Swap Record Keeping

76666 Federal Register / Vol. 75, No.
236 / Thursday, December 9, 2010 / Proposed Rules
b. The Types of Information BIS Seeks functionality, and (b) the enhancement aspects of current export controls are
Regarding the How Items on the CCL is effected in destinations outside the similarly outside the scope of this
Could Be Tiered above-listed destinations. Information inquiry.
As described above, there are two about the availability of these CCL-listed Comments should be submitted to BIS
primary aspects to determining how an items will help BIS and the other as described in the ADDRESSES section of
relevant U.S. Government agencies this notice by February 7, 2011.
item on the CCL should be tiered—(i)
determine the appropriate tier for these Dated: December 6, 2010.
the degree to which the item provides
items.
a military or intelligence advantage to Public comments should do more Kevin J. Wolf,
the United States and (ii) its availability than merely state that specific items are Assistant Secretary of Commerce for Export
outside of certain groups of countries. available outside the United States or Administration.
this group of countries. Rather, they [FR Doc. 2010–30966 Filed 12–8–10; 8:45 am]
i. Request for Comments on How Items
on the CCL Could Be Described Based should include specific, objectively BILLING CODE 3510–33–P
on the Tier Criteria verifiable information regarding the

availability—that is, the indigenous
BIS seeks public comments on
development, production, or COMMODITY FUTURES TRADING
whether items on the CCL that are
enhancement of the CCL-listed items. COMMISSION
controlled for other than solely Anti-
The types of availability information
Terrorism (AT) or Crime Control (CC) that will be most useful to BIS include, 17 CFR Part 23
reasons provide a ‘‘critical,’’ for example, those set out in EAR
‘‘substantial,’’ or ‘‘significant’’ military or section 768.6, which are evidence that RIN 3038–AC96
intelligence advantage to the United the item is (i) available-in-fact, (ii) from
States, as these terms are defined above. a non-U.S. source, (iii) in sufficient Reporting, Recordkeeping, and Daily
This includes a request for comments on quantity, and (iv) of comparable quality. Trading Records Requirements for
how existing ECCNs, down to the For example, a public comment Swap Dealers and Major Swap
subparagraph level, could be further identifying a CCL-listed item as being Participants
divided so that their descriptions are manufactured outside the above-listed
divided by technical or other objective AGENCY: Commodity Futures Trading
countries should ideally include (a) Commission.
characteristics consistent with the information about its foreign
‘‘critical,’’ ‘‘substantial,’’ and ‘‘significant’’ ACTION: Notice of proposed rulemaking.
manufacturer(s), (b) relevant company
criteria. The U.S. Government will make catalogues or print-outs from company SUMMARY: The Commodity Futures
the final decisions on what types of websites that describe the item’s Trading Commission (Commission or
CCL-listed items are within the scope of technical capabilities and parameters, CFTC) is proposing regulations to
any of the three tiers and, thus, may or and (c) a detailed, documented implement new statutory provisions
may not accept suggestions regarding explanation of why these parameters established under Title VII of the Dodd-
how items should be tiered. equal or exceed those contained in the Frank Wall Street Reform and Consumer
Nonetheless, BIS is interested in the relevant ECCN entry. Company claims Protection Act (Dodd-Frank Act).
public’s comments on the issue of how that are made in catalogues or Web sites Section 731 of the Dodd-Frank Act
CCL-listed items can be described so that are based on accepted international added new sections 4s(f) and (g) to the
that they are distinguished even within standards or other internationally Commodity Exchange Act (CEA), which
ECCNs by tier. recognized certification authorities are set forth reporting and recordkeeping
ii. Request for Comments on the more likely to be useful to BIS than requirements and daily trading records
Availability of Items on the CCL claims that are more difficult to requirements for swap dealers and
objectively verify. major swap participants. The proposed
BIS also seeks public comments on
whether items with the capabilities and 3. Comments That Are Outside the rules would establish the regulatory
characteristics described on the CCL, Scope of This Notice standards for compliance with these
and controlled for other than solely anti- As a separate regulatory initiative, BIS new sections of the CEA.
terrorism (AT) reasons or Crime Control and the State Department are planning DATES: Submit comments on or before
(CC) reasons, are indigenously to coordinate on the parallel publishing February 7, 2011.
developed, produced, or enhanced (a) of proposed rules in the Federal ADDRESSES: You may submit comments,
almost exclusively in the United States Register that would create a definition identified by RIN number 3038–AC96
or (b) in destinations other than of the term ‘‘specially designed’’ that and Reporting, Recordkeeping, and
Argentina, Australia, Austria, Belgium, would be common within the CCL and Daily Trading Records Requirements for
Bulgaria, Canada, Croatia, the Czech that would replace the definition of Swap Dealers and Major Swap
Republic, Denmark, Estonia, Finland, ‘‘specifically designed’’ in the ITAR. Participants, by any of the following
France, Germany, Greece, Hungary, Accordingly, this notice of inquiry does methods:
Iceland, Ireland, Italy, Japan, Latvia, not solicit comments pertaining to the • Agency Web site, via its Comments
Lithuania, Luxembourg, Netherlands, use of this term. In addition, this notice Online process: http://
New Zealand, Norway, Poland, does not seek public comment on comments.cftc.gov. Follow the
Portugal, Romania, Slovakia, Slovenia, whether an item should or should not instructions for submitting comments
erowe on DSK5CLS3C1PROD with PROPOSALS-1
South Korea, Spain, Sweden, be controlled on the CCL, whether the through the Web site.
Switzerland, Turkey, Ukraine, or the United States should ask any of the four • Mail: David A. Stawick, Secretary of
United Kingdom. For purposes of this export control regimes to change the the Commission, Commodity Futures
notice, ‘‘enhanced’’ means that (a) the controls on an item, or whether an item Trading Commission, Three Lafayette
basic characteristics, such as accuracy, should be controlled differently for Centre, 1155 21st Street, NW.,
capability, performance, or productivity export and reexport to different Washington, DC 20581.
of the item listed on the CCL are countries. General comments on the • Hand Delivery/Courier: Same as
improved to provide greater overall reform process or the other mail above.
VerDate Mar<15>2010 14:53 Dec 08, 2010 Jkt 223001 PO 00000 Frm 00020 Fmt 4702 Sfmt 4702 E:\FR\FM\09DEP1.SGM 09DEP1
Federal Register / Vol. 75, No. 236 / Thursday, December 9, 2010 / Proposed Rules 76667
• Federal eRulemaking Portal: http:// regulation of swap dealers and major authority granted under sections
www.regulations.gov. Follow the swap participants; (2) imposing clearing 4s(h)(1)(D), 4s(h)(3)(D), 4s(f), 4s(g), and
instructions for submitting comments. and trade execution requirements on 8a(5) of the CEA.5 The Dodd-Frank Act
Please submit your comments using standardized derivative products; (3) requires the Commission to promulgate
only one method. creating rigorous recordkeeping and these provisions by July 15, 2011.
All comments must be submitted in real-time reporting regimes; and (4) The proposed regulations reflect
English, or if not, accompanied by an enhancing the Commission’s consultation with staff of the following
English translation. Comments will be rulemaking and enforcement authorities agencies: (i) The Securities and
posted as received to http:// with respect to all registered entities Exchange Commission; (ii) the Board of
www.cftc.gov. You should submit only and intermediaries subject to the Governors of the Federal Reserve
information that you wish to make Commission’s oversight. System; (iii) the Office of the
available publicly. If you wish the Section 731 of the Dodd-Frank Act Comptroller of the Currency; and
Commission to consider information amends the CEA by adding a new (iv) the Federal Deposit Insurance
that may be exempt from disclosure Section 4s, which sets forth a number of Corporation. Staff from each of these
under the Freedom of Information Act, requirements for swap dealers and agencies has had the opportunity to
a petition for confidential treatment of major swap participants. Specifically, provide oral and/or written comments
the exempt information may be sections 4s(f) and 4s(g) of the CEA to the proposal, and the proposed
submitted according to the established establish reporting and recordkeeping regulations incorporate elements of the
procedures in § 145.9 of the requirements and daily trading records comments provided.
Commissions regulations, 17 CFR 145.9. requirements for swap dealers and The Commission requests comment
The Commission reserves the right, major swap participants. on all aspects of the proposed
but shall have no obligation, to review, Section 4s(f)(1) requires swap dealers regulations, as well as comment on the
pre-screen, filter, redact, refuse or and major swap participants to ‘‘make specific provisions and issues
remove any or all of your submission such reports as are required by the highlighted in the discussion below.
from http://www.cftc.gov that it may Commission by rule or regulation The Commission further requests
deem to be inappropriate for regarding the transactions and positions comment on an appropriate effective
publication, such as obscene language. and financial condition of the registered date for final regulations, including
All submissions that have been redacted swap dealer or major swap comment on whether it would be
or removed that contain comments on participant.’’ 4 Under sections appropriate to have staggered or delayed
the merits of the rulemaking will be 4s(f)(1)(B)(i) and (ii), the Commission is effective dates for some regulations
retained in the public comment file and authorized to prescribe the books and based on the nature or characteristics of
will be considered as required under the records requirements of ‘‘all activities the activities or entities to which they
Administrative Procedure Act and other related to the business of swap dealers apply. Moreover, the Commission
applicable laws, and may be accessible or major swap participants,’’ regardless recognizes that there will be differences
under the Freedom of Information Act. of whether or not the entity has a in the size and scope of the business of
FOR FURTHER INFORMATION CONTACT: prudential regulator. All books and particular swap dealers and major swap
Sarah E. Josephson, Associate Director, records shall be open to inspection and participants. Therefore, comments are
202–418–5684, sjosephson@cftc.gov; examination by any representative of solicited on whether certain provisions
Frank N. Fisanich, Special Counsel, the Commission, and under section of the proposed regulations should be
202–418–5949, ffisanich@cftc.gov; or 4s(f)(1)(D), books and records relating to modified or adjusted to reflect the
Christopher Hower, Attorney Advisor, security-based swap agreements also differences among swap dealers and
202–418–6703, chower@cftc.gov; must be open to inspection and major swap participants.
Division of Clearing and Intermediary examination by the Securities and
Oversight, Commodity Futures Trading II. Proposed Regulations
Exchange Commission.
Commission, Three Lafayette Centre, Section 4s(g)(1) requires that swap A. General Records Requirements
1155 21st Street, NW., Washington, DC dealers and major swap participants Section 4s(f)(1)(B) of the CEA requires
20581. ‘‘maintain daily trading records of the registered swap dealers and major swap
SUPPLEMENTARY INFORMATION: swaps of the registered swap dealer and participants to keep records of all
major swap participant and all related activities related to their business.
I. Background
records (including related cash and Section 4s(f)(2) directs the Commission
On July 21, 2010, President Obama forward transactions) and recorded to adopt rules governing recordkeeping
signed the Dodd-Frank Act.1 Title VII of communications, including electronic for swap dealers and major swap
the Dodd-Frank Act 2 amended the mail, instant messages, and recordings participants.
Commodity Exchange Act (CEA) 3 to of telephone calls.’’ Section 4s(g)(3) Proposed § 23.201 sets forth the
establish a comprehensive regulatory requires that daily trading records for records swap dealers and major swap
framework to reduce risk, increase each swap transaction be identifiable by participants must maintain. The records
transparency, and promote market counterparty, and section 4s(g)(4) required under the proposed rule would
integrity within the financial system by, specifies that swap dealers and major include full and complete swap
among other things: (1) Providing for the swap participants maintain a ‘‘complete transaction information, including all
registration and comprehensive audit trail for conducting documents on which swap information
comprehensive and accurate trade is originally recorded. Under proposed

