Fed.2010-29994

Tuesday,

December 7, 2010









Part III



Commodity Futures

Trading Commission

17 CFR Part 43

Real-Time Public Reporting of Swap

Transaction Data; Proposed Rule

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76140 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



COMMODITY FUTURES TRADING review, pre-screen, filter, redact, refuse, v. Appendix A to Proposed Part 43

COMMISSION or remove any or all of your submission vi. Examples to Illustrate the Public

from www.cftc.gov that it may deem to Reporting of Real-Time Swap

17 CFR Part 43 Transaction and Pricing Data

be inappropriate for publication, such as 5. Proposed Section 43.5—Block Trades

RIN 3038–AD08 obscene language. All submissions that and Large Notional Swaps

have been redacted or removed from the i. Parties to a Block Trade or Large Notional

Real-Time Public Reporting of Swap Commission’s Internet Web site, but that Swap

Transaction Data contain comments on the merits of the ii. Block Trades on Swaps

rulemaking, will be retained in the iii. Large Notional Swaps

AGENCY: Commodity Futures Trading public comment file and will be iv. Time-Stamp and Reporting Requirements

Commission. for Block Trades and Large Notional

considered as required under the Swaps

ACTION: Notice of proposed rulemaking. Administrative Procedure Act, 5 U.S.C. v. Responsibilities of Registered SDRs in

SUMMARY: The Commodity Futures 551 et seq., and other applicable laws, Determining the Appropriate Minimum

Trading Commission (‘‘Commission’’) is and may be accessible under the Block Size

proposing rules to implement new Freedom of Information Act, 5 U.S.C. vi. Formula to Calculate the Appropriate

552. Minimum Block Size

statutory provisions enacted by Title VII vii. Distribution Test

of the Dodd-Frank Wall Street Reform FOR FURTHER INFORMATION CONTACT: viii. Multiple Test

and Consumer Protection Act (the Thomas Leahy, Associate Director, ix. Responsibilities of Swap Markets in

‘‘Dodd-Frank Act’’). Specifically, in Division of Market Oversight, 202–418– Determining Minimum Block Trade

accordance with Section 727 of the 5278, tleahy@cftc.gov; or Jeffrey L. Sizes

Dodd-Frank Act, the Commission is Steiner, Special Counsel, Division of x. Responsibilities of the Parties to a Swap

Market Oversight, 202–418–5482, in Determining the Appropriate

proposing rules to implement a new

Minimum Large Notional Swap Size

framework for the real-time public jsteiner@cftc.gov; Commodity Futures xi. Time Delay in the Real-Time Public

reporting of swap transaction and Trading Commission, Three Lafayette Reporting of Block Trades and Large

pricing data for all swap transactions. Center, 1155 21st Street, NW., Notional Swaps

Additionally, the Commission is Washington, DC 20581. xii. Prohibition of Aggregation of Trades

proposing rules to address the SUPPLEMENTARY INFORMATION: III. Related Matters

appropriate minimum size and time A. Cost-Benefit Analysis

Table of Contents 1. Introduction

delay relating to block trades on swaps

I. Background 2. Summary of Proposed Requirements

and large notional swap transactions. 3. Costs

II. Explanation of the Proposed Rules

DATES: Comments must be received by A. Overview 4. Benefits

February 7, 2011. 1. Introduction B. Paperwork Reduction Act

ADDRESSES: You may submit comments, 2. Parties Responsible for Reporting Swap 1. Introduction

identified by RIN number 3038–AD08, Transaction and Pricing Data to a 2. Information Provided by Reporting

by any of the following methods: Registered Entity Entities/Persons

3. Parties Responsible for Publicly i. Reporting Requirement

• Federal eRulemaking Portal at

Disseminating Swap Transaction and ii. Public Dissemination Requirement

http://www.regulations.gov. Follow the Pricing Data in Real-Time iii. Recordkeeping Requirement

instructions for submitting comments. 4. Proposed Effective Date and iv. Determination of Appropriate Minimum

• Agency Internet Web site, via Its Implementation Schedule Block Size

Comments Online Process: http:// B. Section-by-Section Analysis 3. Information Collection Comments

comments.cftc.gov. Follow the 1. Proposed Section 43.1—Purpose, Scope C. Regulatory Flex Act

instructions for submitting comments and Rules of Construction

2. Proposed Section 43.2—Definitions I. Background

through the Internet Web site.

• Mail: David A. Stawick, Secretary of 3. Proposed Section 43.3—Method and On July 21, 2010, President Obama

Timing for Real-Time Public Reporting signed the Dodd-Frank Wall Street

the Commission, Commodity Futures

i. Responsibilities of the Reporting Party To

Trading Commission, Three Lafayette Reform and Consumer Protection Act

Report Data

Centre, 1155 21st Street, NW., ii. Responsibilities of Swap Markets To (‘‘Dodd-Frank Act’’).2 Title VII of the

Washington, DC 20581. Publicly Disseminate Swap Transaction Dodd-Frank Act 3 amended the

• Hand Delivery/Courier: Same as and Pricing Data in Real-Time Commodity Exchange Act (‘‘CEA’’) 4 to

mail above. iii. Requirements for Registered SDRs establish a comprehensive, new

All comments must be submitted in iv. Requirements for Third-Party Service regulatory framework for swaps and

English, or if not, accompanied by an Providers security-based swaps.5 The legislation

English translation. Comments will be v. Availability of Real-Time Swap was enacted to reduce risk, increase

posted as received on http:// Transaction and Pricing Data transparency and promote market

vi. Errors or Omissions

www.cftc.gov. You should submit only vii. Hours of Operation integrity within the financial system by,

information that you wish to make viii. Recordkeeping Requirements among other things: (1) Providing for the

publicly available. If you wish the ix. Fees Charged by Registered SDRs

Commission to consider information x. Consolidated Public Dissemination of 2 See Dodd-Frank Wall Street Reform and



that is exempt from disclosure under the Swap Data Consumer Protection Act, Public Law 111–203, 124

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4. Proposed Section 43.4 and Appendix A Stat. 1376 (2010). The text of the Dodd-Frank Act

Freedom of Information Act, a petition may be accessed at http://www.cftc.gov./

for confidential treatment of the exempt to Proposed Part 43—Swap Transaction

LawRegulation/OTCDERIVATIVES/index.htm.

information may be submitted according and Pricing Data to be Publicly 3 Pursuant to Section 701 of the Dodd-Frank Act,

Disseminated in Real-Time

to the established procedures in i. Ensuring the Anonymity of the Parties to

Title VII may be cited as the ‘‘Wall Street

Commission Regulation § 145.9.1 Transparency and Accountability Act of 2010.’’

a Swap 4 7 U.S.C. 1 et seq.

The Commission reserves the right, ii. Unique Product Identifiers 5 Rules governing the reporting and dissemination

but shall not have the obligation, to iii. Price-Forming Continuation Data of security-based swaps are the subject of a separate

iv. Reporting and Public Dissemination of and forthcoming rulemaking by the Securities and

1 17 CFR 145.9. Notional or Principal Amount Exchange Commission (‘‘SEC’’).







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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76141



registration and comprehensive CEA but are not cleared. The four II. Explanation of the Proposed Rules

regulation of swap dealers and major categories described in Section A. Overview

swap participants (‘‘MSPs’’); (2) 2(a)(13)(C) of the CEA cover all swaps

imposing mandatory clearing and trade and, therefore, the real-time reporting 1. Introduction

execution requirements on standardized requirements apply to all swaps, The Commission proposes to create a

derivative products; (3) creating robust including those swaps executed on a new part 43 of its regulations,

recordkeeping and real-time reporting registered swap execution facility implementing the provisions of Section

regimes; and (4) enhancing the (‘‘SEF’’) or a registered designated 2(a)(13) of the CEA. The proposed rules

Commodity Futures Trading contract market (‘‘DCM,’’ together with a in part 43 set out: (1) The entities or

Commission’s (‘‘Commission’’ or persons that shall be responsible for

SEF, a ‘‘swap market’’) and those swaps

‘‘CFTC’’) rulemaking and enforcement reporting swap transaction and pricing

executed bilaterally between

authorities with respect to, among data; (2) the entities or persons that

counterparties and not pursuant to the

others, all registered entities and shall be responsible for publicly

intermediaries subject to the rules of a SEF or DCM (‘‘off-facility

swaps’’).9 disseminating such data; (3) the data

Commission’s oversight. fields and guidance on the appropriate

Accordingly, in order to ensure the With regard to swaps described in order and format for data to be reported

proper implementation of the new Sections 2(a)(13)(C)(i) and (ii) of the to the public in real-time; (4) the

regulatory framework, Section 727 of CEA, Section 2(a)(13)(E) of the CEA appropriate minimum size and time

the Dodd-Frank Act created Section provides that the Commission shall delay for block trades and large notional

2(a)(13) of the CEA, which requires the prescribe rules that: (i) Ensure such swaps; and (5) the proposed effective

Commission to promulgate rules that information does not identify the date and implementation schedule for

provide for the public availability of participants; (ii) specify the criteria for the proposed rules.

swap transaction and pricing data in determining what constitutes a large The proposed rules reflect

real-time in such form and at such times notional swap transaction (block trade) consultation with staff of the Securities

as the Commission determines for particular markets and contracts; (iii) and Exchange Commission (the

appropriate to enhance price discovery.6 specify the appropriate time delay for ‘‘SEC’’) 11 and staff of the Board of

Under new Section 2(a)(13)(A) of the Governors of the Federal Reserve.12

reporting large notional swap

CEA, the definition of ‘‘real-time public Staff from each of these agencies has

transactions (block trades) to the public;

reporting’’ means reporting ‘‘data provided verbal and/or written

and (iv) take into account whether

relating to a swap transaction, including comments and the proposed rules

price and volume, as soon as public disclosure will materially reduce

market liquidity. CEA Section incorporate elements of the comments

technologically practicable after the provided. The proposed rules have been

time at which the swap transaction has 2(a)(13)(E) does not state explicitly that

the proposed rules must contain similar further informed by (i) the joint

been executed.’’ roundtable conducted by CFTC staff and

Sections 2(a)(13)(C)(i) through (iv) of provisions for those swaps described in

staff of the SEC on September 14, 2010

the CEA set out the four types of swaps Sections 2(a)(13)(C)(iii) and (iv).

(the ‘‘Roundtable’’); 13 (ii) public

for which transaction and pricing data However, in applying its authority

comments posted on the Commission’s

must be reported to the public in real- under Section 2(a)(13)(B) to ‘‘make swap Internet Web site; 14 and (iii) CFTC staff

time: (i) Swaps that are subject to the transaction and pricing data available to meetings with market participants.15

mandatory clearing requirement 7 the public in such form and at such The SEC is adopting rules related to

(including those swaps that may qualify times as the Commission determines the real-time reporting of security based

for a non-financial end-user exception appropriate to enhance price discovery,’’ swaps as required under Section 763 of

from the mandatory clearing the Commission is authorized to the Dodd-Frank Act. Understanding that

requirement); 8 (ii) swaps that are not prescribe similar rules to those the Commission and the SEC regulate

subject to the mandatory clearing provisions in Section 2(a)(13)(E) for off- different products and markets and, as

requirement but are cleared at a facility swap transactions described in such may be proposing alternative

registered derivatives clearing Sections 2(a)(13)(C)(iii) and (iv).10 regulatory requirements, the

organization (‘‘DCO’’); (iii) swaps that Commission requests comments on the

are not cleared at a registered DCO and impact of any differences between the

which are reported to a registered swap Commission’s and the SEC’s approach

9 The legislative history of the Dodd-Frank Act

data repository (‘‘SDR’’) or to the to the regulation and reporting of swaps

also suggests that the real-time reporting

Commission pursuant to Section 2(h)(6) and security-based swaps and the public

requirements of Section 2(a)(13) apply to all swaps.

of the CEA; and (iv) swaps that are Senate Agriculture Committee Chairwoman dissemination of swap transaction and

‘‘determined to be required to be Blanche Lincoln stated during Senate deliberations

cleared’’ under Section 2(h)(2) of the that ‘‘[t]he major components of the derivatives title 11 Section 763 of the Dodd-Frank Act authorizes



include: 100 percent reporting of swaps and the SEC to promulgate rules ‘‘to provide for the

6 Section 2(a)(13)(B) of the CEA states that ‘‘[t]he security-based swaps, mandatory trading and public availability of security-based swap

purpose of this section is to authorize the clearing of standardized swaps and security-based transaction, volume, and pricing data * * *.’’

Commission to make swap transaction and pricing swaps and real-time price reporting for all swap 12 See Section 712(a)(1) of the Dodd-Frank Act



data available to the public in such form and at transactions—those subject to mandatory trading requires staff to consult with the SEC and other

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such times as the Commission determines and clearing as well as those subject to the end-user prudential regulators.

appropriate to enhance price discovery.’’ 13 The transcript from the Roundtable (the

clearing exemption and customized swaps.’’ 156

It is notable that the CEA is silent as to the Cong. Rec. S5,920 (daily ed. July 15, 2010) ‘‘Roundtable Tr.) is available at: http://

appropriate method through which real-time public www.cftc.gov/ucm/groups/public/@swaps/

(statement of Sen. Blanche Lincoln).

reporting must occur. documents/file/derivative18sub091410.pdf.

10 In addition, the Commission is required by

7 The mandatory clearing requirement is found in 14 Such comments are available at: http://



Section 2(h)(1) of the CEA, as added by Section Section 2(a)(13)(C)(iii) of the CEA to prescribe real- www.cftc.gov/LawRegulation/DoddFrankAct/

723(a)(3) of the Dodd-Frank Act. time public reporting requirements for off-facility OTC_18_RealTimeReporting.html.

8 Section 2(h)(7) of the CEA provides the non- swaps ‘‘in a manner that does not disclose the 15 A list and description of such meetings is



financial end-user exception from the mandatory business transactions and market positions of any available at: http://www.cftc.gov/LawRegulation/

clearing requirement. person.’’ DoddFrankAct/ExternalMeetings/index.htm.







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76142 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



pricing data in real-time. In addition, swaps, the Commission’s proposal provider. Under the proposal, if a swap

the Commission requests specific places the requirement to report the market sends the swap transaction and

comment on the following issues: swap transaction and pricing data in pricing data to a registered SDR, the

• Would the regulatory approach of real-time to a registered entity (i.e., a swap market is responsible for ensuring

the Commission in this proposed registered SDR that accepts and publicly that such data is sent in a timely manner

rulemaking, pursuant to Section 727 of disseminates real-time swap transaction for public dissemination. Alternatively,

the Dodd-Frank Act, and the SEC’s and pricing data in real-time) in a if a swap market sends the swap

proposed rulemaking, pursuant to manner similar to that in which all transaction and pricing data to a third-

Section 763 and 766 of the Dodd-Frank swap transaction information for party service provider for the public

Act, result in duplicative or inconsistent uncleared swaps would be reported to a dissemination of such data, the swap

requirements on the part of market registered SDR pursuant to Section market does not absolve itself from or

participants to both regulatory regimes 4r(a)(3) of the CEA.18 With respect to satisfy the requirement to publicly

or result in gaps between those regimes? swaps that are executed on a swap disseminate swap transaction and

If so, in what way should these market, the Commission’s proposal pricing data until such time as the third-

duplications, inconsistencies or gaps be provides that if the parties to a swap party service provider actually

minimized? execute a transaction on a swap market, disseminates such data. Indeed, under

• Do commenters believe that the then the transacting parties’ reporting the alternative, a swap market must

proposed approaches by the requirements under Section 2(a)(13)(F) ensure that the third-party service

Commission and the SEC for the real- of the CEA are satisfied. The provider publicly disseminates the data

time reporting and public dissemination Commission views the real-time swap in the manner set forth in the

of swap transaction and pricing data are transaction and pricing data that is sent proposal.20

comparable? If not, why? Are there to a real-time disseminator and the swap The Commission requests comment

approaches that could make the real- information that is sent to a registered on all aspects of the proposed rules, as

time reporting and public dissemination SDR as two separate and distinct data well as comment on the specific

of swap transaction and pricing data streams.19 provisions, issues and questions

more comparable? If so, what? highlighted in the discussion in Section

• Do commenters believe that it 3. Parties Responsible for Publicly B below.

would be appropriate for the Disseminating Swap Transaction and

Commission to adopt an approach Pricing Data in Real-Time 4. Proposed Effective Date and

proposed by the SEC that differs from Section 2(a)(13)(D) of the CEA Implementation Schedule

the Commission’s proposal? If so, which authorizes the Commission to require The Dodd-Frank Act requires the

one(s)? The Commission requests that registered entities ‘‘to publicly Commission to promulgate rules to

commenters provide data, to the extent disseminate the swap transaction and implement these provisions by July 15,

possible, to support any suggested pricing data.’’ With respect to all off- 2011.21 Proposed part 43 is designed to

approaches. facility swaps, the Commission’s provide clarity as to the real-time

proposal requires that reporting parties reporting and public dissemination

2. Parties Responsible for Reporting

send swap transaction and pricing data requirements with respect to all swap

Swap Transaction and Pricing Data to a

to registered SDRs to publicly transaction and pricing data. The

Registered Entity

disseminate such data in real-time. With Commission acknowledges that the

Section 2(a)(13)(F) of the CEA respect to swaps that are executed on a systems for reporting and public

provides that the parties to a swap swap market, the Commission’s dissemination described in proposed

(including agents of the parties to a proposal requires that swap markets part 43 may take a significant amount of

swap) shall be responsible for reporting publicly disseminate swap transaction time and resources to implement

swap transaction information to the and pricing data either through a effectively. While the Commission is

appropriate registered entity 16 in a registered SDR or a third-party service fully committed to implementing

timely manner as may be prescribed by Congress’ directive to require real-time

the Commission.17 For off-facility to establish business conduct standards and public reporting of all swaps and will

requirements relating to the real-time reporting adopt final rules by July 15, 2011,

16 Section 1a(40) of the CEA, as amended by requirements on swap dealers and major swap participants will need a reasonable

Section 721(a) of the Dodd-Frank Act, defines participants.

‘‘registered entity’’ to include SEFs, DCMs and 18 Section 4r(a)(3) of the CEA provides that for

amount of time in which to acquire or

SDRs, but does not include swap dealers and MSPs. swaps in which only one counterparty is a swap configure the necessary systems, engage

Section 1a(40) also defines registered entity to dealer or MSP, the swap dealer or MSP is required

include DCOs. The Commission has determined not to report the swap to a registered SDR. For swaps 20 In considering different schemes of real-time

to apply this requirement to DCOs because it in which only one counterparty is a swap dealer public reporting requirements, the Commission also

believes that the value of timely public and the other is an MSP, the swap dealer is required considered a ‘‘first touch’’ method of reporting

dissemination outweighs the benefit of waiting to report to a registered SDR. For all other swaps, whereby the swap dealer, MSP or swap market

until a swap is presented to a clearing organization. Section 4r(a)(3) provides that the counterparties to where a swap transaction occurred would have

17 Sections 4s(f)(1)(A) and 4s(f)(2) of the CEA, the swap shall select a counterparty to report to a been required to real-time report the transaction by

provide the Commission with broad authority to registered SDR. posting the transaction on its Internet Web site or

adopt rules governing the reporting of all swap 19 The real-time reporting requirements pursuant through other electronic means. The Commission

transaction information for swap dealers and MSPs. to Section 2(a)(13) of the CEA are separate and apart chose not to pursue a ‘‘first touch’’ method because

Specifically, Section 4s(f)(1)(A) of the CEA provides from the requirements to report swap transaction it would likely lead to greater fragmentation of

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that ‘‘[e]ach registered swap dealer and major swap information to a registered SDR. The reporting market data, increased search costs for market

participant shall make such reports as are required requirements for all swap transaction information to participants and potential concerns with the quality

by the Commission by rule or regulation regarding an SDR are found in Sections 2(a)(13)(G) and of the data that would be publicly disseminated.

the transactions and positions and financial 4r(a)(1) of the CEA. Specifically, Section 2(a)(13)(G) 21 See Section 754 of the Dodd-Frank Act which



condition of the registered swap dealer or major of the CEA provides that [e]ach swap, (whether states: ‘‘Unless otherwise provided in this title, the

swap participant * * *’’ Section 4s(f)(2) of the CEA cleared or uncleared) shall be reported to a provisions of this subtitle shall take effect on the

provides that ‘‘[t]he Commission shall adopt rules registered swap data repository.’’ In addition, later of 360 days after the date of enactment of this

governing reporting and recordkeeping for swap Section 4r(a)(1) provides that ‘‘[e]ach swap that is subtitle or, to the extent a provision of this subtitle

dealers and major swap participants.’’ Additionally, not accepted for clearing by any [DCO] shall be requires a rulemaking, not less than 60 days after

Sections 4s(h)(1)(D) and 4s(h)(3)(D) of the CEA reported to [an SDR] described in section 21 [of the publication of the final rule or regulation

provide the Commission with rulemaking authority CEA];’’ or if no SDR exists, to the Commission. implementing such provision of this subtitle.’’







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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76143



and train the necessary staff and B. Section-by-Section Analysis (usually an end-user) electronically

develop and implement the necessary acknowledges its assent to complete

1. Proposed Section 43.1—Purpose,

policies and procedures to implement swap terms submitted to the vendor by

Scope and Rules of Construction

the proposed rules. The Commission’s its counterparty (usually a dealer). This

proposed rules provide that appropriate The proposed rules apply to all swaps process allows for electronic

minimum block sizes will be published as defined in Section 1a(47) of the CEA confirmation even when one party to

by registered SDRs beginning in January and as may be further defined by the swap does not have the systems

Commission regulations. The categories necessary to submit swap terms to the

2012.22 Accordingly, it is anticipated

of swaps described in Section vendor electronically. Upon such assent

that registered entities and registrants

2(a)(13)(C) of the CEA account for all to complete swap terms, a swap is

will have begun their compliance by

swaps, whether cleared or uncleared, legally confirmed (i.e., ‘‘confirmation by

that time. and regardless of whether a swap is affirmation’’). Parties that use a

The Commission requests comment executed on a SEF, DCM or off-facility. confirmation by affirmation process

on what would be an appropriate The proposed rules apply real-time previously will have affirmed the

implementation schedule (i.e., effective reporting requirements to SEFs, DCMs, primary economic terms of the trade

date) for the final rules. In addition, the SDRs and the parties of a swap, and therefore executed the trade

Commission requests specific comment including registered or exempt swap pursuant to the definitions in the

on the following issues: dealers, registered or exempt MSPs and proposed rules.

• How do commenters believe that an U.S.-based end-users.

The Commission requests comment As Soon as Technologically Practicable

appropriate implementation schedule

generally on the scope of transactions Section 2(a)(13)(A) of the CEA defines

should be structured? Should there be a

covered by this part. In addition, the ‘‘real-time public reporting’’ to mean ‘‘to

phased-in approach? Please provide report data relating to a swap

Commission requests specific comment

specific examples. transaction, including price and

on which parties to a swap should be

• Do commenters believe that covered by the reporting requirements volume, as soon as technologically

different types of reporting parties (e.g., in this part in order to enhance price practicable after the time at which the

swap dealers, MSPs and end-users) discovery? swap transaction has been executed.’’

should have different implementation ‘‘As soon as technologically practicable’’

2. Proposed Section 43.2—Definitions and ‘‘executed’’ are not defined in the

timeframes? If so, why and what

timeframes? If not, why and what Proposed § 43.2 contains definitions Dodd-Frank Act.23

timeframe? for, inter alia, the following terms: The proposed rules provide

‘‘Affirmation’’; ‘‘As Soon As definitions for ‘‘as soon as

• Do commenters believe that Technologically Practicable’’; ‘‘Asset technologically practicable’’ and

different types of execution (e.g., SEF, Class’’; ‘‘Confirmation’’; ‘‘Execution’’; ‘‘executed’’. Proposed § 43.2(d) defines

DCM and off-facility) should have ‘‘Public Dissemination’’ or ‘‘Publicly the term ‘‘as soon as technologically

different implementation timeframes? If Disseminate’’; ‘‘Real-Time practicable’’ to mean as soon as possible,

so, why and what timeframes? If not, Disseminator’’; ‘‘Reportable Swap taking into consideration the prevalence

why and what timeframe? Transaction’’; ‘‘Swap Instrument’’; and of technology, implementation and use

• How long would swap dealers, ‘‘Third-Party Service Provider’’. of technology by comparable market

MSPs and end-users need to establish participants. In defining ‘‘as soon as

Affirmation

the appropriate connections to report technologically practicable’’, the

off-facility swaps to registered SDRs? Proposed § 43.2(b) defines Commission has considered that this

Please explain. ‘‘affirmation’’ as the process term may have different interpretations

(electronically, orally, in writing or for different parties to a swap (i.e., swap

• How long after registration would otherwise) in which the parties to a dealers, MSPs and end-users), for

registered SDRs need to accept and swap verify that they agree on the different types of swaps (e.g., energy

publicly disseminate swap transaction primary economic terms of a swap, but swaps, credit default swaps, interest rate

and pricing data in real-time? Please not necessarily all terms of the swap. swaps, etc.) and for different methods of

explain. The affirmation of the swap is only the execution (i.e., SEFs, DCMs and off-

• Should there be different agreement to the primary economic facility). Staff considered real-time

implementation timeframes for terms of the swap, as distinguished from reporting regimes that are currently in

particular asset classes, markets or the confirmation of a swap in which all place, comments by market participants

contracts? If so, what criteria should be of the terms of the swap are agreed to at external meetings, the discussions at

used to select those asset classes, in writing to memorialize the agreement the Roundtable and the potential costs

markets or contracts? of all parties to the swap. Such to market participants, among other

confirmation legally supersedes any things. Cost, access to the latest

• Should the implementation

previous agreement of the parties. technology and other factors may

timeframes for real-time reporting and Affirmation and execution can, but do

public dissemination requirements for prevent some of the fastest, most

not necessarily, occur at the same time. efficient technology from being

swaps and security-based swaps be In either case, affirmation and execution

coordinated? available to all market participants.

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always occur prior to the confirmation Because of these factors, the

• Should there be different of a swap. One further distinction is that Commission recognizes that what is

implementation timeframes for the ‘‘affirmation’’, as defined in the ‘‘technologically practicable’’ for one

block trade and large notional swap proposed rules, differs from party to a swap may not be the same as

rules explained in the discussion ‘‘confirmation by affirmation’’. Some what is ‘‘technologically practicable’’ for

relating to proposed § 43.5 below? confirmation service vendors (e.g., another party to a swap.

Deriv/SERV, MarkitSERV) have used the

22 See discussion relating to proposed § 43.5(g)(4) term ‘‘affirmation’’ to describe the 23 The terms ‘‘execution’’ and ‘‘executed’’ are



below. process by which one party to a swap discussed below.







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76144 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



The Commission requests comment The Commission requests comment does not attempt to define what

on whether the term should account for on the following issues related to the constitutes a legally enforceable

other considerations not presently definition of asset class: contract, only that execution occurs if

identified in the definition. • Do commenters agree with the and when the parties have formed a

proposed asset class categories? If not, legally enforceable contract (which is a

Asset Class why? Should there be any additional matter to be decided by applicable

Proposed § 43.2(e) defines the term categories of asset classes? Should any law).27 If pre-execution affirmation of

‘‘asset class’’ to mean the broad category categories of asset classes in the the primary economic terms creates a

of goods, services or commodities proposed definition be changed or legally enforceable contract under

underlying a swap. The asset classes removed? applicable law, then it would also

include, but are not limited to, the • Do commenters agree on the constitute execution. If pre-execution

following five major categories: interest proposed method of allocating swaps affirmation does not create a legally

rate, currency, credit, equity and other among asset class categories? If not, enforceable contract, then execution

commodity.24 In proposing these five why? would not have occurred at that stage.

major categories, the Commission • Should the Commission classify

considered market statistics that cross-currency rate swaps as belonging Public Dissemination and Publicly

distinguish between those general types to the interest rate asset class or to the Disseminate

of underlying instruments, as well as currency asset class? Please explain. Proposed § 43.2(r) defines ‘‘public

market infrastructures that have been • Should the asset class for other dissemination’’ and ‘‘publicly

established for these five types of commodity be divided further (e.g., disseminate’’ to mean publishing and

instruments. The interest rate asset class agricultural commodity, energy making available swap transaction and

would encompass the underlying of any commodity, etc.)? If so, how should it be pricing data in a non-discriminatory

swap which is primarily based on one divided? manner, through the Internet or other

or more reference rates, such as swaps electronic data feed that is widely

Confirmation

of payments determined by fixed and published and in a machine-readable

floating rates. The currency asset class Proposed § 43.2(g) defines the term format. The definition encompasses the

would encompass the underlying of any ‘‘confirmation’’ to mean the non-delayed provision of such data to

swap that is primarily based on rates of consummation (electronically or the public, including market

exchange between different currencies, otherwise) of legally binding participants, end-users, data vendors

changes in such rates or other aspects of documentation (electronic or otherwise) and news media.

such rates including any swap that is a that memorializes the agreement of the

parties to all terms of a swap. A Real-Time Disseminator

foreign exchange option. This category

includes foreign exchange swaps confirmation must be in writing Proposed § 43.2(s) defines ‘‘real-time

defined in Section 1a(25) of the CEA. (whether electronic or otherwise) and disseminator’’ to mean any registered

The credit asset class would encompass must legally supersede any previous SDR or third-party service provider that

the underlying of any swap that is agreement (electronic or otherwise). A is responsible for accepting and publicly

primarily based on one instruments of confirmation between parties to a swap disseminating swap transaction and

may occur in various ways including via pricing data in real-time from multiple

indebtedness, including without

facsimile, via ‘‘confirmation by sources, in accordance with proposed

limitation any swap primarily based on

affirmation’’ and via electronic part 43.

one or more broad-based indices related

to instruments of indebtedness and any matching. A confirmation will contain Reportable Swap Transaction

swap that is an index credit default all of the terms to a swap that have been

agreed to between two parties, whereas Proposed § 43.2(v) defines ‘‘reportable

swap or a total return swap on one or swap transaction’’ to mean any executed

more indices of debt instruments. The an affirmation contains a subset of the

terms of the confirmation. swap, novation, swap unwind, partial

equity asset class would encompass the novation, partial swap unwind or such

underlying of any swap that is primarily Execution post-execution event that affects the

based on equity securities, including, price of a swap. A reportable swap

As noted above, swap counterparties

without limitation, any swap primarily transaction includes not only the

and reporting entities must report ‘‘as

based on one or more broad-based execution of a swap contract, but also

soon as technologically practicable after

indices of equity securities and any total certain price-affecting events that occur

the time at which the swap transaction

return swap on one or more equity over the ‘‘life’’ of a swap. The

has been executed.’’ 26 Proposed

indices. The other commodity asset Commission believes novations and

§ 43.2(k) defines ‘‘execution’’ as the

class would encompass the underlying swap unwinds are events that clearly

agreement between parties to the terms

of any swap not included in the credit, affect the price of the swap and,

of a swap that legally binds the parties

currency, equity or interest rate asset therefore, should be publicly

to such terms under applicable law. An

class categories, including, without disseminated in real-time. In addition to

agreement may be in electronic form

limitation, any swap for which the novations and swap unwinds, other

(e.g., on a swap market or via instant

primary underlying notional item is a price-affecting events over the life of a

message), oral (e.g., over the phone), in

physical commodity or the price or any swap may be considered reportable

writing (e.g., a bespoke, structured

other aspect of a physical commodity.25 swap transactions. For example, certain

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transaction where documents are

exchanged) or in some other format not amendments that change the price terms

24 Proposed § 43.2(e) also provides that the

contemplated at this time. Execution of a swap may be subject to the real-time

Commission may determine other asset classes.

