providing additional time-limited relief from reporting certain data elements under the CFTC’s final ownership and control (OCR) reporting rules for physical commodity swaps.
Update: On March 10, 2017, the CFTC published No-Action Letter 17-16, which extends the relief granted in No-Action Letter 16-33 until:
  • 12:01 a.m. EST on September 1, 2017 for reportable swaps in French and Swiss jurisdictions.
  • For all other jurisdictions, the date on which the reporting party no longer holds the requisite reasonable belief regarding the privacy law consequences of reporting and subject to the terms and conditions in the prior No-Action Letter 16-33, discussed below, other than the requirement found in in No-Action Letter 13-41 that parties relying on relief request confirmation from the relevant foreign authority that foreign law or regulation prohibit reporting swap data.
On April 8, 2016, the CFTC issued No-Action Letters 16-32 and 16-33, addressing data masking requirements and providing additional time-limited relief from reporting certain data elements under the CFTC’s final ownership and control (OCR) reporting rules (17 CFR Part 17, 17 CFR Part 18, and 17 CFR Part 20).
The OCR rule requires electronic reporting of trading identification and market participant data to assist the CFTC with identification of participants in the futures and swaps markets (see Practice Note, US Derivatives Regulation: Practical Guide to Over-the-Counter (OTC) Swap Data Reporting: Large-Trader Position Data Reporting for Physical Commodity Swaps.
However, since the dissemination of certain data elements is prohibited in certain jurisdictions, the CFTC is extending previously-issued no-action relief from reporting those data elements under the rule (see Legal Update, CFTC Extends Relief on Use of New Large-trader OCR Data Reporting Forms).

No-Action Letter 16-32

No-Action 16-32 extends the relief previously granted in No-Action Letter No. 15-52, by providing reporting parties with temporary relief from certain OCR reporting obligations. The relief, which exempts reporting parties from filing certain forms, was previously set to expire on April 27, 2016, but has been extended until:
  • September 28, 2016, for New Form 102A, New Form 102B (with respect to Designated Contract Market (DCM) volume threshold accounts), and New Form 102S.
  • November 17, 2016, for New Form 40/40S and New Form 71.
  • August 29, 2018 for New Form 102B (with respect to Swap Execution Facility (SEF) volume threshold accounts).
No-Action Letter 16-32 (No-Action 16-32) also provides new, substantive time-limited relief from reporting certain data elements identified by the Futures Industry Association (FIA) on New Form 102A, New Form 102B, and New Form 102S once their filing becomes required on September 29, 2016, including, among others:
  • On New Form 102A:
    • until September 28, 2017, a reporting party may report that a client will not provide certain required information in Question 10;
    • until August 29, 2018, a reporting party will not be required to provide certain required information in Question 10(ii) and Question 10(iii); and
    • until August 29, 2018, the CFTC will not enforce an action against reporting parties who modify certain required information in Question 10(ii) and Question 10(iii).
  • On New Form 102B:
    • until September 28, 2017, reporting parties may disregard the reporting trigger of 50 vendor contracts under Form 102B, and rely on the trigger of 250 or more contracts per day, and from September 29, 2017 until August 29, 2018, the trigger of 100 or more contracts per day. Upon expiration, the reportable trading volume level will revert back to the original 50 contracts;
    • until September 28, 2017, a reporting party may report that a client will not provide certain required information in Form 102B, Questions 5 and 6 (with respect to DCM volume threshold account reporting); and
    • until August 29, 2018, a reporting party must report certain information, including DCM volume threshold account owner and account controller names, in Form 102B, Questions 5 and 6; however, the CFTC will not enforce an action against reporting parties who modify the information provided in Questions 5 and 6.
  • On New Form 102S, until September 28, 2017, reporting parties will not be required to provide certain identifying information in Question 3(ii), Question 3(iii) and Question 3(iv) of Form 102S, on the condition the reporting parties provide consolidated account counterparty information and the required 102S information via the new automated methods introduced by OCR final rule.
Reporting parties must continue to report under requirements that were in place before the OCR final rule, by submitting Legacy Form 102, Legacy 102S filings, Legacy Form 40, and Legacy Form 40S. The relief in No-action 16-32 is also contingent on certain conditions, including, among others:
  • Cooperating with CFTC staff to provide “Production Grade” test submissions, status reports, and other form filings as requested; and
  • Providing a list of clients that had not provided such information to reporting parties.

No-Action Letter 16-33

On April 8, 2016, the CFTC also issued No-action Letter 16-33 (No-Action 16-33), resolving the legal complications imposed on reporting entities by certain foreign privacy laws by permitting the masking of certain information reportable under OCR final rule.
The relief granted under No-action 16-33 is an extension of relief granted under No-Action Letter 16-03. The OCR final rule requires electronic reporting of trader identification and market participant data on Form 102A and new Form 102B. Consistent with the no-action relief granted under No-action Letter 16-03, No-action 16-33 permits the masking of such information on Form 102A and new Form 102B, but requires both:
  • That the reporting party have a reasonable belief that non-US privacy laws preclude a reporting party from reporting information on Form 102A or new Form 102B.
  • A formal response from the relevant foreign regulator(s) that reporting such information would violate the law of the non-US jurisdiction.
Similar to the relief stated in No-Action 16-03, the relief granted under No-Action 16-33 will expire on the earlier of:
  • The date on which the reporting party no longer holds the requisite reasonable belief regarding the privacy law consequences of reporting.
  • 11:59 p.m. EST on March 1, 2017.
The relief is contingent on certain conditions, including, among others:
  • Submission of the formal foreign regulator’s report reporting such information would violate the law of the non-US jurisdiction;
  • Submission of Form 102A or new Form 102B, including, the country of reportable owner or controller; and that information has been masked due to privacy law in each field of Form 102A or new Form 102B; and
  • Upon expiration of relief, submission of a corrective Form 102A or new Form 102B including all unmasked information, by no later than 30 days from date of expiration.