Alert January 02, 2013

CFTC Issues Time-Limited No-Action Relief to Swap Dealers Regarding Certain Reporting Requirements

The CFTC’s Division of Market Oversight (the “Division”) issued no-action relief regarding the reporting of certain swap transaction data by swap dealers.  The relief, which is generally premised on concerns by industry participants that technical difficulties would prevent them from meeting the reporting requirements in a timely manner, applies in several different situations:

  • Swaps executed by a swap dealer’s branches located in emerging market jurisdictions (as defined in the relief) need not comply with certain reporting requirements included in Part 43 of the CFTC’s regulations (which covers real-time public reporting), Part 45 (swap data recordkeeping and reporting requirements), and Part 46 (swap data recordkeeping and reporting requirements for historical swaps) prior to April 30, 2013, or as soon as technologically practicable upon resolution of the technological issues preventing timely compliance, whichever comes first;
  • Certain “exotic/multi-leg swap transactions,” which are transactions involving a single executed swap that, by convention or for technological/operational reasons must (currently) be captured as multiple swaps for reporting purposes, may be reported on a component-by-component basis (that is, not reported on a composite basis) for purposes of certain regulations included in Parts 43 and 45.  This relief expires on April 30, 2013, or as soon as technologically practicable upon resolution of the technological issues preventing timely compliance, whichever comes first;
  • Swap dealers need not comply with the Part 45 reporting requirements mandating that a report for subsequent post-trade allocations, compressions, or novations be linked to the unique swap identifier (“USI”) of the previously reported initial swap.  This relief expires on April 30, 2013, or as soon as technologically practicable upon resolution of the technological issues preventing timely compliance, whichever comes first; 
  • In the absence of the relief, regulations included in Parts 43 and 45 require that certain “life cycle events,” such as partial terminations, terminations, partial exercises, exercises, and credit events, must be linked to the original trades and not reported as new trades.  However, the relief provides that a swap dealer whose systems cannot distinguish between such life cycle events and new swaps is not required to (and should not) report life cycle events at all; those swap dealers that cannot withhold the reporting of such life cycle events may report them, albeit incorrectly, as new swaps.  This relief expires on April 30, 2013, or as soon as technologically practicable upon resolution of the technological issues preventing timely compliance, whichever comes first.

The above relief is subject to various conditions, such as a requirement that the swap dealer’s chief information officer document the technical difficulties necessitating the relief and that the swap dealer update, correct, or amend its previous reports after resolving the technical difficulties.