25 Proposed § 43.2(q) defines ‘‘other commodity’’ immediately follows or is simultaneous public reporting requirements. Further,

to mean any commodity that cannot be grouped in with the pre-execution affirmation of the Commission recognizes that certain

one of the other four asset classes (i.e., interest rate, the swap. The Commission notes that

currency, credit, equity). Other commodities may 27 Because contract law varies by jurisdiction, the



include physical commodities (e.g., natural gas, oil) the proposed definition of execution time at which a legally enforceable contract is

but may also include non-physical commodities formed may differ based on the applicable state or

(e.g., weather and property). 26 Section 2(a)(13)(A) of the CEA. local law.







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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76145



market participants may enter into a report swap transaction and pricing data that the requirement for parties to report

swap and then immediately enter into to the appropriate registered entity in a the swap transaction and pricing data is

an amendment to the swap that alters timely manner; 28 and (2) registered itself satisfied by the act of execution on

the price terms, thus reducing entities to publicly disseminate swap the swap market. The Commission

transparency and price discovery. The transaction and pricing data.29 In believes that this approach should result

Commission believes that including addition, Section 2(a)(13)(B) of the CEA in the timeliest and most efficient

such post-execution price-affecting provides that the Commission is method of reporting swap transaction

events to be reportable for the purposes authorized to make swap transaction and pricing data, since swap markets by

of real-time public reporting will and pricing data available to the public definition would have immediate access

enhance the transparency and price in such form and at such times as the to the most accurate execution

discovery attributes of swaps trading. Commission determines appropriate to information related to each swap

The Commission requests comments enhance price discovery. Accordingly, transaction (e.g., information on the

on other post-execution events that the Commission’s proposal in § 43.3 sets counterparties to the swap, date and

could affect price and that should be out both the manner in which parties to time of execution, bid-offer information,

considered reportable swap a swap must report the swap transaction final pricing information, whether the

transactions. and pricing data to the appropriate swap should be deemed a block trade,

registered entity, as well as the manner etc.). Proposed § 43.3(a)(2)(ii) recognizes

Swap Instrument

in which registered entities must that block trades may not be executed

Proposed § 43.2(y) defines ‘‘swap publicly disseminate such data. In on a swap market, but would be

instrument’’ to mean each swap in the addition, proposed § 43.3 sets out effective pursuant to the rules of the

same asset class with the same or requirements for: (1) The acceptable swap market. For that reason, this

similar characteristics. Under proposed forms of media through which swap section would require the reporting

§ 43.5, discussed below, registered SDRs transaction and pricing data must be party to the block trade to report such

would determine the appropriate made available to the public; (2) the trades to the swap market in accordance

minimum block size based on the type appropriate methods to cancel or correct with the rules of the swap market and

of swap instrument. After a registered erroneous or omitted data that has been proposed § 43.5.

SDR sets the appropriate minimum publicly disseminated; (3) the hours of For off-facility swaps, proposed

block size for a swap instrument and operation that swap markets and § 43.3(a)(3) provides that, except

groups a specific swap contract that is registered SDRs must maintain for the otherwise provided in proposed § 43.5,

listed on a swap market into a category public dissemination of swap the reporting party must report (i.e.,

of swap instrument, a swap market that transaction and pricing data; and (4) the transmit or otherwise electronically

lists such swap contract would then recordkeeping of data by swap markets transfer) swap transaction and pricing

reference such appropriate minimum and registered SDRs. data to a registered SDR as soon as

block size when adopting the minimum technologically practicable. Once a

block trade size for such swap. The i. Responsibilities of the Reporting Party reporting party has reported its swap

Commission believes that it is To Report Data transaction and pricing data to a

appropriate to group particular swap As discussed above, Section registered SDR, the reporting party has

contracts into various broad categories 2(a)(13)(F) of the CEA provides that the satisfied its requirement to report

of swap instruments in determining the parties to a swap (including agents of pursuant to Section 2(a)(13)(F) of the

appropriate minimum block size. the parties to a swap) shall be CEA and this proposed part 43.

The Commission is requesting general responsible for reporting swap The Commission believes that

and specific comments on swap transaction information to the advanced technologies presently exist

instruments, as described in the through which a reporting party to an

appropriate registered entity. In general,

discussion of appendix A to proposed off-facility swap can send swap

proposed § 43.3(a) provides that the

part 43 below. transaction and pricing data to a

‘‘reporting party’’ to each swap

registered SDR as soon as

Third-Party Service Provider transaction shall be responsible for

technologically practicable. Through

reporting any reportable swap

Proposed § 43.2(bb) defines ‘‘third- discussions with market participants,

transaction to a registered entity as soon

party service provider’’ to mean an the Commission understands that many

as technologically practicable.30

entity, other than a registered SDR, that swaps are executed over the telephone

Proposed § 43.2(w) defines ‘‘reporting

publicly disseminates swap transaction and then inputted manually into

party’’ to mean a party to a swap with electronic recording systems. The

and pricing data in real-time on behalf

the duty to report a reportable swap Commission believes that reporting

of a swap market or, in the case of an

transaction to a registered entity. Under parties should remain current with

off-facility swap where there is no

this proposal, the determination of who changes in technology and regularly

registered SDR available to publicly

has this duty depends on whether the update their technology infrastructure to

disseminate the data in real-time, on

reportable swap transaction is executed decrease the time of transmission of

behalf of a reporting party.

on a swap market. For reportable swap swap transaction and pricing data to

3. Proposed Section 43.3—Method and transactions that are executed on a swap real-time disseminators.31

Timing for Real-Time Public Reporting market, proposed § 43.3(a)(2)(i) provides

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Section 2(a)(13) of the CEA does not 28 See

31 Two examples of how reporting technology can

Section 2(a)(13)(F) of the CEA. improve over time are seen in the evolution of (1)

provide an explicit method or timeframe 29 See Section 2(a)(13)(D) of the CEA. As

the Financial Industry Regulatory Authority’s

in which swap transaction and pricing discussed below, the Commission’s proposal (‘‘FINRA’’) Trade Reporting and Compliance Engine

data must be reported to the public in requires registered entities to publicly disseminate (‘‘TRACE’’), and (2) the reporting of over-the-counter

real-time. Instead, Section 2(a)(13) of the swap transaction and pricing data ‘‘as soon as (‘‘OTC’’) equity securities. Under the reporting rules

CEA provides the Commission with technologically practicable’’. See Section for TRACE, the current maximum reporting time

2(a)(13)(A). requirement for publicly reporting transaction and

authority to prescribe rules requiring: 30 The Commission proposes to define ‘‘timely pricing data for corporate bonds is 15 minutes.

(1) The parties to a swap transaction manner’’ to mean ‘‘as soon as technologically FINRA staff has noted in meetings with

(including agents of the parties) to practicable’’. Continued









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76146 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



The determination of which party to interfaces, which will aide reporting • Do commenters believe that the

a swap will be deemed the reporting parties in complying with the rules should require that any additional

party for the purposes of proposed requirements proposed in § 43.3(a) and parties to a swap be the reporting party

§ 43.3(a) chiefly depends on the types of reduce the cost burden associated with for a swap? If so, which parties and in

entities that are parties to the swap. their compliance. In addition, the which circumstances?

Specifically, proposed § 43.3(a)(3) Commission believes that the total • Should the Commission’s final

provides that for off-facility swaps: number of end-user to end-user swaps rules address the reporting and public

• If only one party is a swap dealer will be small and thus the costs dissemination of swap transaction and

or MSP, the swap dealer or MSP shall imposed on end-users will likely be pricing data for swaps, which are

be the reporting party. lower relative to the total number of transacted between two non-U.S.

• If one party is a swap dealer and the swaps.32 persons? If so, how should the

other party is an MSP, the swap dealer The Commission’s proposal with Commission’s final rules address these

shall be the reporting party. respect to off-facility swaps is consistent situations?

• If both parties are swap dealers, the with the reporting requirements for the • In off-facility swap transactions

swap dealers shall designate which reporting of uncleared swaps to a where a non-U.S. swap dealer or non-

party shall be the reporting party. registered SDR under Section 4r(a) of U.S. MSP transacts with a U.S.-based

• If both parties are MSPs, the MSPs the CEA.33 After consulting with market end-user, which party to the swap

shall designate which party shall be the participants at the Roundtable and in should have the obligation to report to

reporting party. meetings with market participants, the a real-time disseminator? Are there

• If neither party is a swap dealer or Commission believes that this other situations involving non-U.S.

an MSP, the parties shall designate consistency may reduce technology parties where this issue may arise? How

which party (or its agent) shall be the infrastructure costs for swap dealers and should the Commission address these

reporting party. MSPs, particularly since swap dealers situations in its final rules?

Through discussions with market and MSPs will likely establish direct • Should there be an alternative

participants at the Roundtable and connectivity to registered SDRs to method of reporting and subsequently

external meetings, the Commission satisfy the reporting requirements for disseminating swap transaction and

believes that swap dealers and MSPs are the reporting of uncleared swaps under pricing data in real-time when no

more likely to have the infrastructure Section 4r(a) of the CEA. registered SDR is available to accept and

and resources available to report their In the event that no registered SDR publicly disseminate such data? If there

swap transaction information to a exists or is available to accept and is no registered SDR available and there

registered SDR in a quicker period of publicly disseminate swap transaction is no third-party service provider

time than parties to an end-user-to-end- and pricing data, proposed § 43.3(a)(4) available to accept and publicly

establishes a special rule for the real- disseminate data for a swap transaction,

user, off-facility swap. Indeed, the

time reporting of these swaps. what should the real-time reporting

Commission recognizes that non-

Specifically, proposed § 43.3(a)(4) requirement be for such transaction?

financial end-users do not frequently

provides that the reporting party may • Is there a better or more efficient

enter into swap transactions and may

report such data to a third-party service alternative to have swap transaction and

not have the technology readily

provider, which provides public pricing data reported by a reporting

available to report swap transaction and

dissemination services. Similar to the party to a registered SDR for public

pricing data for the purposes of the real-

requirements placed on swap markets dissemination in real-time? If so, what

time reporting requirements under

when such markets choose to publicly would that be?

Section 2(a)(13)(F) of the CEA, and

disseminate through a third-party

therefore, may lead to longer reporting service provider, the reporting party ii. Responsibilities of Swap Markets To

time periods from execution for such will be required to ensure that the swap Publicly Disseminate Swap Transaction

reporting parties. transaction and pricing data is publicly and Pricing Data in Real-Time

The Commission understands that the disseminated in real-time. Section 2(a)(13)(D) of the CEA gives

requirement to report swap transaction The Commission requests comment the Commission the authority to require

and pricing data as soon as related to the responsibilities of the registered entities to publicly

technologically practicable may increase parties to a swap to report swap disseminate swap transaction and

costs for reporting parties as a result of transaction and pricing data. In pricing data.34 Proposed § 43.3(b)

such parties having to upgrade their addition, the Commission requests provides the method and timeliness of

technology infrastructures. Based on specific comment on the following public dissemination of swap

discussions with market participants, issues: transaction and pricing data. Proposed

however, the Commission believes that • Should the Commission establish § 43.3(b) distinguishes the public

technology solutions may develop, such maximum timeframes in which dissemination requirement for swaps

as web portals and other Internet-based reporting parties must report to a that are executed on a swap market

registered SDR that accepts and publicly versus those swaps that are executed

Commission staff that over 90% of its trades are disseminates swap transaction and

reported within five minutes. See FINRA Rule 6730 off-facility.35 Irrespective of the mode of

(‘‘Transaction Reporting’’). Available at: http:// pricing data in real-time (e.g., as soon as

finra.complinet.com/en/display/ technologically practicable but no later 34 As noted above, Section 1a(40) of the CEA, as

srobinson on DSKHWCL6B1PROD with PROPOSALS2









display_main.html?rbid=2403&element_id=4402. than five minutes)? If so, what should amended by Section 721(a) of the Dodd-Frank Act,

With respect to the OTC securities market, FINRA the maximum timeframes be and how defines ‘‘registered entity’’ to include SEFs, DCOs,

has recently reduced the reporting requirements for DCMs and SDRs. The Commission has determined,

these securities to within 30 seconds of execution.

should they be determined? however, not to apply the Section 2(a)(13)(D)

See Securities Exchange Act Release No. 61819 requirement to DCOs because it believes that the

32 In addition, the Commission believes that value of timely public dissemination outweighs the

(March 31, 2010), 75 FR 17806 (April 7, 2010

(Notice of Filing of Amendment No. 2 and Order increased transparency may lead to more robust benefit of waiting until a swap is presented to a

Granting Accelerated Approval of File No. SR– price competition, thus decreasing bid-offer spreads clearing organization.

FINRA–2009–061)); See also, FINRA Rules 6282(a); in certain swap contracts and benefiting end-users. 35 Block trades that are transmitted pursuant to a



6380A(a) and (g); 6380B(a) and (f); 6622(a) and (f); 33 The requirements of Section 4r(a)(3) of the CEA swap market’s rules are addressed in proposed

7130(b); 7230A(b); 7230B(b); and 7330(b). are discussed in footnote 18 above. § 43.5.







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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76147



execution, the Commission sought to oversight authority over a registered cases, the data may only be made

provide market participants with SDR, but not over a third-party service available to the particular market (e.g.,

reasonable guidelines to report and provider. This distinction would be data for a swap executed on a particular

publicly disseminate swap transaction especially important if, for example, a SEF or DCM may only be shared with

and pricing data in real-time. third-party service provider failed to market participants on that SEF or

With respect to reportable swap publish swap transaction and pricing DCM). The Commission believes that

transactions that are executed on a swap data in real-time. Under those granting swap markets and swap dealers

market, proposed § 43.3(b)(1)(i) provides circumstances, the Commission may the flexibility to provide swap

that a swap market shall satisfy its have no authority over the third-party transaction and pricing data to its

requirement to publicly disseminate service provider to remedy the failure. market participants or customer base,

swap transaction and pricing data by: Since the swap market is still obligated respectively, concurrent with reporting

(1) Sending, or otherwise electronically to publicly disseminate, the to the real-time disseminator may

transmitting, swap transaction and Commission may require the swap incentivize a rapid transmittal of data to

pricing data to a registered SDR that market to resolve the failure and the real-time disseminator.

accepts swaps for the particular asset publicly disseminate the swap

class of reportable swap transactions; or transaction and pricing data through The Commission requests comment

(2) disseminating such data to the another third-party service provider or a generally on the responsibilities of swap

public through a third-party service registered SDR. Accordingly, the markets to publicly disseminate real-

provider operating on behalf of the swap Commission would expect that a swap time swap transaction and pricing data.

market.36 The Commission notes that a market that uses a third-party service In addition, the Commission requests

swap market that relies on a third-party provider to meet its public comment on the following issues:

service provider to disseminate swap dissemination obligation should be • Should the Commission establish a

transaction and pricing data, for vigilant in monitoring the timeliness maximum timeframe in which swap

example through a contractual and accuracy of the provider’s markets must report swap transaction

agreement, remains responsible for publication of the swap market’s swap and pricing data to a real-time

compliance with the rules of proposed transaction and pricing data. disseminator? If so, what is an

part 43. Proposed § 43.3(b)(2)(i) prohibits appropriate maximum timeframe and

If a swap market sends swap swap markets or any reporting party to why?

transaction and pricing data to a a swap from disclosing the swap

registered SDR, proposed § 43.3(b)(1)(i) transaction and pricing data before the • Do commenters agree with the

provides that such data must be sent as real-time disseminator has publicly Commission’s proposal that swap

soon as technologically practicable after disseminated such data. The markets satisfy their public

the swap has been executed. As a result Commission believes that this dissemination requirement by either

of industry comments made during staff prohibition will ensure that swap sending to a registered SDR that accepts

meetings and at the Roundtable, the transaction and pricing data is and disseminates swap transaction and

Commission believes that technologies disseminated uniformly and is not pricing data or by publicly

presently exist through which a swap published in a manner that creates disseminating through a third-party

market can send swap transaction and unfair advantages for any segment of service provider? If not, why? Should

pricing data to a registered SDR almost market participants. there be any other means by which a

instantaneously after execution of a The proposed rules do allow for swap swap market can satisfy its public

reportable swap transaction.37 Under markets and swap dealers to provide dissemination requirement? If yes, by

the proposal, once the swap market has their market participants and customers, what other means?

sent the swap transaction and pricing respectively, with swap transaction and

iii. Requirements for Registered SDRs

data to a registered SDR, the swap pricing data for swaps that they execute.

market will have satisfied its In particular, proposed § 43.3(b)(2)(ii) Sections 2(a)(13)(D) and 21(c)(4)(B) of

dissemination requirement. provides that notwithstanding the non- the CEA provide the Commission with

In contrast, proposed § 43.3(b)(1)(ii) disclosure provision in proposed the authority to require registered SDRs

provides that if a swap market sends § 43.3(b)(2)(i), a swap market may make to publicly disseminate swap

swap transaction and pricing data to a swap transaction and pricing data transaction and pricing data in real-

third-party service provider, the swap available to participants on its market time. In particular, Section 2(a)(13)(D)

market does not satisfy its requirement prior to the public dissemination of provides that the Commission may

to publicly disseminate swap such data; however, the swap market require registered entities to publicly

transaction and pricing data until such must send such swap transaction and disseminate swap transaction and

data is actually disseminated to the pricing data to a real-time disseminator pricing data. Registered SDRs are

public. The Commission’s proposal at the same time as or earlier than it registered entities as defined in Section

distinguishes between a registered SDR makes such data available to its market 1(a)(40)(E) of the CEA. Section

and a third-party service provider participants. Similarly, proposed 21(c)(4)(B) of the CEA provides that an

because the Commission would have § 43.3(b)(2)(iii) provides that SDR must provide swap transaction

notwithstanding the non-disclosure information in such form and at such

36 As discussed immediately below, provision in proposed § 43.3(b)(2)(i), a frequency as the Commission may

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proposed§ 43.3(b)(2) prohibits a swap market or swap dealer may make swap transaction

reporting parties from disclosing swap transaction require to comply with the real-time

and pricing data prior to sending such data to a

and pricing data for off-facility swaps reporting requirements under Section

real-time disseminator. available to its customer base prior to 2(a)(13).

37 See, e.g., Comments by Steve Joachim, the public dissemination of such data;

Executive Vice President, Transparency Services, however, such swap dealer must send Pursuant to these authorities, the

FINRA (‘‘[T]he technology for collecting, such swap transaction and pricing data Commission is proposing § 43.3(c)(1) to

aggregating, and disseminating [swap] data, require that registered SDRs that accept

assuming [the] use [of] current infrastructures

to a registered SDR at the same time as

* * * can allow [real-time public reporting] to or earlier than it makes such data and publicly disseminate such data in

work pretty efficiently.’’) Roundtable Tr. at 277–78. available to its customer base. In both real-time to comply with proposed part





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76148 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



49 of the Commission’s regulations.38 described in proposed part 43 and the publicly disseminates swap transaction

Under proposed part 49, a registered relevant provisions relating to real-time and pricing data in real-time must

SDR may choose, but would not be public reporting that will be proposed publicly disseminate any cancellations

required, to publicly disseminate swap in part 49 of the Commission’s or corrections to such data as soon as

transaction and pricing data in real-time regulations. In addition, this section technologically practicable after receipt

for an asset class of swaps. Further, a provides that the swap market must or discovery of such cancellation or

registered SDR that accepts swap ensure that the Commission has access correction.

transaction and pricing data for public to any swap transaction and pricing The proposal also seeks to prevent

dissemination must publicly data, either through the swap market or fraudulent dissemination for the

disseminate such data as soon as directly through the third-party service purpose of distorting market pricing.

technologically practicable upon receipt provider. Specifically, proposed paragraph (f)(2)

of such data. Proposed § 43.3(c)(2) of this section provides that reporting

v. Availability of Real-Time Swap parties, swap markets and registered

provides that if a registered SDR Transaction and Pricing Data

chooses to publicly disseminate swap SDRs that accept and publicly

transaction and pricing data in real-time Under proposed § 43.3(e), registered disseminate swap transaction and

for its specified asset class,39 the SDRs that report swap transaction and pricing data in real-time are prohibited

registered SDR must accept and publicly pricing data to the public in real-time, from submitting or agreeing to submit a

disseminate swap transaction and must make the data available and cancellation or correction for the

pricing data for all swaps within such accessible in an electronic format that is purpose of re-reporting swap transaction

asset class. This requirement is intended capable of being downloaded, saved and pricing data in order to gain or

to minimize the number of swaps that and/or analyzed. The Commission is extend a delay in publication or to

are not accepted by a registered SDR for proposing this provision to address the otherwise evade the reporting

public dissemination by enabling concern that a registered SDR may flash requirements of proposed part 43.

market participants to easily identify the real-time swap transaction and pricing Proposed paragraph (f)(3) of this

SDR that accepts particular asset data to selected market participants section sets forth the appropriate

classes. In addition, proposed with the technology to view such data method of canceling incorrectly

§ 43.3(c)(3) provides that any registered without making such information published swap transaction and pricing

SDR that accepts and publicly available to the public and all market data. Specifically, this paragraph

participants. Requiring registered SDRs provides that a real-time disseminator

disseminates swap transaction and

to allow market participants and the must cancel incorrect data that has been

pricing data in real-time shall perform,

public to download, save and/or analyze disseminated to the public by

on an annual basis, an independent

the real-time swap transaction and publishing a cancellation of the

review of its security and other system

pricing data upon public dissemination, incorrect data in the format and manner

controls, in accordance with established

ensures equal access to real-time swap described in appendix A to proposed

audit procedures and standards, for the

transaction and pricing data. part 43.

purposes of ensuring that the Proposed paragraph (f)(4) of this

requirements of proposed part 43 are vi. Errors or Omissions

section sets forth the appropriate

met. Proposed § 43.3(f)(1) sets out the method of correcting erroneous or

The Commission requests comment process through which any errors or omitted swap transaction and pricing

generally on the requirements for omissions in swap transaction and data. Specifically, this paragraph

registered SDRs under proposed part 43. pricing data that were publicly provides that a real-time disseminator

In addition, the Commission requests disseminated in real-time shall be must correct any erroneous or omitted

comment on whether it should require corrected or cancelled. Section 43.3(f)(1) data that has been disseminated to the

registered SDRs to publicly disseminate sets out different processes depending public by first publicly disseminating a

all real-time swap transaction and on whether the data error or omission cancellation of the incorrect data and

pricing data. was discovered by the reporting party to then publicly disseminating the correct

iv. Requirements for Third-Party Service the swap or the non-reporting party. data pursuant to the format described in

Providers Proposed paragraph (f)(1)(i) provides appendix A to proposed part 43.

that if the non-reporting party becomes Depending on the situation, a

If a swap market chooses to publicly aware of an error or omission in the data cancellation may or not be followed by

disseminate swap transaction and reported for its swap, it shall promptly a correction. For example, a cancellation

pricing data through a third-party notify the reporting party of the may occur in a situation where a

service provider, proposed § 43.3(d) correction. Proposed paragraph (f)(1)(ii) clearinghouse does not accept a

provides that the swap market must provides that if the reporting party particular swap for clearing and,

ensure that the provider maintains becomes aware of an error or omission therefore, the swap may be busted and

standards that are, at a minimum, equal in the reported data, it is required to not require a correction. In another

to those standards for registered SDRs promptly submit the corrected data to situation, one or more terms to a swap

38 In a forthcoming release, the Commission will

the swap market or real-time may be incorrectly reported by the party

propose part 49 of the Commission’s regulations, disseminator. Proposed paragraph responsible for reporting the swap, and

which will set out the requirements that a registered (f)(1)(iii) provides that if the swap upon confirmation of the swap the error

srobinson on DSKHWCL6B1PROD with PROPOSALS2









SDR must satisfy in connection with its receipt and market becomes aware of an error or in the terms would be realized. Under

public dissemination of swap transaction and omission in the swap transaction and the proposed rules, such a situation

pricing data in real-time. Proposed part 49 of the

Commission’s regulations also will identify the pricing data reported for a swap, would require a cancellation of the

necessary systems that registered SDRs must whether or not it received notification original incorrectly reported data,

develop and maintain in order to receive and from the reporting party, the swap followed by a correction with the

publicly disseminate such data. market shall promptly submit corrected correct swap transaction and pricing

39 In the forthcoming proposed part 49 of the



Commission’s regulations, registered swap data

data to the real-time disseminator. data. Whenever reporting a cancellation

repositories will select the asset class(es) for which Proposed paragraph (f)(1)(iv) provides or correction, the real-time disseminator

they accept swaps. that a registered SDR that accepts and must report the data in the same form





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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76149



and manner in which it was originally viii. Recordkeeping Requirements offered to all reporting parties and swap

reported and include a date stamp Proposed § 43.3(i) requires reporting markets.

reflecting the time of the original parties, swap markets and registered

transaction, so that market participants x. Consolidated Public Dissemination of

SDRs to retain all data related to a Swap Data

and the public are aware of exactly reportable swap transaction (including

which swap has been canceled or large notional swaps and block trades) The Commission recognizes the

corrected. for a period of not less than five years benefits of consolidating the public

vii. Hours of Operation following the time at which such dissemination of swap transaction and

Since Section 2(a)(13) of the CEA reportable swap transaction is publicly pricing data in real-time.42 During the

requires that swap transaction and disseminated. The Commission believes Roundtable and in Commission external

pricing data be reported and that it is necessary to retain such meetings, several market participants

subsequently disseminated to the public records in order to recreate transaction commented on their desire for the

in real-time, the Commission proposes profiles for the purposes of trade Commission to establish a consolidator

that registered SDRs maintain certain practice surveillance and compliance. in order to avoid fragmentation of the

hours of operation in order to comply This requirement is separate and publication of swap transaction and

with this legislative requirement. distinct from any other recordkeeping pricing data. The Commission believes

Proposed § 43.3(g)(1) requires registered requirements under the Commission’s

that a real-time reporting consolidator of

SDRs that accept and publicly regulations, including § 1.31.40

swap transaction and pricing data could

disseminate swap transaction and The Commission requests comment

on the following questions regarding provide a comprehensive record of all

pricing data in real-time to be able to swaps executed in chronological order.

receive and publicly disseminate such recordkeeping requirements:

• Do commenters believe that the Additionally, a real-time reporting

data at all times, twenty-four hours a consolidator would create greater

day. proposed retention period for data

related to reportable swap transactions anonymity for the parties to

Because the Commission recognizes

that a registered SDR periodically may is an appropriate period of time? transactions, particularly for swap

need to conduct maintenance on its • Should the recordkeeping dealers and MSPs.

electronic systems, proposed § 43.3(g)(2) requirement be the same as § 1.31 of the Unlike the federal securities laws,43

would permit a registered SDR to Commission’s regulations? however, neither the CEA nor the Dodd-

declare special closing hours to perform • What are the anticipated costs Frank Act grants the Commission

such maintenance on an ad hoc basis. In associated with storing such real-time explicit statutory authority to establish

addition, this section would require a swap transaction and pricing data for a a real-time reporting consolidator.44 The

registered SDR to provide advance longer period of time? Commission requests comment on

notice of its special closing hours to ix. Fees Charged by Registered SDRs methods to encourage the consolidation

market participants and the public. of publicly disseminated swap

Further, proposed § 43.3(g)(3) provides The Commission believes that the

intent and purpose of Sections 2(a)(13) transaction and pricing data.

that registered SDRs should avoid

scheduling special closing hours during and 21 of the CEA is for registered SDRs

42 The Commission considered the experience of

those periods when the U.S. markets to provide open and equal access to

the European Union under the Markets in Financial

and major foreign swap markets are their data collection services for the

Instruments Directive (‘‘MiFID’’) and its Financial

most active. Proposed § 43.3(h) provides purposes of real-time public reporting.41 Services Action Plan, which went into effect on

that during special closing hours, a Consistent with open and equal access November 1, 2007 for OTC equity securities. Under

registered SDR that accepts and publicly to registered SDR services, the this plan, the European Union broadened post-trade

disseminates swap transaction and Commission further believes that fees or transparency requirements in European OTC equity

charges adopted by a registered SDR for securities markets. While MiFID required

pricing data in real-time shall have the transparency, many market participants expressed

capability to receive and hold in queue its data collection services for the

concerns about the fragmentation of post-trade

information regarding reportable swap purposes of real-time public reporting transparency under the MiFID regime, especially in

transactions pursuant to proposed part must be equitable and non- OTC trading. The quality, disparate timing of

43. discriminatory. Proposed § 43.3(j) publication and other barriers to consolidation of

The Commission requests comment ensures that any fees or charges assessed post-trade data were all highlighted as problems by

on a reporting party or a swap market the Committee of European Securities Regulators

on the following questions regarding (‘‘CESR’’) in its Technical Advice report. See ‘‘CESR

hours of operation: are consistent with the intent and

Technical Advice to the European Commission in

• Should swap markets have purpose of Sections 2(a)(13) and 21. the Context of the MiFID Review and Responses to

requirements regarding hours of Proposed § 43.3(j) also prohibits a the European Commission Request for Additional

operation for the purposes of the real- registered SDR from offering a discount Information’’ (CESR/10–802, CESR/10–799, CESR/

time reporting requirements? based on the volume of swap 10–808, CESR/10–859), July 29, 2010. Available at:

• Do the proposed requirements transaction and pricing data reported to http://www.cesr-eu.org/popup2.php?id=7003.

43 See, e.g., 15 U.S.C. 78k–1.

regarding hours of operation provide the registered SDR for public

44 As mentioned above, FINRA oversees TRACE,

registered SDRs with sufficient dissemination, unless such discount is

which is a mechanism through which post-trade

flexibility to conduct the necessary data regarding OTC secondary market securities in

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40 Section 1.31 of the Commission’s regulations

maintenance on their electronic fixed income is reported. FINRA requires its broker-

generally provides, inter alia, all books and records

systems? required to be kept by the CEA or the Commission’s

dealer member firms to report transactions to

• Do commenters agree that registered regulations shall be kept for a period of five years TRACE under an SEC-approved set of rules.