1 See Dodd-Frank Wall Street Reform and
reconstructions.’’ § 23.201(a)(1), such records would be
Consumer Protection Act, Public Law 111–203, 124
Stat. 1376 (2010). The text of the Dodd-Frank Act The Commission would adopt the required to be maintained in a manner
may be accessed at http://www.cftc.gov/ regulations discussed below pursuant to
LawRegulation/OTCDERIVATIVES/index.htm. 5 Section 8a(5) of the CEA authorizes the
2 Pursuant to Section 701 of the Dodd-Frank Act, 4 Recordkeeping related to the swap dealer’s or Commission to promulgate such regulations as, in
Title VII may be cited as the ‘‘Wall Street major swap participant’s financial condition reports the judgment of the Commission, are reasonably
Transparency and Accountability Act of 2010.’’ will be prescribed in separate rulemaking proposals necessary to effectuate any of the provisions or to
3 7 U.S.C. 1 et seq. and are not included in the proposed rules below. accomplish any of the purposes of the CEA.
76668 Federal Register / Vol. 75, No. 236 / Thursday, December 9, 2010 / Proposed Rules
that is identifiable and searchable by Finally, under proposed § 23.201(d) comprehensive and accurate trade
transaction and by counterparty. The swap dealers and major swap reconstructions.’’
rule would require retention of all participants would be required to Proposed § 23.202 would prescribe
documents customarily generated in maintain records of information daily trading record requirements,
accordance with market practice that required to be reported on a real-time which would include trade information
demonstrate the existence and nature of public basis and records of information related to pre-execution, execution, and
the transaction. relating to large notional swaps in post-execution data. Proposed
Proposed § 23.201(a)(2) would require accordance with proposed part 43 and § 23.202(a) would require swap dealers
retention of records of each position CEA section 2(a)(13).8 Specifically, with
and major swap participants to ensure
held by the swap dealer or major swap regard to large notional swaps, swap
(1) that they preserve all information
participant, identified by product and dealers and major swap participants
necessary to conduct a comprehensive
counterparty. Position records would be should retain a record of the rationale
and accurate trade reconstruction for
required to be linked to transaction for determining that the swap is a large
each swap, and (2) that they maintain
records in a manner that permitted notional swap in accordance with new
identification of the transaction that part 43 of the Commission regulations. each transaction record as a separate
established the position. Position Additionally, for the purposes of real- electronic file identifiable and
information would be retained in time reporting under part 43, if less searchable by transaction and
accordance with Commission specific information relating to a counterparty.
regulations under part 45, which required data field is reported to protect Proposed § 23.202(a)(1) would require
provides for unique product identifiers the identities of the parties to a swap registrants to keep pre-execution trade
and unique counterparty identifiers. (e.g., underlying asset or tenor), a swap information. This would include
Proposed § 23.201(a)(3) would require dealer or major swap participant must records of all oral and written
swap dealers and major swap retain a record of the rationale for why communications that lead to the
participants to maintain records for reporting less specific information is execution of a swap, whether
transactions executed on a swap necessary to protect the anonymity of communicated by telephone, voicemail,
execution facility (SEF) or designated the parties to the swap. facsimile, instant messaging, chat
contract market (DCM) or cleared by a The Commission requests comment rooms, electronic mail, mobile device,
derivatives clearing organization (DCO). on all aspects of proposed § 23.201. In or other digital or electronic media. This
It should be noted, that for transactions particular, the Commission solicits rule would require swap dealers and
that are executed on a SEF or DCM, or comment on the following questions: major swap participants to maintain
cleared on a DCO, many of the • Should the Commission provide recordings of telephone calls and other
requirements of the daily trading record greater specificity on the requirement communications created in the normal
rule, described below, would be easily that transaction records be kept in a course of its business, but would not
achieved through procedures form and manner identifiable and establish an affirmative new
established by the SEF, DCM, or DCO searchable by transaction and requirement to create recordings of all
(e.g., confirming the transaction, valuing counterparty? telephone conversations if the complete
the transaction, or margining the audit trail requirement can be met
• Are there additional types of
position). through other means, such as electronic
records that should be required to be
Proposed § 23.201(b) would require messaging or trading.
kept by swap dealers and major swap
that swap dealers and major swap
participants? For example, should drafts Significant technological
participants keep basic business
of documents be kept? advancements in recent years,
records, including, among other things,
particularly with respect to the cost of
minutes from meetings of the entity’s B. Daily Trading Records
capturing and retaining copies of
governing body, organizational charts,
Section 4s(g)(1) of the CEA requires electronic material, including telephone
and documentation of audits conducted.
that swap dealers and major swap communications, have made the
Additionally, certain financial records,6
participants maintain daily trading prospect of establishing recordkeeping
records of complaints 7 against
records of their swaps and ‘‘all related requirements for digital and electronic
personnel, and marketing materials
records (including related cash and communications more economically
would be required to be kept. Under
forward transactions).’’ This section also feasible and systemically prudent.
proposed § 23.201(c), swap dealers and
requires that swap dealers and major Evidence of these trends was examined
major swap participants would be
swap participants maintain recorded in March 2008 by the United Kingdom’s
required to maintain records of
communications, including electronic Financial Services Authority (‘‘FSA’’),
information required to be submitted to
mail, instant messages, and recordings which studied the issue of mandating
a swap data repository.
of telephone calls. Section 4s(g)(2) the recording and retention of voice
6 Financial condition reporting, including
provides that the daily trading records conversations and electronic
reporting for compliance with capital rules, will be
shall include such information as the communications.9 The FSA issued a
proposed in a separate rulemaking. Commission shall require by rule or Policy Statement detailing its findings
7 A complaint is defined in proposed rule 23.200 regulation. Section 4s(g)(3) requires that and ultimately implemented rules
as any formal or informal complaint, grievance, daily trading records for each swap relating to the recording and retention of
criticism, or concern communicated to the swap transaction be identifiable by such communications, including a
dealer or major swap participant in any format

