At its final meeting of the year, the Commodity Futures Trading Commission (CFTC) Tuesday unanimously approved two final rules that require market participants to report transaction data in a real-time fashion, and to report swap data when the transaction is executed and over the lifetime of the swap.

By 5-0, the Commission voted out final rules on real-time public reporting of swap transaction and pricing data, and a final rule on swap data record keeping and reporting requirements. With these two rules, the CFTC has finalized a total of 22 rules this year to implement reforms under the Dodd-Frank Wall Street Reform and Consumer Protection Act, said CFTC Chairman Gary Gensler. Still, “we have much to do after the 1st of the year,” he said.

“These rules…will level the playing field and benefit our markets and the economy as a whole, even if we all find ourselves fumbling around for a bit getting used to the newness of having that much information at our fingertips and figuring out how to be utilize it,” said Commissioner Scott O’Malia.

The real-time public reporting rule “will ensure complete, timely and accurate data on all swaps is available to the Commission and regulators. This data will provide a comprehensive view of the entire swaps market, strengthening our ability to police markets and protect against system risk,” Gensler said.

Under the real-time rule, parties to a swap are responsible for reporting swap transaction data to the appropriate registered swap data repository (SDR) in a timely manner for public dissemination. Parties would satisfy their reporting obligation to a SDR by executing their transaction on or pursuant to the rules of a registered swap execution facility (SEF) platform or designated contract market (DCM).

For swap transactions that are not executed on or pursuant to the rules of a registered SEF or DCM, the parties to the transaction would need to report the transaction data themselves to the appropriate registered SDR for public dissemination.

The final rule on real-time public reporting “addresses many concerns that were expressed by end-users. Specifically, the final rule provides a longer time for end-users that are reporting parties to come into compliance with the real-time reporting requirements. Additionally, [it] provides for the phasing in of longer time delays with respect to bilateral (off-facility) swaps in which at least one party is an end-user,” O’Malia said.

As for the record keeping rule, it calls for electronic reporting to an SDR of swap data from each of two important stages of the existence of a swap: the creation of the swap; and the continuation of the swap over its existence until its final termination or expiration. Continuation data for cleared swaps will be reported to the derivatives clearing organizations (DCO), through swaps dealer (SD) and major swap participant (MSP) reporting counterparties must also report valuation data. For uncleared swaps, all continuation data is required to be reported by the reporting counterparty.

According to the CFTC rule, SDs, MSPs, SEFs, DCMs and DCOs must keep records throughout the existence of a swap and five years following the termination of a swap. The records must be readily accessible to the entity or counterparty throughout the life of a swap and for two years following its termination, the agency rule said.

Non-SD/MSP counterparties must maintain records throughout the existence of a swap and for five years following the termination of a swap, the CFTC said. The records should be retrievable by the counterparty within five business days throughout the period. The agency indicated that it plans to take a phased approach to compliance with both rules.

O’Malia cited improvements in the final swap data record keeping over the proposed rule. “The first improvement…is a streamlined reporting approach where reporting is done by the reporting counterparty that the Commission believes has the easiest, fastest and cheapest access to data.” And second, the rule provides “for staggered reporting timelines depending on the asset class and the status of the counterparty. The phasing recognizes the many significant differences in technological maturity between asset classes and counterparties. The rule [also] allows an extended phase-in period for compliance and reporting, which should minimize burdens, particularly on commercial end-users,” O’Malia said.

“These rules will require market participants to build out complex and costly technology systems. The cost-benefit analyses of both rules identify that each rule will impose costs of more than $100 million on the American economy, thus making each rules a major rule.” O’Malia estimated that the Dodd-Frank rules promulgated by the CFTC this year will cost the U.S. economy at least $700 million.

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