CFTC Unanimously Approves Reporting Rule Changes

The US Commodity Futures Trading Commission (CFTC) has unanimously approved two proposed rules to revise CFTC regulations for swap data reporting, dissemination, and public reporting requirements for market participants.

The Commission also unanimously approved re-opening the comment period of a proposed rule to amend certain agency regulations related to swap data repositories. All three measures are intended to improve data quality and streamline CFTC regulations, the regulator says.

Key amongst the proposed revisions are those regarding real-time public reporting and dissemination requirements for swap data repositories (SDRs), derivatives clearing organisations (DCOs), swap execution facilities (SEFs), designated contract markets (DCMs), swap dealers (SDs), major swap participants (MSPs), and swap counterparties that are neither SDs nor MSPs. Assuming the rules are added to the statute book at the end of the consultation period, end users of swaps will now have to public report large trades within two days, rather than the current 15 minutes. Major dealers will also have an extended reporting period of one day.

As part of the changes the CFTC also approved proposed revisions that, among other things, will change the “block trade” definition and the block swap categories; as well as update the block thresholds and cap sizes.

The CFTC also unanimously approved proposed revisions to its regulations that establish swap data recordkeeping and reporting requirements for SDRs, DCOs, SEFs, DCMs, SDs, MSPs, and swap counterparties that are neither SDs nor MSPs. These include proposals that, among other things, streamline the requirements for reporting new swaps, define and adopt swap data elements that harmonise with international technical guidance, and reduce reporting burdens for reporting counterparties that are not SDs or MSPs.

The proposed rules have a 90-day comment period following this week’s approval and the CFTC says the measures are part of the its efforts to improve the quality, accuracy, and completeness of the data reported to the Commission, as well as streamline data reporting, and clarify obligations for market participants.

Announcing his backing for the changes, CFTC chairman Heath Tarbert says, “Simplicity should be a central goal of our swap data reporting rules. After all, making rules simple and clear facilitates compliance, price discovery, and risk monitoring. While principles-based regulation can offer numerous advantages, there are areas where a rules-based approach is preferable because of the level of clarity, standardisation, and harmonsation it provides. Swap data reporting is one such area.

“As it stands, SDRs and market participants have been left to wade through Parts 43 and 45 of our rules on their own. We have essentially asked them to decide what to report to the CFTC, instead of being clear about what we want,” he continues. “The result is a proliferation of reportable data fields designed to ensure compliance with our rules – but which exceed what market participants can readily provide and what the agency can realistically use. These fields can run hundreds deep, imposing costly burdens on market participants.  Yet for all its sprawling complexity, the current data reporting system omits, of all things, uncleared margin information—thereby creating a black box of potential systemic risk.”

Warming to his theme, Tarbert then stressed how his comments just describes CFTC reporting. “As it stands today, a market participant with a swap reportable to the CFTC might also have to report the same swap to the SEC, the European Securities and Markets Authority (ESMA), and perhaps other regulators as well,” he explains. “The global nature of our derivatives markets has led to the preparation and submission of multiple swap data reports, creating a byzantine maze of disparate data fields and reporting timetables. Market participants should not incur the costs and burdens of reporting a grab-bag of dissimilar data for the very same swap. That approach helps neither the market nor the CFTC; conflicting data reporting requirements make regulatory coordination more difficult, preventing a panoramic view of risk. Today we take the first step toward changing this.

“It is time for the Commission to reform our swap data reporting rules,” he adds. “Sir Isaac Newton realised long ago that simplicity can often lead to truth. It does not take an apple striking us on the head to realise that simplifying our swap data reporting rules to achieve clarity, standardisation, and harmonisation will inevitably make for sounder regulation.”


Colin Lambert

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