relating to, arising from, or in connection with, any counterparty, and section 4s(g)(4) recent determination that all financial
trading conduct or behavior or with the swap dealer specifies that swap dealers and major service firms will be required to record
or major swap participant’s performance (or failure swap participants maintain a ‘‘complete any relevant communication by
to perform) any of its regulatory obligations, and audit trail for conducting
includes any and all observations, comments,
remarks, interpretations, clarifications, notes, and 9 Financial Services Authority, ‘‘Policy Statement:
examinations as to such conduct or behavior 8 The proposed real-time reporting rules under Telephone Recording: recording of voice
communicated or documented by the complainant, part 43 are available on the Commission’s Web site conversations and electronic communications,’’
swap dealer, or major swap participant. at http://www.cftc.gov. (March 2008).
employees on their work cell phones.10 directly with the existence of high- same requirements as swaps. The
Similar rules that mandate recording of quality recordings of voice Commission believes that requiring one
certain voice and/or telephone communications and of electronic approach to recordkeeping will be
conversations have been promulgated communications between the persons simpler for swap dealers and major
by the Hong Kong Securities and involved. Conversely, the Commission’s swap participants to implement and
Futures Commission 11 and by the enforcement capabilities have been will provide the Commission with
Autorité des Marchés Financiers in limited in cases where such voice information necessary for its regulatory
France,12 and have been recommended recordings and copies of electronic oversight.
by the International Organization of communications were not available. The Commission requests comment
Securities Commissions (IOSCO).13 Accordingly, the Commission is on all aspects of proposed § 23.202.
While technological advancements proposing § 23.202(a)(1), which would With respect to records regarding
have made capturing and retaining such require swap dealers and major swap related cash and forward transactions,
material more economically feasible, participants to maintain records of all the Commission solicits comment upon
modern technologies likewise have communications provided or received whether the Commission has provided
altered the methods by which market concerning information that leads to the sufficient clarity concerning what type
participants conduct their business, execution of a swap, whether conveyed of information would be required to be
especially the means through which by telephone, voicemail, facsimile, retained. The Commission also requests
such persons communicate solicitations, instant messaging, chat rooms, comment on whether it should require
bids, offers, orders, instructions, trading, electronic mail, mobile device, or other swap dealers and major swap
and prices. digital or electronic media. As noted participants to keep records related to
On February 5, 2009, the above, the proposed § 23.202(a) would high frequency trading, and what the
Commission’s Division of Market require that each recorded nature of those records should be.
Oversight (DMO) issued an advisory, communication be maintained as a
which made clear that the existing separate electronic file identifiable and C. Retention and Inspection of Records
language of § 1.35 of the Commission’s searchable by transaction and Proposed § 23.203 prescribes the form
regulations ‘‘appl[ies] to records that are counterparty. and manner in which records shall be
created or retained in an electronic The Commission solicits comments retained, and prescribes the period of
format, including e-mail, instant on the potential costs and effects of time for which maintenance of records
messages, and other forms of requiring that all pre-execution is required. Generally speaking, § 23.203
communication created or transmitted communications be recorded. corresponds to the recordkeeping
electronically for all trading.’’ 14 The Additionally, the Commission requests requirements of § 1.31 insofar as records
advisory, which specifically addresses comment on whether it should require are required to be kept for a period of
the Commission’s recordkeeping a record of the source of quotations, at least 5 years, and shall be readily
requirements as applicable to futures including the source of any input if the accessible for the first two years of that
commission merchants, introducing quotation is generated by a formula or period.
brokers, and DCM members, states that model. Comments also are requested Proposed § 23.203(a) would require
‘‘[t]he Commission’s recordkeeping regarding whether the retention period that records be kept at the principal
regulations, by their terms, do not for pre-execution communications place of business of the swap dealer or
distinguish between whatever medium should be shorter than the retention major swap participant. If the principal
is used to record the information period applicable to other business place of business is outside of the
covered by the regulations, including records. United States, then the swap dealer or
e-mails, instant messages, and any other Proposed § 23.202(a)(2) would require major swap participant must provide
form of communication created or the recording of execution information, the requested records at a place
transmitted electronically.’’ including all terms of each swap and the designated by a representative of the
It is also noteworthy that the date and time, to the nearest minute, Commission within 72 hours of
Commission’s enforcement success in that the swap was executed. Post- receiving the request.
cases involving market manipulation execution data, such as records of all Proposed § 23.203(b) would require
and false reporting often has correlated confirmations, reconciliations, and that all records be maintained in
margining of swaps would be required accordance with § 1.31 of the
10 Julia Werdigier, ‘‘Britain to Tape Traders’ Cell under proposed § 23.202(a)(3). The Commission’s regulations, except that
Phones to Fight Fraud,’’ New York Times (Nov. 12, collateralization of risk exposure records of, or related to, each swap
2010). resulting from the business of the swap
11 Code of Conduct for Persons Licensed by or transaction be retained until the
Registered with the Securities and Futures
dealer or major swap participant would termination, maturity, expiration,
Commission para. 3.9 (2010) (H.K.). be recorded under § 23.202(a)(4). transfer, assignment, or novation of the
12 General Regulation of the Autorité des Marchés Proposed § 23.202(b) would require swap, and for five years after such time.
Financiers art. 313–51 (2010) (Fr.). that swap dealers and major swap In other words, the swap dealer or major
13 Press Release, International Organization of
participants retain information of cash swap participant must maintain records
Securities Commissions, ‘‘IOSCO Publishes or forward transactions that are related
Recommendations to Enhance Commodity Futures for the life of the swap or the period in
Markets Oversight,’’ (Mar. 5, 2009), http:// to swaps as required by section 4s(g)(1). which the entity holds the position on
www.iosco.org/news/pdf/IOSCONEWS137.pdf. The Proposed § 23.200 defines a related cash its books (whichever is shorter), plus
IOSCO members on the committee formulating the or forward transaction as ‘‘a purchase or five additional years. Additionally,
recommendations included Brazil, Canada (Ontario sale for immediate or deferred physical
and Quebec), Dubai, France, Germany, Hong Kong, records of any swap data must be
Italy, Japan, Norway, Switzerland, the United shipment or delivery of an asset related maintained in accordance with
Kingdom, and the United States. to a swap where the swap and the requirements under part 45, which was
14 A copy of the advisory, titled ‘‘Advisory for related cash or forward transaction are recently proposed by the Commission.15
Futures Commission Merchants, Introducing used to hedge, mitigate the risk of, or
Brokers, and Members of a Contract Market over
Compliance with Recordkeeping Requirements,’’ is
offset one another.’’ The recordkeeping 15 The proposed rules under part 45 are available
available on the Commission’s Web site at http:// requirements for related cash and on the Commission’s Web site at http://
www.cftc.gov. forward transactions generally track the www.cftc.gov.
In addition to any other comments on determination was based, in part, upon the statutory mandate. Accordingly, the
retention and inspection requirements, the obligation of futures commission Chairman, on behalf of the Commission,
the Commission requests comment on merchants to meet the minimum hereby certifies pursuant to 5 U.S.C.
the approach it has proposed for the financial requirements established by 605(b) that the proposed rules will not
retention of swap data. the Commission to enhance the have a significant economic impact on
protection of customers’ segregated a substantial number of small entities.
D. Reports to Swap Data Repositories
funds and protect the financial
and Real-time Public Reporting B. Paperwork Reduction Act
condition of futures commission
Section 4(s)(f)(1)(A) of the CEA merchants generally.20 Like futures The Paperwork Reduction Act
requires each registered swap dealer and commission merchants, swap dealers (PRA) 22 imposes certain requirements
major swap participant to make such will be subject to minimum capital and on Federal agencies (including the
reports as are required by the margin requirements and are expected Commission) in connection with their
Commission by rule or regulation to comprise the largest global financial conducting or sponsoring any collection
regarding the transactions and positions firms. In addition, the Commission is of information as defined by the PRA.
and financial condition of the registered required to exempt from swap dealer This proposed rulemaking would result
swap dealer or major swap participant. designation any entities that engage in in new collection of information
Proposed § 23.204 implements the a de minimis level of swaps dealing in requirements within the meaning of the
reporting requirements of Commission connection with transactions with or on PRA. The Commission therefore is
rules to be prescribed under CEA behalf of customers. The Commission submitting this proposal to the Office of
section 4r(a) related to reporting of anticipates that this exemption would Management and Budget (OMB) for
swaps to a swap data repository. exclude small entities from registration. review in accordance with 44 U.S.C.
Proposed § 23.205 implements the For essentially the same reasons that 3507(d) and 5 CFR 1320.11. The title for
reporting requirements of Commission futures commission merchants have this collection of information is
rules to be prescribed under CEA previously been determined not to be ‘‘Reporting, Recordkeeping, and Daily
section 2(a)(13) related to real-time small entities and in light of the Trading Records Requirements for Swap
public reporting of swap transactions exemption from the definition of swap Dealers and Major Swap Participants.’’
