2012-10918

Federal Register, Volume 77 Issue 88 (Monday, May 7, 2012)[Federal Register Volume 77, Number 88 (Monday, May 7, 2012)]

[Proposed Rules]

[Pages 26709-26713]

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

[FR Doc No: 2012-10918]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 49

RIN 3038-AD83

Swap Data Repositories: Interpretative Statement Regarding the

Confidentiality and Indemnification Provisions of Section 21(d) of the

Commodity Exchange Act

AGENCY: Commodity Futures Trading Commission.

ACTION: Proposed interpretative statement.

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

``CFTC'') is proposing this interpretative statement to provide

guidance regarding the applicability of the confidentiality and

indemnification provisions set forth in new section 21(d) of the

Commodity Exchange Act (``CEA'') added by section 728 of the Dodd-Frank

Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act'').

The Commission requests comment on all aspects of the proposed

interpretative statement. The proposed interpretative statement

clarifies that the provisions of section 21(d) should not operate to

inhibit or prevent foreign regulatory authorities from accessing data

in which they have an independent and sufficient regulatory interest,

even if that data also has been reported pursuant to the CEA and

Commission regulations.

DATES: Comments must be received on or before June 6, 2012.

ADDRESSES: Comments, identified by RIN number 3038-AD83, may be sent by

any of the following methods:

Agency Web site, via its Comments Online process: http://comments.cftc.gov. Follow the instructions for submitting comments

through the Web site.

Mail: David A. Stawick, Secretary of the Commission,

Commodity Futures

[[Page 26710]]

Trading Commission, Three Lafayette Centre, 1155 21st Street NW.,

Washington, DC 20581.

Hand Delivery/Courier: Same as mail above.

Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.

FOR FURTHER INFORMATION CONTACT: Adedayo Banwo, Counsel, Office of the

General Counsel, at (202) 418.6249, abanwo@cftc.gov; With respect to

questions relating to international consultation and coordination:

Jacqueline Mesa, Director, Office of International Affairs, at (202)

418.5386, jmesa@cftc.gov, Commodity Futures Trading Commission, Three

Lafayette Centre, 1155 21st Street NW., Washington, DC 20581.

All comments must be submitted in English, or if not, accompanied

by an English translation. Comments will be posted as received to

http://www.cftc.gov. You should submit only information that you wish

to make available publicly. If you wish the Commission to consider

information that may be exempt from disclosure under the Freedom of

Information Act (``FOIA''),\1\ a petition for confidential treatment of

the exempt information may be submitted according to the procedures

established in Sec. 145.9 of the CFTC's regulations.\2\ The Commission

reserves the right, but shall have no obligation, to review, prescreen,

filter, redact, refuse, or remove any or all of your submission from

http://www.cftc.gov that it may deem to be inappropriate for

publication, such as obscene language. All submissions that have been

redacted or removed that contain comments on the merits of the

rulemaking will be retained in the public comment file and will be

considered as required under the Administrative Procedure Act and other

applicable laws, and may be accessible under FOIA.

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\1\ 5 U.S.C. 552.

\2\ 17 CFR 145.9.

SUPPLEMENTARY INFORMATION: In this release, the Commission addresses

issues raised by foreign regulators with respect to the scope and

application of the confidentiality and indemnification provisions of

new section 21(d) of the CEA and proposes to clarify that these

provisions should not operate to inhibit or prevent foreign regulatory

authorities from accessing data in which they have an independent and

sufficient regulatory interest.

I. Background: Statutory and Regulatory Authorities

On July 21, 2010, President Obama signed into law the Dodd-Frank

Act.\3\ Title VIIamended the CEA to establish a comprehensive new

regulatory framework for swaps and security-based swaps.\4\ The

legislation was enacted to reduce risk, increase transparency and

promote market integrity within the financial system by, among other

things: (1) Providing for the registration and comprehensive regulation

of swap dealers and major swap participants; (2) imposing clearing and

trade execution requirements on standardized derivative products; (3)

creating robust recordkeeping and real-time reporting regimes; and (4)

enhancing the Commission's rulemaking and enforcement authorities with

respect to, among others, all registered entities and intermediaries

subject to the Commission's oversight.