SDRs that accept and publicly from the date such records come into existence. In Beginning in 2002, TRACE published transaction

disseminate swap transaction and addition, § 1.31 provides that the records shall be data on a consolidated tape. TRACE first published

readily accessible during the first two years of the data on very liquid transactions and later phased-

pricing data should have the capability in additional products. More information on

five year period.

to receive and hold such data in queue 41 Section 21 of the CEA sets forth the rules with TRACE can be accessed at: http://www.finra.org/

during special closing hours? If not, respect to the business conduct standards and Industry/Compliance/MarketTransparency/TRACE/

why and are there any alternatives? regulation of SDRs. index.htm.







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76150 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



4. Proposed Section 43.4 and Appendix to time to amend the data fields meaningful understanding of the swap.

A to Proposed Part 43—Swap described in appendix A. This section The Commission recognizes that it is

Transaction and Pricing Data To Be gives the Commission flexibility to add, conceivable that in situations where few

Publicly Disseminated in Real-Time modify or delete data fields as the parties trade a particular type of

As noted above, Section 2(a)(13)(B) Commission may deem appropriate and underlying asset, the description of that

authorizes the Commission to prescribe necessary to enhance price discovery asset may inadvertently reveal the

regulations to make swap transaction and prevent the disclosure of the identity of one or more party(ies) to the

and pricing data available in real-time identities of the parties to any swap. swap.

in such form as the Commission The Commission requests comment For off-facility swaps, particularly

determines appropriate to enhance price generally on the real-time reporting and other commodity swaps with very

discovery. Proposed § 43.4 establishes public dissemination of the data specific underlying assets, market

the format in which such data will be described in appendix A to proposed participants may be able to infer the

publicly disseminated. part 43. In addition, the Commission identity of a party or parties to a swap

Proposed § 43.4(a) provides that swap requests comment on the following based on the description of the

transaction information shall be issues: underlying asset.48 For example, if the

reported to a real-time disseminator so • Should the Commission specify the underlying asset to an off-facility swap

that the real-time disseminator can format and/or manner in which swap is an energy commodity contract that

publicly disseminate swap transaction transaction and pricing data must be has a specific delivery point at Lake

and pricing data in real-time in reported to a real-time disseminator? Charles, Louisiana and such contract is

• Should the Commission require that only traded by two companies, then

accordance with proposed part 43,

registered SDRs follow a specified order disclosing the underlying asset to the

including the manner and format

and format for the public dissemination public would effectively disclose that

described in appendix A to proposed

of swap transaction and pricing data one of those companies was entering

part 43.45 Appendix A to proposed part

instead of providing examples and into the trade. Proposed § 43.4(e)(2)

43 provides a list of data fields for

guidance?

which a registered SDR must publicly allows reporting parties of off-facility

disseminate swap transaction and i. Ensuring the Anonymity of the Parties swaps to publicly disseminate a

pricing data. The descriptions and to a Swap description an underlying asset or tenor

examples in appendix A to proposed Sections 2(a)(13)(C)(iii) and that by virtue of its real-time reporting

part 43 are intended to provide 2(a)(13)(E)(i) of the CEA emphasize the would enable market participants to

guidance on an acceptable public importance of maintaining the infer the identity of a party to the swap,

reporting format and order for the data anonymity of the parties to a swap.46 in a way that does not disclose a party

fields that are listed. Proposed § 43.4(e)(1) prohibits the to a swap, but provides a meaningful

Proposed § 43.4(b) provides that any disclosure of swap transaction and understanding of the swap for the

registered SDR that accepts and publicly pricing data that is publicly purpose of price discovery.49 In the

disseminates swap transaction and disseminated in real-time, which example, instead of saying a specific

pricing data in real-time shall publicly identifies or otherwise facilitates the delivery point of Lake Charles,

disseminate the information in the data identification of a party to a swap. This Louisiana, the reporting party may use

fields described in appendix A to section further provides that a registered a broader geographic region (e.g.,

proposed part 43. SDR may not report such data in a Louisiana, Gulf coast, etc.) under the

Proposed § 43.4(c) provides that a Commission’s proposal. The

manner that discloses or otherwise

registered SDR that accepts and publicly Commission believes that the issue of

facilitates the identification of a party to

disseminates swap transaction and the description being too specific as to

a swap.

pricing data in real-time may, as The Commission understands that divulge the identity of a party to a swap

necessary, require reporting parties and this latter prohibition may lead to a loss

swap markets to report such information of clarity with respect to the precise 48 See, e.g., comments from Peter Axilrod,



in addition to the data described in characteristics of swaps in certain

Managing Director, New Business Development,

appendix A to proposed part 43, in The Depository Trust & Clearing Corporation (‘‘I

circumstances.47 Proposed § 43.4(e)(2) guess I’d like to make a plea for people to be careful

order to match the swap transaction and provides that a reporting party or a swap with commodities. It’s a little bit of a different

pricing data that was publicly market must provide a real-time market than what most people have been talking

disseminated in real-time to the data disseminator with a specific description

about. There are delivery points all over the

reported to a registered SDR or confirm country, there are load-serving entities, many of

of the underlying asset and tenor of a them all over the country, there are producers all

that parties to a swap have reported in swap. The description must be general over the country, and if you force people to specify

a timely manner pursuant to § 43.3. enough to provide anonymity, but a particular delivery point all the time, people are

Such additional information shall not be specific enough to provide for a

pretty much going to know who’s making those

publicly disseminated, on either a trades. So, whatever you do in terms of what

commodities data is reported publicly, you have to

transactional or aggregate basis, by the 46 The legislative history of the Dodd-Frank Act leave room for some flexibility in terms of

registered SDR that accepts and publicly states that ‘‘regulators are to ensure that the public anonymization [sic]. So, if the delivery points are

disseminates swap transaction and reporting of swap transactions and pricing data too specific, you may never get much anonymizing

pricing data in real-time. does not disclose the names or identities of the [sic] of trades, but if you allow the geographic area

parties to the transactions.’’ 156 Cong. Rec. S5,921 to be expanded or to have some anonymity criteria

Proposed § 43.4(d) provides that the

srobinson on DSKHWCL6B1PROD with PROPOSALS2









(daily ed. July 15, 2010) (statement of Sen. Blanche and perhaps pick the set of the delivery points that

Commission may determine from time Lincoln). meets the anonymity criteria, something like that

47 See, e.g., comments from Steve Joachim, needs to be done.’’), Roundtable Tr. at 252–253.

45 Proposed § 43.4 would not require that a Executive Vice President, Transparency Services, 49 It is important to note that the reporting



reporting party or swap market provide swap FINRA (‘‘I think we have to recognize that when requirement in this section is separate from the

transaction and pricing data in a particular format we’re talking about transparen[cy] in marketplaces requirement to report swap transaction information

or that such data be anonymized prior to being sent that if we want to pursue the goal of transparency, to a registered SDR pursuant to Section 2(a)(13)(G)

to a real-time disseminator. Reporting parties and that trading in transparent markets is different than of the CEA. The CEA does not require swap

swap markets must, however, provide real-time trading in opaque markets and that you lose some transaction information be reported in a manner

disseminators with the information required to anonymity no matter what happens. There will not that protects anonymity since such information will

publicly disseminate the required data fields. be total confidentiality.’’), Roundtable Tr. at 258. not be publicly disseminated.







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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76151



is more likely to arise when the positions as required under Section dissemination, less specificity in the

underlying asset is a commodity. The 8(a)(1) of the CEA, the Commission has tenor of a swap and how should the

Commission, however, believes that historically created guidelines for tenor be reported? Please provide

other asset classes and markets may various market information reports (e.g., specific examples.

have similar issues. In contrast, for Bank Participation Reports (‘‘BPRs’’) and • What specific parameters for

those swaps that are executed on a swap Commitments of Traders (‘‘COT’’) reporting less specificity in the

market, the Commission believes that, reports) that prevent market participants underlying asset(s) and tenor of a swap

since such contracts will be listed on a and the public from reverse-engineering should be applied to swaps in order to

particular trading platform or facility, it aggregate data to determine the protect the identities of the

will be unlikely that a party to a swap participants that submitted the data.53 counterparties?

could be inferred based on the reporting The Commission believes that the • Should there be an indication to the

of the underlying asset and therefore approach in the proposed rules public that a description of the

parties to swaps executed on swap regarding protecting the identities of underlying asset or tenor lacks

markets must report the specific parties to a swap under Sections specificity in order to protect the

underlying assets and tenor of the swap. 2(a)(13)(C)(iii) and 2(a)(13)(E)(i) of the identities of the parties to the swap?

The Commission recognizes that swap CEA is consistent with the approach to

markets may differ and that new types confidentiality under Section 8(a)(1). ii. Unique Product Identifiers

of swaps may emerge; therefore, the The Commission requests comment The Commission anticipates that

Commission is not proposing specific generally on the protection of identities unique product identifiers may develop

guidelines at this time for how an of the parties to the swap relating to for various swap products in various

underlying asset should be described for real-time public reporting. In addition, markets. Proposed § 43.4(f) provides

the purposes of proposed § 43.4(e)(2). the Commission requests comment on that if a unique product identifier is

The specificity of the description will the following issues: developed and it sufficiently describes

vary based on particular markets and • Do commenters agree with the the information in one or more of the

contracts, but the proposed rules proposed method for real-time reporting data fields for public dissemination in

provide reporting parties with of less specific information with regard real-time, as described in appendix A,

discretion on how to report swap to the underlying asset and tenor data then such unique product identifier may

transaction and pricing data. Proposed fields in order to protect the anonymity be used in lieu of such data fields. If a

§ 43.3(e)(2) and proposed part 23 of the of parties to a swap? If not, why? swap does not have a unique product

Commission’s regulations require that • Should any additional data fields be identifier, the swap transaction and

swap dealers and MSPs who do not allowed to have less specificity to pricing data must contain all of the

disclose a specific description of an ensure the anonymity of the parties to appropriate product identification fields

underlying asset and/or tenor because a swap? Should this proposed provision in appendix A to proposed part 43.54

such disclosure would facilitate the apply to all asset classes? If so, why?

identity of a party to a swap, must • In what situations, if any, would it iii. Price-Forming Continuation Data

document why the specific information be appropriate for a reporting party to Proposed § 43.4(g) requires any swap-

regarding the underlying asset and/or report, for the purposes of public specific event (including, but not

tenor was not publicly disseminated.50 dissemination, less specificity in the limited to, novations, swap unwinds,

Further, swap dealers and MSPs must underlying asset(s) of a swap and how partial novations and partial swap

retain and provide such written should such underlying asset(s) be unwinds) that occurs during the life of

justifications to the Commission reported? Please provide specific a swap and affects the price of such

pursuant to proposed part 23 of the examples. swap to be publicly disseminated (a

Commission’s regulations.51 • Do commenters believe that it is ‘‘price forming continuation event’’). The

The Commission notes that the appropriate to allow for less specificity Commission does not believe that a

language found in Section than the month and year (as described price-forming continuation event

2(a)(13)(C)(iii) of the CEA, requiring that in appendix A to proposed part 43) for includes the scheduled expiration of a

real-time public reporting be done ‘‘in a the tenor of the swap? If not, why? If so, swap, any anticipated interest rate

manner that does not disclose the in what situations would it be adjustments, or any other event that

business transactions and market appropriate for a reporting party to does not result in a change to the price

positions of any person’’ is similar to the report, for the purposes of public that would otherwise not have been

language found in Section 8(a) of the known at the point of execution.

CEA. Section 8(a)(1) of the CEA 53 The BPRs, which provide large-trader positions



provides, in relevant part, that ‘‘the of banks participating in various financial and non- v. Reporting and Public Dissemination

financial commodity futures, collect data for every of Notional or Principal Amount

Commission may not publish data and market where five or more banks hold reportable

information that would separately positions. The BPRs break the banks’ positions into Proposed § 43.4(h) and (i) provide

disclose the business transactions or two categories—U.S. Banks and Non-U.S. Banks— rules for the public reporting of the

market positions of any person and and show their aggregate gross long and short

market positions for each type. However, in those notional or principal amount for all

trade secrets of or names of customers markets where the number of banks in either swaps. Proposed § 43.4(h)(1) would

* * *.’’ 52 For the purposes of protecting category (U.S. Banks or Non-U.S. Banks) is less than require the reporting party to report the

the confidentiality of participants’ five, the number of banks in each of the two actual notional size of any swap,

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business transactions or market categories is omitted and only the total number of

banks is shown for that market. Available at:http:// including large notional swaps, to the

www.cftc.gov/MarketReports/ registered SDR that accepts and publicly

50 In a forthcoming release, the Commission will

BankParticipationReports/ExplanatoryNotes/ disseminates such data. Proposed

propose part 23 of the Commission’s regulations, index.htm. Similarly, the COT reports provide a

which will set out the internal business conduct § 43.4(h)(2) would require a reporting

breakdown of each Tuesday’s open interest for

standards for swap dealers and MSPs, including markets in which 20 or more traders hold positions party to transmit the actual notional size

recordkeeping requirements in connection with equal to or above the reporting levels established by

real-time public reporting. the Commission. Available at:http://www.cftc.gov/ 54 The Commission is considering the issue of

51 See id.

MarketReports/CommitmentsofTraders/ unique product identifiers in two forthcoming

52 7 U.S.C. 12(a)(1). AbouttheCOTReports/index.htm. rulemakings under proposed parts 45 and 49.







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76152 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



of any block trade to a swap market. would this apply to swaps with an describing which real-time data fields

Further, a swap market must transmit underlying asset that is a physical must be publicly disseminated, the

the actual notional size for all swaps commodity with a specific delivery Commission anticipates that certain

executed on or pursuant to its rules to point? If not, why and what additional fields will be easier to standardize than

a real-time disseminator. The rounding convention may be needed? other fields. For example, it should be

Commission believes that the • Does the rounding convention for easy to standardize the format for an

application of the rounding convention reporting notional and principal execution time-stamp across all swap

for notional or principal size, described transaction amounts in proposed transactions; whereas it may be more

in proposed § 43.4(i) should be done at § 43.4(i) help to protect the anonymity difficult to achieve standardization

the point of public dissemination (as of the parties to a swap? when describing an underlying asset.

opposed to the point at which it is • Should the actual notional or The Commission anticipates that, as

reported to real-time disseminator) since principal amount be publicly markets develop over time, real-time

this timing would provide for a more disseminated at a later time? disseminators and market participants

efficient audit trail of the swap. • Should registered SDRs publish the may develop a form of standardization

Proposed § 43.4(i) provides that for all aggregate volume for each category of for certain data fields in certain asset

swaps the notional or principal amount swap instrument on a daily basis? If so, classes.

that must be reported pursuant to why? If not, why not? While real-time disseminators must

proposed § 43.4 and appendix A to • Would the daily publication of disseminate swap transaction and

proposed part 43 should be rounded aggregate volume of swap instruments pricing data to the public, the reporting

pursuant a specific rounding be useful to market participants and the parties and swap markets must provide

convention. Specifically, proposed public? the real-time disseminators with, at a

§ 43.4(i) provides that if the notional or minimum, the relevant information

v. Appendix A to Proposed Part 43 needed to report the data fields

principal amount of a swap is:

• Less than one million, round to the The Commission anticipates that real- described in appendix A to proposed

nearest 100 thousand; time swap transaction and pricing data part 43. As discussed above, a real-time

• Less than 50 million, but greater may be publicly disseminated by disseminator that is a registered SDR

than one million, round to the nearest multiple real-time disseminators in the may require a reporting party or a swap

million; same asset class. In order to reduce the market to report additional information

• Less than 100 million, but greater effects of fragmentation and increase to the information necessary for public

than 50 million, round to the nearest 5 consistency both within an asset class dissemination. Since all swap data must

million; and between asset classes, the be sent to a registered SDR pursuant to

• Less than 250 million, but greater Commission is proposing that the Section 2(a)(13)(G) of the CEA and

than 100 million, round to the nearest information in the data fields in forthcoming Commission proposals, and

10 million; and appendix A to proposed part 43 be an SDR may be a real-time disseminator,

• Greater than 250 million, use publicly disseminated. In addition, the as previously discussed, the proposed

‘‘250+’’. Commission is providing proposed rules provide that a registered SDR that

For example, if the notional size of a guidance on the order and format of is a real-time disseminator may require

swap is $575 million, the notional size reporting swap transaction and pricing additional information to match the

that would be reported by a reporting data.55 Additionally, the Commission real-time swap transaction and pricing

party to a swap market (assuming such believes that the public dissemination of data to data reported to the registered

swap is a block trade) would be $575 standardized data should reduce the SDR or confirm that parties to a swap

million. The swap market would then search costs to the public and market have reported in a timely manner

report the notional amount of $575 participants, increase consolidation of pursuant to Section 2(a)(13)(F) of the

million to a real-time disseminator and real-time swap transaction and pricing CEA. Such additional information

the real-time disseminator would data and promote post-trade requested by a registered SDR may

publicly disseminate the notional transparency and price discovery.56 include a transaction identification

amount for such block trade as ‘‘$250+’’. While appendix A to proposed part 43 code, the names of the parties to the

By reporting the notional or principal attempts to provide consistency in swap, or such other information as may

transaction amount pursuant to the be necessary.

rounding convention set forth in 55 In developing the Commission’s proposal, As mentioned above, proposed

proposed § 43.4(i), parties to swaps, Commission staff considered technical advice § 43.4(b) would require that the

particularly those swaps that are of a reports from CESR in the context of MiFID. In those information in any data field listed in

large notional size, would be given a reports, CESR concluded that market participants in appendix A to proposed part 43 to be

the equities markets are not delivering consolidated

greater amount of anonymity. data to the market in a standard format as a result

publicly disseminated by a registered

The Commission requests comment of the ‘‘inadequate quality and consistency of the SDR or swap market through a third-

generally on all aspects of the proposed raw data itself, the inconsistencies in the way in party service provider to the extent that

rules relating to the reporting and public which firms report it for publication, and the lack such data field captures a term of the

of any formal requirements to publish data through

dissemination of notional or principal bodies with responsibilities for monitoring the

reportable swap transaction. In many

amount. In addition, the Commission publication process.’’ Committee for European cases, several data fields listed in

requests specific comment on the Securities Regulators, ‘‘CESR Technical Advice to appendix A to proposed part 43 will not

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following issues: the European Commission in the Context of the be applicable to a particular reportable

MiFID Review—Equity Markets,’’ CESR/10–802,

• Do commenters agree with the July 29, 2010. Available at: http://www.cesr-eu.org/

swap transaction. To the extent that a

proposed rounding convention for popup2.php?id=7004. See also, ‘‘CESR Technical data field is not a term of the swap, such

public dissemination of large notional Advice to the European Commission in the Context field need not be reported and should be

or principal amount provided in of the MiFID Review and Responses to the left blank. Appendix A to proposed part

European Commission Request for Additional 43 also provides specific examples of

proposed § 43.4(i)? If not, why and Information’’ (CESR/10–802, CESR/10–799, CESR/

provide alternatives? 10–808, CESR/10–859), July 29, 2010. Available at: how the reporting of a particular field

• Would this rounding convention be http://www.cesr-eu.org/popup2.php?id=7003. should look (both in form and in order)

appropriate for all swaps? For example, 56 See id. when disseminated to the public.





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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76153



Table A1 of appendix A to proposed price of the swap. For cleared swaps, trade size for a listed swap based on the

part 43 provides that the following data the specific DCO that clears the swap appropriate minimum block size for the

fields be reported to the public in real- will not be listed. In consideration of relevant category of swap instrument as

time. protecting the identities of the parties to calculated by the SDR. Proposed § 43.5

1. Cancellation. This data field reports the swap, the Commission does not provides rules on block trades and large

the swap transaction and pricing data believe that the specific DCO through notional swaps, including the

that was incorrectly or erroneously which a swap is cleared must be determination of minimum block trade

reported and is therefore being reported to the public. sizes. The reporting of the swap

canceled. Any cancellations must also 6. Indication of other price-affecting instrument data field provides market

contain a date stamp of the original term (non-standardized swaps). This participants and the public with an

swap, even if such date stamp was not data field reports whether there are understanding of the type of swap

originally reported, followed by the full other non-standard terms to the swap instrument for which a block trade is

swap transaction and pricing data that that materially affect the price of the occurring.

is being canceled (including the original swap. This indicator signals to market The Commission believes that within

time-stamp of execution). It must be participants that there may be each asset class there should be certain

made clear to the public exactly which unreported terms of the contract that criteria that are used to determine a

transaction is being reported so that the affect the price. Any reporting of category of swap instrument. For

public can easily disregard such swap bespoke swap transactions must include example, swaps in the interest rate asset

transaction and pricing data. A this indicator, since in these class may be considered the same swap

cancellation does not have to be transactions there are other terms or instrument if they are denominated in

corrected; however, any corrections factors that materially affect the price of the same major currency (or

must first be canceled. Any such the swap and are otherwise not denominated in any non-major currency

cancellation must be done in included in the required fields for real- considered in the aggregate) and if they

accordance with proposed § 43.3(f). time public reporting found elsewhere have the same general tenor.57 With

2. Correction. This data field reports in appendix A to proposed part 43. regard to tenor, the Commission

the swap transaction and pricing data 7. Block trades and large notional believes that tenors may be grouped into

that is being reported is a correction to swaps. This data field reports whether ranges based on maturity date (e.g.,

real-time swap transaction and pricing the swap is a block trade or large short, intermediate and long). For

data that has been incorrectly publicly notional swap. This data field does not, example, a single category of swap

disseminated. Any corrections must also however, make a distinction between instrument may be ‘‘U.S. dollar interest

contain a date stamp to indicate the date block trades and large notional swaps, rate swaps in a short maturity bucket,

of the initial swap that is being since the execution venue data field will including swaps, swaptions, inflation-

corrected, even if such date stamp was reveal that information. linked swaps, etc. and all underlying

not originally reported, and the time- 8. Execution venue. This data field

reference rates.’’ Similarly, swaps in the

stamp must indicate the time of reports where the swap was executed.

‘‘other commodity’’ asset class may be

execution of the swap, not the time of The reporting party must indicate

considered the same swap instrument if

the correction. Providing the date and whether the swap was executed on a

they have the same underlying asset,

original time-stamp of the swap will swap market or whether such swap is an

which generally would include all

allow the public to easily replace the off-facility swap. This data field assists

the public in understanding the other swaps whose economic terms relate to

incorrect data. Any reportable swap

data fields that are being reported. In the same underlying product (e.g., oil,

transaction for which there are

consideration of protecting the natural gas, heating oil, gold, etc.). In

corrections to real-time swap

identities of the parties, the Commission contrast, the Commission believes that

transaction and pricing data must first

does not believe that the specific swap for swaps under the Commission’s

be canceled prior to the correction, so

market on which the swap was executed jurisdiction in the credit or equity asset

that the public is aware of which data

need be publicly disseminated. classes all swaps within each asset class

is being corrected. Any such correction

Similarly, the Commission does not can be considered to be the same swap

must be done in accordance with

believe that a distinction need be made instrument. The swaps in the credit and

proposed § 43.3(f).

3. Date stamp. This data field reports between those swaps executed on a SEF equity asset class will be broad-based or

the date of execution of the swap (if not and those executed on a DCM. on indexes and such swaps can likely be

the same day or a correction). This data 9. Swap instrument. This data field grouped together for purposes of

field need only be publicly must be reported only if a trade is a determining the appropriate minimum

disseminated if the swap that is being block trade or a large notional swap. block size. In the currency asset class,

reported was executed on a day other Large notional swaps must refer to an swap instruments may be defined by

than the current day or if the swap existing swap instrument that is posted major currency pair, not by whether a

transaction or pricing data is a by a registered SDR and has an major currency is one of the currencies

cancellation or correction to previously appropriate minimum block size involved in the swap.

associated with such instrument. The The Commission requests comment

real-time reported swap transaction and

parties to a swap must use the generally about swap instruments. In

pricing data.

4. Execution time-stamp. This data appropriate minimum block size of the addition the Commission requests

comment on the following specific

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field reports the time of execution of the swap instrument when determining if a

swap. The reporting party provides the swap constitutes a large notional swap. issues:

execution time-stamp of the swap. The Swap markets, in setting the minimum • What criteria for each asset class

execution time-stamp is the only time- block trade size for a particular listed should a registered SDR consider in

stamp that will be publicly swap, must reference the appropriate determining if a swap falls within a

disseminated. minimum block size for the category of 57 Major currencies are those of the United States,

5. Cleared or uncleared. This data swap instrument within which the Japan, the United Kingdom, Canada, Australia,

field reports whether a swap is cleared particular listed swap is included. A Switzerland, Sweden and the European Monetary

through a DCO, which may affect the swap market will set a minimum block Union. See § 15.03 of the Commissions regulations.







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76154 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



particular grouping of swap instrument? proposed § 43.2(e). This data field will will have an underlying asset that

Specifically, what criteria should be allow the public to easily compare should be reported as a separate field.

used to classify a swap instrument and swaps within an asset class and to easily If there are more than two underlying

how do those criteria differ by asset identify the type of swap that is being assets, all underlying assets should be

class? What particular considerations reported. Swaps within an asset class real-time reported and publicly

should apply to swaps in interest rate, would have broadly similar disseminated. The Commission is not

equity, credit, currency and other characteristics. providing a specific format for all

commodity classes? Who should 12. Sub-asset class for other underlying asset fields, but the

determine the categories of swap commodity. This data field provides description of each underlying asset

instrument? greater detail as to the type of other should be in a format that is commonly

• How broad or narrow should the commodity that is being reported. The used by market participants. The

categories of swap instruments be for Commission realizes that there may be Commission encourages reporting

each asset class? Do commenters believe vast differences in the types of products parties and real-time reporting

that the appropriate minimum block that fall under a particular asset class. disseminators to consult with one

size should be determined based on For this reason, a sub-asset class should another to determine consistent ways of

particular types of swap contracts and be reported for other commodities so reporting similar underlying assets. If a

not on categories of swap instruments? that the public can easily understand standardized industry abbreviation

If so, why? similar types of swaps. Such sub-asset exists for a particular underlying asset,

• Should certain asset classes have classes may include, but are not limited such abbreviation should be used to

additional or fewer criteria in to, specific energy, weather, precious describe the underlying asset. Whenever

determining a swap instrument? If so, metals, other metals, agricultural possible, alphabetical abbreviations

what asset classes and what criteria? commodities, etc. should be used, including roman

• Should a registered SDR apply any 13. Contract type. This data field numerals; provided, however the

other criteria to the other commodity reports the specific type of swap that underlying asset must be reasonably

asset class to decide whether a swap has been executed. This data field apparent to the public (e.g., six-month

falls within a particular type of swap provides greater transparency and price LIBOR could be represented as VIL, 10-

instrument? How should the underlying discovery to market participants and the year Treasury could be represented as

asset be grouped for the other public, as knowledge of the contract TX, etc.). Further, if a unique product

commodity asset class? type will allow the public to understand identifier adequately captures the

• Is it an appropriate approach to the swap transaction and pricing data underlying asset, the underlying asset

group tenors for swaps in the interest that is being reported. The Commission field may not need to be reported.

rate asset class into ranges (e.g., short- has identified four broad categories of 17. Price notation and additional

term, intermediate-term and long-term)? contracts that may be entered into: price notation. These data fields report

What should be the appropriate ranges swaps, swaptions, forwards and stand- the price of the swap. These fields

of tenor or maturity date for each of alone options. These categories may be should include the total or net of any

these ranges? Should there be tenor further defined by the contract sub-type premium that is associated with a

ranges for other asset classes? data field discussed immediately below. party’s requirements under the swap.

