In an effort to improve the quality of swap data, the Commodity Futures Trading Commission ("CFTC") proposed amendments to Part 45 of its regulations governing counterparties' and registered entities' reporting obligations for cleared swap transactions.

Part 45 establishes both the reporting procedures and the information required to be reported to swap data repositories ("SDR"). While the original framework of Part 45 was premised on the reporting of a single continuous swap, the proposal is intended to better reflect the multi-swap framework of cleared swaps. The proposed rules also seek to eliminate uncertainty regarding which counterparty to a swap is responsible for reporting creation and continuation data for the various components of a cleared swap transaction.

Among the changes outlined in the proposed amendments are the addition of the terms "original swap" and "clearing swap." The proposed rules define an original swap as one that has been accepted for clearing by a derivatives clearing organization ("DCO"), which is commonly known as an "alpha" swap. By comparison, a clearing swap is created under the rules of a DCO that has a DCO as a counterparty, typically referred to as a "beta" or "gamma" swap. DCOs would also be established as the reporting counterparty for swaps.

CFTC Chairman Timothy Massad described swaps reporting data as "one of the most important requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act," calling the proposal "one big step" toward obtaining useful and timely data as efficiently as possible.

The proposed rules state that in cases in which a clearing swap replaces an original swap, DCOs would be required to report creation data for each clearing swap as soon as is technologically practicable after the DCO accepts an original swap for clearing. When a clearing swap doesn't replace the original swap, DCOs must report creation data as soon as technologically practicable after execution of the clearing swap. Otherwise, the existing requirements for creation data reporting would be largely unchanged.

For swaps executed on or pursuant to a swap execution facility ("SEF") or designated contract market ("DCM") rules, including original swaps, the SEF or DCM would be required to select the SDR to which creation data for that swap is reported. For all other cases, including off-facility swaps and clearing swaps, the reporting counterparty would be required to select the SDR.

In instances where swaps are intended to be cleared at the time of execution, the rules would remove existing confirmation data reporting requirements. The SEFs/DCMs and reporting counterparties would continue to be responsible for reporting primary economic terms ("PET") data without having to report confirmation data for swaps intended to be submitted to a DCO at the time of execution. Instead, the DCO would report PET and confirmation data for clearing swaps in its creation data reporting.

With respect to continuation data for original swaps, a DCO would have to report all such data, including terminations, to the SDR to which the swap was reported, and would require the SDR to accept and record the termination. For a clearing swap, DCOs would be required to report all creation and continuation data to a single SDR. In addition, the proposed rules remove the existing requirement that a swap dealer/major swap participant reporting counterparty must report daily valuation data for cleared swaps. Instead, a DCO would be the only counterparty required to report continuation data, including valuations, for clearing swaps.

The CFTC's amendments also outline certain requirements for unique swap identifier ("USI") creation and transmission. A DCO would be required to generate and assign a USI to each clearing swap upon, or as soon as technologically practicable after, acceptance of an original swap by the DCO for clearing. A DCO would also need to transmit the USI for a clearing swap electronically both to the SDR to which the DCO reports required swap creation data for the clearing swap and to the DCO's counterparty as soon as technologically practicable after acceptance of an original swap or execution of a clearing swap.

Finally, the proposed rules would modify and add several data fields to the existing PET fields in Part 45.

The proposed amendments were based on feedback the CFTC received in 2014 regarding possible improvements to the manner in which swap data reporting rules address cleared swaps. The CFTC is accepting feedback on the proposed amendments until Oct. 30, 2015.

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