and pricing data.16 Each of the reports dealer for those engaging in a de An agency may not conduct or sponsor,
required under the proposed rules minimus level of swap dealing, the and a person is not required to respond
would assist the Commission to monitor Commission is hereby proposing that to, a collection of information unless it
the swap markets and the operations of swap dealers not be considered ‘‘small displays a currently valid control
swap dealers and major swap entities’’ for purposes of the RFA for this number. The OMB has not yet assigned
participants and to enforce their rulemaking. this collection a control number.
compliance with the Commission’s The Commission also has determined The collection of information under
rules. previously that large traders are not these proposed regulations is necessary
‘‘small entities’’ for RFA purposes.21 In to implement certain provisions of the
III. Related Matters
that determination, the Commission CEA, as amended by the Dodd-Frank
A. Regulatory Flexibility Act considered that a large trading position Act. Specifically, it is essential to
The Regulatory Flexibility Act was indicative of the size of the ensuring that each swap dealer and
(RFA) 17 requires that agencies consider business. Major swap participants, by major swap participant maintains
whether the rules they propose will statutory definition, maintain records of all the activities related to its
have a significant economic impact on substantial positions in swaps or business including, but not limited to,
a substantial number of small entities. maintain outstanding swap positions daily trading records and transaction
The Commission previously has that create substantial counterparty reporting as required by section 4s(f) of
established certain definitions of ‘‘small exposure that could have serious the Act. The recordkeeping requirement
entities’’ to be used in evaluating the adverse effects on the financial stability also is necessary for a complete audit
impact of its regulations on small of the United States banking system or trail to conduct comprehensive and
entities in accordance with the RFA.18 financial markets. Accordingly, for accurate trade reconstructions.
The proposed rules would affect swap purposes of the RFA for this Commission staff would use the
dealers and major swap participants. rulemaking, the Commission is hereby information required to be preserved or
Swap dealers and major swap proposing that major swap participants reported when conducting the
participants are new categories of not be considered ‘‘small entities’’ for Commission’s examination and
registrants. Accordingly, the essentially the same reasons that large oversight program with respect to the
Commission has not previously traders have previously been applicable registrants.
addressed the question of whether such determined not to be small entities. If the proposed regulations are
persons are, in fact, small entities for Moreover, the Commission is carrying adopted, responses to this collection of
purposes of the RFA. The Commission out Congressional mandates by information would be mandatory. The
previously has determined, however, proposing this regulation. Specifically, Commission will protect proprietary
that futures commission merchants are the Commission is proposing these information according to the Freedom of
not small entities for purposes of the regulations to comply with the Dodd- Information Act and 17 CFR part 145,
RFA.19 The Commission’s Frank Act, the aim of which is to reduce ‘‘Commission Records and Information.’’
systemic risks presented by swap In addition, section 8(a)(1) of the CEA
16 In a recent release of proposed Part 43 and dealers and swap market participants strictly prohibits the Commission,
pursuant to CEA section 2(a)(13)(A), reporting through comprehensive regulation. The unless specifically authorized by the
parties, for the purposes of real-time public Commission does not believe that there CEA, from making public ‘‘data and
reporting, will be obligated to report certain data
fields relating to swaps ‘‘as soon as technologically are regulatory alternatives to those being information that would separately
practicable’’ following the execution of a swap. proposed that would be consistent with disclose the business transactions or
17 5 U.S.C. 601 et seq. market positions of any person and
18 47 FR 18618, Apr. 30, 1982. 20 Id.
19 Id. at 18619. 21 Id. at 18620. 22 44 U.S.C. 3501 et seq.
trade secrets or names of customers.’’ time required to input any unique proposed § 23.204, to engage in real
The Commission is also required to transaction terms into electronic time public reporting of swap
protect certain information contained in recordkeeping systems. The transaction and pricing data in
a government system of records Commission believes that registrants accordance with proposed § 23.205, and
according to the Privacy Act of 1974, will expend an additional 63 hours per to maintain the electronic systems and
5 U.S.C. 552a. year compiling daily records of their procedures necessary to report
positions, identified by product and transactions and data in the manner
1. Information Provided by Reporting
counterparty, as required by proposed required by the regulations would result
Entities/Persons
§ 23.201. in any additional hourly burdens or
Swap dealers and major swap The Commission estimates that each costs to swap dealers and major swap
participants would be required to swap dealer and major swap participant participants other than those set forth in
comply with the recordkeeping will spend 5 hours per year compiling the recently proposed part 45
requirements of §§ 23.201, 23.202, and the complaint records required by the regulations for swap data recordkeeping
23.203 and the reporting requirements proposed regulations. This and reporting 23 and in the recently
of §§ 23.204 and 23.205. The proposed approximation is based on the belief proposed part 43 regulations governing
regulations generally would require that the affected registrants primarily real-time public reporting of swap
swap dealers and major swap engage in principal to principal transaction data 24 promulgated as part
participants to keep transaction and transactions, which are less likely to of the Commission’s implementation of
position records of their swaps generate complaints than transactions the Dodd-Frank Act.
(including daily trading records of conducted on an agency basis. It also It is not currently known how many
swaps and related cash and forward assumes that most registrants possess swap dealers and major swap
transactions); to maintain specified pre-existing complaint recordkeeping participants will become subject to
business records (including records systems and thus, any hourly burden these rules, and this will not be known
related to the swap dealer’s or major imposed would be limited to the time to the Commission until the registration
swap participant’s governance, financial required to document and retain the requirements for these entities become
status, and complaints); to report certain specific complaint information effective after July 16, 2011, the date on
swap transaction data to swap data mandated by the rule that is not already which the Dodd-Frank Act becomes
repositories; to satisfy certain real time kept. Finally, the Commission estimates effective. The Commission believes that
public reporting requirements; and to the hourly burden associated with there are likely to be approximately 200
maintain records of information compliance with the marketing swap dealers and 50 major swap
reported to swap data repositories and communication recordkeeping participants that would be required to
for real time public reporting purposes. requirement to be approximately 12 register with the Commission. It has
The annual burden associated with hours per year. The Commission expects chosen to take a more conservative
these proposed regulations is estimated that swap dealers and market approach for PRA purposes, however,
to be 2,096 hours, at an annual cost of participants presently maintain records and has estimated that there will be a
$209,600 for each swap dealer and of most of their marketing presentations, combined number of 300 swap dealers
major swap participant. Burden means advertisements, sales literature, and and major swap participants who will
the total time, effort, or financial marketing communications as part of be required to comply with the
resources expended by persons to their customary business practices and, recordkeeping and reporting obligations
generate, maintain, retain, disclose, or thus, any new hourly burden is limited imposed by the proposed regulations.
provide information to or for a federal to the requirement to maintain a record The Commission estimated the number
agency. This hourly burden primarily of compliance with relevant marketing of affected entities based on industry
results from the recordkeeping regulations. data.
obligations that would be imposed by The Commission believes that several According to recent Bureau of Labor
proposed §§ 23.201 and 23.202. aspects of the rule would not result in Statistics, the mean hourly wage of an
Specifically, the Commission any additional hourly burdens upon
anticipates that swap dealers and major affected registrants. For example, the 23 The proposed rules are available on the
swap participants will spend required records of transactions Commission’s Web site at http://www.cftc.gov. The
approximately eight hours per trading executed on a swap execution facility or Commission has estimated the average hour burden
day (2,016 hours per year) compiling incurred by swap dealers and major swap
designated contract market or participants in connection with reporting to swap
and maintaining transaction records, transactions cleared by a designated data repositories to be 2,080 hours. This estimate
including daily trading records. The clearing organization would be the same was based upon the assumption that a significant
Commission believes that swap dealers transaction and daily trading records number of swap dealers and major swap
and major swap participants already participants would dedicate the equivalent of at
accounted for previously and, therefore, least one full time employee to ensuring
maintain the vast majority of the have not been assigned an extra hourly compliance with the relevant reporting obligations
required transaction records burden. The Commission also expects (2,080 hours = 52 weeks × 5 days × 8 hours). The
(particularly execution and post- that swap dealers and major swap Commission noted that it believed this assumption
execution records) as part of their to be reasonable due to the volume of swap
participants currently make and/or transactions to be processed by such entities, the
customary and usual business practices maintain their meeting minutes; information required by proposed regulations and
and that any additional expenditure organizational charts; the resumes of the frequency with which reports would be made.
generally would be limited to the costs relevant managers; records of their The Commission also estimated the cost of the
associated with developing and obligation to report a unique swap identifier to

