CFTC Tackles Swap Data Reporting

Terry Flanagan

The Commodity Futures Trading Commission has announced the formation of an interdivisional staff working group to review certain swaps transaction data recordkeeping and reporting provisions.

The working group, led by the director of the Division of Market Oversight, will formulate and recommend questions for public comment regarding, among other things, compliance with part 45 reporting rules, and related provisions, and consistency in regulatory reporting among market participants.

Acting Chairman Mark Wetjen has directed the working group to publish the request for public comment in the Federal Register by March 15, 2014. Wetjen also has directed the working group to review the public comments submitted in response to this request and make recommendations to the Commission in June.

“The goal of this cross-divisional staff working group is to seek and review public comments on informed questions regarding the swaps data submitted to the CFTC,” Wetjen said. “In order for the Commission to enforce the significant Dodd-Frank reforms, the agency must have accurate data and a clear picture of activity in the marketplace. We’ve seen an incredible shift to a transparent, regulated swaps marketplace, and this is an appropriate review to ensure the data we are receiving is of the best possible quality so the Commission can effectively oversee the marketplace.”

In December 2011, the Commission adopted part 45 of the Commission’s Regulations to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act’s new statutory framework regarding swap data recordkeeping and reporting requirements for CFTC-regulated market participants, including swap data repositories, derivatives clearing organizations, designated contract markets, swap execution facilities, swap dealers, major swap participants and other swap counterparties.

In order to ensure that complete swap transaction data is available to regulators, the final rule requires reporting counterparties and reporting entities to submit via electronic reporting swap creation data and continuation data to swap data repositories.

“This working group will provide the crucible to analyze how we collect and utilize critically important derivatives market information,” said Commissioner Bart Chilton. “Just repeating ‘transparency, transparency, transparency,’ as a meaningless mantra won’t cut it, we have to actually have the correct, concise, and useful processes in place and functioning for these reform efforts to have teeth.”

“I am pleased that Acting Chairman Wetjen is implementing my recommendation to establish a cross-divisional data team that will begin to review regulatory reporting,” said Commissioner Scott O’Malia. “By seeking public comment on part 45 and related reporting rules, the staff will develop a better understanding of specific changes that can be made to enhance regulatory compliance and data harmonization and reduce misreporting of data that has undermined the Commission’s ability to use its regulatory data.”

In addition to building on the work of the harmonization efforts already underway by the Technology Advisory Committee, the team should carefully evaluate internal solutions that will enhance the Commission’s data utilization, O’Malia said.

As part of the Commission’s efforts to improve swap transaction data quality its ability to utilize the data for analysis and other regulatory purposes, the working group has been asked to: identify and make recommendations to resolve reporting challenges, if any; review industry compliance with reporting obligations; consider data field standardization and consistency in reporting among market participants; recommend additional reporting guidance or requirements, as appropriate; and explore whether the agency should seek additional regulatory and technology improvements and data analysis expertise.

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