On March 26, 2014, the CFTC issued two releases in connection with final swap data reporting rules under Part 45 of the CFTC Regulations (SDR rules), which became effective last year:

On March 26, 2014, the CFTC published in the Federal Register a proposed rule requesting public comment on a wide range of swap data reporting matters under its final SDR rules, which became effective for almost all swaps in 2013. Data reported to swap data repositories (SDRs) by swaps market participants under the final SDR rules is reported to the CFTC for its own regulatory purposes.

The final SDR rules have been viewed as flawed by both market participants and the CFTC itself, which has admitted an inability to process and analyze the large volume of data collected under these rules. The CFTC also asserts, as reported by Reuters, that the data it is receiving from market participants is not being provided to it in a consistent or useful format, and that market participants have failed to provide it with adequate data, preventing it from effectively monitoring the global swaps market as intended under Title VII of the Dodd-Frank Act.

Comments are due on or before May 27, 2014.

The broad array of data reporting issues under Part 45 on which the CFTC has requested comment suggests that the CFTC intends to review all aspects of data reporting under the SDR rules. The proposal, which is limited to Part 45 and "related provisions," contains no specific proposed rules, but rather provides a vehicle for the CFTC to seek comment on a variety of matters under Part 45, including:

In January of this year, the CFTC announced the formation of an internal working group to review the final SDR rules. The working group was established to identify and make recommendations to resolve reporting challenges and to consider data field standardization and reporting consistency. The request for public comment is intended to help the working group determine how the final SDR rules are being applied and to determine whether certain clarifications, enhancements or guidance may be appropriate. The working group includes staff from the CFTC's Division of Market Oversight, Division of Clearing and Risk, Division of Swap Dealer and Intermediary Oversight, Division of Enforcement, Office of the Chief Economist, Office of Data and Technology and Office of General Counsel.

The review arises in the context of a lawsuit against the CFTC by SDR DTCC over SDR competition issues, as well as public acknowledgement of the shortcomings of the SDR rules by the CFTC itself. One CFTC commissioner recently noted that it is unlikely that the CFTC would have been able to identify transactions analogous to the notorious "London Whale" swaps trades from SDR data it collects.

For information on the final SDR rules, including details on the reporting of PET, as well as confirmation data and continuation data, see:

For the PET and other data fields required to be reported under Part 45, see Checklist, The Dodd-Frank Act: CFTC Swap Data Reporting Required Data Fields: Primary Economic Terms (PET) to Be Reported under Final "SDR" Rules (17 CFR Part 45).

UPDATE: As reported by Reuters, the CFTC has entered into a memorandum of understanding (MOU) with the US Treasury's Office of Financial Research (OFR), which has offered to assist the CFTC in sorting through swap data.

Also on March 26, 2014, the CFTC adopted an interim final rule (IFR) which is intended to clarify the scope of permissible access by market participants to swap data and information maintained by registered SDRs. Under Section 21(c)(6) of the Commodity Exchange Act (CEA), an SDR is required to "maintain the privacy of any and all swap transaction information that it receives from a swap dealer, counterparty, or any other registered entity." However, counterparties to a particular swap may access swap data and other information maintained by an SDR that is related to that swap.

Data reported to SDRs by swaps market participants under the final SDR rules is reported to the CFTC and used for regulatory purposes, though unlike data collected by SDRs under the final real-time public swap data reporting rules (Part 43 of the CFTC Regulations) Part 45 data is not publicly disseminated.

The IFR clarifies that for a swap that is executed anonymously on a swap execution facility (SEF) or designated contract market (DCM), and then cleared in accordance with the CFTC's straight-through processing requirements (detailed in the Staff Guidance on Swaps Straight-Through Processing issued by the CFTC on September 26, 2013), a counterparty to the swap will not be able to access the following data and information maintained by a registered SDR:

The IFR took effect on March 26, 2014. The CFTC has also requested public comment on the IFR, which must be submitted by April 25, 2014.

For more information on SDRs, see Legal Update, CFTC Adopts Final Rules on Swap Data Repositories under Dodd-Frank.

For details on the swap clearing process and clearing members, see Practice Note, Mechanics of Derivatives Clearing.