assets, liabilities, income, and expenses; other registered entities and swap participants to be
preserving certain pre-execution data and other governance or financial 6 annual burden hours per entity and the estimated
and communications set forth in records in the ordinary course of their cost of reporting their ownership and affiliation
proposed § 23.202, which currently may businesses. information into a confidential database to be
not be kept by affected registrants (for Finally, the Commission does not 2 hours per entity.
24 The Commission has estimated that swap
example, records of oral and written anticipate that the requirements to dealers and major swap participants will incur
communications and records related to report swap transactions to swap data 2,080 annual burden hours in connection with the
quotes, bids, and offers) as well as the repositories in accordance with real-time reporting requirements.
employee under occupation code 11– Estimated aggregate number of burdens upon affected registrants and
3031, ‘‘Financial Managers,’’ (which responses: 3,600 [300 registrants × 12 the appropriateness of the burden hours
includes operations managers) that is monthly compilations]. attributed to other recordkeeping
employed by the ‘‘Securities and Estimated annual burden per obligations.27 Pursuant to 44 U.S.C.
Commodity Contracts Intermediation registrant: 12 hours [1 hour × 12 3506(c)(2)(B), the Commission solicits
and Brokerage’’ industry is $74.41.25 months]. comments in order to: (i) Evaluate
Because swap dealers and major swap Estimated aggregated annual hour whether the proposed collection of
participants include large financial burden: 3,600 [300 registrants × 12 information is necessary for the proper
institutions whose operations monthly compilations]. performance of the functions of the
management employees’ salaries may Based upon the above, the aggregate Commission, including whether the
exceed the mean wage, the Commission hour burden cost for all registrants is information will have practical utility;
has estimated the cost burden of these 628,800 burden hours and $62,880,000 (ii) evaluate the accuracy of the
proposed regulations based upon an [628,800 × $100 per hour]. Commission’s estimate of the burden of
average salary of $100 per hour. In addition to the per hour burden the proposed collection of information;
Accordingly, the estimated hour discussed above, the Commission (iii) determine whether there are ways
burden was calculated as follows: anticipates that swap dealers and major to enhance the quality, utility, and
swap participants may incur certain clarity of the information to be
Recordkeeping: Transaction Records
start-up costs in connection with the
(including Daily Trading Records) collected; and (iv) minimize the burden
proposed recordkeeping obligations.
Number of registrants: 300. of the collection of information on those
Such costs would include the
Frequency of collection: Daily. who are to respond, including through
expenditures related to developing and
Estimated number of responses per the use of automated collection
installing new technology or re-
registrant: 252 [252 trading days]. techniques or other forms of information
programming or updating existing
Estimated aggregate number of technology.
recordkeeping technology and systems
responses: 75,600 [300 registrants × 252 Comments may be submitted directly
to enable the swap dealer or major swap
trading days]. to the Office of Information and
participant to collect, capture, process,
Estimated annual burden per Regulatory Affairs, by fax at (202) 395–
maintain, and re-produce any newly
registrant: 2,016 hours [252 trading days 6566 or by e-mail at
required records. The Commission
× 8 hours per trading day]. OIRAsubmissions@omb.eop.gov. Please
believes that swap dealers and major
Estimated aggregate annual hour swap participants generally could adapt provide the Commission with a copy of
burden: 604,800 hours [300 registrants × their current infrastructure to submitted comments so that all
252 trading days × 8 hours per trading accommodate the new or amended comments can be summarized and
day]. technology and thus no significant addressed in the final rule preamble.
Recordkeeping: Position Records infrastructure expenditures would be Refer to the ADDRESSES section of this
Number of registrants: 300. needed. The Commission estimates the notice of proposed rulemaking for
Frequency of collection: Daily. programming burden hours associated comment submission instructions to the
Estimated number of responses per with technology improvements to be Commission. A copy of the supporting
registrant: 252 [252 trading days]. 160 hours. statements for the collections of
Estimated aggregate number of According to recent Bureau of Labor information discussed above may be
responses: 75,600 [300 registrants × 252 Statistics, the mean hourly wages of obtained by visiting RegInfo.gov. OMB
trading days]. computer programmers under is required to make a decision
Estimated annual burden per occupation code 15–1021 and computer concerning the collection of information
registrant: 63 hours [252 trading days × software engineers under program codes between 30 and 60 days after
.25 hours per record]. 15–1031 and 1032 are between $34.10 publication of this document in the
Estimated aggregate annual hour and $44.94.26 Because swap dealers and Federal Register. Therefore, a comment
burden: 18,900 hours [300 registrants × major swap participants generally will is best assured of having its full effect
252 trading days × .25 hours per record]. be large entities that may engage if OMB receives it within 30 days of
Recordkeeping: Complaints employees with wages above the mean, publication.
Number of registrants: 300. the Commission has conservatively
Frequency of collection: As needed. C. Cost-Benefit Analysis
chosen to use a mean hourly
Estimated number of responses per programming wage of $60 per hour. Section 15(a) of the CEA 28 requires
registrant: 5. Accordingly, the start-up burden the Commission to consider the costs
Estimated aggregate number of associated with the required and benefits of its actions before issuing
responses: 1,500 [300 registrants × 5 technological improvements would be a rulemaking under the CEA. By its
complaints per registrant]. $9,600 [$60 × 160 hours] per affected terms, section 15(a) does not require the
Estimated annual burden per registrant or $2,880,000 in the aggregate. Commission to quantify the costs and
registrant: 5. benefits of a new regulation or to
Estimated aggregate annual hour 2. Information Collection Comments
determine whether the benefits of the
burden: 1,500 [300 registrants × 5 The Commission invites the public rule outweigh its costs; rather, it
complaints per registrant]. and other federal agencies to comment requires that the Commission ‘‘consider’’
Recordkeeping: Marketing on any aspect of the recordkeeping the costs and benefits of its actions.
Communications burdens discussed above. The