• Are there any other currencies other 14. Contract sub-type. This data field For example, if Party A’s contractual

than those described in § 15.03 of the provides more detail on the type of requirements are linked to a 10-year

Commissions regulations that the contract specified in the contract type Treasury note and Party B’s

Commission should consider as a major data field. The Commission envisions requirements are linked to three-month

currency? If so, which currencies and that there will be many contract sub- LIBOR, the price notation should be the

why? types. Such contract sub-types may rate of 10-year Treasury note compared

10. Start date. This data field reports include, for example, basis swaps, index to three-month LIBOR (e.g., 2.5).

the day on which the contractual swaps, broad-based security swaps and The Commission recognizes that a

provisions of a swap commence or basket swaps. Specific option types and number of different pricing conventions

become effective. The Commission other information about options are currently exist across swap transactions

recognizes that the start date may be covered by the options fields found in and even among market participants for

different than the execution date. The Table A2 to appendix A to proposed similar swap transactions. Nevertheless,

Commission also recognizes that the part 43. the Commission believes that

markets may develop such that swaps 15. Price-forming continuation data. standardizing of pricing conventions

traded on swap markets become This data field describes whether the will result in greater price transparency.

standardized to the point where the start information that is being reported is a In order to promote such

date is embedded or understood by a price-affecting event to an existing standardization, it becomes important to

unique product identifier. For example, swap. Such events may include define what ‘‘pricing’’ means for swaps.

the start date for a particular swap may novations, partial novations, swap Notional or principal amount is the

always be the day following execution unwinds and partial swap unwinds as amount on which payment rates are

(i.e., T+1), and such information could well as other price-forming events that calculated and is not the actual amount

be captured by simply identifying the may occur following the execution of or units exchanged in most cases.

product through a unique product the swap. Such other events may also Payments under the swap are based on

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identifier. If the markets evolve in such include amendments to the swap that what the market refers to as ‘‘legs’’ and

a manner, then this data field may not have a specific affect on the price of the what the Commission refers to as

be necessary to report for these swaps. swap. ‘‘underlying assets’’ in this proposed

Nonetheless, the start date must always 16. Underlying asset 1 and underlying rulemaking. The additional price

be provided in a manner that is asset 2. These data fields describe the notation would be necessary in such

apparent to the public. specifics of the swap and help the instances where there are multiple

11. Asset class. This data field public evaluate the price of the swap premiums yields, spreads or rates are

provides a general description of the transaction. It is likely that each leg of characteristics of the swap. It is for this

asset class for a swap, as defined in a swap (i.e., the fixed and the variable) reason that the proposed rules require





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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76155



the additional price notation to include, applicable, should refer to the notional swap. It represents the frequency that a

inter alia, front-end payments, back-end or principal amount 2 field. If there are price for an underlying asset may be

payments, mid-cycle flat payments, more than two notional or principal adjusted. It is possible that there is no

collateral and margin. All of the amounts that require a notional reset frequency, that the reset frequency

elements to additional price notation currency field, then these fields should is the same for both underlying assets or

must be represented in this field as a be reported in a similar manner. that the reset is different for both

single number, relative to the difference 20. Notional or principal amount 1 underlying assets. If different, the reset

in payments between the underlying and notional or principal amount 2. frequencies must be reported for each

assets of the swap. This data field is needed to identify the underlying asset. The format for reset

In the example above, if Party A’s size or amount of the swap transaction. frequency must be consistent and may

requirement is tied to the 10-year The notional amount may be reported in be a numerical character followed by a

Treasury note yield and Party B’s a currency and if so, the currency must letter.60 For example, if adjustments are

requirement is linked to three-month be disclosed and made easily to be made every two weeks, then ‘‘2W’’

LIBOR and Party B is also required to identifiable to the public. Such may be reported in this field, if

post a back-end payment of $100,000, disclosure can be done by reporting the adjustments are to be made every year,

then the price notation would be the notional currency field with respect to then ‘‘1Y’’ may be reported, etc. Each

rate of 10-year Treasury note compared the notional amount that requires such reset frequency (if there is more than

to three-month LIBOR (e.g., 2.5). The information. If a principal amount is in one) should be labeled with a number

additional price notation might be units, then a currency description does (e.g., 1, 2, 3, etc.), such that the number

calculated to be +0.05, because in this not need to be reported. Appendix A to corresponds to the underlying asset for

example, the net present value of the proposed part 43 contemplates the which the reset frequency is applicable.

back-end payment of $100,000, as potential for two or more notional or 23. Tenor. This data field is needed to

applied to the exchange of payments principal amounts. When a swap has describe the duration of a swap and

within the swap, would be equal to more than two notional or principal when a swap will terminate, mature or

+0.05. These two data fields provide the amounts, then all such amounts must be end. To protect the anonymity of the

public and market participants with an reported and made easily identifiable by parties to a swap, the tenor field should

easily accessible and uniform means of reporting parties and real-time reporting only be reported as the month and year

understanding the price at which the disseminators. The notional or principal that the swap terminates, matures or

parties to a swap have reached an amount for swaps should be reported ends. Such description may use the

agreement regarding the swap’s pursuant to proposed § 43.4(h) and (i). three character alpha-numerical format

payment streams. Each notional or principal amount (if that is used in describing futures

18. Unique product identifier. This there is more than one) should be contracts.61 For example, if a swap ends

data field, if available, describes a labeled with a number (e.g., 1, 2, 3, etc.), on March 15, 2020, the tenor may be

standardized swap. If a unique product such that the number corresponds to the reported as ‘‘H20’’.

identifier is available for a particular underlying asset for which the notional Table A2 of appendix A to proposed

product, it may be reported in lieu of or principal amount is applicable. part 43 provides the following data

reporting other identifying fields 21. Payment frequency 1 and payment fields to be publicly disseminated in

including, but not limited to, the frequency 2. This data field is needed to real-time for options, swaptions and

underlying asset, asset class, contract assist in understanding the price of a swaps with embedded options, if

type, contract sub-type and start date, so swap. It represents the frequency at applicable to a swap. If a swap has more

long as such fields are adequately which payments will be made for a than one embedded option or swaption

described and apparent to the public. party’s contractual requirements under a provision, then all such embedded

The Commission believes that the swap. It is possible that the payment options or swaptions should be real-

markets will evolve to a point where the frequency may be the same for both time reported to the public in the same

use of such unique product identifiers parties to a swap; however, the payment manner.

will increase transparency and promote frequency also may be different. If there 1. Embedded option on swap. This

price discovery across real-time is a difference, the payment frequencies data field is needed to describe whether

disseminators. The Commission must be reported for each requirement the data listed in the option fields is an

envisions unique product identifiers under the swap. The format for payment option that is embedded in the price of

will be uniform across different swap frequency should be consistent and may the swap. Proposed § 43.2(i) defines

markets. be reported as a numerical character

19. Notional currency 1 and notional ‘‘embedded option’’ as any right, but not

followed by a letter.59 For example, if an obligation, provided to one party of

currency 2. This data field is needed if payments are to be made every two

the notional or principal amounts are a swap by the other party to the same

weeks, then ‘‘2W’’ may be reported in swap that provides the party in

referenced in terms of a currency. The this field; if payments are to be made

currency field may be reported in a possession of the option with the ability

every year, then ‘‘1Y’’ may be reported, to change any one or more of the

commonly-accepted code. For example, etc. Each payment frequency (if there is

U.S. dollars may be reported with the economic terms of the swap as they

more than one) should be labeled with were previously established at

ISO 4217 currency code ‘‘USD’’.58 The a number (e.g., 1, 2, 3, etc.), such that confirmation (or were in effect on the

notional currency 1 field should refer to the number corresponds to the start date). By requiring a separate field

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the notional or principal amount 1 field, underlying asset for which the payment for embedded options on swaps, market

while the notional currency 2 field, if frequency is applicable. participants and the public will be able

22. Reset frequency 1 and reset to compare prices across the same or

58 The International Organization for

frequency 2. This data field is needed to

Standardization (‘‘ISO’’) provides a list of currency

and funds names that are represented by both a assist in understanding the price of a 60 See id.

three-letter alphabetical and a three-number 61 Futures month symbols are as follows: January

numerical code (the ‘‘ISO 4217’’ code list), which is 59 Such period descriptions may be described as (F), February (G), March (H), April (J), May (K), June

available at: http://www.iso.org/iso/support/ follows: daily (D), weekly (W), monthly (M) and (M), July (N), August (Q), September (U), October

currency_codes_list-1.htm. yearly (Y). (V), November (X) and December (Z).







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76156 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



similar swaps. The Commission believes alphabetical descriptors in Table A2 of publicly disseminated, increase

that requiring this field will increase appendix A to proposed part 43. The uniformity and transparency across real-

transparency and price discovery across Commission intends for the list in Table time disseminators and ultimately lead

the swap markets, as it will allow for the A2 to promote consistency and to greater transparency and price

easy comparison of price by market transparency across reporting parties discovery. Below, the Commission has

participants and the public. Further, the and real-time disseminators. Some set out two examples of how real-time

Commission does not wish to see examples of option families include public reporting of swap transaction and

market participants wasting resources to American, Bermudan, European and pricing data may evolve as

try to avoid transparency by adding Asian. consolidation and standardization

embedded options to otherwise 5. Option currency. This data field is

develops in particular asset classes and

standardized swap contracts. If the needed to explain the currency for the

option that is being reported. If markets.

Commission did not require separate

reporting of the embedded option field, applicable, the option currency field Example 1

it would be possible for market shall refer to both the option premium

participants to attach worthless options field and the option strike price. On Friday, February 4, 2011, Bank X

to a swap in order to avoid real-time 6. Option premium. This data field enters into a new plain vanilla 10-year

public reporting the swap in the same reports the purchase price for the option fixed versus floating interest rate swap

format as a standardized swap that does at the time of execution of the swap. with Bank Y, for a notional amount of

not have an embedded option. This number represents the total $10 million U.S. dollars. The swap is

2. Option strike price. This data field additional cost of the option as a scheduled to start on Tuesday, February

reports the level or price at which a numerical value and is broken out 8, 2011 (note: start dates are usually 2

party to a swap may exercise an option. separately from the price notation and business days later for interest rate

The Commission recognizes that for additional price notation fields to allow swaps). Bank X is the payer of the fixed

some option types, such as collars, for an easier comparison of a swap with leg of the swap and is obligated to pay

strangles and condors, it will be an option to similar swaps that do not

a fixed rate of 2.53% on the notional

necessary to report two or more prices include an option.

7. Option lockout period. This data amount for the ten-year tenor of the

in this field. This data field is the first

field reports the time at which an option swap. Bank Y is the payer of the floating

field that would be reported for options

and real-time disseminators may choose first can be exercised and thus, assist leg of the swap and is obligated to pay

to place an ‘‘O’’ prior to the strike price. them in evaluating the price of an the prevailing three-month LIBOR on

After the ‘‘O’’, the level or price should option. The option lockout date should the $10 million notional amount. The

follow immediately thereafter. For be reported in the year and month first LIBOR payment will be based upon

example, an option or swaption with a format used in futures markets.62 This the three-month LIBOR rate for February

strike price of $25 should be real-time field most often will be needed for 4, 2011 with the rate reset on a quarterly

publicly reported as ‘‘O25’’. European style options and other basis going forward. This interest rate

3. Option type. This data field reports options where the start date for the swap is plain vanilla with both banks

the type of option. The option type is requirements to a swap with an using the same day count convention,

important because it clarifies how the embedded option may be different than payment currency and notional value

buying or selling of the asset is to be the date that an embedded option is for both of the underlying assets to the

transacted between two parties. To available for execution. The option swap.

promote standardization, this data field lockout period should be reported in the Bank X and Bank Y have no

should be reported from the perspective year and month format used in futures.

of the party to the swap associated with 8. Option expiration. This data field additional premiums or payments under

underlying asset 1. The Commission reports when an option can no longer be the terms of the swap. In this example,

recognizes that there are several exercised. This data field will assist the the reset and payment frequency for the

different types of options, and has tried public and market participants in fixed-rate are semi-annual. The reset

to identify some of the more common evaluating the price of an option. In and payment frequency for the floating

option types and their suggested two- most cases, this data field can be rate (i.e., three-month LIBOR) are

character alphabetical descriptors in omitted, as a standard option would quarterly. The parties’ requirements

Table A2 of appendix A to proposed expire at the same time as the swap under the swap for both the fixed leg

part 43. The Commission intends for the contract to which it is linked. The and floating leg are scheduled to mature

list of options in Table A2 to promote option expiration should be reported in on Monday, February 8, 2021. Bank X

consistency and transparency across the year and month format used in and Bank Y are both members in good

reporting parties and real-time futures markets. standing with a SEF named ‘‘Xeqution

disseminators. Some examples of option Co.’’ and use a DCO named ‘‘ClearitAll’’.

types include caps, collars, floors, puts, v. Examples To Illustrate the Public

calls, pay fixed versus floating, receive Reporting of Real-Time Swap

Field Description

fixed versus floating, straddles, strangles Transaction and Pricing Data

and knock-outs. The Commission envisions that the Execution time-stamp 16:20:47

4. Option family. This data field reporting of the data fields in appendix Cleared or uncleared C (note: the name of

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reports the family associated with the A to proposed part 43 may eventually be DCO is not re-

option. The option family is important reported in the form of a consolidated ported)

because it identifies the period of time ticker, particularly for the more Execution Venue ....... SWM (note: the

over which an option may be executed. standardized swaps that are traded on name of SEF is not

The Commission recognizes that there reported)

swap markets. Additionally, the

are several different types of option Start date .................. 08–02–11

Commission believes that when unique

families, and has tried to identify some Asset class ................ IR

product identifiers emerge they will be

Contract type ............. S-

of the more common option families

and provided suggested two-character 62 See id.







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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76157



Field Description would also be excluded for both of the for 9-years to Bank X (i.e., through the

underlying assets because the symbol maturity of the swap). This swaption

Underlying asset 1 .... TX (note: TX rep- ‘‘TXIIIL’’ now represents a plain vanilla effectively will terminate the original

resents the ref- interest rate swap where payment swap with Bank X, and in this example,

erence rate of frequency and reset frequency are we can assume that the cost of the

Treasury 10 year, standardized terms of the swap swaption is $100,000. This swaption

which is the fixed

transaction. The number ‘‘2.53’’ for price might also be listed as an adjustment to

rate)

Underlying asset 2 .... IIIL (note: IIIL rep- notation remains but in some cases, the fixed rate that Bank Y would receive

resents 3 month such as a basis swap, this field may be from Bank X in the initial swap if the

LIBOR, which is omitted as the market develops. The payments were not made outright, but

the floating rate) symbol ‘‘@0’’ is used because in some were blended into the initial fixed rate.

Notional currency 1 ... USD cases front-end, back-end, margin, In this example, this might be

Notional or principal 10M (note: this may collateral or other payments that are not represented by subtracting four basis

amount 1. be reported as included in the terms of the swap must points or ‘‘–0.04’’.

‘‘10,000,000’’) be reported as an additional price The reset and payment frequency for

Pricing Notation ......... 2.53

notation characteristic. In this example, the fixed rate is semi-annual (every six

Payment frequency 1 6M

Payment frequency 2 3M there is no additional price notation that months), while the reset and payment

Reset frequency 1 ..... 6M must be reported. The symbol ‘‘G21’’ is frequency for the three-month LIBOR is

Reset frequency 2 ..... 3M still reported to indicate that the swap weekly, upon the request of the variable

Tenor ......................... G21 (note: actual matures (i.e., terminates) in February rate payer. The parties’ requirements

day is not reported) 2016. under the swap are scheduled to mature

Example 2: on Monday, February 8, 2021. Bank X

The Commission believes that as and Bank Y are both members in good

swaps become more standardized, On Friday, February 4, 2011, Bank X, standing with a SEF named ‘‘Xeqution

market participants and real-time once again enters into a plain vanilla 10- Co.’’ and use a DCO named ‘‘ClearitAll’’.

disseminators may develop a year fixed versus floating interest rate

nomenclature that combines data fields swap with Bank Y for a notional amount Field Description

in an easy-to-follow manner, ensuring of $10 million U.S. dollars. The swap is

that all the relevant information in scheduled to start on Tuesday, February Execution time-stamp 16:20:47

appendix A to this proposed part 43 is 8, 2011 (Note: start dates are usually 2 Cleared or uncleared C (note: the name of

publicly disseminated. For example, the business days later). Bank X is payer of DCO is not re-

swap in the above example may be the fixed leg of the swap and is ported)

displayed as follows: obligated to pay a fixed rate of 2.53% on Execution Venue ....... SWM (note: the

name of SEF is not

the notional amount for the ten-year

16:20:47 IRS 10 TXIIIL 2.53 @0 G21. reported)

tenor of the swap. Bank Y is the payer Start date .................. 08–02–11

In the illustration above, the symbol of the floating leg of the swap and is Asset class ................ IR

‘‘C’’ is not included, because as the obligated to pay the prevailing three- Contract type ............. S–

markets develop, the majority of month LIBOR on the $10 million Underlying asset 1 .... TX (note: TX rep-

standardized swaps will be cleared notional amount. To illustrate an resents Treasury

through DCOs and an indication of ‘‘U’’ exception from the plain vanilla swap, 10 year)

would only be necessary for the the first LIBOR payment in this example Underlying asset 2 .... IIIL (note: IIIL rep-

reporting of uncleared swaps. The term is based on the three-month LIBOR rate resents 3 month

‘‘SWM’’ is also omitted since it could be for February 4, 2011 with a weekly rate LIBOR)

assumed by market participants and the Price Notation ........... 2.53

reset, instead of the normal quarterly

public that the swap has taken place on Additional price nota- +0.07

rate reset. Both parties have agreed to tion.

a swap market. Such an indication use the same day count convention, Notional currency 1 ... USD

would only be needed if the swap was payment currency and notional amount Notional or principal 10M (note: this may

done off-facility pursuant to the non- for both of the underlying assets to the amount 1. be reported as

financial end-user exception from the swap. ‘‘10,000,000’’)

mandatory clearing requirement under Bank X and Bank Y have additional Payment frequency 1 6M

Section 2(h)(7) of the CEA. The start payments to be made between the two Payment frequency 2 1W

date is not reported because in this parties under the terms of the swap. Reset frequency 1 ..... 6M

illustration it is assumed for a swap of Bank X is required to deliver a front-end Reset frequency 2 ..... 1W

‘‘TXIIIL’’ the start date is always two Tenor ......................... G21 (note: actual

payment of $500,000 U.S. dollars to

business days after the date of execution day is not reported)

Bank Y, which is represented by an Embedded option on EMBED1

(i.e., T+2). The term ‘‘IRS’’ would replace increase to the fixed-rate payer’s swap.

the separate data fields for asset class requirement of ‘‘+0.07’’ and reported in Option Strike Price .... O2.53

‘‘IR’’ and contract type ‘‘S–’’ as the the additional price notation data field. Option Type .............. PF (note: this is al-

standard format once market For the sake of clarity, this additional ways reported from

participants have become accustomed to price notation data field should be in the point of view of

srobinson on DSKHWCL6B1PROD with PROPOSALS2









reading data on a consolidated tape for the same format as the price notation the variable leg)

swaps. The terms ‘‘USD’’ and ‘‘M’’ in field and be displayed as an addition or Option Family ............ EU (note: this is a

10,000,000 are also dropped because in European style op-

subtraction to the fixed-rate payer’s rate

this illustration the market would have tion)

under the swap. Option currency ......... USD

developed in such a manner as to In order for the parties to protect Option premium ........ –.04 (note: this may

understand that the standard trade is themselves from a possible increase in be reported as

done in U.S. dollars and in round lots interest rates, Bank Y purchases a one- ‘‘$100,000’’ de-

of one million or in this case ‘‘10’’. year pay fixed versus floating swaption pending on market

Payment frequency and reset frequency with a strike rate of 2.53% to pay fixed conventions)







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76158 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



Field Description consistently use these data fields.63 An used instead of ‘‘G12’’ to indicate the

example of the evolution of lock out period to provide clarity. The

Option lockout period G12 (note: actual standardization is shown in the option expiration of ‘‘G21’’ is omitted

day is not reported) illustration above where price notation because the embedded option is

Option expiration ....... G21 (note: actual is displayed as the number ‘‘2.53’’, assumed to be in a standard form and

day is not reported) which is equal to the rates associated as such would be set to expire at the

with payments on each leg at execution. same time as the swap itself. If such

The Commission believes that as Each leg of the swap’s present value of embedded option was not in standard

swaps become more standardized, future payments would be equal to zero form, then the option expiration field

market participants or real-time (i.e., a par swap’s value). The symbol would have been reported as an

disseminators may develop a ‘‘@0.07’’ is listed in the illustration above additional data field.

nomenclature that combines data fields because the present value of the front- The Commission requests comment

in an easy-to-follow manner, while end payment is the equivalent of a on all aspects of the data fields in

ensuring that all the relevant higher interest payment of 0.07 over the appendix A to proposed part 43 that

information in appendix A to this life of the swap for the party that is would be required to be reported in real-

proposed part 43 is publicly paying the fixed rate at execution. time under this proposal. In addition,

Payment frequency and reset frequency the Commission requests specific

disseminated. Even swaps with one or

have been represented with an ‘‘S/1W’’ comment on the following issues:

more non-standard terms may still be • Do commenters agree with the

for the underlying assets because the

reported in a consolidated format. For proposed data fields that would be

symbol ‘‘TXIIIL’’ represents a plain

example, the swap in the example above required to be reported in real-time? If

vanilla interest rate swap where

may be displayed as follows: payment frequency and reset frequency not, what additional data fields should

16:20:47 IRS 10 TXIIIL S/1W 2.53 @0.07 are standardized terms of the swap be reported and why? How would

G21 EMBED1 EU 2.53PF@–.04 LOG12 transaction. In the illustration above, public dissemination of these data fields

however, only the Treasury leg is enhance transparency and price

In the illustration above, the symbol standard, while the floating LIBOR leg discovery?

‘‘C’’ is not included because as the is set to weekly versus its standard • Which data fields, if any, should

markets develop the majority of quarterly format. The symbol ‘‘G21’’ is not be required to be publicly

standardized swaps will be cleared reported to indicate that the disseminated in real-time and why?

through DCOs, and an indication (e.g., requirements under the swap terminate • Would public dissemination of

the symbol ‘‘U’’) would only be in February 2021. In this illustration, certain data fields reduce market

‘‘TXIIIL’’ is still used as a symbol that liquidity? 64 If so, why?

necessary for the reporting of uncleared

lets participants know several of the • Should the portion of the amount

swaps. The term ‘‘SWM’’ is also omitted reported in the additional price notation

since, it could be assumed by market previously required data fields are

standardized and combined and data field that relates to the

participants and the public that the creditworthiness of a counterparty be

swap has taken place on a swap market. therefore do not need to be displayed

separately for real-time public reporting, extracted and reported as a separate data

Such indication would only be field? If so, why? Should the

necessary if the swap was done off- while those fields that are non-standard

creditworthiness of a counterparty be

facility, pursuant to the non-financial are simply broken out and reported

reported in some other way?

separately in a more traditional long

end-user exception from the mandatory • Do commenters agree that tenure

clearing requirement under Section format. should only be reported with month and

The interest rate swap in this

2(h)(7) of the CEA. The start date not year? Is this a useful method for

illustration contains an embedded

reported for this swap because in this protecting the anonymity of the

option that is broken out so that data

illustration, it is assumed that for a counterparties? Does this provide an

fields can be easily comparable across a

swap of ‘‘TXIIIL’’ the start date is always adequate level of transparency?

wider variety of similar, but not • Do commenters agree with the

two business days after the date of identical swaps, thus promoting post-

execution (i.e., T+2). The term ‘‘IRS’’ proposed method for real-time reporting

trade price transparency. The term and public dissemination of non-

would replace the separate data fields ‘‘EMBED1’’ indicates that this interest

for asset class ‘‘IR’’ and contract type ‘‘S- standardized swaps? Should the

rate swap has an embedded option and ‘‘indication of other price affecting term’’

’’ as the standard format once market the pricing information for such

participants have come accustomed data field contain more specificity as to

embedded option follows on the real- what type of term is affecting the price?

reading data on a consolidated tape for time public reporting consolidated tape.

swaps. The terms ‘‘USD’’ and ‘‘M’’ in If so, what additional information

The symbol ‘‘2.53PF’’ replaces the should be included and how should it

10,000,000 are also dropped because in separate data fields for option strike

this illustration the market has be reported?

price ‘‘O2.53’’ and option type ‘‘PF’’. • Would public dissemination of

developed in such manner as to Option family ‘‘EU’’ is included in the information concerning non-

understand that the standard trade is consolidated tape to indicate the family standardized swaps materially reduce

done in U.S. dollars and in round lots of the embedded option. The option market liquidity? If so, why? 65

of one million or in this case ‘‘10’’. currency ‘‘USD’’ is left off of this • Under the proposal, the swap

srobinson on DSKHWCL6B1PROD with PROPOSALS2









The Commission anticipates that in transaction because it is assumed for a instrument data field would only be

order for the price notation and ‘‘TXIIIL’’ swap, the option currency for required for block trades and large

additional price notation data fields to any embedded options would be ‘‘USD’’, notional swaps, should this data field be

be of the greatest value to market unless broken out and reported reported for all swaps? If so, why?

participants and the public, some form individually. The symbol ‘‘LOG12’’ is

64 Section 2(a)(13)(E)(iv) requires that the

of standardization likely will develop

63 Itis important to note that such standards are Commission ‘‘take into account whether the public

for the purposes of real-time public disclosure will materially reduce market liquidity.’’

not intended to change the form in which market

reporting and market participants participants use to quote or construct swaps. 65 See Section 2(a)(13)(E)(iv).









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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76159



• Would information concerning the block trades in the futures markets. i. Parties to a Block Trade or Large

type of counterparties that enter into a Additionally, the Commission Notional Swap

swap enhance transparency and price considered the treatment of block trades Proposed § 43.5(b)(1) provides that

discovery (e.g., whether the in other markets (both foreign and any party to a block trade or large

counterparty is a swap dealer, MSP, or domestic), such as those for equities, notional swap is required to be an

not)? If so, why? options and corporate bonds. Further, eligible contract participant (‘‘ECP’’) as

• Would separately reporting the Commission considered the that term is defined in Section 1(a)(18)

embedded option information enhance treatment and effects of swaps with of the CEA. The ECP requirement relies

price discovery and transparency? If large notional or principal amounts in on Section 2(e) of the CEA, which

not, why? the current OTC swap markets. The provides that ‘‘[i]t shall be unlawful for

• Do proposed § 43.4 and appendix A Commission is not aware of any any person, other than an eligible

to proposed part 43 provide adequate academic literature that offers empirical contract participant, to enter into a swap

guidance with respect to the evidence to support the claim of unless the swap is entered into on, or

information that must be reported? If impaired liquidity given greater subject to the rules of, a board of trade

not, what additional guidance do transparency or how block trades on designated as a contract market under

commenters believe is necessary? swaps or large notional swaps are section 5.’’ The parties to any block

• Do commenters agree with the affected by a post-trade transparency trade, pursuant to a swap market’s rules,

reporting of price-affecting continuation regime.67 and any large notional swap executed

events? Should data relating to these The Commission recognizes that the off-facility, must be ECPs. However, the

events be publicly disseminated in real- term ‘‘block trade’’ has different proposed rule makes clear that a

time in the same way as new swap meanings in different markets. For registered DCM may allow commodity

transactions? What additional types of example, in the futures markets, a block trading advisors acting in an asset

transactions, if any, would be price- trade is a permissible, privately managerial capacity and investment

affecting continuation events that negotiated transaction that equals or advisors that have over $25 million in

should be reported and publicly exceeds a DCM’s specified minimum assets under management, including

disseminated in real-time? quantity of futures or options contracts foreign persons performing equivalent

• What would be the costs of and is executed away from the DCM’s roles, to carry out block trades on a

reporting and publicly disseminating centralized market but pursuant to its registered DCM for non-ECP customers.

the proposed data fields? What would rules.68 Block trades are large-sized Any such person may not conduct a

be the benefits? Please provide transactions that would cause a trade on behalf of a customer unless the

examples, if possible. significant price impact if required to be person receives instruction or prior

executed on the DCM’s centralized consent to do so.

5. Proposed Section 43.5—Block Trades

market. In contrast, the Commission Proposed § 43.5(b)(2) requires that

and Large Notional Swaps

understands, through discussions with parties to a swap that is equal to or

Sections 2(a)(13)(E)(ii) and (iii) of the market participants, that in the swaps greater than the minimum block trade

CEA authorize the Commission to markets, asset managers that execute size must elect to be treated as a block

prescribe rules ‘‘to specify the criteria OTC swaps and then later distribute or trade and that the swap market must

for determining what constitutes a large allocate the swap to various clients or provide the real-time disseminator with

notional swap transaction (block trade) funds may refer to such bunched such election. The block trade election

for particular markets and contracts’’ transactions as block trades. To clarify allows parties to a swap to calculate the

and ‘‘to specify the appropriate time the Commission’s view of block trades impact of executing the transaction

delay for reporting large notional swap on swaps, the proposed rules include bilaterally and delaying public

transactions (block trades) to the definitions for both ‘‘block trade’’ and dissemination versus executing the

public.’’ As discussed in the Background ‘‘large notional swap’’.69 transaction on a swap market’s trading

Section above, while Section 2(a)(13)(E) system or platform where there would

of the CEA specifically refers to the 67 The Commission will continue to analyze and

be no delay in the dissemination of the

swaps described only in Sections study the effects of increased transparency on post-

swap’s transaction and pricing data.

2(a)(13)(C)(i) and 2(a)(13)(C)(ii) of the trade liquidity, particularly in the context of block

trades on swaps and large notional swaps. The Proposed § 45.5(b)(2) also requires that

CEA (i.e., clearable swaps, including Commission expects that, as post-trade the parties to a swap that qualifies as a

swaps that are exempt from clearing), transparency is implemented in the context of the large notional swap must elect to be

the Commission believes that it is Dodd-Frank Act, new data will come to light that

treated as a large notional swap and the

appropriate to consider the four criteria will inform the discussion and could cause

subsequent revision of the proposed rules. reporting party must provide the real-

in Section 2(a)(13)(E) of the CEA for all 68 See, e.g., CME Rulebook, Rule 526 (‘‘Block time disseminator with such election.70

four categories of swaps described in Trades’’). Available at: http://www.cmegroup.com/

Section 2(a)(13)(C) of the CEA.66 rulebook/CME/index.html; ICE Futures U.S. ii. Block Trades on Swaps

Therefore, proposed § 43.5 establishes: Rulebook, Rule 4.31 (‘‘Block Trading’’). Available at: Proposed § 43.2(f) and (l) define

https://www.theice.com/Rulebook.shtml?

(1) the procedures for determining the futuresUSRulebook=. ‘‘block trade’’ and ‘‘large notional swap’’

appropriate minimum sizes for block 69 The legislative history to the Dodd-Frank Act



trades and large notional swaps; and (2) provides the following statement by Senate time delayed reporting * * *.’’ 156 Cong. Rec.

the appropriate time delays for the Agriculture Committee Chairwoman Blanche S5921 (daily ed. July 15, 2010) (statement of Sen.

srobinson on DSKHWCL6B1PROD with PROPOSALS2









Lincoln regarding block trades and large notional Blanche Lincoln).

reporting of block trades and large

swaps: ‘‘I would like to specifically note the 70 By way of comparison, a party to a futures

notional swaps. treatment of ‘block trades’ or ‘large notional’ swap contract may elect not to treat the transaction as a

In developing the proposed rules with transactions. Block trades, which are transactions block trade. By not electing to treat the transaction

respect to block trades and large involving a very large number of shares or dollar as a block trade, the party is choosing to place its

notional swaps, the Commission amount of a particular security or commodity and order on the DCM’s centralized market. The party

which transactions could move the market price for who makes such an election may believe that it will

considered its guidance with respect to the security or contract, are very common in the receive a better price in settling its trade

securities and futures markets. Block trades, which immediately, on the DCM’s centralized market,

66 Pursuant to the Commission’s authority under are normally arranged privately, off exchange, are rather than bilaterally negotiating the transaction

Sections 2(a)(13)(B) and 2(a)(13)(E)(iii) of the CEA. subject to certain minimum size requirements and and delaying the reporting of the trade.







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76160 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



as separate concepts to distinguish the § 43.5; and (3) is reported in accordance § 43.4 and appendix A to proposed part

difference between large notional or with the appropriate time delay 43, proposed § 43.5(f) would require a

principal sized trades executed requirements set forth in proposed swap market and registered SDR that

pursuant to a swap market’s rules (block § 43.5. Similar to the proposed reporting accepts and publicly disseminates swap

trades) and off-facility swaps that are requirements for block trades, the transaction and pricing data in real-time

not subject to a swap market’s rules but reporting party to a large notional swap to have additional time-stamp

have very large notional or principal must report to a real-time disseminator requirements with respect to block

sizes (large notional swaps). Proposed as soon as technologically practicable. trades and large notional swaps.

