The Commodity Futures Trading Commission ("CFTC") has proposed swap reporting and recordkeeping amendments that would, among other things: provide for geographic masking to preserve counterparty anonymity in public reporting once the CFTC designates a unique product identifier ("UPI") system for the "other commodity" asset class; and update the list of swap data elements that must be reported.
Background
On December 12, 2023, the CFTC proposed amendments to its Part 43 and Part 45 swap reporting and recordkeeping regulations ("NPRM"). The NPRM has a 60-day comment period and a proposed compliance date of 365 days after Federal Register publication of final rules.
Principal Amendments
UPI System Designation for Swaps in the "Other Commodity" Asset Class.In a February 2023 order, the CFTC designated a UPI system for all swaps other than those in the "other commodity" asset class. Due to unique features of "other commodity" swaps that can allow counterparty identification using publicly reported, location-related Part 43 data, the CFTC has not yet designated a UPI system for those swaps. Geographic locations, such as delivery points, are often included in the underlying UPI reference data library elements. Without changes to the CFTC's regulations, geographic locations would be potentially publicly available, creating a risk that Part 43 reporting of a UPI code could enable identifying "other commodity" swap counterparties.
Geographic Masking. To mitigate counterparty identification risk while still allowing the CFTC to receive location data, the CFTC proposed "geographic masking"—i.e., the use of a UPI for "other commodity" swaps that uses general, regional identifiers rather than specific geographic details—for Part 43 reporting. The NPRM would require reporting entities to: (i) report a geographically-masked UPI to swap data repositories ("SDRs") for Part 43 purposes and (ii) provide a separate, non-geographically-masked UPI to SDRs for Part 45 purposes. The NPRM includes conforming changes to also protect counterparty anonymity.
UPI System Designation Conditions. The CFTC also proposed an amendment permitting it to conditionally designate a UPI system and to limit, suspend, or withdraw that designation. The CFTC mentioned adherence to international standards as a sample condition. The current regulations permit only unconditional designations. The amendment would apply to UPI system designations for all swap categories.
Changes to Swap Data Elements. Lastly, the CFTC proposed 30 additional data elements in the Clearing, Counterparty, Notional Amounts and Quantities, Price, Product, and Transaction categories based on CDE Technical Guidance and the CFTC's experience. The new CDE-based fields are rooted in international harmonization efforts, and the NPRM includes modifications to existing data element descriptions to further those efforts. The new CFTC-based fields are intended to promote standardization and address data quality concerns. Several of the proposed new data elements are designed to improve the CFTC's ability to conduct its enforcement-related functions, such as benchmark manipulation surveillance and insider trading investigations. The CFTC also proposed a data element to identify swaps with crypto asset underliers; these swaps currently are reported inconsistently using various data elements not specific to crypto asset underliers. CFTC staff published proposed conforming technical specifications contemporaneously with the NPRM and proposed to move certain information from CFTC reporting regulations appendixes to the technical specifications for simplicity and consistency.
This Alert was updated on December 29, 2023.
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