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\3\ See Dodd-Frank Wall Street Reform and Consumer Protection

Act, Pub. L. 111-203, 124 Stat. 1376 (2010), available at http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm.

\4\ Pursuant to section 701 of the Dodd-Frank Act, Title VII may

be cited as the ``Wall Street Transparency and Accountability Act of

2010;'' 7 U.S.C. 1 et seq.

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To enhance transparency, promote standardization and reduce

systemic risk, section 727 of the Dodd-Frank Act added to the CEA new

section 2(a)(13)(G),\5\ which requires all swaps--whether cleared or

uncleared--to be reported to swap data repositories (``SDRs'').SDRs are

new registered entities created by section 728 of the Dodd-Frank

Act.\6\ SDRs are required to perform specified functions related to the

collection and maintenance of swap transaction data and information.\7\

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\5\ 7 U.S.C. 2(a)(13)(G).

\6\ Section 721 of the Dodd-Frank Act amends section 1a of the

CEA to add a definition of the term ``swap data repository.''

Pursuant to CEA section 1a(48), the term ``swap data repository

means any person that collects and maintains information or records

with respect to transactions or positions in, or the terms and

conditions of, swaps entered into by third parties for the purpose

of providing a centralized recordkeeping facility for swaps.'' 7

U.S.C. 1a(48).

\7\ See 7 U.S.C. 24a(c). See also Commission, Final Rulemaking:

Swap Data Recordkeeping and Reporting Requirements, 77 FR 2136, Jan.

13, 2012 (``Data Final Rules''). The Data Final Rules, among other

things, set forth regulations governing SDR data collection and

reporting responsibilities under part 45 of the Commission's

regulations.

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CEA section 21(c)(7) requires that SDRs make data available to

certain domestic and foreign regulators \8\ under specified

circumstances.\9\ Separately, section 21(d) mandates that prior to

receipt of any requested data or information from an SDR, a regulatory

authority described in section 21(c)(7) shall agree in writing to abide

by the confidentiality requirements described in section 8 of the

CEA,\10\ and to indemnify the SDR and the Commission for any expenses

arising from litigation relating to the information provided under

section 8 of the CEA.\11\

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\8\ The Commission's regulations designate such regulators as

either an ``Appropriate Domestic Regulator'' or an ``Appropriate

Foreign Regulator'' in Sec. 49.17(b). See Commission, Final

Rulemaking: Swap Data Repositories: Registration Standards, Duties

and Core Principles, 76 FR 54538, 54554 Sept. 1, 2011 (``SDR Final

Rules'').

\9\ 7 U.S.C. 24a(c)(7).

\10\ 7 U.S.C. 12.

\11\ 7 U.S.C. 24a(d).

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Section 752 of the Dodd-Frank Act seeks to ``promote effective and

consistent global regulation of swaps,'' and provides that the CFTC and

foreign regulators ``may agree to such information-sharing arrangements

as may be deemed to be necessary or appropriate in the public interest.

* * *'' \12\ In light of this statutory directive, the Commission has

been working to provide sufficient access to SDR data to appropriate

domestic and foreign regulatory authorities.

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\12\ See section 752(a) of the Dodd-Frank Act.

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On June 8, 2011, the Chairman of the CFTC and the Chairman of the

Securities and Exchange Commission (``Chairmen'') jointly submitted a

letter to Michel Barnier, European Commissioner for Internal Markets

and Services,\13\ highlighting their desire for international

cooperation. In the letter, the Chairmen expressed their belief that

indemnification and notice requirements need not apply when a

registered SDR is also registered in a foreign jurisdiction and the

foreign regulator, acting within the scope of its jurisdiction, seeks

information directly from the SDR.

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\13\ See letter from Gary Gensler, Chairman of the Commission,

and Mary Schapiro, Chairman of the SEC, to Michel Barnier, European

Commissioner for Internal Markets and Services, European Commission,

dated June 8, 2011.

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On September 1, 2011, the Commission adopted regulations

implementing CEA section 21's registration standards, duties, and core

principles for SDRs. To implement the provisions of section 21(c)(7)

and (d), the Commission adopted definitions and standards for

determining access by domestic and foreign regulators to data

maintained by SDRs.

