Tuesday, January 17, 2017

CFTC swap data proposals align with Congress’s FAST Act

CFTC Chairman Timothy Massad has announced the proposal, by a unanimous vote, of Commodity Exchange Act (CEA) rule amendments making it easier for domestic and foreign regulators to access swap data repository (SDR) swap data.

The Dodd-Frank Act promulgated new CEA Section 21 to create SDRs for housing swap data that other CEA rules required swap dealers (and other parties) to report on from their swaps transactions. CEA Section 21 also mandated that domestic and foreign regulators, to receive this swap data, had to first agree in writing to abide by a CEA Section 8 confidentiality agreement, as well as indemnify the SDR and CTFC for any expenses arising from litigation pertaining to the confidentiality agreement.

When the CFTC, in its preamble to the 2011 final rules adopting the above Dodd-Frank provision, and in a 2012 interpretive statement, expressed concern that domestic and foreign regulators would have trouble complying with the indemnification clause because of their respective home country laws, Congress repealed the indemnification clause in the Fixing America’s Surface Transportation (FAST) Act. But the December 3, 2015-adopted FAST Act retained the confidentiality agreement, specified that “swap” data as opposed to “all” data must be provided to entities, and authorized the CFTC to determine which “other foreign authorities” are appropriate to receive SDR swap data.

Massad expressed his pleasure that with the FAST Act in place, the CTFC can now eliminate the indemnification provision in the current proposal and make other swap and non-swap changes to Part 49 of the CEA rules to conform to Congress’s intent for a seamless process that allows domestic and foreign regulators to access SDR information, while simultaneously protecting confidentiality.

CEA Rules, Part 49. The CFTC would propose the following amendments to Part 49 (RIN 3038-AE44), Sections 49.2, 49.9, 49.17, 49.18 and 49.22:
  • 49.2 adds “other foreign authorities” to the list of foreign regulators identified in Section 49.2(a)(5), consistent with the FAST Act’s amendments to CEA Section 21(c)(7)(E) which include “other foreign regulators” among the entities that the CFTC may consider appropriate to access SDR swap data;
  • 49.9 makes clarifying changes;
  • 49.17 and 49.18 delete all references to the indemnification requirement and/or indemnification agreement, among proposing other similar changes; and
  • 49.22 omits a reference to indemnification, to conform to the corresponding FAST Act amendment to the CEA.
CEA Rules, Parts 3 and 9. Separately, the CFTC voted to propose updates to Parts 3 and 9 (RIN 3038-AE15) of the CEA rules. Part 3 governs registration, and Part 9 contains the rules related to review of exchange disciplinary, access denial, and other adverse actions. The proposed amendments, technical in nature, would integrate existing advisory guidance, incorporate swap execution facilities (CEFs) and update designated contract market (DCM) provisions. The proposed revisions to Part 9 would specifically delete numerous cross-references to previously deleted Part 8 regulations during Dodd-Frank implementation and add citations to applicable parallel provisions in Part 37 for SEFs and Part 38 for DCMs. The proposal would also address the publication of final disciplinary and access denial actions that SEFs and DCMs took on their exchange websites.