On September 17, 2020, the Commodity Futures Trading Commission ("CFTC") unanimously approved three final rules1 to overhaul its regulations for real-time public reporting, swap data reporting, and data validation, verification, and correction (collectively, "Final Rules").2 Key highlights of the Final Rules include:
Real-Time Public Reporting
- Block Trade Dissemination Delays. Contrary to a proposal to adopt a single block trade public dissemination delay of 48 hours after execution, the CFTC retained the existing delays, which for most transactions range from 15 minutes to 2 hours after execution, depending on the transaction type.
- Adjustment to Minimum Block Sizes and Notional Cap Sizes. Consistent with its proposal and provisions of its existing rules that it had not previously implemented, the CFTC will adjust its minimum block sizes (above which a trade is eligible for a public dissemination delay and an exception from certain trade execution requirements) and notional cap sizes (above which the full notional amount of a trade is not publicly disseminated) using a methodology that will, for many types of swaps, significantly increase those sizes relative to the status quo, making fewer swaps eligible. Related to this change, the CFTC revised the swaps categories that govern how minimum block sizes and notional cap sizes apply to different types of swaps.
- Post-Priced Swaps. The CFTC will permit the reporting counterparty to delay reporting an off-facility swap for which the price is not determined as of the time of execution until the earlier of the price being determined and 11:59:59 pm eastern time on the execution date.
- Prime Brokerage Swaps. The CFTC codified previously expired no-action relief from real-time public reporting requirements for the "mirror swap" in a prime brokerage agency arrangement while also requiring the "trigger swap" in such an arrangement to be reported as soon as technologically practicable ("ASATP") after execution.
Swap Data Reporting
- Swap Creation Data
Reporting. The CFTC made several changes to swap
creation data reporting requirements, including:
- combining primary economic terms ("PET") and confirmation data into a single set of creation data reporting requirements;
- extending reporting deadlines (e.g., from ASATP to T+1 following the execution date for swaps where a swap dealer ("SD") is a party); and
- eliminating the requirement to report certain information relating to "international swaps" reported to non-U.S. trade repositories ("TRs").
- Continuation Data
Reporting. The CFTC also made several change to
continuation data reporting requirements, including:
- eliminating the state data reporting method, leaving only life cycle data as a permissible continuation data reporting method;
- mandating that SDs and major swap participants ("MSPs") report collateral and margin data in addition to the valuation data that they currently report; and
- eliminating valuation data reporting requirements for reporting counterparties that are not SDs, MSPs, or derivatives clearing organizations ("DCOs").
- Transaction Identifiers. In lieu of the existing unique swap identifier ("USI"), the CFTC adopted a requirement to identify swaps using unique transaction identifiers ("UTIs"), consistent with international standards.
- Counterparty Identifiers. The CFTC adopted a requirement for each financial entity reporting counterparty to obtain a Legal Entity Identifier ("LEI") for a counterparty to the extent such counterparty does not have an LEI but is eligible to receive one (or report such counterparty to the CFTC, if this is not feasible) and require a non-reporting counterparty to obtain an LEI. The Final Rules also require SDs, MSPs, swap execution facilities ("SEFs"), designated contract markets ("DCMs"), DCOs, and SDRs to renew their LEIs annually.
- Revised Data Elements. The CFTC overhauled the data elements set forth in Appendix 1 to Part 45 to align them with technical guidance contained in international standards. The Appendix will be accompanied by technical specifications for the form and manner for reporting the swap data elements. The data elements that are required to be publicly disseminated pursuant to Part 43 will be a subset of those required to be reported pursuant to Part 45.
Validation, Verification, and Correction of Swap Data
- Validation. The CFTC codified best practices regarding data validation.
- Verification. The CFTC adopted a new requirement for a reporting counterparty to verify the accuracy and completeness for all of its open swaps at least once every 30 days, using a verification method that the Final Rules require SDRs to provide.
- Correction. The CFTC will require any SEF, DCM, or reporting counterparty to correct errors in swap data within 7 business days (or else notify CFTC staff) for both open swaps and swaps terminated or expired within applicable record retention periods.
- The compliance date for the Final Rules will be 18 months from the date of Federal Register publication, except that changes to minimum block sizes and notional cap sizes will have a compliance date one year after the end of that 18-month transition period. The CFTC confirmed that market participants may implement the Final Rules in advance of the compliance date.
- The CFTC confirmed that it will address the cross-border application of its reporting rules in a separate rulemaking. Until then, existing guidance and noaction relief will continue to apply.
1. See Real-Time Public Reporting Requirements, https://www.cftc.gov/media/4696/votingdraft091720Part43/download ("Part 43 Final Rules"); Swap Data Recordkeeping and Reporting Requirements, https://www.cftc.gov/media/4701/votingdraft091720Part45/download ("Parts 45, 46, and 49 Final Rules"); Amendments to the Commission's Regulations Relating to Certain Swap Data Repository and Data Reporting Requirements, https://www.cftc.gov/media/4706/votingdraft091720Part49/download ("Part 49 Final Rules").
2. The Part 49 Final Rules also made several other changes relating to regulation of swap data repositories ("SDRs"), which we do not address in this Memorandum.
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