The Commission acknowledged in the SDR Final Rules that the CEA's

indemnification requirement could have the unintended effect of

inhibiting direct access by other regulators to data maintained by

SDRsdue to various home country laws and regulations.\14\ The SDR Final

Rulesprovided that

[[Page 26711]]

under specified circumstances, certain ``Appropriate Domestic

Regulators'' \15\ may gain access to the swap data reported and

maintained by SDRs without being subject to the notice and

indemnification requirements of CEA sections 21(c)(7) and (d).\16\ In

connection with foreign regulatory authorities, the Commission

determined in the SDR Final Rules that confidential swap data reported

to and maintained by an SDR may be accessed by an Appropriate Foreign

Regulator \17\ without the execution of a confidentiality and

indemnification agreement when the Appropriate Foreign Regulator has

supervisory authority over an SDR registered with it pursuant to

foreign law and/or regulation that is also registered with the

Commission.

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\14\ See SDR Final Rules at 54554.

\15\ The term Appropriate Domestic Regulator is defined in 17

CFR 49.17(b)(1) as the Securities and Exchange Commission; each

prudential regulator identified in section 1a(39) of the CEA. 7

U.S.C. 1a(39); the financial Stability Oversight Council; the

Department of Justice; any Federal Reserve Bank; the Office of

Financial Research; and any other person the Commission deems

appropriate.

\16\ In the Commission's view, it is appropriate to permit

access to the swap data maintained by SDRs to Appropriate Domestic

Regulators that have concurrent regulatory jurisdiction over such

SDRs, without the application of the notice and indemnification

provisions of sections 21(c)(7) and (d) of the CEA. See SDR Final

Rules at 54554 n.163. Accordingly, these provisions do not apply to

an Appropriate Domestic Regulator that has regulatory jurisdiction

over an SDR registered with it pursuant to a separate statutory

authority that is also registered with the Commission, if the

Appropriate Domestic Regulator executes an MOU or similar

information sharing arrangement with the Commission and the

Commission, consistent with CEA section 21(c)(4)(A), designates the

Appropriate Domestic Regulator to receive direct electronic access.

See 17 CFR 17(d)(2).

\17\ The term Appropriate Foreign Regulator is defined in 17 CFR

49.17(b)(2) as a foreign regulator with an existing memorandum of

understanding (``MOU'') or similar type of information sharing

arrangement executed with the Commission, and/or a foreign regulator

without an MOU as determined on a case-by-case basis by the

Commission.

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The confidentiality and indemnification provisions of new CEA

section 21 apply only when a regulatory authority seeks access to data

from an SDR. In the SDR Final Rules, the Commission noted that section

8(e) of the CEA provides for the Commission (as opposed to an SDR) to

share confidential information in its possession with any department or

agency of the Government of the United States, or with any foreign

futures authority, department or agency of any foreign government or

political subdivision thereof,\18\ acting within the scope of its

jurisdiction.\19\

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\18\ Section 725(f) of the Dodd-Frank Act amended section 8(e)

of the CEA to include foreign central banks and ministries.

\19\ See SDR Final Rules at 54554.

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The SDR Final Rules became effective on October 31, 2011.\20\ Under

these rules, trade repositories may apply to the Commission for full

registration as SDRs.Pending the adoption and effectiveness of other,

related regulatory provisions and definitions, however, such

registrations are deemed ``provisional.'' \21\

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\20\ Id.

\21\ See 17 CFR 49.3(b).

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II. Considerations Relevant to the Commission's Proposed Interpretative

Statement \22\

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\22\ Legislation has been introduced in Congress that would

amend the CEA to eliminate or substantially limit the SDR

indemnification provision.

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A. International Considerations

As noted above, section 752(a) of the Dodd-Frank Act directs the

Commission to consult and coordinate with foreign regulatory

authorities regarding the establishment of consistent international

standards for the regulation of swaps and various ``swap entities.''

Section 752(a) also provides that the Commission ``may agree to such

information-sharing arrangements [with foreign regulatory authorities]

as may be deemed to be necessary or appropriate in the public

interest'' or for the protection of investors and counterparties.\23\

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\23\ See section 752(a) of the Dodd-Frank Act.

