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CFTC Issues No-Action Relief on Cleared Swap Data Reporting
Practical Law Legal Update w-005-1288 (Approx. 6 pages)
CFTC Issues No-Action Relief on Cleared Swap Data Reporting
by Practical Law Finance
| Published on 05 Jan 2017 • USA (National/Federal) |
The CFTC has issued two no-action letters extending relief to CFTC-registered derivatives clearing organizations and other reporting entities from certain Dodd-Frank Title VII swap data reporting obligations for cleared swaps.
No-action Letter 16-85: Reporting Obligations for Swaps Cleared Through DCOs
On December 19, 2016, the CFTC issued No-Action Letters 16-85 and 16-86 extending relief to CFTC-registered derivatives clearing organizations (DCOs), as well as "relief DCOs" and other reporting entities, from certain Dodd-Frank Title VII swap data reporting obligations for cleared swaps.
Relief DCOs are DCOs not registered with the CFTC and therefore not required to undertake certain DCO reporting obligations that may therefore fall to the swap counterparties. For details on which is the reporting party to a swap, see Practice Note, US Derivatives Regulation: Practical Guide to Over-the-Counter (OTC) Swap Data Reporting, Which Is the Reporting Party?
On June 27, 2016, the CFTC published a final rule (referred to as the cleared swap rule) amending swap data recordkeeping and reporting requirements for cleared swaps (see Legal Update, CFTC Amends Cleared Swap Reporting Regulations). The cleared swap rule requires DCOs to:
- Report the termination of swaps accepted for clearing by the DCO.
- Report creation data and continuation data for swaps to which the DCO is a counterparty.
- Provide the unique swap identifier (USI) for each cleared swap (for details about USI see, Legal Update, ISDA Releases Unique Swap Identifier (USI) Overview Document).
- Transmit the USI to the DCO's counterparty.
No-Action Letter 16-85 (No-Action 16-85) and No-Action Letter 16-86 (No-Action 16-86) provide relief from certain swap data reporting obligations for cleared swaps required under the cleared swap rule to the following parties:
- Counterparties to swaps cleared through relief DCOs (No-Action 16-85).
- Registered DCOs and other swap data reporting entities such as swap counterparties (No-Action 16-86).
No-Action Letter 16-85: Relief from Data Reporting for Swaps Cleared Through a Relief DCO
Relief DCOs are clearing organizations currently exempt from DCO reporting obligations. Because relief DCOs are not subject to the reporting requirements of registered DCOs, reporting obligations for relief DCOs may fall to the reporting counterparty of a swap cleared through a relief DCO (relief DCO reporting counterparties). No-Action 16-85 addresses reporting issues resulting from the definition of “derivatives clearing organization” in the cleared swap rule, which includes only registered DCOs.
No-Action 16-85 relieves relief DCO reporting counterparties until January 31, 2018 from some of the reporting requirements of the cleared swap rule. Relief DCO reporting counterparties are swap dealers (SDs), major swap participants (MSPs), and other parties that clear swaps through the relief DCO.
No-Action 16-85 grants relief to relief DCO reporting counterparties from the obligation to:
- Report continuation data for relief DCO original swaps as required by CFTC Regulations Part 45.4 (17 C.F.R § 45.4). Original swaps are swaps that have been accepted for clearing. For details on continuation data reporting, see Practice Note, US Derivatives Regulation: Practical Guide to Over-the-Counter (OTC) Swap Data Reporting: CFTC Reporting Compliance: Continuation Data Under Parts 45 and 46.
- Report creation data on relief DCO original swaps required by CFTC Regulations Part 45.3 (17 C.F.R § 45.3).
- Generate USIs for relief DCO cleared swaps required by CFTC Regulations Part 45.5 (17 C.F.R § 45.5).
No-Action 16-85 also relieves relief DCO reporting counterparties from restrictions on reporting "clearing indicator," "clearing venue," and other primary economic terms (PET) data for swaps cleared through DCOs (for details on PET, see The Dodd-Frank Act: CFTC Swap Data Reporting Required Data Fields Checklist, Primary Economic Terms (PET) to Be Reported under Final "SDR" Rules (17 CFR Part 45)).
