CFTC Amends Cleared Swap Reporting Regulations | Practical Law

CFTC Amends Cleared Swap Reporting Regulations | Practical Law

The CFTC approved a final rule (referred to as the cleared swap rule), which amends and clarifies existing swap data reporting obligations for cleared swaps under CFTC Regulations Part 45 ("SDR" swap data reporting rules).

CFTC Amends Cleared Swap Reporting Regulations

Practical Law Legal Update w-002-7203 (Approx. 4 pages)

CFTC Amends Cleared Swap Reporting Regulations

by Practical Law Finance
Published on 30 Jun 2016 • USA (National/Federal)
The CFTC approved a final rule (referred to as the cleared swap rule), which amends and clarifies existing swap data reporting obligations for cleared swaps under CFTC Regulations Part 45 ("SDR" swap data reporting rules).
On June 14, 2016, the CFTC approved a final rule, referred to as the cleared swap rule, which amends and clarifies existing swap data reporting obligations for cleared swaps under CFTC Regulations Part 45 ("SDR" swap data reporting rules). The final rule aims to:
  • Provide additional clarity to swap counterparties and registered entities regarding their reporting obligations for cleared swaps transactions.
  • Improve the efficiency of data collection and maintenance associated with swap data reporting of cleared swap transactions.
The cleared swap rule adopts changes to Part 45 that were proposed in August 2015 (see Legal Update, Amendments to Part 45 Cleared Swap Data Reporting Proposed by CFTC).
The final SDR rules were originally adopted in December 2011 and 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).
The changes to the final rule include:
  • A revised definition of derivatives clearing organization (DCO).
  • Clarification of DCO creation data reporting obligations for swaps created under the rules of a DCO that have a DCO as a counterparty.
  • Added definitions of the terms:
    • "original swap": a swap that has been accepted for clearing by a DCO.
    • "clearing swap": a swap created pursuant to the rules of a DCO that has a DCO as a counterparty. This includes any swap that replaces an original swap that was extinguished upon acceptance of the original swap by a DCO, as part of the clearing process. When a swap is cleared, the original swap that is submitted for clearing is extinguished and replaced by two new swaps - one between the clearinghouse and each counterparty (for details on clearing, see Practice Note, Mechanics of Derivatives Clearing).
  • Clarification on which entity has the obligation to choose the SDR to which creation data is reported. For swaps executed on or pursuant to the rules of a swap execution facility (SEF) or designated contract market (DCM), the SEF or DCM has the obligation to choose the SDR to which creation data for that swap is reported. For all other swaps, the reporting counterparty has the obligation to choose the SDR.
  • Elimination of confirmation data reporting obligations for swaps that are intended to be cleared at the time of execution.
  • Clarification of DCO continuation data reporting obligations for swaps that are accepted for clearing, including the obligation to report termination of the swap to the SDR to which the swap data was originally reported. The continuation data must include:
    • the legal entity identifier (LEI) of the SDR to which each clearing swap that replaced an original swap as part of the clearing process was reported by the DCO;
    • the unique swap identifier (USI) of the original swap that was replaced by the clearing swap as part of the clearing process; and
    • the USIs for each of the clearing swaps that replace the original swaps as part of the clearing process.
  • Clarification of DCO obligations to report data providing for the linking of the clearing swap to the original swap that it replaces.
  • Removal of § 45.4(b)(2)(ii), which eliminates the requirement for swap dealer and major swap participant reporting counterparties to report daily valuation data for cleared swaps. This removal became effective immediately upon publication of the rule in the Federal Register on June 27, 2016.
  • Clarification of DCO obligations to create, transmit, and use USIs for swaps created pursuant to the rules of a DCO that have a DCO as a counterparty.
  • Clarification that the DCO will be the reporting counterparty for swaps created pursuant to the rules of a DCO that have a DCO as a counterparty.
  • Clarification that all swap data for a given swap created pursuant to the rules of a DCO that has a DCO as a counterparty, and that all swap data for each such swap that replaces a particular swap that is accepted for clearing, must be reported to a single SDR.
  • Modification and addition of data elements to be reported as primary economic terms (PET) data fields in Appendix 1 to Part 45 to account for all the above clarifications.
The cleared swap rule becomes effective on July 27, 2016, except for the removal of § 45.4(b)(2)(ii) (the obligation for valuation data reporting for SDs and MSPs), which is effective June 27, 2016.
The compliance date for all revisions and additions to Part 45 of the CFTC's regulations under the cleared swap rule is December 27, 2016. Until then, all existing reporting obligations under Part 45 (other than removed 45.4 (b)(2)(ii)), including existing obligations on reporting continuation data on original swaps and creation and continuation data on cleared swaps, remain in effect.
The CFTC also published a fact sheet on the rule.