Number of registrants: 300. Commission specifically request 27 The Commission notes that, because it has not
Frequency of collection: As needed. comment upon its determination that regulated swap dealers, swap market participants,
Estimated number of responses per certain of the proposed recordkeeping or the swaps market in the past, it has not
registrant: 12 (monthly compilation of previously collected data on the number of
requirements would not impose any particular swap market participants or the average
records). additional information collection number of daily transactions in which particular
types of swaps market participants engage.
25 http://www.bls.gov/oes/current/oes113031.htm. 26 http://www.bls.gov/oes/current/oes113031.htm. 28 7 U.S.C. 19(a).
Section 15(a) further specifies that proposed regulations would require a 2. Subpart F, (consisting of §§ 23.200,
costs and benefits of a proposed swap dealer or major swap participant 23.201, 23.202, 23.203, 23.204 and
rulemaking shall be evaluated in light of to keep records and make reports that 23.205) is added to read as follows:
five broad areas of market and public will result in reduced risk and greater
concern: (1) Protection of market market integrity in the swap market. Subpart F—Reporting, Recordkeeping, and
participants and the public; (2) Reporting to swap data repositories Daily Trading Records Requirements for
efficiency, competitiveness, and under 23.204 will provide regulators Swap Dealers and Major Swap Participants
financial integrity of futures markets; (3) with a more transparent view of the Sec.
price discovery; (4) sound risk swap market when such data is 23.200 Definitions.
management practices; and (5) other aggregated. Such reporting would 23.201 Required records.
23.202 Daily trading records.
public interest considerations. The further the goal of avoiding market 23.203 Records; retention and inspection.
Commission may, in its discretion, give disruptions and financial losses to 23.204 Reporting to swap data repositories.
greater weight to any one of the five market participants and the general 23.205 Real-time public reporting.
enumerated considerations and could, public. Therefore, the Commission
in its discretion, determine that, believes it is prudent to prescribe Subpart F—Reporting, Recordkeeping,
notwithstanding its costs, a particular recordkeeping and reporting and Daily Trading Records
regulation was necessary or appropriate requirements for swap dealers and Requirements for Swap Dealers and
to protect the public interest or to major swap participants. Major Swap Participants
effectuate any of the provisions or to The proposed regulations also would
accomplish any of the purposes of the promote appropriate back office data § 23.200 Definitions.
CEA. management, thereby fostering better For purposes of subpart F, the
Summary of proposed requirements. risk management. The proposed following terms shall be defined as
The proposed regulations would regulations also would reward provided.
implement certain provisions of section efficiency insofar as swap dealers and (a) Business trading unit means any
731 of the Dodd-Frank Act, which adds major swap participants that operate department, division, group, or
new sections 4s(f) and 4s(g) to the efficiently would have lower operating personnel of a swap dealer or major
Commodity Exchange Act. The costs and thus would require fewer swap participant or any of its affiliates,
proposed regulations would set forth resources to comply with the whether or not identified as such, that
certain duties imposed upon swap regulations. Finally, the proposed performs or is involved in any pricing,
dealers and major swap participants regulations are designed to ensure that trading, sales, purchasing, marketing,
registered with the Commission with swap dealers and major swap advertising, solicitation, structuring, or
regard to recordkeeping and reporting of participants can sustain their market brokerage activities on behalf of a
information and data in connection with operations and meet their financial registrant.
such entities’ activities in the swap obligations to market participants, thus (b) Clearing unit means any
market. contributing to the integrity of the department, division, group, or
Costs. With respect to costs, the financial markets. Therefore, the personnel of a registrant or any of its
Commission has determined that for Commission believes it is prudent to affiliates, whether or not identified as
swap dealers and major swap require risk management requirements such, that performs any proprietary or
participants, costs to institute for swap dealers and major swap customer clearing activities on behalf of
recordkeeping and reporting systems participants. a registrant.
and personnel in order to satisfy the Public Comment. The Commission (c) Complaint means any formal or
new regulatory requirements are far invites public comment on its cost- informal complaint, grievance,
outweighed by the benefits to the benefit considerations. Commentators criticism, or concern communicated to
financial system as a whole. As are also invited to submit any data or the swap dealer or major swap
described above, it is expected that the other information that they may have participant in any format relating to,
any additional cost imposed by the quantifying or qualifying the costs and arising from, or in connection with, any
recordkeeping requirements of proposed benefits of the proposed rules with their trading conduct or behavior or with the
regulations 23.201, 23.202, and comment letters. swap dealer or major swap participant’s
23.203 29 would be minimal because the List of Subjects in 17 CFR Part 23 performance (or failure to perform) any
information and data required to be of its regulatory obligations, and
recorded is information and data a Antitrust, Commodity futures,
includes any and all observations,
prudent swap dealer or major swap Conduct standards, Conflict of Interests,
comments, remarks, interpretations,
participant would already maintain Major swap participants, Reporting and
clarifications, notes, and examinations
during the ordinary course of its recordkeeping, Swap dealers, Swaps.
as to such conduct or behavior
business. Moreover, most swap dealers For the reasons stated in this release, communicated or documented by the
and major swap participants have the Commission proposes to amend 17 complainant, swap dealer, or major
adequate, existing resources and CFR part 23 as proposed to be added by swap participant.
recordkeeping structures that are FR Doc. 2010–29024, published on (d) Counterparty means any party to
capable of adjusting to the new November 23, 2010 (75 FR 71379) as a derivative. When referring to a
regulatory framework without material follows: derivative between a swap dealer or
diversion of resources away from major swap participant and any other
commercial operations. PART 23—SWAP DEALERS AND
MAJOR SWAP PARTICIPANTS person, ‘‘counterparty’’ means such
Benefits. With respect to benefits, the other person.
Commission has determined that the 1. The authority citation for part 23 to (e) Executed means the completion of
read as follows: the execution process.
29 As discussed previously, the cost burdens
associated with the reporting requirements Authority: 7 U.S.C. 1a, 2, 6, 6a, 6b, 6b– (f) Execution means, with respect to a
contained in proposed regulation 23.204 and 23.205 1, 6c, 6p, 6r, 6s, 6t, 9, 9a, 12, 12a, 13b, 13c, swap, an agreement by the parties
are addressed in separately proposed rulemakings. 16a, 18, 19, 21. (whether orally, in writing,
electronically, or otherwise) to the terms participant shall keep full, complete, positions, including job responsibilities
of a swap that legally binds the parties and systematic records, together with all and scope of authority;
to such swap terms under applicable pertinent data and memoranda, of all its (v) Internal and external audit, risk
law. swaps activities. Such records shall management, compliance, and
(g) Governing body typically means, include: consultant reports (including
with respect to: (1) Transaction records. Records of management responses); and
(1) A sole proprietorship, the each transaction, including all (vi) Business and strategic plans for
proprietor; documents on which transaction the business trading unit.
(2) A corporation, its board of information is originally recorded. Such (2) Financial records.
directors; records shall be kept in a form and (i) Records reflecting all assets and
(3) A partnership, any general partner; manner identifiable and searchable by liabilities, income and expenses, and
(4) A limited liability company or transaction and by counterparty, and capital accounts as required by the Act
limited liability partnership, the shall include: and Commission regulations; and
manager, managing member or those (i) All documents customarily (ii) All other financial records
members vested with management generated in accordance with market required to be kept under the Act and
authority; and practice that demonstrate the existence Commission regulations.
(5) Any other person, the body or (3) Complaints.
and nature of an order or transaction,
person with ultimate decision-making (i) A record of each complaint
including, but not limited to, records of
authority over the activities of such received by the swap dealer or major
all orders (filled, unfilled, or cancelled);
person. swap participant concerning any
correspondence; journals; memoranda;
(h) Prudential regulator has the partner, member, officer, employee, or
ledgers; confirmations; risk disclosure
meaning given to such term in section agent. The record shall include the
documents; statements of purchase and
1a(39) of the Commodity Exchange Act complainant’s name, address, and
sale; contracts; invoices; warehouse
and includes the Board of Governors of account number; the date the complaint
receipts; documents of title; and
the Federal Reserve System, the Office was received; the name of all persons
(ii) The daily trading records required identified in the complaint; a
of the Comptroller of the Currency, the
to be kept in accordance with § 23.202. description of the nature of the
Federal Deposit Insurance Corporation,
(2) Position records. Records of each complaint; the disposition of the
the Farm Credit Association, and the
position held by each swap dealer and complaint, and the date the complaint
Federal Housing Finance Agency, as
major swap participant, identified by was resolved.
applicable to the swap dealer or major
product and counterparty, including (ii) A record indicating that each
swap participant. The term also
records reflecting whether each position counterparty of the swap dealer or major
includes the Federal Deposit Insurance
is ‘‘long’’ or ‘‘short’’ and whether the swap participant has been provided
Corporation, with respect to any
position is cleared. Position records with a notice containing the physical
financial company as defined in section
shall be linked to transaction records in address, email or other widely available
201 of the Dodd-Frank Wall Street
a manner that permits identification of electronic address, and telephone
Reform and Consumer Protection Act or
the transactions that established the number of the department of the swap
any insured depository institution
position. dealer or major swap participant to
under the Federal Deposit Insurance
(3) Records of transactions executed which any complaints may be directed.
Act, and with respect to each affiliate of
on a swap execution facility or (4) Marketing and sales materials. All
any such company or institution.
designated contract market or cleared marketing and sales presentations,
(i) Registered entity has the meaning
by a derivatives clearing organization. advertisements, literature, and
given to such term in section 1a(40) of
Records of each transaction executed on communications, and a record
the Commodity Exchange Act, and
a swap execution facility or designated documenting that the swap dealer or
includes boards of trade designated as
contract market or cleared by a major swap participant has complied
contract markets, derivatives clearing
derivatives clearing organization with, or adopted policies and
organizations, swap execution facilities,
maintained in compliance with the Act procedures reasonably designed to
and swap data repositories.
(j) Related cash or forward transaction and Commission regulations. establish compliance with, all
means a purchase or sale for immediate (b) Business records. Each swap applicable federal requirements,
or deferred physical shipment or dealer and major swap participant shall Commission regulations, and the rules
delivery of an asset related to a swap keep full, complete, and systematic of any self-regulatory organization of
where the swap and the related cash or records of all activities related to its which the swap dealer or major swap
forward transaction are used to hedge, business as a swap dealer or major swap participant is a member.
mitigate the risk of, or offset one participant, including but not limited to: (c) Records of data reported to a swap
another. (1) Governance. data repository. With respect to each
(k) Swap confirmation means the (i) Minutes of meetings of the swap, each swap dealer and major swap
consummation (electronically or governing body and relevant committee participant shall identify, retain, and
otherwise) of legally binding minutes, including handouts and produce for inspection all information
documentation (electronic or otherwise) presentation materials; and data required to be reported in
that memorializes the agreement of the (ii) Organizational charts for its accordance with part 45 of this chapter,
parties to all the terms of the swap. A governing body and relevant along with a record of the date and time
confirmation must be in writing committees, business trading unit, the swap dealer or major swap
(whether electronic or otherwise) and clearing unit, risk management unit, and participant made the report.
must legally supersede any previous all other relevant units or divisions; (d) Records of real-time reporting
agreement (electronically or otherwise). (iii) Biographies or resumes of data.
managers, senior supervisors, officers, (1) Each swap dealer and major swap
§ 23.201 Required records. and directors; participant shall identify, retain, and
(a) Transaction and position records. (iv) Job descriptions for manager, produce for inspection all information
Each swap dealer and major swap senior supervisor, officer, and director and data required to be reported in
accordance with part 43 of this chapter, (2) Execution trade information. Each Time (UTC), by timestamp or other
along with a record of the date and time swap dealer and major swap participant timing device; and
the swap dealer or major swap shall make and keep trade execution (iii) Each swap dealer and major swap
participant made the report. records, including: participant shall make and keep a
(2) When the swap dealer or major (i) All terms of each swap, including record of each swap portfolio
swap participant reports a less specific all terms regarding payment or reconciliation, including the number of
data field in accordance with part 43 of settlement instructions, initial and portfolio reconciliation discrepancies
this chapter in order to protect the variation margin requirements, option and the number of swap valuation
anonymity of the participants to such premiums, payment dates, and any disputes (including the time-to-
swap as permitted under part 43 of this other cash flows; resolution of each valuation dispute and
chapter, the record shall contain the (ii) The trade ticket for each swap the age of outstanding valuation
rationale for reporting a less specific (which, together with the time of disputes, categorized by transaction and
data field. execution of each swap, shall be counterparty);
(3) Each swap dealer and major swap immediately recorded electronically for (iv) Each swap dealer and major swap
participant shall identify and retain a further processing); participant shall make and keep a
record of any determination that any (iii) The unique swap identifier, as record of each swap portfolio
swap is a block trade or large notional required by § 45.4(a) of this chapter, for compression exercise in which it
swap, as defined in part 43 of this each swap; participates, including the dates of the
chapter. When the swap dealer or major (iv) A record of the date and time of compression, the swaps included in the
swap participant enters into such a execution of each swap, to the nearest compression, the identity of the
swap, the record shall contain the minute, using Coordinated Universal counterparties participating in the
rationale for determining that the swap Time (UTC), by timestamp or other exercise, the results of the compression,
is a large notional swap, in accordance timing device; and the name of the third-party entity
with part 43 of this chapter. (v) The name of the counterparty with performing the compression, if any; and
which each such swap was executed, (v) Each swap dealer and major swap
§ 23.202 Daily trading records.
including its unique counterparty participant shall make and keep a
(a) Daily trading records for swaps. identifier, as required by § 45.4(b) of this record of each swap that it centrally
Each swap dealer and major swap chapter; clears, categorized by transaction and
participant shall make and keep daily (vi) The date and title of the counterparty.
trading records of all swaps it executes, agreement to which each swap is (4) Ledgers. Each swap dealer and
including all documents on which subject, including but not limited to, major swap participant shall make and
transaction information is originally any master swap netting agreement or keep ledgers (or other records) reflecting
recorded. Each swap dealer and major swap credit support agreement; the following:
swap participant shall ensure that its (vii) The product name of each swap, (i) Payments and interest received;
records include all information including its unique product identifier, (ii) Moneys borrowed and moneys
necessary to conduct a comprehensive as required by § 45.4(c) of this chapter; loaned;
and accurate trade reconstruction for (viii) The price at which the swap was (iii) The daily calculation of the value
each swap. Each swap dealer and major executed; of each outstanding swap;
swap participant shall maintain each (ix) Fees or commissions and other (iv) The daily calculation of current
transaction record as a separate expenses, identified by transaction; and and potential future exposure for each
electronic file identifiable and (x) Any other information relevant to counterparty;
searchable by transaction and the swap. (v) The daily calculation of initial
counterparty. (3) Post-execution trade information. margin to be posted by the swap dealer
(1) Pre-execution trade information. Each swap dealer and major swap or major swap participant for each
Each swap dealer and major swap participant shall make and keep records counterparty and the daily calculation
participant shall make and keep pre- of post-execution trade information of initial margin to be posted by each
execution trade information, including, containing an itemized record of all counterparty;
at a minimum, records of all oral and relevant post-trade processing and (vi) The daily calculation of variation
written communications provided or events. margin payable to or receivable from
received concerning quotes, (i) Records of post-trade processing each counterparty;
solicitations, bids, offers, instructions, and events shall include all of the (vii) The daily calculation of the value
trading, and prices, that lead to the following, as applicable: of all collateral, before and after
execution of a swap, whether (A) Confirmation; haircuts, held by or posted by the swap
communicated by telephone, voicemail, (B) Termination; dealer or major swap participant;
facsimile, instant messaging, chat (C) Novation; (viii) All transfers of collateral,
rooms, electronic mail, mobile device or (D) Amendment; including any substitutions of collateral,
other digital or electronic media. Such (E) Assignment; identifying in sufficient detail the
records shall include, but are not (F) Netting; amounts and types of collateral
limited to: (G) Compression; transferred; and
(i) Reliable timing data for the (H) Reconciliation; (ix) All charges against and credits to
initiation of the trade that would permit (I) Valuation; each counterparty’s account, including
complete and accurate trade (J) Margining; funds deposited, withdrawn, or