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The Commission is committed to a cooperative international approach

to the registration and regulation of SDRs, and consulted extensively

with various foreign regulatory authorities in promulgating both its

proposed and final regulations concerning SDRs.\24\ The Commission

notes that the SDR Final Rules are largely consistent with the

recommendations and goals of the May 2010 ``CPSS-IOSCO Consultative

Report, Considerations for Trade Repositories in the OTC Derivatives

Market'' (``Working Group Report'').\25\

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\24\ See public comment file in response to the proposal for the

SDR Final Rules, available at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=939 and SDR Final Rules note 6 at

54539, supra.

\25\ This working group was jointly established by the Committee

on Payment and Settlement Systems (``CPSS'') of the Bank of

International Settlements and the Technical Committee of the

International Organization of Securities Commissions (``IOSCO'').

The Working Group Report presented a set of factors to consider in

connection with the design, operation and regulation of SDRs. A

significant focus of the Working Group Report is access to SDR data

by appropriate regulators. The Working Group Report urges that a

trade repository ``should support market transparency by making data

available to relevant authorities and the public in line with their

respective information needs.'' The Working Group Report is

available at http://www.bis.org/publ/cpss90.pdf. See also CPSS-IOSCO

Consultative Report, Principles of Financial Market Infrastructures

(March 2011) available at http://www.bis.org/publ/cpss94.pdf. See

also Financial Stability Board (``FSB''), Implementing OTC

Derivatives Market Reforms, Oct. 25, 2010 (``FSB Report''); FSB,

Derivative Market Reforms, Progress Report on Implementation, Apr.

15, 2010 (``FSB Progress Report'').

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B. Public Comments on SDR Regulations

In developing the SDR Final Rules, the Commission received several

comments regarding access to SDR data by foreign regulatory authorities

and the confidentiality and indemnification provisions of CEA section

21(d). The Commission has considered these comments in formulating this

proposed interpretation but requests further comment concerning the

specific interpretative statement proposed.

Managed Funds Association (``MFA'') requested that the Commission

actively participate in facilitating foreign regulatory access and

confirming a foreign regulator's authority in connection with any SDR

data request.\26\ The CME Group Inc. (``CME'') argued against the

Commission designating any third party to receive swap data, and

TriOptima suggested that the Commission ``adopt as flexible an

interpretation as possible'' regarding the indemnification provisions

in CEA section 21(d).\27\

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\26\ See comment letter from MFA.

\27\ See comment letters from CME and TriOptima.

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The Depository Trust & Clearing Corporation (``DTCC'') stated that

the ``indemnification provisions should not apply in situations where

regulators are carrying out regulatory responsibilities, acting in a

manner consistent with international agreements and maintaining the

confidentiality of data.'' \28\ Additionally, the Commission received a

comment letter from the European Securities and Markets Authority

(``ESMA'') \29\ stating that it believes the indemnification provision

``undermines'' principles of trust and consultation.

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\28\ See comment letter from DTCC.

\29\ See comment letter from ESMA.

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C. Consultations With Foreign Regulatory Authorities

Consistent with the international harmonization envisioned by

section 752 of the Dodd-Frank Act, the Commission has engaged in

consultations with foreign regulatory authorities regarding the

Commission's regulations relating to the Dodd-Frank Act. During these

consultations, many foreign regulatory authorities have expressed

concern about the difficulty in complying with the indemnification

provisions of CEA section 21(d).

As a consequence of these consultations with foreign regulatory

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authorities, and pursuant to the mandate for cooperation under section

752, the Commission concludes that further guidance is necessary to

ensure that appropriate access by foreign regulatory authorities is not

unnecessarily inhibited. For example, the Commission has learned that

foreign regulatory authorities have asked whether a recognition regime

with respect to SDRs, and/or access by foreign authorities that do not

regulate an SDR, would conflict with Sec. 49.17(d)(3) and Sec.

49.18(c) of the SDR Final Rules, which refer to registration with

Appropriate Foreign Regulators. Foreign regulatory authorities have

also taken action to harmonize regulatory reporting rules.

While the SDR Final Rules address foreign regulators with

supervisory authority and regulatory responsibility, the Commission is

proposing the following interpretative statement, pursuant to section

752, to ensure that foreign regulators receive sufficient access to

data reported to SDRs where such foreign regulators have an independent

and sufficient regulatory interest.

