The CFTC approved unanimously revisions to part 45 of the CFTC regulations. The final amendments (i) delineate the swap data reporting requirements associated with each of the swaps involved in a cleared swap transaction, and (ii) leave the choice of the swap data repository ("SDR") for each swap in a cleared swap transaction to the entity submitting the first report on such swap.
The revisions impose reporting obligations for clearing swaps on derivatives clearing organizations ("DCOs") where such entities act as counterparties (which usually occurs as part of the clearing process). In such a capacity, DCOs are required to report primary economic terms, legal entity identifiers, and unique swap identifiers where relevant. The amendments remove the existing confirmation data reporting requirements for swaps intended to be cleared at the time of execution, and eliminate the requirement that a swap dealer / major swap participant reporting counterparty must report daily valuation data for cleared swaps. The amendments also require DCOs to report all creation and continuation data for a particular "clearing swap" to a single SDR, and to report all creation data for each "clearing swap," or "beta" or "gamma" swap, that replaces a particular "original swap," or "alpha" swap, to a single SDR (i.e., to report data for the beta and gamma that replace a particular alpha).
The changes are based on a revised premise regarding the life cycle of a swap. Previously, the CFTC viewed swap data in terms of one continuous swap. Currently, it views swaps in more traditional clearing terms where an original swap is extinguished and replaced by equal and opposite swaps, with the DCO as the counterparty to each of the replacement swaps. That is why the amendments focus on DCOs for reporting purposes.
In his statement on the final amendments, CFTC Chair Timothy Massad voiced his support for the CFTC's approval of the final rule, and predicted that the rule would enhance data quality and reduce reporting costs significantly:
This rule provides clarity and certainty in a number of areas, and will improve our ability to trace a swap through all phases of its life cycle. Ultimately, it will provide us with a better picture of the swaps market, and enhance our ability to identify the buildup of risk that may pose a threat to the financial system.
The final amendments will become effective upon their publication in the Federal Register, and the compliance date for the amendments will occur 180 days after their publication. Until the compliance date is reached, all existing reporting obligations under part 45, including existing obligations for reporting continuation data on original swaps, and creation and continuation data on clearing swaps, will remain in effect.
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