reconstruction; and (K) Collateralization; and transferred, and charges or credits
(ii) A record of the date and time, to (L) Central clearing. resulting from losses or gains on
the nearest minute, using Coordinated (ii) Each swap dealer and major swap transactions.
Universal Time (UTC), by timestamp or participant shall make and keep a (b) Daily trading records for related
other timing device, for each quotation record of all swap confirmations, along cash and forward transactions. Each
provided to, or received from, the with the date and time, to the nearest swap dealer and major swap participant
counterparty prior to execution. minute, using Coordinated Universal shall make and keep daily trading
records of all related cash or forward records as requested at the place in the § 23.204 Reports to swap data
transactions it executes, including all United States, its territories, or repositories.
documents on which the related cash or possessions designated by the (a) Reporting of swap transaction data
forward transaction information is representative within 72 hours after to swap data repositories. Each swap
originally recorded. Each swap dealer receiving the request. dealer and major swap participant shall
and major swap participant shall ensure report all information and data in
(2) Contact information. Each swap
that its records include all information accordance with part 45 of this chapter.
dealer and major swap participant shall
necessary to conduct a comprehensive
and accurate trade reconstruction for maintain for each of its offices a listing, (b) Electronic reporting of swap
each related cash or forward transaction. by name or title, of each person at that transaction data. Each swap dealer and
Each swap dealer and major swap office who, without delay, can explain major swap participant shall have the
participant shall maintain each the types of records the swap dealer or electronic systems and procedures
transaction record as a separate major swap participant maintains at that necessary to transmit electronically all
electronic file identifiable and office and the information contained in information and data required to be
searchable by transaction and by those records. reported in accordance with part 45 of
counterparty. Such records shall this chapter.
(b) Record retention. (1) The records
include, but are not limited to: required to be maintained by this § 23.205 Real-time public reporting.
(1) A record of all oral and written chapter shall be maintained in
communications provided or received accordance with the provisions of (a) Real-time public reporting of swap
concerning quotes, solicitations, bids, transaction and pricing data. Each swap
§ 1.31, except as provided in paragraphs
offers, instructions, trading, and prices, dealer and major swap participant shall
(b)(2) and (3) of this section. All records
that lead to the conclusion of a related report all information and swap
required to be kept by the Act and by
cash or forward transaction, whether transaction and pricing data required to
Commission regulations shall be kept be reported in accordance with the real-
communicated by telephone, voicemail, for a period of five years from the date
facsimile, instant messaging, chat time public recording requirements in
the record was made and shall be part 43 of this chapter.
rooms, electronic mail, mobile device or
readily accessible during the first two
other digital or electronic media; (b) Electronic reporting of swap
(2) Reliable timing data for the (2) years of the five-year period. All
such records shall be open to inspection transaction data. Each swap dealer and
initiation of the transaction that would major swap participant shall have the
permit complete and accurate trade by any representative of the
electronic systems and procedures
reconstruction; Commission, the United States
necessary to transmit electronically all
(3) A record of the date and time, to Department of Justice, or any applicable
information and data required to be
the nearest minute, using Coordinated prudential regulator. Records relating to
reported in accordance with part 43 of
Universal Time (UTC), by timestamp or swaps defined in section 1a(47)(A)(v)
this chapter.
other timing device, for each quotation shall be open to inspection by any
provided to, or received from, the representative of the Commission, the Issued in Washington, DC, on December 1,
United States Department of Justice, the 2010, by the Commission.
counterparty prior to execution;
(4) A record of the date and time of Securities and Exchange Commission, David A. Stawick,
execution of each related cash or or any applicable prudential regulator. Secretary of the Commission.
forward transaction, to the nearest (2) Records of any swap or related Appendices to Reporting,
minute, using Coordinated Universal cash or forward transaction shall be kept Recordkeeping, and Daily Trading
Time (UTC), by timestamp or other until the termination, maturity, Records Requirements for Swap
timing device; Dealers and Major Swap Participants—
expiration, transfer, assignment, or
(5) All terms of each related cash or Commission Voting Summary and
forward transaction; novation date of the transaction, and for
a period of five years after such date. Statements of Commissioners
(6) The price at which the related cash
or forward transaction was executed; Such records shall be readily accessible
Note: The following appendices will not
and until the termination, maturity,
appear in the Code of Federal Regulations.
(7) A record of the daily calculation expiration, transfer, assignment, or
of the value of the related cash or novation date of the transaction and Appendix 1—Commission Voting
forward transaction and any other during the first two years of the 5-year Summary
relevant financial information. period following such date. All such
records shall be open to inspection by On this matter, Chairman Gensler and
§ 23.203 Records; retention and any representative of the Commission, Commissioners Dunn, Sommers, Chilton and
inspection. O’Malia voted in the affirmative.
the United States Department of Justice,
(a) Location of records. (1) All records or any applicable prudential regulator.
required to be kept by a swap dealer or Records relating to swaps defined in Appendix 2—Statement of Chairman
major swap participant by the Act and section 1a(47)(A)(v) shall be open to Gary Gensler
by Commission regulations shall be kept inspection by any representative of the
at the principal place of business of the I support the proposed rule regarding
Commission, the United States reporting, recordkeeping and daily trading
swap dealer or major swap participant
Department of Justice, the Securities
or such other principal office as shall be records for swap dealers and major swap
and Exchange Commission, or any participants. The rule establishes the records
designated by the swap dealer or major
swap participant. If the principal place applicable prudential regulator. to be maintained by swap dealers and major
swap participants and the required reporting
of business is outside of the United (3) Records of any swap data reported
by such entities. This proposal will help
States, its territories or possessions, then in accordance with part 45 of this increase transparency and promote market
upon the request of a Commission chapter shall be maintained in integrity. The proposed rules are consistent
representative, the swap dealer or major accordance with the requirements of with the Congressional requirement that
swap participant must provide such § 45.2 of this chapter. swap dealers and major swap participants
comply with rigorous recordkeeping and and 3 p.m., by calling the Disclosure category of financial institution, among
real-time reporting regimes. Officer at (703) 905–5034 (not a toll-free others, from the requirement to establish
[FR Doc. 2010–30884 Filed 12–8–10; 8:45 am] call). an AML program.8 The purpose of the
BILLING CODE 6351–01–P FOR FURTHER INFORMATION CONTACT: The temporary exemption was to enable
FinCEN regulatory helpline at (800) Treasury and FinCEN to study the
949–2732 and select Option 6. exempted categories of institutions and
DEPARTMENT OF THE TREASURY SUPPLEMENTARY INFORMATION: to consider the extent to which AML
requirements should be applied to them,
31 CFR Part 103 I. Background taking into account their specific
RIN 1506–AB02
The Bank Secrecy Act (‘‘BSA’’) 1 characteristics and money laundering
authorizes the Secretary of the Treasury vulnerabilities.
Financial Crimes Enforcement (the ‘‘Secretary’’) to issue regulations The statutory mandate that all
Network: Anti-Money Laundering requiring financial institutions to keep financial institutions establish an anti-
Program and Suspicious Activity records and file reports that the money laundering program is a key
Report Filing Requirements for Secretary determines ‘‘have a high element in the national effort to prevent
Residential Mortgage Lenders and degree of usefulness in criminal, tax, or and detect money laundering and the
Originators regulatory investigations or proceedings, financing of terrorism. This NPRM
or in the conduct of intelligence or proposes to apply the AML program
AGENCY: Financial Crimes Enforcement counterintelligence activities, including requirement to companies performing
Network (‘‘FinCEN’’), Treasury. analysis, to protect against international specified services in connection with
ACTION: Notice of proposed rulemaking. terrorism.’’ 2 In addition, the Secretary is residential mortgages. This would put
authorized to impose anti-money these institutions on par with
SUMMARY: FinCEN, a bureau of the laundering program requirements on depository institutions performing such
Department of the Treasury financial institutions.3 The authority of services in this respect.9
(‘‘Treasury’’), is issuing proposed rules the Secretary to administer the BSA has
defining non-bank residential mortgage been delegated to the Director of B. Suspicious Activity Reporting
lenders and originators as loan or FinCEN.4 Programs
finance companies for the purpose of With the enactment of 31 U.S.C.
requiring them to establish anti-money A. Anti-Money Laundering Programs 5318(g) in 1992,10 Congress authorized
laundering programs and report Financial institutions are required to the Secretary to require financial
suspicious activities under the Bank establish anti-money laundering institutions to report suspicious
Secrecy Act. (‘‘AML’’) programs that include, at a transactions. As amended by the USA
DATES: Written comments on this notice minimum: (1) The development of PATRIOT Act, subsection (g)(1) states:
of proposed rulemaking (‘‘NPRM’’) must internal policies, procedures, and The Secretary may require any financial
be submitted on or before February 7, controls; (2) the designation of a institution, and any director, officer,
2011. compliance officer; (3) an ongoing employee, or agent of any financial
employee training program; and (4) an institution, to report any suspicious
ADDRESSES: independent audit function to test transaction relevant to a possible violation of
FinCEN: You may submit comments, programs.5 When prescribing minimum law or regulation.
identified by Regulatory Identification standards for AML programs, FinCEN
Number (RIN) 1506–AB02, by any of the There has been a regulatory gap
must ‘‘consider the extent to which the between the BSA’s coverage of
following methods: requirements imposed under [the AML
• Federal E-rulemaking Portal: depository institutions and residential
program requirement] are mortgage lenders and originators in that
http://www.regulations.gov. Follow the commensurate with the size, location,
instructions for submitting comments. the latter are currently not subject to
and activities of the financial BSA requirements, the Suspicious
Include 1506–AB02 in the submission. institutions to which such regulations
Refer to Docket Number FINCEN–2010– Activity Report (‘‘SAR’’) foremost among
apply.’’ 6 them. Imposing a SAR requirement
0001. The BSA defines the term ‘‘financial
• Mail: FinCEN, P.O. Box 39, Vienna, would address this regulatory gap.
institution’’ to include, in part, ‘‘a loan
VA 22183. Include 1506–AB02 in the Moreover, a SAR requirement would
or finance company.’’ 7 On April 29,
body of the text. Please submit potentially expand the kinds of
2002, and again on November 6, 2002,
comments by one method only. activities being reported to FinCEN’s
FinCEN temporarily exempted this
Comments submitted in response to this BSA database, thereby giving our
NPRM will become a matter of public 1 ‘‘Bank Secrecy Act’’ is the name that has come
regulatory and law enforcement partners
record. Therefore, you should submit to be applied to the Currency and Foreign a more complete picture, both on a
only information that you wish to make Transactions Reporting Act (Titles I and II of Pub. systemic and case-specific level, of
L. 91–508), its amendments, and the other statutes
publicly available. referring to the subject matter of that Act. These 8 See 31 CFR 103.170; 67 FR 21113 (Apr. 29,
Inspection of comments: Public statutes are codified at 12 U.S.C. 1829b, 12 U.S.C.
2002), as amended at 67 FR 67549 (Nov. 6, 2002)
comments received electronically or 1951–1959, and 31 U.S.C. 5311–5314 and 5316–
and corrected at 67 FR 68935 (Nov. 14, 2002).
5332, and notes thereto.
through the U.S. Postal Service sent in 2 31 U.S.C. 5311.
9 See 31 CFR 103.120.
response to a notice and request for 3 31 U.S.C. 5318(h).