III. Commission Proposed Interpretative Statement

In this proposed interpretative statement, the CFTC provides

guidance regarding the confidentiality and indemnification provisions

of CEA section 21(d). As noted above, the Commission seeks comment from

interested members of the public on all aspects of this proposed

interpretative statement.

A. Data Reported to Registered SDRs

The Commission understands that some registered SDRs also maybe

registered, recognized or otherwise authorized in a foreign

jurisdiction and may accept swap data reported pursuant to the foreign

regulatory regime. The Commission concludes that the confidentiality

and indemnification provisions of CEA section 21(d) generally apply

only to such data reported pursuant to the CEA and Commission

regulations.

The Commission further concludes that the confidentiality and

indemnification provisions should not operate to inhibit or prevent

foreign regulatory authorities from accessing data in which they have

an independent and sufficient regulatory interest (even if that data

also has been reported pursuant to the CEA and Commission regulations).

Accordingly, and consistent with the Commission's SDR Final Rules,

the Commission proposes to interpret CEA section 21(d) such that a

registered SDR would not be subject to the confidentiality and

indemnification provisions of that section if:

Such registered SDR also is registered, recognized or

otherwise authorized in a foreign jurisdiction's regulatory regime; and

The data sought to be accessed by a foreign regulatory

authority has been reported to such registered SDR pursuant to the

foreign jurisdiction's regulatory regime.

This proposed interpretative guidance is grounded in principles of

international law and comity. For example, in F. Hoffmann-La Roche Ltd.

v. Empagran S.A., the U.S. Supreme Court, in reviewing the

extraterritorial applicability of a different federal statute, stated

that extraterritorial jurisdiction should be construed, where

ambiguous, ``to avoid unreasonable interference with the sovereign

authority of other nations.'' \30\ In cases considering concepts of

international law and comity in evaluating the extraterritorial scope

of federal statutes, the Supreme Court has noted that the principles in

the Third Restatement of Foreign Relations Law are relevant to the

interpretation of U.S. law.\31\

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\30\ F. Hoffmann-LaRoche, Ltd. v. Empagran S.A., 542 U.S. 155,

164 (2004). In Hoffmann-LaRoche, the Supreme Court also stated that

canons of statutory construction ``assume that legislators take

account of the legitimate sovereign interests of other nations when

they write American laws.'' Id.

\31\ Id. at 164-165.

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Specifically, section 403 of the Third Restatement of Foreign

Relations Law states, in relevant part:

Whether exercise of jurisdiction over a person or activity is

unreasonable is determined by evaluating all relevant factors,

including, where appropriate:

(a) The link of the activity to the territory of the regulating

state, i.e., the extent to which the activity takes place within the

territory, or has substantial, direct, and foreseeable effect upon

or in the territory;

(b) The connections, such as nationality, residence, or economic

activity, between the regulating state and the person principally

responsible for the activity to be regulated, or between that state

and those whom the regulation is designed to protect;

(c) The character of the activity to be regulated, the

importance of regulation to the regulating state, the extent to

which other states regulate such activities, and the degree to which

the desirability of such regulation is generally accepted;

(d) The existence of justified expectations that might be

protected or hurt by the regulation;

(e) The importance of the regulation to the international

political, legal, or economic system;

(f) The extent to which the regulation is consistent with the

traditions of the international system;

(g) The extent to which another state may have an interest in

regulating the activity; and

(h) The likelihood of conflict with regulation by another

state.\32\

\32\ Rest. 3d., Third Restatement Foreign Relations Law section

403 (scope of a statutory grant of authority must be construed in

the context of international law and comity including, as

appropriate, the extent to which regulation is consistent with the

traditions of the international system).

To avoid unreasonable interference with the sovereign authority of

foreign regulators, this proposed interpretative statement is supported

and underpinned by principles of international law and comity.

B. Foreign Regulatory Access

In the Commission's view, a foreign regulator's access to data held

in a registered SDR that also is registered, recognized, or otherwise

authorized in a foreign jurisdiction's regulatory regime, where the

data sought to be accessed has been reported pursuant to that

regulatory regime, should be governed by such foreign jurisdiction's

regulatory regime. The Commission concludes that application of the

requirements of CEA section 21(d) in these circumstances is

unreasonable in light of, among other things, the importance of such

data to the foreign jurisdiction's regulatory regime, foreign

regulators' interest in unfettered access to such data, and the

traditions of mutual trust and cooperation among international

regulators.\33\

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\33\ The Commission notes that access to data held by trade

repositories is a concept under discussion and development among

international regulators. At the request of the FSB, CPSS and IOSCO

have established a working group of relevant authorities to produce

a forthcoming report regarding authorities' access to trade

repository data.

