CFTC/SEC Adopt Rules for Reporting of Swaps

 

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October 18, 2010

TO: CLOSED-END INVESTMENT COMPANY MEMBERS No. 51-10
ETF (EXCHANGE-TRADED FUNDS) COMMITTEE No. 30-10
ETF ADVISORY COMMITTEE No. 45-10
EQUITY MARKETS ADVISORY COMMITTEE No. 39-10
FIXED-INCOME ADVISORY COMMITTEE No. 21-10
SEC RULES MEMBERS No. 103-10 RE: CFTC/SEC ADOPT RULES FOR REPORTING OF SWAPS

 

The Commodity Futures Trading Commission and the Securities and Exchange Commission adopted interim final rules for reporting of unexpired swap [1] transactions entered into before July 21, 2010 (“pre-enactment swaps”). [2]  The rules require the “reporting party” to a pre-enactment swap to submit to a registered swap data repository (“SDR”) or to the appropriate Commission: (1) a copy of the transaction confirmation in electronic form, if available, or in written form, if there is no electronic copy; and (2) the time the transaction was executed, if available.  The reporting party also must report to the Commissions, on request, any information relating to a pre-enactment swap transaction during the time that the rules are in effect.  This information may include trade data, a description of a swap dealer’s counterparties, the total number of pre-enactment swap transactions entered into by a dealer, and some measure of the frequency and duration of those contracts. 

The reporting party is:

• Where only one counterparty is a swap dealer or major swap participant, that swap dealer or major swap participant;
• Where one counterparty is a swap dealer and the other is a major swap participant, the swap dealer; and
• For all other swaps, the counterparties shall select the reporting party.

The interim final rules are effective immediately as of July 21st even though there are no registered SDRs to accept swap data, the Commissions are not prepared to accept swap data, and the Commissions have not adopted rules governing the registration of swap dealers or major swap participants or the reporting and maintenance of swap data.  Consequently, the reporting requirements require reporting parties to retain all data relating to pre-enactment swaps until such time as reporting can be effected.  To satisfy their reporting obligations, reporting parties must retain all information and documents relating to the terms of a pre-enactment swap to the extent and in the form as they presently exist.  Relevant documents include, but are not limited to, any information necessary to identify and value the swap, the date and time of execution, pricing information, whether the swap was accepted for clearing by any clearing organization, any modification to the terms of the swap, and the final confirmation.

 

Heather L. Traeger
Associate Counsel

endnotes

 [1] In this memorandum, the term “swap” includes security-based swaps.

 [2] See CFTC Release – Interim Final Rule for Reporting Pre-enactment Swap Transactions, 75 FR 63080 (October 14, 2010), available at  http://www.cftc.gov/LawRegulation/FederalRegister/ProposedRules/2010-25325.html and SEC Release No. 34-63094 (October 13, 2010), available at http://www.sec.gov/rules/interim/2010/34-63094.pdf.  The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted on July 21, 2010.  The interim final rules do not apply to swaps entered into after July 21, 2010.