10 31 U.S.C. 5318(g) was added to the BSA by
comment will be made available for 4 See Treasury Order 180–01 (Sept. 26, 2002).
section 1517 of the Annunzio-Wylie Anti-Money
Laundering Act, Title XV of the Housing and
public review as soon as possible on 5 31 U.S.C. 5318(h).
Community Development Act of 1992, Public Law
http://www.regulations.gov. Comments 6 Public Law 107–56 § 352(c), 115 Stat. § 322,
102–550; it was expanded by section 403 of the
received may be physically inspected in codified at 31 U.S.C. 5318 note. Public Law 107– Money Laundering Suppression Act of 1994 (the
the FinCEN reading room located in 56 is the Uniting and Strengthening America by Money Laundering Suppression Act), Title IV of the
Providing Appropriate Tools Required to Intercept Riegle Community Development and Regulatory
Vienna, Virginia. Reading room and Obstruct Terrorism Act of 2001 (‘‘USA Improvement Act of 1994, Public Law 103–325, to
appointments are available weekdays PATRIOT Act’’). require designation of a single government recipient
(excluding holidays) between 10 a.m. 7 31 U.S.C. 5312(a)(2)(P). for reports of suspicious transactions.

Swap Record Keeping

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76666 Federal Register / Vol. 75, No.

236 / Thursday, December 9, 2010 / Proposed Rules

on the Tier Criteria verifiable information regarding the

comprehensive and accurate trade is originally recorded. Under proposed

dealer or major swap participant in any format

associated with developing and obligation to report a unique swap identifier to

Communications burdens discussed above. The

complete and accurate trade (J) Margining; funds deposited, withdrawn, or

response to a notice and request for 3 31 U.S.C. 5318(h).

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