§ 43.2(f) defines a block trade as a swap Such large notional swaps may include: Proposed § 43.5(f)(1) would require

transaction that: (1) Involves a swap that (1) Swaps that would have been subject swap markets to time-stamp swap

is made available for trading or to mandatory clearing, and for which an transaction and pricing data with the

execution on a swap market; (2) occurs end-user relies on the exception from date and time to the nearest second (1)

off the swap market’s trading system or the mandatory clearing requirement in when such swap market receives the

platform pursuant to the swap market’s Section 2(h)(7) of the CEA; 72 or (2) other data from a reporting party and (2) when

rules and procedures; (3) is consistent off-facility swaps that are not subject to a swap market transmits such data to a

with the minimum block trade size mandatory clearing but have large real-time disseminator. Proposed

requirements set forth in proposed notional amounts (which would include § 45.5(f)(2) would require registered

§ 43.5; and (4) is reported in accordance non-standardized swaps). The proposed SDRs that accept and publicly

with the swap market’s rules and rules provide that if a swap is disseminate swap transaction and

procedures and subject to the sufficiently large in notional or pricing data in real-time to time-stamp

appropriate time delay set forth in principal amount, such swap could be such data with the date and time to the

proposed § 43.5.71 considered a large notional swap and nearest second when (1) such registered

Proposed § 43.5(c)(2) provides that a therefore may be eligible for the same SDR receives such swap transaction and

reporting party for any block trade must time delay in real-time public reporting pricing data from a swap market or

report the block trade transaction and as block trades. reporting party and (2) when such data

pricing data pursuant to the rules of the Proposed § 43.5(d) requires the is publicly disseminated.73 Proposed

swap market that makes that swap registered SDR that has received the § 43.5(f)(3) would require that records of

available for trading. Such reporting swap transaction and pricing data for a these additional time-stamps be

must occur as soon as technologically large notional swap not to publicly maintained for a period of at least five

practicable after execution of the block disseminate such data before the years from the execution of the block

trade and pursuant to the rules of the expiration of the appropriate time delay trade or large notional swap. The

swap market. described in proposed § 43.5(k). Commission believes that requiring a

Proposed § 43.5(c)(3) would require Proposed § 43.5(e) provides that an swap market and a registered SDR to

the swap market that accepts the block off-facility swap where neither time-stamp these actions for block

trade to immediately send the block counterparty is a swap dealer or an MSP trades and/or large notional swaps is

trade transaction and pricing data to a (e.g., a swap between two end-users) essential in providing an audit trail for

real-time disseminator, which shall not may be eligible to be a large notional block trade and large notional swap

publicly disseminate the swap swap. Although the parties to these transactions from execution through

transaction and pricing data before the swaps will not be registrants with the public dissemination. Additionally,

expiration of the appropriate time delay Commission, this provision specifies such time-stamps would provide the

described in proposed § 43.5(k) that such swaps (i.e., end-user to end- Commission ability to monitor whether

discussed below. user transactions) will be treated the reporting parties, swap markets and

The Commission requests comment same as swaps in which a swap dealer registered SDRs are reporting the block

generally on all aspects of the proposed or MSP is a party. trades and large notional swaps in the

rules regarding block trades. In addition, The Commission requests comment manner described in proposed part 43.

the Commission requests specific generally on all aspects of the proposed v. Responsibilities of Registered SDRs in

comment on the following issues: rules regarding large notional swaps. In Determining the Appropriate Minimum

• Do commenters agree with the addition, the Commission requests Block Size

proposed definition of ‘‘block trade’’? If specific comment on the following Proposed § 43.5(g) would require

not, why? issues: registered SDRs to calculate the

• Do commenters believe that the • Do commenters agree with the appropriate minimum block size 74 for

Commission should set a maximum proposed definition of ‘‘large notional

time frame in which a reporting party swap’’? If not, why? 73 Proposed § 43.5(f) would require five distinct

must report a block trade to a swap • Do commenters agree that off- time-stamps for block trades and three distinct

market, or should such time period be facility swaps in which neither party is time-stamps for large notional swaps. Block trades

defined pursuant to the rules of the would receive a time-stamp by: (1) The parties at

a swap dealer or an MSP be eligible to execution; (2) the swap market upon receipt of the

respective swap markets? be treated as large notional swaps? If data; (3) the swap market when it sends the data

iii. Large Notional Swaps not, why? to a real-time disseminator; (4) the real-time

disseminator upon receipt of the data; and (5) the

Proposed § 43.2(l) defines a large iv. Time-Stamp and Reporting real-time disseminator upon public dissemination

srobinson on DSKHWCL6B1PROD with PROPOSALS2









Requirements for Block Trades and of the data. A large notional swap would receive a

notional swap as a swap that (1) is not time-stamp: (1) The parties at execution; (2) the

available for trading or execution on a Large Notional Swaps real-time disseminator (a registered SDR, if

swap market; (2) is consistent with the In addition to the execution time- available) upon receipt of the data; and (3) the real-

appropriate size requirements for large time disseminator (a registered SDR, if available)

stamp requirement under proposed upon public dissemination of the data.

notional swaps set forth in proposed 74 Proposed § 43.2(c) defines ‘‘appropriate

72 As described below, swaps that rely on the

minimum block size’’ to mean the minimum

71 Both block trades and large notional swaps exception in Section 2(h)(7) of the CEA, although notional or principal size of a swap instrument that

would only apply to new events (i.e., not price large notional swaps, are subject to the same time qualifies swaps within such category of swap

affecting continuation events). delay as block trades. instrument as a block trade.







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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76161



swaps for which such registered SDR determinations of the appropriate asset classes and within the same asset

receives data in accordance with minimum block size for swap class.

Section 2(a)(13)(G) of the CEA. Such instruments? Proposed § 43.5(g)(1) would also

appropriate minimum block size for a require a registered SDR to set the

swap instrument 75 shall be the greater vi. Formula To Calculate the appropriate minimum block size at the

of the resulting number derived from Appropriate Minimum Block Size greater resulting number of each of the

the ‘‘distribution test’’ and the ‘‘multiple Section 2(a)(13)(E)(ii) of the CEA ‘‘distribution test’’ and ‘‘multiple test.’’

test’’ (each described below).76 If there is directs the Commission to determine the

only one registered SDR for a particular vii. Distribution Test

appropriate minimum size for large

asset class, the registered SDR would notional swaps and block trades.78 Proposed § 43.5(g)(1)(i) describes the

have to calculate the appropriate Proposed § 43.5(g)(1) describes the distribution test as applying the

minimum block size. Since registered procedure and calculations that a ‘‘minimum threshold’’ to the

SDRs will be receiving data from all registered SDR must follow in ‘‘distribution of the notional or principal

swaps within an asset class, they should determining the appropriate minimum transaction amounts.’’ The proposed

have a more complete set of swap data block size. In determining the distribution test would require a

and therefore the calculations will be appropriate calculations, the registered SDR to create a distribution

based off of a more complete set of swap curve to see where the most and least

Commission considered: (1) Currently

data. In the event that there are multiple liquidity exists based on the notional or

existing size standards for block trades

registered SDRs for an asset class, and principal transaction amounts for all

in other markets; (2) the potential

therefore, multiple registered SDRs swaps within a category of swap

impact of block trades on liquidity; and

would accept swaps for a particular instrument.81 The application of the

(3) the frequency of block trades in other

category of swap instrument, the distribution test requires a registered

markets, including equities, bonds and

Commission will prescribe how the SDR to determine first the distribution

futures markets. The Commission also

appropriate minimum block size should of the rounded notional or principal

considered the standards used by

be calculated, in a way that accounts for transaction amounts of swaps (rounded

TRACE in setting its minimum

all the relevant data.77 pursuant to the proposed rules in

The Commission requests comment threshold for block trades.79 In that

regard, for trades with a par value § 43.4(i)) within a category of swap

on the appropriate methods to calculate instrument and then calculate a notional

the appropriate minimum block size exceeding $5 million for investment-

grade bonds or $1 million for non- or principal size for such swap

when more than one registered SDR instrument that is greater than the

accepts swap data for a particular asset investment grade bonds (e.g., high-yield

and unrated debt), TRACE publicly minimum threshold.

class or swap instrument. In addition, Proposed § 43.5(g)(1)(i)(A) would

the Commission requests specific disseminates the quantity as ‘‘5MM+’’

and ‘‘1MM+’’, respectively.80 In require a registered SDR to pool and

comment on the following issues: perform an empirical distributional

• Who should determine the developing the appropriate minimum

block size formula, the Commission analysis on the transactional data for the

appropriate minimum block size when swaps included in each category of

there is more than one registered SDR considered the many differences within

the swaps markets, including swap instrument by pooling the data

that accepts swap data for a particular from such swaps for which it has data

asset class or instrument? differences in liquidity between

that are executed on a swap market and

• Should the Commission require particular markets and contracts and

differences in product types between that are executed off-facility. Proposed

registered SDRs to self-certify

§ 43.5(g)(1)(i)(A) also provides that a

75 As discussed below, proposed § 43.2(y) defines 78 The legislative history to the Dodd-Frank Act

registered SDR may consider other

‘‘swap instrument’’ to mean a grouping of swaps in provides the following statement by Senate economic information in determining

the same asset class with the same or similar Agriculture Committee Chairwoman Blanche the appropriate minimum block size, in

characteristics. Swaps in a category of swap Lincoln regarding the calculation of the minimum consultation with the Commission.82

instruments may be traded on SEFs, DCMs or off- size for block trades and large notional swaps: ‘‘The

facility. The Commission is requesting general and The registered SDR should: (1) identify

committee expects that regulators to distinguish

specific comment about the determination of swap between different types of swaps based on the all of the rounded notional or principal

instrument, as explained in the discussion of commodity involved, size of the market, term of the amounts traded; (2) group the

appendix A to part 43 above.

76 The Commission has the authority to require

contract and liquidity in that contract and related transactions of a particular swap

contracts, i.e.; for instance the size/dollar amount of instrument based on the rounded

registered SDRs to provide the appropriate block what constitutes a block trade in 10-year interest

trade minimum size to the public under Sections rate swap, 2-year dollar/euro swap, 5-year CDS, 3- notional or principal amounts; 83 and (3)

21(c)(4)(B) and 21(c)(5) of the CEA. Section year gold swap, or a 1-year unleaded gasoline swap.

21(c)(4)(B) of the CEA states that an SDR shall While we expect the regulators to distinguish 81 For the purposes of determining the

provide data ‘‘in such form and at such frequency between particular contracts and markets, the appropriate minimum block size, swaps may be

as the Commission may require to comply with the guiding principal in setting appropriate block trade grouped by asset class into a category of swap

public reporting requirements contained in section

levels should be that the vast majority of swap instruments. As discussed above, proposed § 43.2(y)

2(a)(13).’’ Section 21(c)(5) of the CEA states that an

transactions should be exposed to the public defines swap instrument as a grouping of swaps in

SDR shall ‘‘at the direction of the Commission,

through exchange trading.’’ 156 Cong. Rec. S5,921– the same asset class with the same or similar

establish automated systems for monitoring,

22 (daily ed. July 15, 2010) (statement of Sen. characteristics. A registered SDR would determine

screening, and analyzing swap data, including

compliance and frequency of end-user clearing Blanche Lincoln). a swap instrument based on different criteria per

exemption claims by individual and affiliate

79 TRACE does not use the term ‘‘block trades.’’ asset class. The Commission is requesting comment

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entities.’’ Rather, the TRACE system uses the term on the appropriate criteria to determine the

77 The Commission is considering alternative ‘‘disseminated volume caps.’’ In discussions categories of swap instruments for a particular asset

between TRACE representatives and staff, TRACE class.

methods on how to determine the appropriate

minimum block size when there is more than one informed staff that disseminated volume caps are, 82 The Commission anticipates that as swap



registered SDR that accepts data for a particular for all intents and purposes, substantially similar to markets develop, certain adjustments for

asset class, including requiring a registered SDR to the minimum size requirements for block trades. seasonality, etc., may become relevant depending

follow the requirements in § 40.6(a) of the CEA to 80 See TRACE, Trade Reporting and Compliance on the particular type of swap contract.

self-certify the appropriate minimum block size and Engine, User Guide, Version 2.4—March 31, 2010, 83 Rounding would occur pursuant to the



having the Commission make a determination of the p. 50, http://www.finra.org/web/groups/industry/ rounding rules for the real-time public reporting of

appropriate minimum block size for a swap @ip/@comp/@mt/documents/appsupportdocs/ notional or principal amounts which are illustrated

instrument. p116039.pdf. in proposed § 43.4(i).







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76162 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



calculate the empirical distribution of market for swaps is not as liquid as that customary transaction size, for a swap

all trades for the swap instrument. of futures, and recognizing market varies by asset class, tenor and delivery

Once the distribution of notional or participants’ needs to lay-off risk points.

principal transaction amounts is associated with block trades, the Once the social size is determined,

completed for a swap instrument, a Commission is proposing a minimum the registered SDR must then apply the

registered SDR must then apply the threshold of greater than 95%. block multiplier. Proposed

minimum threshold to such viii. Multiple Test § 43.5(g)(1)(ii)(B) provides that the block

distribution. Proposed § 43.5(g)(1)(i)(B) Proposed § 43.5(g)(1)(ii) provides that multiple shall be set at five, so therefore

describes the ‘‘minimum threshold’’ as a to apply the multiple test to a swap the registered SDR should multiply the

notional or principal amount that is instrument, a registered SDR shall social size by five. The resulting product

greater than 95% of transaction sizes in multiply the ‘‘block multiple’’ by the will be the number that the registered

a category of swap instrument during ‘‘social size’’.85 The multiple test is SDR compares to the resulting number

the period of time represented by the necessary since the market for a swap from the distribution test, the greater of

distribution of the notional or principal instrument may be illiquid and there which will be the appropriate minimum

transaction amounts. Setting the may be very few transactions over a block size for such swap instrument. In

threshold level at 95% ensures that the particular period to provide a determining the block multiplier, the

resulting number from the distribution meaningful distribution of transaction Commission selected a number that it

test will be large relative to the notional amounts. believed would help to ensure that the

value of other swaps of the same type. Proposed § 43.5(g)(1)(ii)(A) provides block trade size was sufficiently large

In determining the appropriate that the social size shall be determined relative to the trading in a particular

percentage at which to set the by: (1) Calculating the mode, median market and would take into account

‘‘minimum threshold,’’ the Commission and mean transaction sizes for all swaps those markets that have very little

considered the impact of block trades in within a category swap instrument; and trading.

selected futures markets.84 In the (2) choosing the greatest of the mode, The Commission believes this

studies conducted by the Commission, median and mean transaction sizes.86 proposed two-part test is necessary to

the Commission found that block trades Commission staff’s research and ensure that qualifying block trades are,

made up a small percentage of the external meetings with market in fact, large trades relative to the

overall markets, accounting for less than participants indicated that a swap’s notional or principal amounts for a

0.075% of total trades in the three ‘‘social size’’ is an important criterion in swap instrument.88 For example,

observed markets (i.e., ED, CL and RB quantifying an appropriate minimum suppose there is a swap instrument that

futures contracts). Recognizing that the block size.87 The social size, or has 500 trades over a one month period

and all of the specific swap instruments

85 Proposed § 43.2(x) defines the ‘‘social size’’ as

84 The Commission examined trading data for the had notional values between $50 and

the greatest of the mode, median and mean

Eurodollar (‘‘ED’’), crude oil (‘‘CL’’) and reformulated

transaction sizes of a particular type of swap.

$60 million. Using the distribution test,

gasoline blendstock for oxygenate blending (‘‘RB’’) the appropriate minimum block size

86 The Commission also considered using one of

futures contracts, among other contracts. In the ED,

CL and RB studies, the relevant time period was the mode, median, or mean of a swap instrument would be somewhere close to $60

February 2009 to September 2010 (‘‘relevant time category as the sole measurement of social size million. Using the multiple test, the

period’’). The Commission evaluated the frequency without first comparing the three to determine appropriate minimum block size would

of use and impact of block trades in these three which is largest. However, the Commission

determined such a methodology would render an be $275 million.89 The $60 million

futures markets, which represent both liquid (e.g.,

ED) and less liquid (e.g., RB) markets. In the ED incomplete understanding of a particular swap

futures market, the Commission looked at a total of category. By itself, the mean would not represent many trades have you done? What is the maturity

56,643,563 trades of which 502 trades were block the social size of a particular type of swap because, profile? What is the median ticket size? What ticket

trades under CME’s rules, representing 0.00089% of as the sum of the values divided by the total size will put you in the top tenth percentile? Those,

all trades in the ED futures market during the number of transactions, it would fail to accurately I think, you would have the relatively the least

relevant time period. The average size of an ED account for the influence of outliers at the extreme amount of hurdles to derive those number

futures block trade during the relevant time period large end of the data set. The median, although it scientifically. Where it gets difficult is with the

consisted of 2,835 contracts, and the largest ED would take into account swap transaction outliers, products that might trade, like, once a month,

futures block trade consisted of 21,800 contracts. In would fail to accurately reflect which trade size is because then you’ve got the issue with these lumpy

the RB futures market, the Commission looked at transacted most often. Finally, the mode, which trades, right. It could be very illiquid. Well, you

10,230,939 trades of which 7,551 trades met the would represent the trade size that occurs most may not trade for a few months. You do this

minimum qualifications of a block trade, frequently in a particular type of swap, would fail gigantic trade and then you do very little trades

representing 0.0739% of all trades in the RB futures to take into account a market where trade sizes were again and then another gigantic trade. But for—

market during the relevant time period. The average thinly spread and where there were large gaps in again for the bulk of the OTC derivative market, for

size of a RB futures block trade was 106.47 data points or in swap markets without a normal interest rate swaps and plain vanilla options, I

contracts and the largest RB futures block trade was distribution. believe that that data is relatively readily available.

87 See, e.g., Comments from Robert Cook, Director Mr. Voldstad: I would think the same is true for

1,050 contracts. Lastly, in the CL futures market, the

Commission looked at 53,796,956 trades of which of the Division of Trading and Markets, SEC, Yunho (inaudible) credit default swaps as it is for various

9,346 trades were block trades, representing Song, Managing Director/Senior Trader, Bank of indices. Roundtable Tr. at 376–377.

0.0173% of all trades during the relevant time America Merrill Lynch and Conrad Volstad, Chief 88 The legislative history to the Dodd-Frank Act



period. The average size of a block trade in CL Executive Officer, ELX Futures, L.P.: provides the following statement by Senate

futures was 294.2 contracts and the largest Mr. Cook: Let me ask in terms of methodology, Agriculture Committee Chairwoman Blanche

individual trade was 5,200 contracts. it’s been argued by some to us that there are certain Lincoln regarding the calculation of the minimum

At the time of the study, the block trade markets where there’s a social size of trade or fairly size for block trades and large notional swaps:

minimum was 4,000 ED futures contracts (or 1,000 standardized level of trading that could be used as ‘‘Block trades, which are transactions involving a

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ED futures contracts, provided that a minimum of a part of a building block or measuring— very large number of shares or dollar amount of a

1,000 contracts are transacted in years 6–10), the measurement of a block trade and others where particular security or commodity and which

block trade minimum size for RB futures was 100 there aren’t. I would just ask if, in your experience, transactions could move the market price for the

contracts and the block trade minimum size for RB there are generalizations that can be drawn and, if security or contract, are very common in the

futures was 100 contracts. See CME & CBOT Market so, what product categories do you think would securities and futures markets. ’’ 156 Cong. Rec.

Regulation Advisory Notice RA1006–3, October 19, lend themselves most to that type of approach to S5,921 (daily ed. July 15, 2010) (statement of Sen.

2010. Available at: the issue? Blanche Lincoln).

http://www.cmegroup.com/rulebook/files/ Mr. Song: Well, I’ll have a go at this. It’s relatively 89 Assuming that the median ($55 million) is the



CME_CBOT_RA1006–3.pdf. See also, CME Rule 526 the easiest for the most liquid products say like largest of the mode, median and mean, the median

(‘‘Block Trades’’). Available at: http:// interest rate swaps because you can get data from would be multiplied by the block multiplier (five

www.cmegroup.com/rulebook/CME/I/5/26.html. banks and brokers as to—like data mining. How (5)) to equal $275 million.







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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76163



notional size determined by the be available to the public in an open engage in long-term investment

distribution test would not move the and non-discriminatory manner. strategies. The Commission believes that

market (since the market can clearly Proposed § 43.5(g)(4) would require an annual review of the appropriate

handle that size) and would therefore that a registered SDR evaluate the minimum block sizes is appropriate to

not be a large notional amount relative distribution of notional or principal balance these competing interests.91

to the other notional amounts that transaction amounts and calculate the

mode, median and mean, on a yearly ix. Responsibilities of Swap Markets in

traded over the one month period.

basis, initially beginning in accordance Determining Minimum Block Trade

Therefore, in this example, the

with the implementation timeframe for Sizes

distribution test alone would not

provide a good measure for the which the Commission is requesting Proposed § 43.5(h) provides that after

appropriate minimum block size. The public comment. The Commission an ‘‘appropriate minimum block size’’ is

proposed rules would require the recognizes that the appropriate established by either a registered SDR or

registered SDR to compare the resulting minimum block size for a swap by a Commission prescribed method, a

number from the distribution test to instrument may change due to market swap market shall set the ‘‘minimum

resulting number from the multiple test. conditions. Such annual adjustments block trade size’’ 92 for those swaps that

The greater of the two numbers would are in addition to the requirement to it lists and wishes to allow block

be the appropriate minimum block size provide an appropriate minimum block trading, by referring to the appropriate

for a swap instrument, which the size for newly-listed swaps one month minimum block size that is posted on a

registered SDR would post on its after the registered SDR first receives registered SDR’s Internet Web site for

Internet Web site. In the example above, data for such swap. Publishing the the swap instrument category for such

the result of the multiple test ($275 information on the same date each year swap. A swap market must set the

million) is greater than the distribution (10th business day) will allow swap minimum block trade size for a swap at

test and therefore would be the markets, market participants and the an amount that is equal to or greater

appropriate minimum block size that is public certainty as to when they should than the appropriate minimum block

posted by the registered SDR for the check the appropriate minimum block size listed by the appropriate registered

swap instrument. sizes and, in the case of swap markets, SDR. A swap market would be

With respect to newly-listed swaps, a adjust the minimum block trade sizes. responsible for ensuring that the

registered SDR would be required to In making its calculations, the registered minimum block trade sizes for swaps

evaluate the distribution of notional or SDR should look back to the data over that it lists are consistent with the

principal transaction amounts and the previous year for a category of swap annual updates to the appropriate

calculate the mode, median and mean, instrument. If a particular swap minimum block size for swap

over the one month period following the instrument does not have a an entire instruments. Additionally, a swap

registered SDR’s acceptance of the swap year’s worth of data, the proposed rules market would have to immediately

data pursuant to Section 2(a)(13)(G) of provide that the registered SDR should apply any change to the minimum block

the CEA. Proposed § 43.5(g)(2) provides use the data that it has to make its size of a particular swap, following the

that after such one month period, the determination of the appropriate posting of an appropriate minimum

registered SDR would assign the newly- minimum block size for a particular block size by a registered SDR. The

listed swap to the appropriate category swap instrument. Proposed § 43.5(g)(4) swap market should follow the

of swap instrument or determine that a also provides that registered SDRs shall requirements set forth in § 40.6(a) of the

new category of swap instrument was begin to publish appropriate minimum Commission’s regulations.93

necessary and would set an appropriate block sizes for swap instruments in Proposed § 43.5(h) provides that if a

minimum block size. Proposed January 2012. The Commission believes swap market wishes to set a minimum

§ 43.5(g)(2) also provides that registered that such timeframe allows the block trade size for a swap that does not

SDRs should make an initial registered SDRs enough time to receive have an appropriate minimum block

determination of the appropriate data to determine appropriate minimum size listed by a registered SDR, the swap

minimum block size 90 for a newly- block sizes for swap instruments. market must follow the rules in

listed swap one month after such newly- The Commission considered the proposed § 43.5(i) which discusses the

listed swap is first executed and burden on registered SDRs and the procedure for setting the minimum

reported to the registered SDR pursuant benefit to market participants, swap block trade size for newly-listed swaps.

to Section 2(a)(13)(G) of the CEA. The markets and the public in proposing an Proposed § 43.5(i) would require a

Commission believes that one month of annual update of the appropriate swap market to set a minimum block

trading data provides a registered SDR minimum block size. Allowing for a trade size for newly-listed swap.

with sufficient data to determine an longer period between reviews would, Proposed § 43.2(n) defines a ‘‘newly-

appropriate minimum block size for a presumably, bring more certainty to

swap instrument. traders who engage in long-term 91 Registered SDRs will have the relevant swap



Proposed § 43.5(g)(3) provides that investment strategies. However, such data readily available since it will be sent to them

registered SDRs must publish the list of longer periods would fail to take into pursuant to Section 2(a)(13)(G) of the CEA, and the

Commission does not anticipate that the annual

the appropriate minimum block sizes in account the dynamic nature of swaps review calculations required by this proposed rule

swap instruments on its Internet Web markets, as significant changes in swaps will be burdensome on a registered SDR.

site, for which the registered SDR has markets may occur in a relatively short Additionally, market participants and the public

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received data pursuant to Section amount of time. Therefore, previously will receive the benefit of having up-to-date,

appropriate minimum block sizes that accurately

2(a)(13)(G) of the CEA. Such appropriate established appropriate minimum block reflect the current market for a swap instrument.

minimum block size information must sizes may fail to accurately reflect the 92 Proposed § 43.2(m) defines ‘‘minimum block



market. Conversely, shorter timeframes trade size’’ as the minimum notional or principal

90 As discussed, such initial determination may (e.g., weekly, monthly, quarterly, etc.) amount, as determined by each swap market, for a

be done by either grouping such newly-listed swap were considered by the Commission, block trade in a particular type of swap that is listed

into an existing swap instrument category or by or executed on such swap market.

creating a new category of swap instrument and

but such updates may be burdensome 93 The Commission recently proposed



determining the appropriate minimum block size on registered SDRs and may create amendments to § 40.6(a) of the CEA. See 75 FR

based on the criteria set forth in proposed § 43.5. instability for market participants who 67282 (November 2, 2010).







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76164 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



listed swap’’ as a swap that is listed on the minimum block trade size for such with the selected swap instrument, and

any swap market where an appropriate newly-listed swap as trading increases the notional or principal amount of such

minimum block size has not been in order to ensure that the estimated swap must be equal to or greater than

published by a registered SDR.94 The minimum block trade size is reasonable the appropriate minimum block size. If

minimum block trade size for a newly- relative to increased trading activity for there is not an existing category of swap

listed swap that is set by a swap market such newly-listed swap. Such process instrument with an appropriate

would govern the trading of the newly- should continue until an appropriate minimum block size available to

listed swaps on such swap market until minimum block size is published for the reference, then such swap between the

such time as a registered SDR type of swap by a registered SDR.95 parties shall not qualify as a large

establishes an appropriate minimum If the same type of swap begins notional swap and would not be

block size for the newly-listed swap. trading on more than one swap market afforded any time delay in public

Proposed§ 43.5(i)(1) provides that if a during the one-month period before a reporting. In determining the

newly-listed swap is within the registered SDR sets the appropriate appropriate category of existing swap

parameters of an existing category of minimum block size, proposed § 43.5(i) instrument, the parties to a swap should

swap instrument for which a registered would apply to each swap market where consider and must document: (1) The

SDR has posted an appropriate such swap is traded. Each such swap similarities of the terms of the swap

minimum block size, the swap market market should set the minimum block between the parties compared to the

shall set the minimum block trade size trade size the swap listed on its facility terms of swaps that are grouped within

for such newly-listed swap at a level until an appropriate minimum block the existing category of swap instrument

equal to or greater than such appropriate size is published by a registered SDR.96 (e.g., similarities of the fields listed in

minimum block size. The requirement x. Responsibilities of the Parties to a appendix A to proposed part 43); and

would enable a swap market to Swap in Determining the Appropriate (2) other swaps listed on swap markets

reference a currently existing Minimum Large Notional Swap Size that were considered in evaluating the

appropriate minimum block size as a swaps that are grouped within the

point of reference during the one-month Section 43.5(j)(1) provides the existing swap instrument.

interim period until the registered SDR procedure for parties to a swap to The Commission considered several

actually puts the swap in a particular determine the appropriate minimum factors in determining this proposed

category of swap instrument and large notional swap size.97 Because the method for calculating the appropriate

establishes an appropriate minimum appropriate minimum block size for minimum size for large notional swaps.

block size. Proposed § 43.5(i)(2) swap instruments will be available on a First, the appropriate minimum block

registered SDR’s Internet Web site with sizes that are posted by a registered SDR

provides that in setting the minimum

respect to swaps that have been trading should be accurate, up to date and

block trade size for a newly-listed swap

for one month or longer, the proposed accessible to market participants.

that is not within an existing category of

rules provide that parties who engage in Additionally, to the extent that the

swap instrument, the swap market

an off-facility swap, and seek to qualify reporting party to a large notional swap

should consider: (i) The anticipated

their swap as a large notional swap, is a swap dealer or MSP, such reporting

distribution of notional or principal

must refer to the appropriate minimum parties would be subject to the

transaction amounts; (ii) the social size

block sizes for swap instruments. Parties Commission’s proposed rules for

for swaps in other markets that are in

to such off-facility swap must then internal business conduct standards in

substance the same as the newly-listed

identify the category of swap instrument proposed part 23 of the Commission’s

swap; and (iii) the minimum block trade

in which the swap that they wish to be regulations. Further, the swap

sizes of similar swaps in the same asset

considered a large notional swap would instrument categories should be broadly

class.. After taking into account these

likely fall. The parties to the off-facility defined to allow parties to a large

considerations, proposed § 43.5(i)(3)

swap should refer to the appropriate notional swap to easily place their swap

provides that the swap market must

minimum block size that is associated into one of the categories of swap

ensure that the notional or principal

amount selected represents a reasonable instrument. The parties to an off-facility

estimate of the greater of (i) a notional

95 If the initial minimum block trade size

swap should therefore be able to

established by a swap market is greater than or accurately choose a swap instrument

or principal amount that is greater than equal to the appropriate minimum block size posted

based on the criteria set forth in this

all but 95% of the total anticipated on a registered SDR’s Internet Web site, a swap

market may not have to adjust its minimum block proposed rule.

distribution of notional or principal Proposed § 43.5(j)(2) provides that, to

trade size. In such a situation, a swap market may

transaction amounts over the one-month reduce its minimum block trade size to the the extent that the parties to a large

period immediately following the first appropriate minimum block size. notional swap transaction are swap

execution of the swap; or (ii) five times 96 For example, if on March 1, a newly-listed

dealers and/or MSPs, such parties must

the anticipated social size over the one- swap is executed on swap market 1 and a registered

SDR is available to accept the swap transaction and maintain records that illustrate the basis

month period immediately following pricing data for the swap. If on March 15, a swap for the selection of the swap instrument

the first execution of the swap. is traded on swap market 2 with the same terms as for the large notional swap in

In the event that a registered SDR the swap traded on swap market 1. The minimum

accordance with proposed part 23 of the

does not set an appropriate minimum block trade size established by swap market 1 will

prevail until the appropriate minimum block size Commission’s regulations. This section

block size for a newly-listed swap after is calculated and posted on the registered SDR’s also requires that such records be made

one month, as described in proposed

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Internet Web site on April 1, at which time swap available to the Commission upon

§ 43.5(g)(2), the Commission believes market 1 must ensure its minimum block trade size

request. This proposed recordkeeping

that in order to comply with the is greater than or equal to the appropriate minimum

block size. The minimum block trade size requirement should ensure that parties

proposed requirements of § 43.5(i), a established by swap market 2 will only be its to an off-facility swap do not attempt to

swap market should continue to revise prevailing block trade size until April 1st, when it manipulate these proposed rules.

must conform to the appropriate minimum block Proposed § 43.5(j)(3) provides that if

94 A swap market may, however choose not to size as calculated by the registered SDR.

allow block trading for such swaps and would 97 As noted, proposed § 45.3(b)(2) requires the the parties to a swap are unable to

therefore not be required to make such reporting party of a large notional swap to elect to determine, identify or agree on the

determination. treat such swap as a large notional swap. appropriate swap instrument to





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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76165



reference for the purposes of treating percentage be? Should some other test begin? Should there be different initial

such swap as a large notional swap, be used to address this situation? determinations times based on asset

such swap cannot qualify as a large • Do commenters agree that the class? If so, why?

notional swap and therefore will not be appropriate minimum block sizes for • Should registered SDRs consider

eligible for a time delay thereby swap instruments, as determined by a data for pre-existing swaps (i.e., swaps

requiring that such swap transaction registered SDR, should apply to all swap entered into prior to the effective date

and pricing data be publicly markets and off-facility swaps, of the Dodd-Frank Act) in making their

disseminated in real-time. regardless of differences in liquidity in determinations of the appropriate

The Commission requests comment swap markets or off-facility? 98 minimum block sizes for swap

generally on all aspects of determining • Should there be one block trade instruments? If so, why? If not, why?

the appropriate minimum size for block formula for all swaps? Should there be • Should registered SDRs have a

trades and large notional swaps. In one block trade formula for all swaps in requirement to consult with swap

addition, the Commission requests an asset class? Should different swap markets in calculating the appropriate

comment on the following issues: instruments have different block trade minimum block size of a swap

• Do commenters agree with the formulas? If commenters believe there instrument? If not, should swap markets

approach of having a registered SDR should be various block trade formulas have an ability to dispute and/or appeal

calculate and publicize appropriate for different markets, for which markets the calculation of the appropriate

minimum block size, but allowing swap and how should those standards be minimum block size for a swap

markets to individually set their own defined? instrument that is determined by a

minimum block sizes for particular • Do commenters agree with the registered SDR?

contracts at a higher level based on the proposed method for determining the • Should registered SDRs submit to

appropriate minimum block size? Why minimum block size for large notional the Commission their formulas/

or why not? If not, please provide an swaps? If not, why (please provide calculations for the appropriate

alternative approach. alternative methods)? Do commenters minimum block sizes of swap

• Is the distribution test an acceptable believe that there should be other instruments in order to ensure market

method of determining an appropriate criteria that should be considered in transparency?

minimum block size? If so, is 95% the determining if a swap is a large notional

swap? If so, what other criteria? xi. Time Delay in the Real-Time Public

appropriate minimum threshold?