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Therefore, the Commission proposes that a foreign regulator's

access to data from a registered SDR that also is registered,

recognized, or otherwise authorized in a foreign jurisdiction's

regulatory regime, where the data to be accessed has been reported

pursuant to that regulatory regime, will be dictated by that foreign

jurisdiction's regulatory regime and not by the CEA or Commission

regulations. Such access is appropriate, in the Commission's view, even

if the applicable data is also reported to the registered SDR pursuant

to the Commission's Data Final Rules.\34\

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\34\ Regarding the Commission's access to SDR data, section

21(b)(1)(A) of the CEA states that the Commission ``shall prescribe

standards that specify the data elements for each swap that shall be

collected and maintained by each registered swap data repository.''

Section 21(c)(1) of the CEA requires registered SDRs to ``accept

data prescribed by the Commission for each swap under subsection

(b).'' Therefore, with respect to Commission access to data held in

registered SDRs, the Commission concludes that the direct electronic

access provisions of CEA section 21(c)(4) apply only to such data

that the SDR is required to accept under section 21(c)(1), which is

further defined by part 45 of the Commission's regulations. In this

respect, the Commission concludes that its direct electronic access

applies only to such data reported pursuant to section 21 and

Commission regulations promulgated thereunder.

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Additionally, the Commission reiterates that a foreign regulatory

authority, like domestic regulators, can nonetheless receive

confidential data, without the execution of a confidentiality and

indemnification agreement, from the Commission (as opposed to an SDR)

pursuant to section 8(e) of the CEA.\35\ Such data sharing and access

would be governed by the confidentiality provisions of section 8 of the

CEA.

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\35\ As noted above, CEA section 8(e) allows the Commission to

share confidential information in its possession obtained in

connection with the administration of the CEA with ``any department

or agency of the Government of the United States'' or with any

foreign futures authority or a department, central bank or ministry,

or agency of a foreign government or political subdivision thereof,

acting within the scope of its jurisdiction. The Commission

acknowledges the difficulty that registered SDRs may face in

determining what data or reporting falls within the jurisdiction of

a regulatory authority. In this regard, the Commission is

considering a separate release regarding section 2(i) of the CEA.

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C. Request for Comment

The Commission requests comment on all aspects of its proposed

interpretative statement. In particular, the Commission requests

comment on the following issue: How would the timing and implementation

of foreign jurisdictions' regulatory regimes affect the Commission's

proposed interpretative guidance?

By the Commission.

Dated: Issued in Washington, DC, on April 30, 2012.

David A. Stawick,

Secretary of the Commission.

Appendices To Swap Data Repositories: Interpretative Statement

Regarding the Confidentiality and Indemnification Provisions of Section

21(d) of the Commodity Exchange Act Interpretive Statement--Commission

Voting Summary and Statements of Commissioners

Note: The following appendices will not appear in the Code of

Federal Regulations.

Appendix 1--Commission Voting Summary

On this matter, Chairman Gensler and Commissioners Sommers,

Chilton, O'Malia and Wetjen voted in the affirmative; no

Commissioner votes in the negative.

Appendix 2--Statement of Chairman Gary Gensler

I support the proposed interpretative statement regarding the

application of the Dodd-Frank Wall Street Reform and Consumer

Protection Act (Dodd-Frank Act) indemnification provisions for swap

data repositories (SDRs). The Commission is working closely with

international regulators on a collaborative approach regarding how

data may be accessed by regulators. The proposed guidance, which

benefited from international input, states the Commission's view

that foreign regulators will not be subject to the indemnification

provisions in the Dodd-Frank Act if the SDR is registered,

recognized or otherwise authorized by foreign law and the data to be

accessed is reported to the SDR pursuant to foreign law. The public

will now have an opportunity to comment on the proposed guidance,

and I look forward to the public's input.