The relief DCO swap reporting counterparty must provide all the data for which relief from reporting restrictions has been granted for all swaps intended to be cleared through the relief DCO. The relief DCO swap reporting counterparties must also provide the legal entity identifier (LEI) of the relief DCO for all swaps intended to be cleared through the relief DCO.
As of the date of No-Action 16-85 there are five relief DCOs:
- ASX Clear (Futures) Pty Limited.
- Japan Securities Clearing Corporation.
- Korea Exchange, Inc.
- OTC Clearing Hong Kong Limited.
- Shanghai Clearing House.
This relief applies to swaps cleared through these clearinghouses.
The relief granted expires on the earlier of:
- January 31, 2018; or
- the effective date of any rule or regulation altering the obligations for which relief is being granted.
No-Action Letter 16-86: Relief from Data Reporting for Swaps Cleared Through a DCO
No-Action 16-86 provides time-limited relief to registered DCOs and reporting entities from some of the reporting requirements set in the cleared swap rule due to delays in developing systems to coordinate data reporting between swap data repositories (SDRs), DCOs, and DCO reporting entities (parties that clear swaps through DCOs). DCO reporting entities must comply with the cleared swap rule unless relief has been granted by No-Action 16-86.
Relief Granted to All Reporting Entities
No-Action 16-86 grants relief to swap execution facilities, designated contract markets, swap dealers, major swap participants, DCOs, and other swap reporting entities until March 27, 2017 from the obligation to report the following creation data for swaps submitted for clearing to a CFTC-registered DCO under the cleared swap rule or cleared by CFTC-registered entities:
- The asset class of the swap.
- Indication of whether the reporting counterparty is a derivatives clearing organization regarding the swap.
- Any applicable clearing exception or exemption type.
- The USI of the cleared swap.
- The USI of the original swap.
- SDR to which the data for the original swap was reported.
- Clearing member LEI.
- Clearing member client account.
- Origin (house or customer).
- Clearing receipt timestamp.
- Clearing acceptance timestamp.
During the relief period, the DCO reporting entity must provide:
- The LEI of the SDR to which the original swap was reported.
- The USI of the original swap for every DCO to which the reporting entity submits a swap for clearing.
- Continuation data for all swaps initially reported during the relief period.
- Complete and accurate data for fields for the data required in Part 45.3 within twenty business days of the end of the relief period (see Practice Note, US Derivatives Regulation: Practical Guide to Over-the-Counter (OTC) Swap Data Reporting: CFTC Reporting Compliance: Continuation Data Under Parts 45 and 46).
The relief ends on the earlier of:
- March 27, 2017.
- The date that the SDR to which the reporting entity is reporting a particular swap has updated its data standards and is accepting these PET data fields in its production environment.
Relief Granted to DCOs
No-Action 16-86 also grants relief to DCOs until June 27, 2017 from continuation data reporting obligations required under CFTC Regulation Part 45.4 (see Practice Note, US Derivatives Regulation: Practical Guide to Over-the-Counter (OTC) Swap Data Reporting: CFTC Reporting Compliance: Creation Data Reporting Under Part 45 and Real-Time Reporting Under Part 43). No-Action 16-86 also requires DCOs to:
- Obtain from entities submitting swaps for clearing the USI of the original swap and LEI of the SDR to which the original swap was reported.
- Continue to terminate original swaps accepted for clearing by reporting the termination directly to the original SDR, through a third-party service provider, or by reflecting the termination in SDR data through other arrangements such as by automatically decrementing the original swap.
- Provide the CFTC with a .csv format file of all original swaps accepted for clearing during the prior week on the first business day of each week or at another time set by the CFTC. The file must include, for each original swap, the asset class, the USI, the LEIs of both counterparties to the original swap, and the USIs of all clearing swaps resulting from the novation of that original swap.
- Coordinate the start of original swap termination reporting with all SDRs to which it anticipates reporting and with all other registered DCOs that will be reporting original swap terminations to those SDRs to ensure that all DCOs reporting to an individual SDR begin original swap termination reporting on the same date.
- Submit original swap termination messages for all original swaps it cleared between December 27, 2016 and the end of the relief period within 20 business days of the end of the relief period. Submission of a termination message for an original swap will not be required if that original swap has already been terminated with a continuation data message.
The relief expires on the earlier of:
- June 27, 2017.
- The date on which all DCOs that will be reporting original swap termination messages to an SDR have successfully tested their reporting systems.