• If there is more than one registered Reporting of Block Trades and Large

• Is the multiple test an acceptable Notional Swaps

SDR per asset class, how could the

method of determining an appropriate

Commission ensure that all registered Section 2(a)(13)(A) of the CEA

minimum block size? If so, is five the

SDRs implement the same appropriate requires that all parties to swap

appropriate block multiple?

minimum block size formula for the transactions, including parties to block

• Do the distribution test and the

entire market for a category of swap trades and large notional swap

multiple test, taken together, account for

instrument? How should the transactions, to report data relating to

a situation where there is a swap

Commission approach this issue? swap transactions ‘‘as soon as

instrument with an extremely small • Do commenters believe that the

sample (e.g., less than 40 transactions technologically practicable after the

concept of block trades should exist for time at which the swap transaction has

for a category of swap instrument)? If newly-listed swaps? If not, why? Do

not, what alternative method of been executed.’’ 99 However, the Dodd-

commenters agree with the proposed Frank Act also requires the Commission

calculation can be added for swap method for determining the minimum

instruments with a small number of to promulgate rules ‘‘to specify the

block trade size for newly-listed swaps? appropriate time delay for reporting

transactions? If not, why?

• Do commenters agree with the large notional swap transactions (block

• Do commenters believe that the trades) to the public.’’ 100 Additionally,

proposal to use the greater of the registered SDRs should initially

distribution test or the multiple test)? If the Dodd-Frank Act requires that the

calculate the appropriate minimum Commission, in writing these proposed

not, what alternative approach should block size for a swap one month after a

be used and why? rules, ‘‘take into account whether public

swap has been executed on a swap disclosure will materially reduce market

• The Commission recognizes that the market? If so, why? If not, why?

two-pronged formula for determining liquidity.’’ 101

• If there is no registered SDR to

the appropriate minimum block size The Commission recognizes the

accept swaps for an asset class, do

may lead to a relatively small potential market impact that the

commenters agree with the

appropriate minimum block size and reporting of a block trade or large

Commission’s proposal that swap

the possibility that a significant notional swap may have on the market.

markets will determine the minimum

percentage of the overall notional or Such potential market impact is critical

block sizes in the manner described in

principal amount of swaps transacted in to the determination of an appropriate

proposed § 43.5(h) and (i)?

a particular category of swap instrument • Do commenters believe that having time delay before public dissemination

could be executed pursuant to block registered SDRs perform an annual of block trade or large notional swap

trade rules or as large notional swaps, review of all appropriate minimum transaction and pricing data. The ability

which are subject to a delay in real-time block sizes is the appropriate frequency? for market participants to trade in large

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public dissemination. Therefore, should If so, why? If not, why? 99 Section 2(a)(13)(A) of the CEA; see also,

the Commission adopt an additional • How much data would be necessary Statement of Senate Agriculture Committee

standard which would limit the for the initial determination by Chairwoman Blanche Lincoln’s statement: ‘‘With

aggregate notional or principal amount registered SDRs of appropriate respect to delays in public reporting of block trades,

of block trades and large notional swap minimum block trade sizes? When we expect the regulators to keep the reporting

delays as short as possible.’’ 156 Cong. Rec. S5,922

transactions to a percentage of the should such initial determination of (daily ed. July 15, 2010) (statement of Sen. Blanche

overall notional or principal volume appropriate minimum block trade sizes Lincoln).

over the prior year? If not, why not? If 100 Section 2(a)(13)(E)(iii) of the CEA.



so, why and what should that 98 See Section 2(a)(13)(E)(iv). 101 Section 2(a)(13)(E)(iv) of the CEA.









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76166 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



notional or principal amounts without with affirmation of the parties to the reporting delay, TRACE does not

market prices moving significantly swap). Therefore, in the case of a block provide any additional time delay for

against them is a vital component of any trade, the time delay would begin prior those trades that are subject to

vibrant and liquid marketplace. to the time that that a swap market disseminated volume caps.105 On the

In external meetings with market receives the swap transaction and other hand, in the equity securities

participants, CFTC staff was often told pricing data from a reporting party. The markets the New York Stock Exchange

that increased pre-trade and post-trade registered SDR that publicly (‘‘NYSE’’) requires all trades to be

transparency would enable front- disseminates such data would be reported within 30 seconds; no

running and may have an adverse responsible for ensuring that such data additional time delay is provided for

impact on market liquidity. Specifically, is disseminated in accordance with block trades.106 The London Stock

market participants expressed concern proposed § 43.5(k). Exchange (‘‘LSE’’) allows the publication

that if they were required to publicly Proposed § 43.5(k)(2) requires that the of the trade to be delayed, if requested,

disseminate swap transaction and time delay for block trades be no later for a specified period of time which is

pricing data immediately after the than 15 minutes after the time of dependent on the volume of the trade

execution of a block trade or large execution. After the 15 minute time compared to the average daily turnover,

notional swap, other market participants delay has expired, the registered SDR or as published by LSE, for that particular

would be able to profit on this the swap market (through a third-party security.107 In the futures markets, CME

information by anticipating the trading service provider) must immediately Group’s rules require the seller in a

activity of the block trade or large disseminate the swap transaction and block trade transaction to report to the

notional swap participants who are pricing data to the public.103 As exchange within five minutes of

attempting to hedge their swap discussed above, such delay does not execution if the trade is executed during

portfolios. As other market participants apply to the reporting party’s regular trading hours (as compared to

anticipate the block trade or large requirement to report to a swap market the immediate reporting exchange

notional swap parties’ hedges, prices or to a swap party’s requirement to executed transactions). After the

may rise adverse to the market report to a real-time disseminator. It is reporting of the block trade data, the

participant who is attempting to hedge the responsibility of the registered SDR exchange ‘‘promptly publishes such

and, as a result, certain market or the swap market (through a third- information separately from the reports

participants may be forced to take on party service provider) to hold the swap of transactions in the regular

increased costs and market exposure in data for a period of 15 minutes after the markets.’’ 108 NYSE Liffe U.S., on the

offsetting their risk. Although CFTC execution of the trade prior to other hand, allows a 15 minute delay

staff was often told of the adverse dissemination. The 15 minute time after the trade is executed to publicly

impact of post-trade transparency on delay would apply to all swaps in report the block trade information.109

market liquidity, staff is not aware of Sections 2(a)(13)(C)(i) and (iv) of the Proposed § 43.5(k)(3) provides that

any empirical evidence to support this CEA, meaning that even though some large notional swap transaction and

position.102 swaps may be large notional swaps (e.g., pricing data must be reported to the

Proposed § 43.5(k)(1) provides the those subject to the non-financial end- public by the registered SDR that

appropriate time delays for public user exception from mandatory clearing) accepts and publicly disseminates such

dissemination of block trades and large they would be subject to the same time data subject to a time delay as may be

notional swaps. The time delay for delay as block trades executed pursuant 105 See TRACE, Trade Reporting and Compliance

public dissemination begins at to the rules of a swap market. The Engine, User Guide, Version 2.4—March 31, 2010,

execution of the swap (i.e., upon or Commission believes that since swaps p. 50. Available at: http://www.finra.org/web/

immediately following or simultaneous in Sections 2(a)(13)(i) and (iv) of the groups/industry/@ip/@comp/@mt/documents/

appsupportdocs/p116039.pdf.

CEA will be standardized, they should 106 The NYSE has a definition of ‘‘block trade’’ but

102 See, e.g., the exchange at the Roundtable

be subject to the same time delay as such designation does not affect how such

between Chester Spatt, Pamela R. and Kenneth B. other standardized swaps. transactions are reported. See NYSE Rule 127.

Dunn Professor of Finance, Tepper School of

Business, Director, Center for Financial Markets In determining this proposed time 107 LSE rules require member firms to submit



delay for standardized block trades and trade reports to LSE as ‘‘close to instantaneously as

Carnegie Mellon University and Yunho Song,

technically possible and that the authorized limit of

Managing Director/Senior Trader, Bank of America large notional swaps, the Commission three minutes should only be used in exceptional

Merrill Lynch: considered time delays for reporting circumstances,’’; however, publication of such data

MR. SPATT: So just to follow up on that as well, may be deferred. See, LSE Rules 3020 and 3030,

in the three years that I was at the SEC, was

block trades or large notional

effective August 2, 2010. Available at: http://

basically coincided with the three years after much transactions in other markets. FINRA’s www.londonstockexchange.com/traders-and-

of the implementation of TRACE. And while folks TRACE system for corporate and agency brokers/rules-regulations/rules-lse-2010.pdf.

from industry repeatedly came in and pressed the debt securities requires that 108 See, CME Rule 526(F), (‘‘The seller must

point that spreads were wider, they never presented

to us in any format a convincing empirical study

‘‘transactions in TRACE-eligible ensure that each block trade is reported to the

securities executed on a business day at Exchange within five minutes of the time of

and nor am I aware of any empirical study in the execution; except that block trades in interest rate

academic community to show those effects. So I do or after 8:00 a.m. Eastern Time through futures and options executed outside of Regular

think it’s incumbent upon critics of post-trade 6:29:59 p.m. Eastern Time must be Trading Hours (7 a.m.–4 p.m. Central Time,

disclosure to point to and identify convincing Monday–Friday on regular business days) and

empirical evidence of these effects. And I think

reported within 15 minutes of the time

Housing and Weather futures and options must be

that’s extremely important to the regulators as they of execution.’’ 104 Given the 15 minute reported within fifteen minutes of the time of

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go forward, but I must say, I’m not aware of that execution.’’). Available at: http://

evidence right now. 103 In calculating the 15 minute time delay, the

www.cmegroup.com/rulebook/CME/I/5/26.html.

MR. SONG: If I may comment on that—I think clock begins immediately upon execution of the 109 See NYSE Liffe U.S. Rule 423(d), (‘‘Block

one of the distinctions we have is a market that may swap transaction. Under proposed § 43.5(k), no Trades must be reported to the Exchange in a

be [smaller] in retail based versus a market that is pause in the running of the clock is permitted manner prescribed from time to time by the

with [a] far small number of participant[s] and during the time it takes the reporting party or swap Exchange. Block Trades must be reported to the

that’s institutional based. So, you may not be able market to report the swap data to a real-time Exchange within 15 minutes after the completion of

to, for example, find who was doing a specific trade disseminator. negotiations, but may not be submitted any later

looking at a TRACE report so it has a marginal 104 FINRA Rule 6730 (‘‘Transaction Reporting’’). than 15 minutes prior to the Contract’s Trading

impact on the marketplace * * *. Available at: http://finra.complinet.com/en/display/ Session close time.’’). Available at: http://

Roundtable Tr. at 332–333. display_main.html?rbid=2403&element_id=4402. www.nyse.com/pdfs/rulebook.pdf.







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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76167



prescribed by the Commission. The that 15 minutes is an appropriate delay to determine whether the benefits of the

Commission believes that such time for these trades? If not, why and what rulemaking outweigh its costs; rather, it

delay for large notional swaps may vary would be an appropriate time delay? requires that the Commission ‘‘consider’’

based on whether a swap’s underlying With regard to the time delay for large the costs and benefits of its actions.

asset is a financial or a physical notional swaps in the other commodity Section 15(a) of the CEA further

commodity, asset class, and/or other asset class, the Commission recognizes specifies that the costs and benefits

factors. This provision covers all swaps a longer time delay may be necessary shall be evaluated in light of five broad

under Sections 2(a)(13)(C)(ii) and (iii) of due to the hedging strategies that are areas of market and public concern: (1)

the CEA, which covers those swaps that associated with such swaps. What time Protection of market participants and

are not subject to the mandatory delay would be appropriate for swaps in the public; (2) efficiency,

clearing requirement. The swaps that the other commodity asset class and competitiveness and financial integrity

fall under Sections 2(a)(13)(C)(ii) and why? of markets; (3) price discovery; (4)

(iii) of the CEA generally will be more • What are the factors that should be sound risk management practices; and

customized and may, in some instances considered in determining how long a (5) other public interest considerations.

require, in the case of large notional time delay for a large notional swap The Commission may in its discretion

swaps, different time delays than the should be? Which characteristics of a give greater weight to any one of the five

time delays for block trades. swap should be taken into consideration enumerated areas and could in its

Proposed § 43.5(l) provides that all in determining the time delay for discretion determine that,

information in the data fields described publicly disseminating swap transaction notwithstanding its costs, a particular

in appendix A to this part and proposed and pricing data relating to a large rule is necessary or appropriate to

§ 43.4 shall be disseminated to the notional swap? protect the public interest or to

public for block trades and large • If commenters believe that there effectuate any of the provisions or

notional swaps. would be an adverse price impact for accomplish any of the purposes of the

The Commission requests comment traders if all information on block trades CEA.

generally on all aspects of the proposed were made available in real-time, do

time delay in reporting block trade and 2. Summary of Proposed Requirements

commenters have any studies or

large notional swap transaction and empirical evidence to support that The proposal provides rules for the

pricing data to the public. In addition, assertion? What would be the long-term real-time public reporting of all swap

the Commission requests specific effects on the market if all market transaction data, including volume and

comment on the following issues: participants knew the swap transaction pricing data. The proposed rules

• Do commenters believe that any and pricing details of all swaps in real- mandate that reporting parties (which

time delay is appropriate for block time? Would this impact liquidity? If so, include swap dealers, MSPs and end-

trades and/or large notional swaps? If how? users) and swap markets (which include

not, why? If so, why? • Would the differences between the SEFs and DCMs), be responsible for the

• Is a 15 minute time delay for Commission’s and the SEC’s proposals reporting of the swap transaction and

publicly reporting the block trade for treatment of block trades, pricing data in real-time by sending the

transaction and pricing data described particularly regarding the time delay for data to an appropriate real-time

in the proposed rules an appropriate public dissemination of block trade disseminator. For swaps traded on a

amount of time? If not, why? If so, why? information provide for unfair treatment swap market, the swap market must

• Should the Commission consider for any market participants? If so, how? send the data to a registered SDR or

different time delays for block trades Could the differences in the proposals third-party service provider and such

that are significantly larger than the regarding the time delay lead to any entity will publicly disseminate the

appropriate minimum block trade size? disruption in trading in any swaps swap transaction and pricing data in

If so, why? How much larger than the markets? If so, how? real-time. For off-facility swaps, the

appropriate minimum block trade size reporting party (either an MSP, swap

should the notional or principal amount xii. Prohibition of Aggregation of Trades dealer, or end-user) must send the data

be to warrant an additional time delay? Proposed § 43.5(m) prohibits the to a registered SDR, or if no registered

• Should the Commission consider aggregation of orders for different SDR is available, to a third-party service

different time delays for block trades trading accounts in order to satisfy the provider, who will publicly disseminate

and large notional swaps based on asset minimum block size requirement, the swap transaction and pricing data.

classes, swap instruments or particular except if done on a DCM by a The proposed rules also specify rules for

contracts? If so, what factors or specific commodity trading advisor acting in an how swap transaction and pricing data

examples would warrant such longer asset manager capacity or an investment for trades deemed as either a block trade

time delays? advisor who has $25 million in total or large notional swap should be

• How should the Commission assets under management. publicly disseminated.

determine an appropriate time delay for

large notional swaps? The Commission III. Related Matters 3. Costs

believes that swaps will fall under the A. Cost-Benefit Analysis With respect to costs, the Commission

Commission’s jurisdiction in the equity, believes that the proposed reporting and

credit, currency and interest rate asset 1. Introduction recordkeeping requirements would

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classes (i.e., financial swaps) can be Section 15(a) of the CEA requires the impose significant compliance costs on

distinguished from those swaps that fall Commission to consider the costs and registered SDRs, SEFs, DCMs, swap

in the other commodity asset class (e.g., benefits of its actions before issuing a dealers, MSPs, end-users and third-

physical commodities). The rulemaking under the CEA.110 By its party service providers. The proposed

Commission’s presumption is that terms, Section 15(a) of the CEA does not rules may reduce liquidity in the market

swaps in the equity, credit, currency require the Commission to quantify the by discouraging dealers from holding

and interest rate asset classes be subject costs and benefits of the rulemaking or inventory as part of a market

to the same time delay as block trades participant’s risk management practice.

(i.e., 15 minutes). Do commenters agree 110 See 7 U.S.C. 19(a). Disclosing the terms of a trade





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76168 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



immediately after execution exposes the costs and benefits of the proposal with collection of information would be

price paid for a large position by a their comment letters. mandatory.

particular dealer to the rest of the The Commission will protect

B. Paperwork Reduction Act proprietary information according to the

market. Market participants may

attempt to anticipate trading activity 1. Introduction Freedom of Information Act and 17 CFR

that the dealer will engage in to part 145, ‘‘Commission Records and

The purposes of the Paperwork

rebalance its portfolio, which may Information.’’ In addition, section 8(a)(1)

Reduction Act (‘‘PRA’’) are, among other

induce adverse price movements against of the CEA strictly prohibits the

things, to minimize the paperwork

such dealer. Additionally, real-time Commission, unless specifically

burden to the private sector, ensure that

public reporting may obstruct some authorized by the CEA, from making

any collection of information by a

trading in illiquid instruments. Swap public ‘‘data and information that would

dealers may be less likely to commit government agency is put to the greatest

separately disclose the business

capital in less liquid products because possible uses, and minimize duplicative

transactions or market positions of any

the terms of the trade are disclosed as information collections across

person and trade secrets or names of

soon as the trade is executed and the government.112 The PRA applies with

customers.’’ The Commission also is

dealer fears his ability to lay off the risk extraordinary breadth to all information,

required to protect certain information

in the market. If a trade is considered a ‘‘regardless of form or format,’’ a

contained in a government system of

block trade or large notional swap, the government agency is ‘‘obtaining,

records according to the Privacy Act of

proposed rules may lead to increased causing to be obtained [or] soliciting’’

1974, 5 U.S.C. 552a.

costs associated with added liquidity and includes requiring ‘‘disclosure to

risks, which may be passed on to end- third parties or the public, of facts or 2. Information Provided by Reporting

users. opinion,’’ when the information Entities/Persons

collection calls for ‘‘answers to identical As mentioned above, proposed part

4. Benefits questions posed to, or identical 43 of the Commission’s regulations

With respect to benefits, the reporting or recordkeeping requirements would result in three new collections of

Commission believes that the proposed imposed on, ten or more people.’’ 113 information requirements within the

rules promote transparency in swaps This provision has been determined to meaning of the PRA. First, proposed

trading which, in turn, creates greater include not only mandatory but also part 43 would create a new reporting

efficiency in the swap markets.111 voluntary information collections, and requirement either on a ‘‘swap market’’

Additionally, real-time reporting may include both written and oral when a swap is executed on a facility,

expand trading opportunities as market communications.114 or on the parties to each swap

participants have more data to analyze To effect the purposes of the PRA, transaction when a swap is not executed

and research when producing Congress requires all agencies to on such a facility. Second, proposed

investment strategies. The Commission quantify and justify the burden of any part 43 would create a public

believes that transparency in the form of information collection it imposes.115 dissemination requirement on a ‘‘real-

real-time public dissemination of swap This includes submitting each time disseminator’’. Third, proposed

transaction and pricing data leads to the collection, whether or not it is part 43 creates a recordkeeping

fairness and efficiency of markets and contained in a rulemaking, to the Office requirement for swap markets, real-time

improves price discovery. The of Management and Budget (‘‘OMB’’) for disseminators, any reporting party.

facilitation of price discovery decreases review.116 The OMB submission process

risk to market participants by promoting includes completing a form 83–I and a i. Reporting Requirement

responsible and informed risk taking supporting statement with the agency’s Under proposed § 43.3(a), reporting

and, to the extent that swaps play a burden estimate and justification for the parties 117 would be required to

central role in the national economy, collection. When the information electronically report any reportable

decreases the risk of another financial collection is established within a swap transactions 118 to a real-time

disaster by enabling market participants rulemaking, the agency’s burden disseminator, except as otherwise

to measure systematic risk. The estimate and justification should be provided in such section. Proposed

Commission believes that the federal provided in the proposed rulemaking, § 43.3 places the duty to report on

government will be better positioned to subjecting it to the rulemaking’s public several entities or persons depending

protect the public as a result of comment process. on: (1) The manner in which the

increased surveillance and monitoring Provisions of proposed part 43 of the transaction is executed; and (2) the

of the swap markets and its market Commission’s regulations would result parties to the swap transaction.

participants. The Commission requests in new collection of information For those swap transactions that are

public comment on its cost-benefit requirements within the meaning of the executed on a swap market (i.e., a DCM

considerations. Specifically, the PRA. The Commission therefore is or SEF), proposed § 43.3 requires the

Commission requests comment on submitting this proposal to the Office of swap market to publicly disseminate

whether there are alternative ways we Management and Budget (‘‘OMB’’) for such swap transaction and pricing data

can meet these statutory requirements review in accordance with 44 U.S.C. by either sending swap transaction

under Section 727 of the Dodd-Frank 3507(d) and 5 CFR 1320.11. The title for information to a registered SDR that

Act in a less costly manner. this collection of information is accepts and publicly disseminates swap

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Commenters are also invited to submit ‘‘Regulation 43—Real-Time Public transaction and pricing data or by

any data or other information that they Reporting,’’ OMB control number 3038–

may have quantifying or qualifying the NEW. If adopted, responses to this new 117 Proposed § 43.2(w) defines ‘‘reporting party’’ to



include the party to a swap with the duty to report

111 Under Section 727 of the Dodd-Frank Act,

112 See

a reportable swap transaction.

44 U.S.C. 3501.

Congress has mandated that swap transaction and 113 44

118 Proposed § 43.2(v) defines ‘‘reportable swap



pricing data be real-time reported and publicly U.S.C. 3502. transaction’’ to mean any executed swap, notation,

114 See 5 CFR 1320.3(c)(1).

disseminated. The Commission has requested swap unwind, partial novation, partial swap

115 See 44 U.S.C. 3506.

comments on ways we can meet these statutory unwind or any other post-execution event that

requirements in a less costly manner. 116 See 44 U.S.C. 3507. affects the pricing of a swap.







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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76169



sending swap transaction information ii. Public Dissemination Requirement 15 entities or persons) and reporting

through a third-party service provider Proposed § 43.3 requires a registered parties must retain all data relating to a

for public dissemination. The SDR to publish through an electronic reportable swap transaction for a period

Commission estimates that DCMs and medium swap transaction and pricing of not less than five years following the

SEFs (an estimated 57 entities or data received from reporting parties as time at which such reportable swap

persons) will have approximately 2,080 soon as technologically practicable, transaction is publicly disseminated in

burdens hours per swap market.119 except when the registered SDR is real-time. With respect to swap markets

For those swap transactions that are required to delay the publication of and real-time disseminators, the

executed ‘‘off-facility’’, proposed § 43.3 information relating to large notional Commission estimates that proposed

requires reporting parties (i.e., swap swaps or block trades. The Commission recordkeeping requirement will be 250

dealers, MSPs and swap end-users) to estimates that there will be annual burden hours per swap market

report their swap transaction and approximately 15 registered SDRs 122 and registered SDR.124 As referenced

pricing data to a registered SDR or, if no Proposed § 43.3(h) requires registered above, the Commission anticipates that

registered SDR will accept such data, to SDRs to receive and publicly 1,500 swap end-users will be reporting

a third-party service provider. With disseminate real-time swap transaction parties for the purposes of this part of

respect to swap dealers and MSPs (an and pricing data at all times, 24-hours the Commission’s regulations. Since the

estimated 300 entities or persons), a day. The Commission anticipates that Commission anticipates that there will

proposed § 43.3 requires only one party there will be 6,900 annual burden hours be lower levels of activity relating to the

to such transaction report to a real-time per registered SDR. Based on the requirement for swap end-users, the

disseminator. The Commission foregoing, the Commission has Commission estimates that there will be

estimates that swap dealers and MSPs determined the estimated aggregate two (2) annual burden hours per swap

will have 2,080 annual burden hours annual burden hours to be 103,500 for end-user. It is important to note that the

associated with the reporting all registered SDRs.123 Therefore, the Commission addresses the

requirement under proposed § 43.3. total aggregate annual burden hours recordkeeping requirements of swap

With respect to swap end-users, associated with this public dealers and MSPs in a separate, but

proposed § 43.3 requires swap end-users dissemination requirement, including related rulemaking relating to the

to report their swap transaction and the burden hours associated with third internal business conduct standards of

pricing data only for end-user-to-end- party service providers, is estimated to these entities as part of the

user transactions. In addition, proposed be 207,000. Commission’s overall rulemaking

§ 43.3 provides that only one swap end- initiative implementing the Dodd-Frank

user in an end-user-to-end-user swap iii. Recordkeeping Requirement

Act.125

transaction will have the obligation to Under proposed § 43.3(i), swap Based on the foregoing, the

report to a real-time disseminator. For markets (an estimated 57 entities or Commission estimates that the aggregate

that reason, the Commission estimates persons), registered SDRs (an estimated annual burden hours associated with

that the total number of swap end-users the recordkeeping requirement under

that would be required to report their 122 Because the Commission has not regulated the

the proposed § 43.3 will be 39,250.

swap transaction and pricing data is swap market, the Commission was unable to collect

1,500 entities or persons.120 The data relevant to these estimates. For that reason, the iv. Determination of Appropriate

Commission requests comment on these estimates. Minimum Block Size

Commission estimates that swap end- 123 The Commission estimates that there will be

users will have four (4) annual burden 15 third-party service providers. These third-party Under proposed § 43.5(g), registered

hours per reporting party or person, for service providers are anticipated to have the same SDRs (an estimated 15 entities or

a total of 6,000 aggregate annual burden public dissemination and recordkeeping burden

hours as those estimated for registered SDRs.

persons) will be required to determine

hours.121 Proposed § 43.3(d) would require a swap market the appropriate minimum block size for

Based on the foregoing, the that chooses to publicly disseminate swap swaps for which these registered SDRs

Commission has determined the transaction and pricing data in real-time through a receive data in accordance with Section

estimated aggregate annual burden third-party service provider to (1) ensure that any

such third-party service provider that publicly 2(a)(13)(G) of the CEA. A registered SDR

hours on swap markets and with respect disseminates the swap market’s swap transaction shall set and publish annually the

to off-facility swap transactions to be and pricing data in real-time does so in a manner appropriate minimum block size for

748,560. that complies with those standards for registered each swap instrument as the greater of

swap data repositories described in this part; and

(2) ensure that the Commission has access to any the numbers derived from two formulas:

119 Because the Commission has not regulated the



swap market, it has not collected data relevant to

such swap transaction and pricing data, through A distribution test and a multiple test as

this estimate. Therefore, the Commission requests

either the swap market or via direct access to the described in the proposal. Additionally,

third-party service provider. Additionally, certain

comment on this estimate.

off-facility swaps may be publicly disseminated

under proposed § 43.5(i), the SDR shall

120 The Commission requests comment on the

through a third-party service provider in those set the appropriate minimum block size

number of swap end-users that would be required instances where no registered SDR is available to for newly-listed swaps one month after

to report their swap transaction and pricing data accept and publish the swap transaction and

pursuant to proposed § 43.3. The Commission the registered SDR receives data in

pricing data. Therefore, although the ultimate

estimates that there will be a total of 30,000 swap responsibility is on the swap market who uses a

accordance with Section 2(a)(13)(G).

market participants and that 1,500 of those third-party service provider to ensure it complies The registered SDR may set the

participants will engage in end-user-to-end-user with standards set forth in part 43 for registered appropriate minimum block size for

swap transactions (5% of 30,000) requiring at least SDRs, the third-party service provider will be the newly-listed swaps by placing them in

srobinson on DSKHWCL6B1PROD with PROPOSALS2









one of those participants to report such swap entity actually performing the public dissemination

transaction and pricing data. and, in some cases, recordkeeping function for

121 Estimated burden hours were obtained in 124 See footnote 123 above.

certain swaps. Therefore, as was estimated for

consultation with the Commission’s experts on registered SDRs, the Commission estimates a public 125 An agency may not conduct or sponsor, and

information technology. This estimate includes the dissemination burden of 6,900 hours per third-party a person is not required to respond to, a collection

expectation that end users who participate in end- service provider, for an aggregate of 103,500 annual of information unless it displays a currently valid

user-to-end-user swaps will contract with other burden hours for all third-party service providers. control number. The Commission invites public

entities to report the swap transaction and pricing Also, the Commission estimates a recordkeeping comment on the accuracy of its estimate that no

data to a registered SDR or third party service burden of 250 hours per third-party service additional recordkeeping or information collection

provider. The Commission requests comment on provider, for an aggregate of 3,750 annual burden requirements related to swap dealers and MSPs

these estimates. hours for all third-party service providers. would result from the rules proposed herein.







