2012-19664

Federal Register, Volume 77 Issue 156 (Monday, August 13, 2012)[Federal Register Volume 77, Number 156 (Monday, August 13, 2012)]

[Rules and Regulations]

[Pages 48060-48061]

From the Federal Register Online via the Government Printing Office [www.gpo.gov]

[FR Doc No: 2012-19664]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 43

RIN 3038-AD08

Real-Time Public Reporting of Swap Transaction Data; Correction

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rule; correction.

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[[Page 48061]]

SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or

``Commission'') published the Real-Time Public Reporting of Swap

Transaction Data (``Real-Time Public Reporting'') rule and an

accompanying preamble in the Federal Register on Monday, January 9,

2012 (77 FR 1182). This document makes an editorial correction to

language of the preamble that conflicted with the rule text of the

final rule.

DATES: Effective Date: These corrections are effective August 13, 2012.

FOR FURTHER INFORMATION CONTACT: Nancy Markowitz, Deputy Director, 202-

418-5453, nmarkowitz@cftc.gov, Laurie Gussow, Attorney-Advisor, 202-

418-7623, lgussow@cftc.gov, Division of Market Oversight, Commodity

Futures Trading Commission, Three Lafayette Center, 1155 21st Street

NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background

The Commission published the final rule entitled Real-Time Public

Reporting of Swap Transaction Data (``Final Rule'') in the Federal

Register on January 9, 2012, (77 FR 1182), adopting rules to implement

a framework for the real-time public reporting of swap transactions and

pricing data for all swap transactions. The final rule, which became

effective on March 9, 2012, contains a sentence in a footnote that

created an inconsistency as to the type of swap transactions that may

be considered ``publicly reportable swap transactions'' under the Final

Rule. The sentence is corrected in this release to eliminate the

inconsistent language in the footnote and, thus, make clear that

certain, and not all, covered transactions as described in Sections 23A

and 23B of the Federal Reserve Act may be considered ``publicly-

reportable swap transactions.''

II. Summary of the Correction to the Real-Time Public Reporting Rule

The Commission received inquiries whether it considered all

``covered transactions'' between affiliates, as defined in Sections 23A

and 23B of the Federal Reserve Act \1\ to be ``publicly reportable swap

transactions.'' As published, the last sentence of footnote 44 of the

Final Rule reads: ``The Commission considers any covered transaction

between affiliates as described in Sections 23A and 23B of the Federal

Reserve Act to be publicly reportable swap transactions.'' This

sentence unintentionally conflicts with the text of Sec. 43.2 defining

``publicly reportable swap transaction,'' and with the preamble of the

Final Rule.

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\1\ Section 608 of the Dodd-Frank Act adds to paragraph 7 of the

definition of ``covered transaction'' in Section 23A of the Federal

Reserve Act (12 U.S.C. 371(c)): ``A derivative transaction, as

defined in paragraph (3) of section 5200(b) of the Revised Statutes

of the United States (12 U.S.C. 84(b)), with an affiliate, to the

extent that the transaction causes a member bank or a subsidiary to

have credit exposure to the affiliate.'' Hence, all derivatives

transactions will be subjected to Section 23A of the Federal Reserve

Act to the extent that they cause the bank to have credit exposure

to the affiliate. Section 23B of the Federal Reserve Act contains an

arm's-length requirement stating that a member bank and its

subsidiaries may engage in any covered transaction with an affiliate

only ``on terms and under circumstances, including credit standards,

that are substantially the same, or at least as favorable to such

bank or its subsidiary, as those prevailing at the time for

comparable transactions with or involving other nonaffiliated

companies, or in the absence of comparable transactions, on terms

and under circumstances, including credit standards, that in good

faith would be offered to, or would apply to, nonaffiliated

companies.''

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Section 43.2 defines the term ``publicly reportable swap

transaction,'' and also provides an example of certain swap

transactions that do not fall within the definition. Under Sec. 43.2,

in paragraph (2)(i) of the definition of ``publicly reportable swap

transaction,'' certain inter-affiliate trades may not be reportable as

the rule excludes from the definition of reportable swap transactions:

``Internal swaps between one hundred percent owned subsidiaries of the

same parent entity.'' Paragraph (3) of the definition states that the

examples of transactions set forth paragraph (2) of the definition that

do not fall within the publicly reportable swap transaction definition

``represent swaps that are not at arm's length and thus are not

publicly reportable swap transactions, notwithstanding that they do

result in a corresponding change in the market risk position between

two parties.'' Indeed, there may be covered transactions as defined in

Sections 23A and 23B of the Federal Reserve Act that are not at ``arm's

length'' transactions under Part 43, but which nevertheless result in a

corresponding change in market risk between the two parties. Under

Sec. 43.2, those types of covered transactions would not be ``publicly

reportable swap transactions.''

Further, correction of the footnote 44 sentence will remove any

conflict with the preamble language. The preamble language immediately

preceding the footnote states: ``As adopted, the definition of a

publicly reportable swap transaction also provides, by way of example,

that internal transactions to move risk between wholly-owned

subsidiaries of the same parent, without having credit exposure to the

other party would not presently require public dissemination because

such swaps are not arm's-length transactions.'' Again, there may be

covered transactions as defined in Sections 23A and 23B of the Federal

Reserve Act that may be internal transactions to move risk between

wholly-owned subsidiaries of the same parent, without having credit

exposure to the other party. Those transactions thus do not require

public dissemination because they are not arm's-length transactions.

Accordingly, this document revises the language of the last

sentence of footnote 44 on page 1187 of the Federal Register to read as

follows: ``Certain covered transactions between affiliates as described

in Sections 23A and 23B of the Federal Reserve Act may be considered to

be publicly reportable swap transactions.''

For compliance purposes, this correction of the footnote sentence

will result in a more accurate reflection of the regulatory language

that the determination of whether a covered transaction under Section

23A or 23B of the Federal Reserve Act is a publicly reportable swap

transaction should be made by the parties to the swap, rather than the

Commission. In turn, the Commission's review of such determination will

be based upon the standards as set forth in Sec. 43.2.

III. Correction

In FR Doc. 2011-33173 appearing on page 1182 in the Federal

Register on Monday, January 9, 2012, the following correction is made:

On page 1187, revise the last sentence of footnote 44 to read,

``Certain covered transactions between affiliates as described in

Sections 23A and 23B of the Federal Reserve Act may be considered to be

publicly reportable swap transactions.''

Dated: August 7, 2012.

Sauntia S. Warfield,

Assistant Secretary of the Commission.

[FR Doc. 2012-19664 Filed 8-10-12; 8:45 am]

BILLING CODE 6351-01-P

Last Updated: August 13, 2012