SEC and CFTC Adopt Interim Final Rules on Reporting and Recordkeeping for Pre-Dodd-Frank Swaps

October 15, 2010

The SEC and the CFTC have adopted substantially similar interim final rules concerning the reporting of swaps and security-based swaps (collectively, "Swaps") that were entered into prior to the enactment of the Dodd-Frank Act but whose terms had not expired as of July 21, 2010.  These interim final rules have been adopted to satisfy the Dodd-Frank Act's requirement for interim rules related to reporting of pre-enactment unexpired swaps within 90 days of enactment of Dodd-Frank, which was on July 21, 2010.  Permanent reporting rules, including reporting rules for post-enactment swaps, are required to be adopted by July 16, 2011.  While actual reporting will not be required until one or more Swap repositories are registered, the new interim rules impose new recordkeeping obligations on persons who may be required to report pre-enactment Swaps (which will include Swap dealers, and in some cases, other Swap counterparties).  The CFTC interim rule is now effective and the SEC interim rule will be effective upon publication in the Federal Register, which is expected within the next several days. 

The Interim Final Rules

The releases and public statements accompanying the interim final rules note that no repositories have registered and that neither the SEC nor the CFTC is prepared to receive Swap data.  As a result, the interim final rules defer reporting by counterparties until the earlier of (i) compliance dates established by the SEC and the CFTC in future rulemaking or (ii) 60 days after a repository registers and becomes operational.  At such time, counterparties will be required to provide to the repository or the CFTC or the SEC (as appropriate):

  • a copy of the transaction confirmation, in electronic form if available, or in written form if there is no electronic copy; and
  • the time, if available, that the transaction was executed.

In addition, counterparties are required to provide any additional information regarding pre-enactment unexpired Swaps requested by the relevant regulator, including both transaction-specific and summary data.[1] The interim final rules require counterparties that may be required to report to retain existing information and documents regarding Swaps, including but not limited to:

  • any information necessary to identify and value the transaction;
  • the date and time of execution of the transaction;
  • for the CFTC, information relevant to the price of the transaction and, for the SEC, all information from which the price of the transaction was derived;
  • whether the transaction was accepted for clearing and, if so, the identity of each clearing organization;
  • any modifications to the terms of the transaction; and
  • the final confirmation of the transaction.

This retention requirement does not require parties to create new records regarding existing Swaps.

In addition, consistent with the Dodd-Frank Act, the interim final rules note that:

  • if only one counterparty is a "Swap dealer" or "major Swap participant," that counterparty must report;

  • if one counterparty is a "Swap dealer" and the other is a "major Swap participant," the Swap dealer must report; and
  • if neither counterparty is a "Swap dealer" nor a "major Swap participant," the two counterparties can choose which reports.

At the CFTC's October 1 meeting announcing the CFTC's interim final rule, Commissioners Bart Chilton and Jill Sommers inquired as to how, given that the CFTC has not yet announced criteria for designating "Swap dealers" and "major Swap participants" nor provided clarity on the definition of a "Swap," market participants should know if they "may be required to report" a specific transaction. The CFTC staff noted that the information listed above should be retained by counterparties until further clarity is provided by the CFTC.

The SEC and the CFTC have requested public comment on these interim rules before proposing final reporting rules.  Comments are due to the CFTC by November 15, 2010 and to the SEC within 60 days of publication in the Federal Register, which is expected within the next several days.


[1] In particular, summary data might include a description of a Swap dealer's counterparties, the number of pre-enactment Swaps entered into by a Swap dealer and the frequency and duration of pre-enactment Swaps entered into by a Swap dealer.

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