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76170 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



a category of existing swap instrument C. Regulatory Flexibility Act regulatory organization, subject to

with an appropriate minimum block The Regulatory Flexibility Act Commission oversight, with statutory

size or by creating a new category of (‘‘RFA’’) was adopted to address the duties to enforce the rules adopted by

swap instrument and performing the concerns that government regulations their own governing bodies. Most of

calculations described in § 43.5(g). The may have a significant and/or these entities will not be small entities

Commission estimates that proposed disproportionate effect on small for the purposes of the RFA.

requirement will impose 20 annual businesses. To mitigate this risk, the With respect to swap dealers, the

burden hours per registered SDR. RFA requires agencies to conduct an Commission previously has determined

initial and final regulatory flexibility that futures commission merchants

Based on the foregoing, the

analysis for each rule of general (‘‘FCMs’’) should not be considered to be

Commission estimates that the aggregate

applicability for which the agency small entities for the purposes of the

annual burden hours associated with

issues a general notice of proposed RFA.130 Like FCMs, swap dealers will

this requirement under the proposed

rulemaking.126 These analyses must be subject to minimum capital and

§ 43.5(g) and (i) will be 300.

describe the impact of the proposed rule margin requirements, and are excepted

3. Information Collection Comments on small entities, including a statement to comprise the largest global financial

of the objectives and the legal bases for firm. Additionally, the Commission is

The Commission invites the public the rulemaking; an estimate of the required to exempt from designation

and other Federal agencies to comment number of small entities to be affected; entities that engage in a de minimis

on any aspect of the reporting and identification of federal rules that may level of swaps.131

recordkeeping burdens discussed above. duplicate, overlap, or conflict with the Similarly, with respect to swap

Pursuant to 44 U.S.C. 3506(c)(2)(B), the proposed rules; and a description of any dealers and MSPs, the Commission has

Commission requests comments in significant alternatives to the proposed previously determined that large traders

order to: (i) Evaluate whether the rule that would minimize any are not ‘‘small entities’’ for RFA

proposed collection of information is significant impacts on small entities.127 purposes. Like large traders, swap

necessary for the proper performance of Proposed part 43 shall affect real-time dealers and MSPs will maintain

the functions of the Commission, disseminators (i.e., registered SDRs and substantial positions, creating

including whether the information will third-party service providers), SEFs, substantial counterparty exposure that

have practical utility; (ii) evaluate the DCMs, swap dealers, MSPs and swap could have serious adverse effects on

accuracy of the Commission’s estimate end-users that transact with other swap the financial stability of the United

of the burden of the proposed collection end-users. The Commission has States banking system or financial

of information; (iii) determine whether previously established certain markets.

there are ways to enhance the quality, definitions of ‘‘small entities’’ to be used Although the regulations will require

utility and clarity of the information to by the Commission in evaluating the reporting from a single end-user

be collected; and (iv) minimize the impact of its regulations on small transacting in a swap with another end-

burden of the collection of information entities in accordance with the RFA.128 user, in all other situations (such as

on those who are to respond, including In its previous determinations, the when an end-user engages in a swap

through the use of automated collection Commission has concluded that DCMs with a swap or MSP), the reporting

techniques or other forms of information are not small entities for the purpose of requirement will be borne by the swap

technology. the RFA.129 dealer or MSP. Additionally, most end-

As registered SDRs and SEFs are new users regulated by the Employee

Comments may be submitted directly

entities to be regulated by the Retirement Income Security Act of 1974

to the Office of Information and

Commission pursuant to the Dodd- (‘‘ERISA’’) 132 such as pension funds,

Regulatory Affairs, by fax at (202) 395–

Frank Act, the Commission previously which are among the most active end-

6566 or by e-mail at

has not determined whether these users in the swap market, are prohibited

OIRAsubmissions@omb.eop.gov. Please

entities are ‘‘small entities’’ for the from transacting directly with other

provide the Commission with a copy of

purpose of the RFA. The Commission is ERISA-regulated end-users. The

submitted comments so that all

proposing to determine that registered Commission does not believe that the

comments can be summarized and

SDRs and SEF covered by these reporting requirements under this

addressed in the final rule preamble.

proposed regulations, for reasons rulemaking will create a significant

Refer to the Addresses section of this

similar to those applicable to DCMs, are economic impact on a substantial

notice of proposed rulemaking for

not small entities for purposes of the number of small entities.

comment submission instructions to the

RFA. Specifically, the Commission Accordingly, the Chairman, on behalf

Commission. A copy of the supporting

proposes that registered SDRs and SEFs of the Commission, hereby certifies

statements for the collections of

should not be considered small entities pursuant to 5 U.S.C. 605(b) that the

information discussed above may be

based on, among other things, the proposed rules, will not have a

obtained by visiting RegInfo.gov. OMB central role they will play in the significant impact on a substantial

is required to make a decision national regulatory scheme overseeing number of small entities. Nonetheless,

concerning the collection of information the trading of swaps. Because they will the Commission specifically requests

between 30 and 60 days after be required to accept swaps across asset comment on the impact these proposed

publication of this release in the Federal classes, registered SDRs will require rules may have on small entities.

srobinson on DSKHWCL6B1PROD with PROPOSALS2









Register. Consequently, a comment to significant resources to operate. With

OMB is most assured of being fully List of Subjects in 17 CFR Part 43

respect to SEFs, not only will SEFs play

effective if received by OMB (and the a vital role in the national economy, but Real-time public reporting; block

Commission) within 30 days after they will be required to operate a self- trades; large notional swaps; reporting

publication of this notice of proposed and recordkeeping requirements.

rulemaking. Nothing in the foregoing 126 See 5 U.S.C. 601 et seq.

affects the deadline enumerated above 127 See 5 U.S.C. 603, 604. 130 See 47 FR 18618 (Apr. 30, 1982).

for public comment to the Commission 128 See 5 U.S.C. 601 et seq. 131 See id. at 18619.

on the proposed rules. 129 See 47 FR 18618 (Apr. 30, 1982). 132 See 29 U.S.C. 1106.









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In consideration of the foregoing, and A to this part 43 are not exclusive. must legally supersede any previous

pursuant to the authority in the Compliance with a particular example agreement (electronically or otherwise).

Commodity Exchange Act, as amended, or application of a sample clause, to the (h) Confirmation by affirmation. The

and in particular Section 2(a)(13) of the extent applicable, constitutes process by which one party to a swap

Act, the Commission hereby proposes to compliance with such portion of the acknowledges its assent to the complete

amend Chapter I of Title 17 of the Code rule to which the example relates. swap terms submitted by the other party

of Federal Regulation by adding part 43 to the swap. If the parties to a swap are

as follows: § 43.2. Definitions. using a confirmation service vendor,

As used in this part: complete swap terms may be submitted

PART 43—REAL-TIME PUBLIC (a) Act means the Commodity electronically by a party to such

REPORTING Exchange Act, as amended. vendor’s platform and the other party

(b) Affirmation means the process by may affirm such terms on such platform.

Sec.

43.1 Purpose, scope, and rules of which parties to a swap verify (orally, With the affirmation by one party to the

construction. in writing, electronically or otherwise) complete swap terms submitted by the

43.2 Definitions. that they agree on the primary economic other party, the swap is legally

43.3 Method and timing for real-time public terms of a swap (but not necessarily all confirmed and a legally binding

reporting. terms of the swap). Affirmation may confirmation is consummated (i.e.,

43.4 Swap transaction and pricing data to constitute ‘‘execution’’ of the swap or ‘‘confirmation by affirmation’’).

be publicly disseminated in real-time. may provide evidence of execution of (i) Embedded option means any right,

43.5 Block trades and large notional swaps the swap, but does not constitute but not an obligation, provided to one

for particular markets and contracts. party of a swap by the other party to the

confirmation (or confirmation by

Appendix A to Part 43—Data Fields for affirmation) of the swap. same swap that provides the party in

Real-Time Public Reporting (c) Appropriate minimum block size possession of the option with the ability

means the minimum notional or to change any one or more of the

Authority: 7 U.S.C. 2(a), 12a(5) and 24a,

amended by Pub. L. 111–203, 124 Stat. 1376 principal size of a swap instrument that economic terms of the swap as they

(2010). qualifies swaps within such category of were previously established at

swap instrument as a block trade. The confirmation (or were in effect on the

§ 43.1 Purpose, scope and rules of appropriate minimum block size is start date).

construction. calculated by a registered swap data (j) Executed means the completion of

(a) Purpose. This part sets forth rules repository or is prescribed by the the execution process.

relating to the collection and public Commission. (k) Execution means an agreement by

dissemination of certain swap (d) As soon as technologically the parties (whether orally, in writing,

transaction and pricing data to enhance practicable means as soon as possible, electronically, or otherwise) to the terms

transparency and price discovery. taking into consideration the of a swap that legally binds the parties

(b) Scope. (1) The provisions of this prevalence, implementation and use of to such swap terms under applicable

part shall apply to all swaps as defined technology by comparable market law. Execution occurs immediately

in Section 1a(47) of the Act and any participants. following or simultaneous with the

implementing regulations therefrom, (e) Asset class means the broad affirmation of the swap.

including: category of goods, services or (l) Large notional swap means a swap

(i) Swaps subject to the mandatory commodities underlying a swap. The transaction that:

clearing requirement described in (1) Involves a swap that is not

asset classes include interest rate,

Section 2(h)(1) of the Act (including available for trading or execution on a

currency, credit, equity, other

those swaps that are excepted from the swap market;

commodity and such other asset classes (2) Is consistent with the appropriate

requirement pursuant to Section 2(h)(7) as may be determined by the

of the Act); size requirements for large notional

Commission. swaps set forth in § 43.5; and

(ii) Swaps that are not subject to the

(f) Block trade means a swap (3) Is reported in accordance with the

mandatory clearing requirement

transaction that: appropriate time delay requirements set

described in Section 2(h)(1) of the Act,

but are cleared at a registered (1) Involves a swap that is made forth in § 43.5(k).

derivatives clearing organization; available for trading or execution on a (m) Minimum block trade size means

(iii) Swaps that are not cleared at a swap market; the minimum notional or principal

registered derivatives clearing (2) Occurs off the swap market’s amount, as determined by each swap

organization and are reported to a trading system or platform pursuant to market, for a block trade in a particular

registered swap data repository that the swap market’s rules and procedures; type of swap that is listed or executed

accepts and publicly disseminates swap (3) Is consistent with the minimum on such swap market. The minimum

transaction and pricing data in real- block trade size requirements set forth block trade size shall be equal to or

time; and in § 43.5; and greater than the appropriate minimum

(iv) Swaps that are required to be (4) Is reported in accordance with the block size.

cleared under Section 2(h)(2) of the Act, swap market’s rules and procedures and (n) Newly-listed swap means a swap

but are not cleared. the appropriate time delay set forth in that is listed on any swap market where

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(2) This part applies to all swap § 43.5(k). an appropriate minimum block size has

execution facilities, designated contract (g) Confirmation means the not been published by a registered swap

markets, swap data repositories, as well consummation (electronically or data repository pursuant to § 43.5.

as parties to a swap including registered otherwise) of legally binding (o) Novation means the process by

or exempt swap dealers, registered or documentation (electronic or otherwise) which a party to a swap transfers all of

exempt major swap participants and that memorializes the agreement of the its rights, liabilities, duties and

U.S.-based end-users. parties to all terms of a swap. A obligations under the swap to a new

(c) Rules of Construction. The confirmation must be in writing legal party other than the counterparty

examples in this part and in appendix (whether electronic or otherwise) and to the swap. The transferee accepts all





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76172 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



of the transferor’s rights, liabilities, (bb) Third-party service provider this part. The following persons shall be

duties and obligations under the swap. means an entity, other than a registered reporting parties for off-facility swaps:

A novation is valid so long as the swap data repository, that publicly (i) If only one party is a swap dealer

transferor and remaining party to the disseminates swap transaction and or major swap participant, the swap

swap are given notice, and the pricing data in real-time on behalf of a dealer or major swap participant shall

transferor, transferee and remaining swap market or, in the case of an off- be the reporting party.

party to the swap consent to the facility swap where there is no (ii) If one party is a swap dealer and

transfer. registered swap data repository the other party is a major swap

(p) Off-facility swap means any available to publicly disseminate the participant, the swap dealer shall be the

reportable swap transaction that is not swap transaction and pricing data in reporting party.

executed on or subject to the rules of a real-time, on behalf of a reporting party. (iii) If both parties are swap dealers,

swap market. (cc) Transferee means a party to a the swap dealers shall designate which

(q) Other commodity means any swap that accepts, by way of novation, party shall be the reporting party.

commodity that cannot be grouped in all of a transferor’s rights, liabilities, (iv) If both parties are major swap

the credit, currency, equity or interest duties and obligations under such swap participants, the major swap

rate asset class categories. with respect to a remaining party. participants shall designate which party

(r) Public dissemination and publicly (dd) Transferor means a party to a shall be the reporting party.

disseminate means to publish and make swap that transfers, by way of novation, (v) If neither party is a swap dealer

available swap transaction and pricing all of its rights, liabilities, duties and nor a major swap participant, the parties

data in a non-discriminatory manner, obligations under such swap, with shall designate which party (or its agent)

through the Internet or other electronic respect to a remaining party, to a shall be the reporting party.

data feed that is widely published and transferee. (4) Special rules when no registered

in machine-readable electronic format. (ee) Unique product identifier means swap data repository will accept and

(s) Real-time disseminator means a a unique identification of a particular publicly disseminate data. If no

registered swap data repository or third- level of the taxonomy of the asset class registered swap data repository is

party service provider that accepts swap or sub-asset class in question, as further available to accept and publicly

transaction and pricing data from described in § 43.4(f) and § 45.4(c) of disseminate swap transaction and

multiple data sources and publicly this chapter. Such unique product pricing data, the reporting party of an

disseminates such data in real-time identifier may combine the information off-facility swap may satisfy the real-

pursuant to this part. from one or more of the data fields time public reporting requirement under

(t) Real-time public reporting means described in appendix A to this part 43. this part by publicly disseminating such

the reporting of data relating to a swap (ff) U.S. person means any U.S.-based data through a third-party service

transaction, including price and swap dealer, major swap participant, provider in the same manner that a

volume, as soon as technologically eligible contract participant, end-user or swap market may report through a third-

practicable after the time at which the other U.S.-based entity or person that party service provider.

swap transaction has been executed. transacts in a swap.

(u) Remaining party means a party to (b) Public dissemination of swap

a swap that consents to a transferor’s § 43.3 Method and timing for real-time transaction and pricing data. (1)

transfer by novation of all of the public reporting. Reportable swap transactions executed

transferor’s rights, liabilities, duties and (a) Responsibilities of parties to a on a swap market. (i) A swap market

obligations under such swap to a swap to report swap transaction and shall publicly disseminate all swap

transferee. pricing data in real-time. (1) In general. transaction and pricing data for swaps

(v) Reportable swap transaction A reporting party shall report any executed thereon, as soon as

means any executed swap, novation, reportable swap transaction to a real- technologically practicable after the

swap unwind, partial novation or partial time disseminator as soon as swap has been executed. A swap market

swap unwind, or such post-execution technologically practicable. shall satisfy this public dissemination

events that affect the pricing of a swap. (2) Swaps listed or executed on a requirement by either sending or

(w) Reporting party means the party swap market. (i) For swaps executed on otherwise electronically transmitting

to a swap with the duty to report a a swap market’s trading system or swap transaction information to a

reportable swap transaction in platform, a reporting party shall satisfy registered swap data repository that

accordance with this part and Section its reporting requirement under this accepts and publicly disseminates swap

2(a)(13)(F) of the Act. section by executing such reportable transaction and pricing data or by

(x) Social size means the greatest of swap transaction on the swap market. publicly disseminating swap transaction

the mode, median and mean transaction (ii) For block trades executed information through a third-party

sizes of a particular swap contract or pursuant to the rules of a swap market, service provider for public

swap instrument, as commonly the reporting party shall satisfy its dissemination.

observed in the marketplace. reporting requirement by reporting such (ii) A swap market that sends swap

(y) Swap instrument means a trades to the swap market in accordance transaction information to a third-party

grouping of swaps in the same asset with the rules of the swap market and service provider to publicly disseminate

class with the same or similar § 43.5. such data in real-time does not satisfy

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characteristics. (3) Off-facility swaps. Except as its requirements under this section until

(z) Swap market means any registered otherwise provided in § 43.5, all off- such data is publicly disseminated

swap execution facility or registered facility swaps shall be reported as soon pursuant to this part.

designated contract market that makes as technologically practicable following (2) Prohibition of disclosure of data

swaps available for trading. execution, by the reporting party, to a prior to sending data to a real-time

(aa) Swap unwind means the registered swap data repository that disseminator.

termination and liquidation of a swap, accepts and publicly disseminates swap (i) No swap market or reporting party

typically followed by a cash settlement transaction and pricing data in shall disclose swap transaction and

between the parties to such swap. accordance with the rules set forth in pricing data prior to the public





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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76173



dissemination of such data by a real- transaction and pricing data in real-time (3) Cancellation. A registered swap

time disseminator. does so in a manner that complies with data repository that accepts and

(ii) Notwithstanding the disclosure those standards for registered swap data publicly disseminates swap transaction

prohibition of § 43.5(b)(2)(i), a swap repositories described in this part. and pricing data in real-time shall

market may disclose swap transaction (2) Ensure that the Commission has cancel any incorrect data that had been

and pricing data available to access to any such swap transaction and publicly disseminated, by publicly

participants on its market prior to the pricing data, through either the swap disseminating a cancellation of such

public dissemination of such data, market or via direct access to the third- data, in the manner and format

provided that such disclosure is made party service provider. described in Appendix A to this part.

no earlier than the disclosure of such (e) Availability of swap transaction (4) Correction. A registered swap data

data to a real-time disseminator for and pricing data to the public. repository that accepts and publicly

public dissemination. Registered swap data repositories shall disseminates swap transaction and

(iii) Notwithstanding the disclosure publicly disseminate swap transaction pricing data in real-time shall correct

prohibition of § 43.5(b)(2)(i), a swap and pricing data in such a format that any incorrect data that had been

dealer may disclose swap transaction may be downloaded, saved and/or publicly disseminated to the public, by

and pricing data for off-facility swaps analyzed. publicly disseminating a cancellation of

available to its customer base prior to (f) Errors or omissions. (1) In general. the incorrect swap transaction and

the public dissemination of such data, Any errors or omissions in swap pricing data and then publicly

provided that such disclosure is made transaction and pricing data that were disseminating the correct data, as soon

no earlier than the disclosure of such publicly disseminated in real-time shall as technologically practicable, in the

data to a registered swap data repository be corrected or cancelled in the manner and format described in

that accepts swap transaction and following manner: Appendix A to this part.

pricing data for public dissemination. (i) If a party to the swap that is not (g) Hours of operation. A registered

(c) Requirements for registered swap the reporting party becomes aware of an swap data repository that accepts and

data repositories in providing the real- error or omission in the swap publicly disseminates swap transaction

time public dissemination of swap transaction and pricing data reported and pricing data in real-time:

transaction and pricing data. (1) with respect to such swap, such party (1) Shall maintain hours of operation

Compliance with part 49 of this chapter. shall promptly notify the reporting party to receive and publicly disseminate

Any registered swap data repository that of the correction. swap transaction and pricing data at all

accepts and publicly disseminates swap (ii) If the reporting party to a swap times, twenty-four hours a day;

transaction and pricing data in real-time becomes aware of an error or omission (2) May declare, on an ad hoc basis,

shall comply with part 49 of this in the swap transaction and pricing data special closing hours to perform system

chapter and shall publicly disseminate which it reported to a swap market or maintenance and shall provide

swap transaction and pricing data as real-time disseminator with respect to reasonable advance notice of its special

soon as technologically practicable such swap, either through its own closing hours to market participants and

upon receipt of such data, unless the initiative or through notice by the other to the public; and

data is subject to a time delay in party to the swap, the reporting party (3) Shall, to the extent reasonably

accordance with § 43.5. shall promptly submit corrected data to possible under the circumstances, avoid

(2) Acceptance of all swaps in an the same swap market or real-time scheduling special closing hours when,

asset class. Any registered swap data disseminator. in its estimation, the U.S. market and

repository that accepts and publicly (iii) If the swap market becomes aware major foreign markets are most active.

disseminates swap transaction and of an error or omission in the swap (h) Acceptance of data during special

pricing data in real-time for swaps in its transaction and pricing data reported closing hours. During special closing

selected asset class shall accept and with respect to such swap, or receives hours, a registered swap data repository

publicly disseminate swap transaction notification from the reporting party, the that accepts and publicly disseminates

and pricing data in real-time for all swap market shall promptly submit swap transaction and pricing data in

swaps within such asset class. corrected data to the same real-time real-time shall have the capability to

(3) Annual independent review. Any disseminator. receive and hold in queue information

registered swap data repository that (iv) Any registered swap data regarding reportable swap transactions

accepts and publicly disseminates swap repository that accepts and publicly pursuant to this part.

transaction and pricing data in real-time disseminates swap transaction and (i) Recordkeeping. All data related to

shall perform, on an annual basis, an pricing data in real-time shall publicly a reportable swap transaction shall be

independent review in accordance with disseminate any cancellations or maintained for a period of not less than

established audit procedures and corrections to such data, as soon as five years following the time at which

standards of the registered swap data technologically practicable after receipt such reportable swap transaction is

repository’s security and other system or discovery of any such cancellation or publicly disseminated pursuant to this

controls for the purposes of ensuring correction. part.

compliance with the requirements in (2) Improper cancellation or (1) Retention of data by a swap

this part. correction. Reporting parties, swap market. Any swap market and any

(d) Requirements if a swap market markets and registered swap data registered swap data repository that

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publicly disseminates through a third- repositories that accept and publicly accepts and publicly disseminates swap

party service provider. If a swap market disseminate swap transaction and transaction and pricing data in real-time

chooses to publicly disseminate swap pricing data in real-time shall not shall retain all swap transaction

transaction and pricing data in real-time submit or agree to submit a cancellation information that is received from

through a third-party service provider, or correction for the purpose of re- reporting parties for public

such swap market shall — reporting swap transaction and pricing dissemination, including data related to

(1) Ensure that any such third-party data in order to gain or extend a delay block trades and large notional swaps

service provider that publicly in publication or to otherwise evade the and information that is received by a

disseminates the swap market’s swap reporting requirements in this part. swap market or by a registered swap





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76174 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



data repository that accepts and and pricing data in real-time on a publicly disseminates such data in real-

publicly disseminates swap transaction transactional or aggregate basis. time.

and pricing data in real-time but is not (d) Amendments to data fields. The (2) Swaps executed on or pursuant to

publicly reported pursuant to § 43.4(c). Commission may determine from time the rules of a swap market. The actual

(2) Retention of data by a swap dealer to time to amend the data fields notional or principal amount for any

or major swap participant. In described in appendix A to this part. block trade executed pursuant to the

accordance with this part and part 23 of (e) Anonymity of the parties to a swap rules of a swap market shall be reported

this chapter, a swap dealer or major transaction. (1) In general. Swap by the reporting party to the swap

swap participant shall retain all data transaction and pricing data that is market. A swap market shall transmit

relating to a reportable swap transaction publicly disseminated in real-time may the actual notional amount for all swaps

that such swap dealer or major swap not disclose the identities of the parties executed on or pursuant to its rules to

participant sends to a swap market or a to the swap. A registered swap data the real-time disseminator.

registered swap data repository that repository that accepts and publicly (i) Public dissemination of notional or

accepts and publicly disseminates such disseminates such data in real-time may principal amount. The notional or

data in real-time or that such swap not do so in a manner that discloses or principal amount data fields described

dealer or major swap participant retains otherwise facilitates the identification of in Appendix A to this Part 43 shall be

in accordance with § 43.5. a party to a swap. publicly disseminated as follows:

(j) Fees. Any fees or charges assessed (2) Use of general description. (1) If the notional or principal amount

on a reporting party or swap market by Reporting parties and swap markets is less than 1 million, round to nearest

a registered swap data repository that shall provide a registered swap data 100 thousand;

accepts and publicly disseminates swap repository that accepts and publicly (2) If the notional or principal amount

transaction and pricing data in real-time disseminates swap transaction and is less than 50 million but greater than

for the collection of such data must be pricing data in real-time with a specific 1 million, round to the nearest million;

equitable and non-discriminatory. If description of the underlying asset(s) (3) If the notional or principal amount

such registered swap data repository and tenor of the swap; this description is less than 100 million but greater than

allows a discount based on the volume must be general enough to provide 50 million, round to the nearest 5

of data reported to it for public anonymity but specific enough to million;

dissemination, such discount shall be provide for a meaningful understanding (4) If the notional or principal amount

provided to all reporting parties and of the economic characteristics of the is less than 250 million but greater than

swap markets impartially. swap. This requirement is separate from 100 million, round to the nearest 10

the requirement that a reporting party million;

§ 43.4 Swap transaction and pricing data (5) If the notional or principal amount

to be publicly disseminated in real-time. must report swap data to a registered

is greater than 250 million, round to

(a) In general. Swap transaction swap data repository pursuant to

‘‘250+’’.

information shall be reported to a real- Section 2(a)(13)(G) of the Act. If a swap

time disseminator so that the real-time dealer or major swap participant does § 43.5 Block trades and large notional

disseminator can publicly disseminate not report the exact description of the swaps for particular markets and contracts.

swap transaction and pricing data in underlying asset(s) or tenor for the (a) In general. The provisions in this

real-time in accordance with this part, purposes of real-time reporting pursuant § 43.5 shall apply to both block trades

including the manner and format to this part, because such exact on swaps and large notional swaps.

requirements described in appendix A description would facilitate the identity (b) Eligible block trade or large

to this part 43 and this section. of a party to a swap, such swap dealer notional swap parties. (1) In general.

(b) Public dissemination of data or major swap participant must comply Parties to a block trade or large notional

fields. Any registered swap data with the related documentation and swap must be ‘‘eligible contract

repository that accepts and publicly recordkeeping requirements described participants’’ as defined in Section

disseminates swap transaction and in Part 23 of this chapter. 1a(18) of the Act. However, a designated

pricing data in real-time shall publicly (f) Unique product identifier. If a contract market may allow a commodity

disseminate the information in the data unique product identifier is developed trading advisor acting in an asset

fields described in appendix A to this that sufficiently describes one or more managerial capacity and registered

part. swap transaction and pricing data fields pursuant to Section 4n of the Act, or a

(c) Additional swap information. A for real-time reporting described in principal thereof, including any

registered swap data repository that appendix A to this part, then such investment advisor who satisfies the

accepts and publicly disseminates swap unique product identifier may be used criteria of § 4.7(a)(2)(v) of this chapter,

transaction and pricing data in real-time in lieu of the data fields that it or a foreign person performing a similar

may require reporting parties and swap describes. role or function and subject as such to

markets to report to such registered (g) Price forming continuation data. foreign regulation, to transact block

swap data repository, such information Any swap-specific event including, but trades for customers who are not eligible

that is necessary to match the swap not limited to novations, swap unwinds, contract participants, if such commodity

transaction and pricing data that was partial novations, and partial swap trading advisor, investment advisor or

publicly disseminated in real-time to unwinds, that occurs during the life of foreign person has more than

srobinson on DSKHWCL6B1PROD with PROPOSALS2









the data reported to a registered swap a swap and affects the price of such $25,000,000 in total assets under

data repository pursuant to Section swap shall be publicly disseminated management. A person transacting a

2(a)(13)(G) of the Act or to confirm that pursuant to this part. block trade on behalf of a customer must

parties to a swap have reported in a (h) Reporting of notional or principal receive written instruction or prior

timely manner pursuant to § 43.3. Such amount. (1) Off-facility swaps. The consent from the customer to do so.

additional information shall not be actual notional or principal amount for (2) Election to be treated as a block

publicly disseminated by the registered any off-facility swap shall be reported trade or large notional swap. Parties to

swap data repository that accepts and by the reporting party to the registered a swap of a large notional value shall

publicly disseminates swap transaction swap data repository that accepts and elect to have the swap treated as a block





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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76175



trade or large notional swap. Any swap transaction and pricing data in (A) In determining the social size for

reporting party or swap market shall real-time shall time-stamp such data a swap instrument, the registered swap

indicate such election to a real-time with the date and time, to the nearest data repository shall calculate the mode,

disseminator. second when such swap data: mean and median transaction sizes for

(c) Block trades on swaps. (1) A swap (i) Is received from a swap market or all swaps in the category of swap

market that permits block trades must reporting party; and instrument and choose the greatest of

have rules that specify the minimum (ii) Is publicly disseminated. the mode, mean and median transaction

size of such block trades pursuant to (3) All records relating to the time- sizes.

this section. stamps required by this section shall be (B) For all swaps, the block multiple

(2) The reporting party of a block maintained for a period of at least five shall be five.

trade shall report the block trade years from the execution of the block (2) Initial determination of

transaction and pricing data to the swap trade or large notional swap. appropriate minimum block size for

market, as soon as technologically (g) Responsibilities of registered swap

newly-listed swaps. A registered swap

practicable after execution of the block data repositories in determining

data repository shall make its initial

trade and pursuant to the rules of such appropriate minimum block size.

(1) In general. A registered swap data determination of the appropriate

swap market. minimum block size for a newly-listed

(3) The swap market shall transmit repository shall determine the

appropriate minimum block size for swap one month after such newly-listed

block trade transaction and pricing data swap is first executed and reported to

to a real-time disseminator as soon as swaps for which such registered swap

data repository receives data in the registered swap data repository.

technologically practicable after receipt Such registered swap data repository

of such data. Such information shall not accordance with Section 2(a)(13)(G) of

the Act. A registered swap data may make such a determination by:

be publicly disseminated until the (i) Grouping a newly-listed swap into

expiration of the appropriate time delay repository shall set the appropriate

minimum block size for each swap an existing category of swap instrument

described in § 43.5(k). for which the registered swap data

(d) Large notional swaps. A registered instrument as the greater of the numbers

derived from the distribution test and repository has already determined an

swap data repository that accepts and appropriate minimum block size; or

publicly disseminates swap transaction the multiple test described in this

paragraph. To qualify as a block trade, (ii) Creating a new category of swap

and pricing data in real-time shall not instrument for the newly-listed swap

publicly report the large notional swap the notional or principal amount of the

swap must be equal to or greater than and calculating the appropriate

transaction and pricing data until the minimum block size based on the

expiration of the appropriate time delay the appropriate minimum block size.

