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Real-Time Reporting, Record Keeping for Some Swap Transactions Begins

Two major Dodd-Frank Wall Street regulatory reforms -- real-time reporting of swap transactions and swap dealer (SD) registration -- began last week, the Commodity Futures Trading Commission (CFTC) said.

Effective Dec. 31, all swaps in the interest rate and credit asset classes, executed on or pursuant to the rules of designated contract markets (exchanges), as well as swaps executed "off-facility" in which at least one party to the swap is a registered SD, were the first to report their transactions. On Feb. 28, reporting is scheduled to start for swap transactions in the remaining three asset classes: equity, foreign exchange and other commodities (i.e. agricultural, energy and metals swaps). All other market participants that are required to report their transactions are due to begin reporting in April.

"The public, for the first time, can see the price and volume of swap transactions, just as it has benefited from transparency for decades in the securities and futures markets. The public also will benefit as SDs will be subject to...standards for sales practices, record keeping and business conduct rules that will help lower risk to the rest of the economy," said CFTC Chairman Gary Gensler.

As of last Monday, the agency said 65 entities had submitted applications and became provisionally registered as SDs. This initial group of entities includes the largest domestic and international financial institutions dealing in swaps with U.S. persons, such as Bank of America NA, Citibank NA, Citigroup Energy Inc., Credit Suisse International, Deutsche Bank AG, Goldman Sachs & Co., JP Morgan Securities LLC and affiliates, Merrill Lynch Capital Services Inc., Merrill Lynch Commodities Inc. and Morgan Stanley Bank NA and affiliates.

The companies in October, the first month in which the SD registration requirement applied, had exceeded the $8 billion de minimis level of swap dealing activity that triggers the registration requirements (see NGI, Sept. 12, 2012). Other parties are expected to register during the year as they exceed the de minimis threshold, the agency said.

Registered SDs reported their interest rate and credit index swap transactions to swap data repositories (SDR). Designated contract markets that trade swaps, such as the New York Mercantile Exchange and IntercontinentalExchange, also are required to follow the reporting and record keeping rules.

SDRs are new entities created by the Dodd-Frank reform law and provide a central facility for swap data reporting and record keeping. All swaps, whether cleared or uncleared, are required to be reported to registered SDRs.

The public will be able to access the real-time swap transaction and pricing data through the SDRs' websites, the CFTC said. It said the new transparency in the swaps market will be similar in a number of ways to TRACE, a trade-reporting vehicle for transactions in corporate bonds and other eligible fixed-income securities.

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