(i) Distribution test. To apply the previous month’s data.

described in § 43.5(k). Immediately

distribution test to a swap instrument, a (3) Publication of appropriate

upon expiration of the appropriate time

registered swap data repository shall minimum block sizes. A registered swap

delay, the registered swap data

apply the minimum threshold to the data repository shall publish the

repository that accepts and publicly

distribution of the notional or principal appropriate minimum block sizes on its

disseminates swap transaction and

transaction amounts, each as set forth in Internet Web site for all swap

pricing data in real-time must publicly

this paragraph. instruments. Additionally, a registered

disseminate the large notional swap

(A) In determining the distribution of swap data repository shall publish the

transaction and pricing data.

(e) Off-facility swaps in which neither the notional or principal transaction types of swaps that fall within a

counterparty is a swap dealer or a major amounts of a swap instrument, a particular category of swap instrument,

swap participant. Off-facility swaps in registered swap data repository shall for which the registered swap data

which neither counterparty is a swap evaluate the transaction sizes, rounded repository has received data on its

dealer or a major swap participant may in the manner discussed in § 43.4(i), for Internet Web site. The appropriate

qualify as large notional swaps. Parties all swaps within a category of swap minimum block size information and

to such transactions shall follow the instrument, by looking at swaps within swap instrument information on the

requirements for large notional swaps in the category of swap instrument that are registered swap data repository’s

§ 43.5. executed: on all swap execution Internet Web site must be available to

(f) Time-stamp and reporting facilities; on all designated contract the public in an open and non-

requirements for block trades and large markets; and as off-facility swaps. discriminatory manner.

notional swaps. In addition to the Registered swap data repositories may (4) Annual update. A registered swap

requirements under § 43.4 and appendix also consider other economic data repository shall each year

A to this part, a swap market and a information to establish the total market beginning in January 2012, publish and

registered swap data repository that size of a category of swap instrument, in update the appropriate minimum block

accepts and publicly disseminates swap consultation with the Commission. sizes for the swap instruments for which

transaction and pricing data in real-time (B) The minimum threshold shall be the registered swap data repository

shall have the following additional a notional or principal amount that is accepts data. Any such updates must be

time-stamp requirements with respect to greater than 95% of the notional or posted on the registered swap data

block trades and large notional swaps: principal transaction sizes in a swap repository’s Internet Web site by the

(1) A swap market shall time-stamp instrument during the applicable period tenth business day of each year. The

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swap transaction and pricing data with of time, as represented by the registered swap data repository shall

the date and time, to the nearest second distribution of the notional or principal calculate the appropriate minimum

of when such swap market: transaction amounts for such swap. block size based on the data that it has

(i) Receives data from a reporting (ii) Multiple test. To apply the received over the previous year. If a

party; and multiple test to a swap instrument, a registered swap data repository has

(ii) Transmits such data to a real-time registered swap data repository shall received data for a category of swap

disseminator. multiply the block multiple by the instrument for less than one year, the

(2) A registered swap data repository social size, as described in this appropriate minimum block size shall

that accepts and publicly disseminates paragraph. be calculated based on such data.





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76176 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



(5) Appropriate minimum block size anticipated distribution of notional or begins upon execution. It is the

determination when more than one principal transaction amounts over the responsibility of the registered swap

registered swap data repository. If more one month period immediately data repository that accepts and

than one registered swap data repository following the first execution of the publicly disseminates swap transaction

maintains data for a swap instrument, swap; or and pricing data in real-time to ensure

then the Commission shall prescribe the (ii) Five times the anticipated social the block trade or large notional swap

manner in which the appropriate size over the one month period transaction and pricing data is publicly

minimum block trade size shall be immediately following the first disseminated following the appropriate

determined. execution of the swap. time delay described in this section.

(h) Responsibilities of swap markets (j) Responsibilities of the parties to a

swap in determining the appropriate (2) Time delay for standardized block

in determining minimum block trade

minimum large notional swap size. (1) trades and large notional swaps. The

sizes. For any swap listed on a swap

The parties to a large notional swap block trade or large notional swap

market, the swap market shall set the

shall be responsible for determining the transaction and pricing data shall be

minimum block trade size. Swap

category of existing swap instrument in reported to the public by the swap

markets must set the minimum block

which such swap should be included. market (through a third-party service

trade sizes for all listed contracts at

Once the category of existing swap provider) or registered swap data

levels greater than or equal to the

instrument is identified by the parties to repository that accepts and publicly

appropriate minimum block sizes

posted on the swap data repositories’ the swap, the parties shall refer to the disseminates such data within 15

Internet Web sites. Swap markets shall appropriate minimum block size that is minutes of the time of execution

immediately apply any change to the associated with such existing swap reflected in the data. This provision

minimum block trade size of a listed instrument and made available to the covers all swaps under Sections

swap following the posting of a new or public on the appropriate registered 2(a)(13)(C)(i) and (iv) of the Act.

adjusted appropriate minimum block swap data repository’s Internet Web site, (3) Time delay for customized large

size on a registered swap data or as otherwise prescribed by the notional swaps. The large notional swap

repository’s Internet Web site, pursuant Commission. The notional or principal transaction and pricing data shall be

to the requirements set forth in part 40 amount of the swap must be equal to or reported to the public by the registered

of this chapter. If a swap listed on a greater than the appropriate minimum swap data repository that accepts and

swap market does not have an block size of the swap instrument in publicly disseminates such data subject

appropriate minimum block size, such order to qualify as a large notional swap. to a time delay as may be prescribed by

swap market shall apply the rules set If there is not a swap instrument with the Commission. This provision covers

forth in § 43.5(i). an appropriate minimum block size all swaps under Sections 2(a)(13)(C)(ii)

(i) Minimum block trade size available to reference, then such swap and (iii) of the Act.

determination for newly-listed swaps. between the parties shall not qualify as (l) Data to be reported to the public.

For any newly-listed swap, the swap a large notional swap or for any time With respect to block trades and large

market that lists the swap for trading delay in reporting. In determining the notional swaps, all information in the

shall set the minimum block trade size. appropriate swap instrument, the

data fields described in appendix A to

(1) If a newly-listed swap is within following factors shall be documented—

this part and § 43.4 shall be

the parameters of a category of swap (i) The similarities of the terms of the

disseminated to the public.

instrument for which a registered swap swap between the parties compared to

data repository has posted an the terms of swaps that are grouped (m) Aggregation. Except as otherwise

appropriate minimum block size, the within the existing swap instrument; stated in this paragraph, the aggregation

swap market shall set the minimum and of orders for different accounts in order

block size for such newly listed swap at (ii) Other swaps listed on swap to satisfy the minimum block trade size

a level equal to or greater than such markets that are grouped within an requirement is prohibited. Aggregation

appropriate minimum block size. existing category of swap instrument. is permissible if done by a commodity

(2) In determining the minimum block (2) To the extent that the parties to a trading advisor acting in an asset

trade size for a newly-listed swap that large notional swap are swap dealers managerial capacity and registered

is not within an existing category of and/or major swap participants, such pursuant to Section 4n of the Act, or a

swap instrument, swap markets shall parties shall maintain records principal thereof, including any

take into account: illustrating the basis for the selection of investment advisor who satisfies the

(i) The anticipated distribution of the swap instrument for the large criteria of § 4.7(a)(2)(v) of this chapter,

notional or principal transaction notional swap pursuant to part 23 of or a foreign person performing a similar

amounts; this chapter. Such records shall be made role or function and subject as such to

(ii) The social size for swaps in other available to the Commission upon foreign regulation, if such commodity

markets that are in substance the same request. trading advisor, investment advisor or

as such newly-listed swap; and (3) In the event that the parties to a foreign person has more than

(iii) The minimum block trade sizes of swap seek to qualify such swap as a $25,000,000 in total assets under

similar swaps in the same asset class. large notional swap, but are unable to management.

(3) In determining the minimum block determine, identify or agree on the

Appendix A to Part 43—Data Fields for

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trade size for a newly-listed swap that appropriate swap instrument to refer to,

is not within an existing category of such swap shall not qualify as a large Real-Time Public Reporting

swap instrument, the swap market that notional swap and shall not qualify for The data fields described in Table A1 and

lists the swap must ensure that the any time delay in reporting. Table A2, to the extent applicable for a

notional or principal amount selected (k) Time delay in the real-time public particular reportable swap transaction, shall

represents a reasonable estimate of the reporting of block trades and large be real-time reported to the public. Table A1

greater of: notional swaps. (1) In general. The time and Table A2 provide guidance and

(i) A notional or principal amount delay for the real-time public reporting examples for compliance with the reporting

that is greater than all but 95% of the of a block trade or large notional swap of each data field.







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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76177



TABLE A1—DATA FIELDS AND SUGGESTED FORM AND ORDER FOR REAL-TIME PUBLIC REPORTING OF SWAP

TRANSACTION AND PRICING DATA

Field Description Example Data application



Cancellation ................. An indication that a reportable swap trans- CANCEL ..................... Information is needed to inform market par-

action has been incorrectly or erroneously ticipants and the public that swap trans-

reported and is canceled. There shall be a action and pricing data was erroneously

clear indication to the public that the report- disseminated to the public.

able swap transaction is being canceled

(e.g., ‘‘CANCEL’’) followed by the swap

transaction and pricing data that is being

canceled same form and manner that it

was erroneously reported. Any cancella-

tions should be made in accordance with

§ 43.3(f).

If a reportable swap transaction is canceled,

it may be corrected by reporting the ‘‘Cor-

rection’’ data field and the correct informa-

tion.

Correction .................... An indication that the swap transaction and CORRECT .................. Information needed to inform market partici-

pricing data that is being reported is a cor- pants and the public that a particular re-

rection to previously publicly disseminated portable swap transaction that is being re-

swap transaction and pricing data that con- ported is a correction to swap transaction

tained an error or omission. In order for a and pricing data that has been publicly dis-

correction to occur, the registered swap seminated by a real-time disseminator.

data repository that accepts and publicly

disseminates swap transaction and pricing

data shall first cancel the incorrectly re-

ported swap transaction and pricing data

and the follow such cancellation with the

correction. There shall be a clear indication

to the public that the swap transaction and

pricing data that is being reported is a cor-

rection (e.g., ‘‘CORRECT’’). Any correc-

tions should be made in accordance with

§ 43.3(f).

Date stamp .................. The date of execution of the reportable swap 13–10–07 ................... Information needed to indicate the date of

transaction. The date shall be displayed execution of the reportable swap trans-

with two digits for day, month, and year. action (if not the same day).

The date stamp shall be reported only

when the reportable swap transaction is

executed on a day other than the current

day or if the reportable swap transaction is

a correction or cancellation.

Execution time-stamp .. The time of execution of the reportable swap 15:25:47 ..................... Information needed to indicate the time of

transaction in Coordinated Universal Time execution of the reportable swap trans-

(UTC). The time-stamp shall be displayed action.

with two digits for each of the hour, minute

and second.

Cleared or uncleared ... An indication of whether or not a reportable C ................................. Information needed to indicate whether or not

swap transaction is cleared by a deriva- a reportable swap transaction is cleared

tives clearing organization. If the reportable through a derivatives clearing organization.

swap transaction is cleared by a deriva-

tives clearing organization, a ‘‘C’’ may be

used and if uncleared a ‘‘U’’ may be used.

Alternatively, the entirety of the data fields re-

ported to the public for the reportable swap

transaction may be color coded white if the

swap is cleared by a derivatives clearing

organization and red if the reportable swap

transaction is uncleared.

Indication of other price An indication that the reportable swap trans- B* ................................ Information needed to indicate whether a re-

affecting term (non- action has one or more additional term(s) portable swap transaction is non-standard-

standardized swaps). or provision(s), other than those listed in ized (bespoke) and to inform the public that

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the required real-time data fields, that ma- there are one or more additional term(s) or

terially affect(s) the price of the reportable provision(s) that materially affect the price

swap transaction. Reportable swap trans- of the reportable swap transaction.

actions that are reported with this designa-

tion would be non-standardized (bespoke)

swaps.









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76178 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



TABLE A1—DATA FIELDS AND SUGGESTED FORM AND ORDER FOR REAL-TIME PUBLIC REPORTING OF SWAP

TRANSACTION AND PRICING DATA—Continued

Field Description Example Data application



Some common material price affecting terms

may include counterparty credit, collateral,

day count fraction, changing notional

amount, etc. A ‘‘B*’’ may be used to indi-

cate that a reportable swap transaction has

a material price affecting term that is not

otherwise shown..

Block trades and large An indication of whether a reportable swap BLK ............................. Information needed to indicate whether a re-

notional swaps. transaction is a block trade or large no- portable swap transaction is a block trade

tional swap. If a reportable swap trans- or a large notional swap. This information

action is a block trade or a large notional is important since it will alert market partici-

swap and subject to a time delay in real- pants and the public to the differences in

time public reporting pursuant to § 43.5, notional or principal amount and the time

such block trade or large notional swap delay in real-time reporting the swap trans-

may be indicated as follows: block trade or action and pricing data.

large notional swap (‘‘BLK’’). If a trade is

not a block trade or large notional swap,

then this field may be left blank.

Execution venue .......... An indication of the venue of execution of a OFF ............................ Information needed to indicate whether a re-

reportable swap transaction. Such indica- portable swap transaction is executed on a

tion may be indicated with a three char- swap market, as an off-facility swap, or as

acter reference code as follows: reportable a block trade or large notional swap.

swap transaction executed on or pursuant

to the rules of a swap market (SWM) or an

off-facility swap (OFF).

Swap instrument .......... A description of the instrument used to deter- SWI–ST–USD–IRS Information needed to understand what swap

mine the appropriate minimum block size (e.g., short term instrument was used by the parties to a

for block trades and large notional swaps. USD interest rate block trade or large notional swap to deter-

The swap instrument may be reported with swaps). mine the appropriate minimum block trade

the letters ‘‘SWI’’ followed by the descrip- size that was relied on to delay reporting

tion of the swap instrument. The swap in- pursuant to § 43.5.

strument should be described in such a

manner that it is clear to market partici-

pants and the public what is being re-

ported. If there is no swap instrument, then

‘‘NA’’ may be reported.

Start date ..................... The date that the reportable swap transaction 20–02–09 ................... Information needed to indicate when the

becomes effective or starts. The effective terms of the reportable swap transaction

date shall be displayed with two digits for become effective or start.

day, month, and year. If a standardized

start date is established for a particular

swap, for example, the start date is always

T+1 for a particular swap contract or the

start date is standardized to start on a

given date in the future (e.g., the first of the

following month), this field may not be nec-

essary.

Asset class .................. An indication of one of the five broad cat- IR ................................ Information needed to broadly describe the

egories as described in § 43.2(e). Report- underlying asset to facilitate comparison

able swap transactions may be reported in with other similar reportable swap trans-

the following asset classes with an appro- actions.

priate two character symbol: interest rate

(IR), currency (CU), credit (CD), equity

(EQ), other commodity (CO)..

Sub-asset class for An indication of a more specific description of AG (agriculture swap) Information needed to define with greater

other commodity. the asset class for other commodity. Such specificity, the type of other commodity that

sub-asset classes for other commodity re- is being real-time reported and to facilitate

portable swap transactions may include, comparison with other similar reportable

but are not limited to, energy, precious swap transactions.

metals, metals—other, agriculture, weather,

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emissions and volatility. The sub-asset

class may be reported with an appropriate

two character symbol (e.g., energy (EN)).

Contract type ............... An indication of one of four specific contract S- ................................ Information needed to describe the reportable

types of reportable swap transactions. The swap transaction and to be able to com-

following product types shall be reported pare such reportable swap transaction to

with an appropriate two character symbol: other similar reportable swap transactions.

swap (S-), swaption (SO), forward (FO)

and stand-alone options (O-).







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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76179



TABLE A1—DATA FIELDS AND SUGGESTED FORM AND ORDER FOR REAL-TIME PUBLIC REPORTING OF SWAP

TRANSACTION AND PRICING DATA—Continued

Field Description Example Data application



Contract sub-type ........ An indication of more specificity into the type SS (basis swap) ......... Information needed to define with greater

of contract described in the contract type specificity, the type of contract that is being

field. Such contract sub-types may include, real-time reported and to facilitate compari-

but are not limited to, basis swaps, index son with other similar reportable swap

swaps, broad based security swaps, and transactions.

basket swaps. The contract sub-type may

be reported with an appropriate two char-

acter symbol (e.g., basket swap (SK)).

Price-forming continu- An indication of whether such reportable PN .............................. Information needed to describe whether the

ation data. swap transaction is a post-execution event reportable swap transaction is a post-exe-

that affects the price of the reportable swap cution event for a pre-existing swap (i.e.,

transaction. The following price-forming not a newly executed swap) that materially

continuation data may be reported with a affects the price of the reportable swap

designation as follows: novation (N-), par- transaction.

tial novation (PN), swap unwind (U-), par-

tial swap unwind (PU), other price-forming

continuation data (PF).

Underlying asset 1 ...... The asset, reference asset or reference obli- TX (e.g., TX rep- Information needed to describe the reportable

gation for payments of a party’s obligations resents ‘‘Treasury swap transaction and to help market par-

under the reportable swap transaction ref- 10 year’’). ticipants and the public evaluate the price

erence. The underlying asset may be a ref- of the reportable swap transaction.

erence price, index, obligation, physical

commodity with delivery point, futures con-

tract or any other instrument agreed to by

the parties to a reportable swap transaction.

Reporting entities may refer to § 43.4(e) when

reporting underlying asset.

Underlying asset 2 ...... The asset, reference asset or reference obli- IIIL (e.g., IIIL rep- Information needed to describe the reportable

gation for payments of a party’s obligations resents 3-month swap transaction and to help market par-

under the reportable swap transaction ref- LIBOR). ticipants and the public evaluate the price

erence. The underlying asset may be a ref- of the reportable swap transaction.

erence price, index, obligation, physical

commodity with delivery point, futures con-

tract or any other instrument agreed to by

the parties to a reportable swap trans-

action..

Reporting entities may refer to § 43.4(e) when

reporting underlying asset..

If there are more than two underlying assets,

such underlying assets shall be reported in

the same manner as above.

Price notation .............. The premium, yield, spread or rate, depend- 2.53 ............................ Information needed to describe the reportable

ing on the type of swap, that is calculated swap transaction and to help market par-

at affirmation and nets to a present value ticipants and the public evaluate the price

of zero at execution. The pricing char- of the reportable swap transaction.

acteristic shall not include any premiums

associated with margin, collateral, inde-

pendent amounts, reconcilable post-execu-

tion events, options on a swap, or other

non-economic characteristics. The format

in which the pricing characteristic is real-

time reported to the public shall be the for-

mat commonly sought by market partici-

pants for each particular market or contract.

Additional price nota- The additional pricing characteristic shall in- +0.25 .......................... Additional information needed to describe the

tion. clude any premiums associated with mar- reportable swap and to help market partici-

gin, collateral, independent amounts, rec- pants and the public evaluate the price of

oncilable post-execution events, front end the reportable swap transaction.

payments, back end payments, or other

non-economic characteristics not illustrated

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in the reporting field for pricing char-

acteristic. The additional pricing char-

acteristic shall not include options as they

are reported elsewhere. The format in

which the additional pricing characteristic is

real-time reported to the public shall be as

an addition or subtraction of the pricing

characteristic and in a way commonly

sought by market participants for each par-

ticular market or contract.







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76180 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



TABLE A1—DATA FIELDS AND SUGGESTED FORM AND ORDER FOR REAL-TIME PUBLIC REPORTING OF SWAP

TRANSACTION AND PRICING DATA—Continued

Field Description Example Data application



Unique product identi- Certain fields may be replaced with a unique To be determined ....... Information needed to describe the reportable

fier. product identifier, if such unique identifier swap transaction and for market partici-

exists, to the extent that such unique prod- pants and the public to be able to compare

uct identifier adequately describes such such reportable swap transaction to other

fields.. similar reportable swap transactions. Such

information would substitute the information

described in one or more reportable fields

in accordance with § 43.4.

Notional currency 1 ..... An indication of the type of currency that the EUR ............................ Information needed to describe the type of

notional amount is in. The notional cur- currency of the notional amount.

rency may be reported in a commonly ac-

cepted code (e.g., the three character al-

phabetic ISO 4217 currency code).

Notional or principal The total currency amount or quantity of units 200 ............................. Information needed to identify the size of the

amount 1. of the underlying asset. The notional or reportable swap transaction and to help

principal amounts for reportable swap evaluate the price of the reportable swap

transactions, including block trades and transaction.

large notional swaps shall be reported pur-

suant § 43.4.

Notional currency 2 ..... An indication of the type of currency that the USD ............................ Information needed to describe the type of

notional amount is in. The notional cur- currency of the notional amount.

rency may be reported in a commonly ac-

cepted code (e.g., the three character al-

phabetic ISO 4217 currency code).

Notional or principal The total currency amount or quantity of units 45 ............................... Information needed to identify the size of the

amount 2. of the underlying asset. The notional or reportable swap transaction and to help

principal amounts for reportable swap market participants and the public evaluate

transactions, including block trades and the price of the reportable swap trans-

large notional swaps, shall be reported pur- action.

suant to § 43.4.

Each notional or principal amount (if there is

more than one) should be labeled with a

number (e.g., 1, 2, 3, etc.) such that the

number corresponds to the underlying

asset for which the notional or principal

amount is applicable.

If there are more than two notional or prin-

cipal amounts, each such additional no-

tional or principal amount shall be reported

in the same manner.

Payment frequency 1 .. An integer multiplier of a time period describ- 2M .............................. Information needed to identify the pricing

ing how often the parties to the reportable characteristic of the reportable swap trans-

swap transaction exchange payments as- action and to help market participants and

sociated with each party’s obligation under the public evaluate the price of the report-

the reportable swap transaction. Such pay- able swap transaction.

ment frequency may be described as one

letter preceded by an integer. Such letter

convention may be reported as follows: D

(daily), W (weekly), M (monthly), Y (yearly).

Payment frequency 2 .. An integer multiplier of a time period describ- 6W .............................. Information needed to identify the pricing

ing how often the parties to the reportable characteristic of the reportable swap trans-

swap transaction exchange payments as- action and to help market participants and

sociated with each party’s obligation under the public evaluate the price of the report-

the reportable swap transaction. Such pay- able swap transaction.

ment frequency may be described as one

letter preceded by an integer. Such letter

convention may be reported as follows: D

(daily), W (weekly), M (monthly), or Y

(yearly).

Each payment frequency (if there is more

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than one) should be labeled with a number

(e.g., 1, 2, 3, etc.) such that the number

corresponds to the underlying asset for

which the payment frequency is applicable.

If there are more than two payment fre-

quency, each such additional payment fre-

quency shall be reported in the same man-

ner.









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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76181



TABLE A1—DATA FIELDS AND SUGGESTED FORM AND ORDER FOR REAL-TIME PUBLIC REPORTING OF SWAP

TRANSACTION AND PRICING DATA—Continued

Field Description Example Data application



Reset frequency 1 ....... An integer multiplier of a period describing 1Y ............................... Information needed to identify the pricing

how often the parties to the reportable characteristic of the reportable swap trans-

swap transaction shall evaluate and, when action and to help market participants and

applicable, change the price used for the the public evaluate the price of the report-

underlying assets of the reportable swap able swap transaction.

transaction. Such reset frequency may be

described as one letter preceded by an in-

teger. Such letter convention may be re-

ported as follows: D (daily), W (weekly), M

(monthly), or Y (yearly).

Reset frequency 2 ....... An integer multiplier of a period describing 6M .............................. Information needed to identify the pricing

how often the parties to the reportable characteristic of the reportable swap trans-

swap transaction shall evaluate and, when action and to help market participants and

applicable, change the price used for the the public evaluate the price of the report-

underlying assets of the reportable swap able swap transaction.

transaction. Such reset frequency may be

described as one letter preceded by an in-

teger. Such letter convention may be re-

ported as follows: D (daily), W (weekly), M

(monthly), or Y (yearly).

Each reset frequency (if there is more than

one) should be labeled with a number

(e.g., 1, 2, 3, etc.) such that the number

corresponds to the underlying asset for

which the reset frequency is applicable.

If there are more than two reset frequencies,

each such additional reset frequency shall

be reported in the same manner.

Tenor ........................... The maturity, termination, or end date of the Z15 ............................. Information needed to determine the end

reportable swap transaction. The tenor may month and year of the reportable swap

be displayed with the 3 character month transaction and to help market participants

and year format used for futures contracts.. and the public evaluate the price of the re-

portable swap transaction.

Reporting entities may refer to § 43.4(e) in re-

porting tenor.







If a swap has more than one embedded Table A2 of Appendix A to this Part 43. linked to the swap with which the embedded

option, or multiple swaptions provisions, all When disseminated to the public, multiple option is associated.

such option provisions shall be reported in embedded options associated with the same

the same manner pursuant to the fields in swap shall be clearly described and clearly



TABLE A2—ADDITIONAL REAL-TIME PUBLIC REPORTING DATA FIELDS FOR OPTIONS, SAPTIONS AND SWAPS WITH

EMBEDDED OPTIONS

Field Description Example Data application



Embedded option on An indication of whether or not the option EMBED1 ..................... Information needed to describe whether an

swap. fields are for an embedded option. This in- option is embedded in a swap to prevent

dication may be displayed as ‘‘EMBED1,’’ confusion and allow the market participants

‘‘EMBED2,’’ etc. and should precede the and the public to understand the informa-

option fields that describe the embedded tion that is being reported.

option.

Option Strike Price ...... The level or price at which an option may be O25 ............................. Information needed to indicate the level or

exercised. The option strike price may be price at which the option may be exercised

displayed with the letter ‘‘O’’ followed im- to market participants and the public.

mediately by the level or price.

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76182 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules



TABLE A2—ADDITIONAL REAL-TIME PUBLIC REPORTING DATA FIELDS FOR OPTIONS, SAPTIONS AND SWAPS WITH

EMBEDDED OPTIONS—Continued

Field Description Example Data application



Option Type ................. An indication of the type of option. The option P- ................................ Information needed to adequately describe

type may be displayed with a two character the option to market participants and the

code as follows: put (P-), call (C-), pur- public.

chase to pay fixed vs. floating (PF), pur-

chase to receive fixed vs. floating (RF) cap

(PC), floors (F-), collar (RC), straddle (D-),

strangle (G-), amortizing (A-), cancelable

(NC), compounding (DC), knock-in (KI),

knock-out (KO), reverse knock-in (RI), re-

verse knock-out (RO), one touch (OT), no

touch (NT), double one-touch (DO), double

no touch (DN), butterfly (BU), collar (L-),

condor (R-), callable inverse snowball (JC),

other exotic option types (XX).

Option Family .............. An indication of the style of the option trans- EU .............................. Information needed to adequately describe

action. The option style/family may be dis- the option to market participants and the

played as a two letter code as follows: Eu- public.

ropean (EU), American (AM), Bermudan

(BM), Asian (AS), other option style/family

(YY).

Option currency ........... An indication of the type of currency of the USD ............................ Information needed to identify the type of cur-

option premium. The option currency may rency of the option premium to market par-

be reported in a commonly accepted code ticipants and the public.

(e.g., the three character alphabetic ISO

4217 currency code).

Option premium ........... An indication of the additional cost of the op- 50000 ......................... Information needed to explain the market

tion to the reportable swap transaction as a value of the option to market participants

numerical value, not as the difference of and the public at the time of execution.

the premiums of the party’s obligations to This field will allow the public to understand

the reportable swap transaction. This field the price of the reportable swap trans-

shall be combined with the option currency action.

field.

Option lockout period .. An indication of the first allowable exercise J19 .............................. Information is needed to identify when the

date of the option. Such option lockout option can first be exercised and to help

date shall be rounded to the month and re- market participants and the public evaluate

ported using the three character month and the price of the option.

year format used for futures contracts.

Option expiration ......... An indication of the date that the option is no Z20 ............................. Information is needed to identify when the

longer available for exercise. Such option option can no longer be exercised and to

expiration shall be rounded off to the help market participants and the public

month and reported using the three char- evaluate the price of the option.

acter month and year format used for fu-

tures contracts.







Issued in Washington, DC, on November occur as soon as technologically appropriate for interest rate, currency

19, 2010, by the Commission. practicable for trades other than trades and other financial swaps and what

David A. Stawick, of large notional size or block trades. delays may be appropriate for

Secretary of the Commission. Congress mandated that these trades be customized large trades referencing

reported without delay regardless of physical commodities. The second

Statement of Chairman Gary Gensler

whether they are standardized or important feature with regard to block

Real-Time Public Reporting of Swap customized. trades or trades of large notional size is

Transaction Data With regard to block trades or trades a reporting method that transactions

I support the proposed rulemaking to of large notional size, the proposed rule greater than $250 million notional

implement a real-time public reporting includes two important features: a time amount—even the very largest of

regime for swaps. The proposed rules delay and a method to report the large trades—will just be reported as being

are designed to fulfill Congress’s sizes. With regard to the delay, the greater than $250 million. This will

direction to bring public transparency to proposed rule includes a 15-minute protect anonymity and promote the

liquidity of these large trades.

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the entire swaps market, both delay on standardized blocks. This

standardized and customized swaps. compares to the futures marketplace, The proposal on real time reporting

This post-trade transparency will which currently has a five-minute delay includes the methods by which to

enhance price discovery and liquidity for blocks, and the equities marketplace, calculate what a block trade is across

while ensuring anonymity and which has an even shorter delay. With the market for various swap

protection for large trades in appropriate regard to customized trades of large instruments. This will be based on data

cases. Per Congress’s direction, the notional size, the proposal asks a series collected by the swap data repositories

proposal requires real time reporting for of questions as to whether a similar in each of the asset classes. Lastly, the

swap transaction and pricing data to delay of 15 minutes would be proposal includes an initial





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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules 76183



implementation date of January 2012 to and to benefit the investing and hedging making. It is an essential ingredient of

provide time for the initial setting of public. When corporations, municipal well-functioning markets. Such

block sizes based on market data and governments, farmers and merchants transparency increases liquidity and

time for market participants to prepare seek to hedge their risk, they will enhances the price discover function of

for such real time reporting benefit from seeing an accurate picture the market.

requirements. of where similar transactions are being [FR Doc. 2010–29994 Filed 12–6–10; 8:45 am]

Real time post-trade reporting is priced concurrent with their decision- BILLING CODE P

critical to promoting market integrity

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