Appendix 3--Statement of Commissioner Jill E. Sommers

I concur in the issuance of this Proposed Interpretative

Statement Regarding the Confidentiality and Indemnification

Provisions of Section 21(d) of the Commodity Exchange Act (Proposed

Interpretive Statement). It provides some additional clarification

with respect to how the Commission intends to interpret the

application of the Section 21(d) indemnification provisions beyond

what the Commission stated when it finalized the swap data

repository (SDR) rules. See Swap Data Repositories: Registration

Standards, Duties and Core Principles, 76 FR 54,538 (Sept. 1, 2011).

However, a legislative fix is the only real solution to providing

appropriate regulators, both foreign and domestic, with timely

access to relevant data. I agree with Commissioner O'Malia that the

Commission should publicly support repeal of the indemnification

provisions, and note that the SEC has already done so.

When finalizing the SDR rules, the Commission stated that a

foreign regulator may have direct access to confidential swap data

reported to and maintained by an SDR registered with the Commission

without executing a Confidentiality and Indemnification Agreement

when the SDR is also registered with the foreign regulator and the

foreign regulator is acting in a regulatory capacity with respect to

the SDR. See id. at 54,554. The Proposed Guidance clarifies that

this should be the case even if the data the foreign regulator seeks

also has been reported pursuant to the CEA and Commission

regulations.

Aside from making this point, the Proposed Interpretive

Statement does not provide any information that cannot be otherwise

gleaned from the SDR final rules, with one notable exception. The

final SDR rules define an ``Appropriate Foreign Regulator'' as one

that has supervisory authority over an SDR that is registered with

the foreign regulator and with the CFTC. The Proposed Interpretive

Statement expands this concept to SDRs that are registered,

recognized, or otherwise authorized in a foreign jurisdiction's

regulatory regime. Thus, registration and recognition are

equivalent. This is a welcome clarification and a step in the right

direction.

I should note that the indemnification provisions of Section

21(d) may have an adverse effect on U.S. regulators too. The

Proposed Interpretive Statement touches on a distinction drawn in

Part 49 between ``Appropriate Domestic Regulators,'' which include a

number of domestic regulatory authorities, and an ``Appropriate

Domestic Regulator with Regulatory Responsibility over a Swap Data

Repository'' (a single entity subcategory of Appropriate Domestic

Regulators, namely, the Securities and Exchange Commission (SEC)).

Only the latter category of domestic regulator (i.e. the SEC) is

exempt from the indemnification provisions of Section 21(d). While

it makes sense that the SEC should be able to receive SDR data

directly from an SDR absent an indemnification agreement, I

encourage comments as to whether other Appropriate Domestic

Regulators should have similar access.

Appendix 4--Statement of Commissioner Scott D. O'Malia

I concur in support of the Commission's proposed interpretative

statement (``Proposed Interpretative Statement'') regarding the

confidentiality and indemnification provisions of Section 21(d) of

the Commodity Exchange Act (``CEA'').

Ultimately, Congress should repeal the confidentiality and

indemnification provisions of Section 21(d) of the CEA and the

Commission should publicly support that repeal. Absent a legislative

fix, however, I believe the Commission is taking the right step to

allay the concerns expressed by many foreign regulatory authorities.

I am somewhat concerned that the Proposed Interpretative

Statement does not address one important issue. Specifically, the

Proposed Interpretative Statement would not provide foreign

regulatory authorities with access to swaps data if those

authorities had not yet finalized their regulations. In order to

better understand the public's view on this issue, I have added a

question seeking comment on how the timing and implementation of

foreign jurisdictions' regulatory regimes should affect the

Commission's final interpretation.

Lastly, I am pleased that this Proposed Interpretative Statement

is based on principles of international harmonization and comity.

The Commission should continue to consult with foreign regulatory

authorities in a manner consistent with international agreements

regarding the registration of swap data repositories and the sharing

of swaps data. In my view, these principles should establish the

foundation of the Commission's forthcoming rulemaking concerning the

extraterritorial application of the Dodd-Frank Act to foreign-based

entities. Several foreign jurisdictions are in the process of

finalizing new rules for the regulation of swaps and it is important

that those rules provide a level and competitive playing field for

U.S. firms as well.

[FR Doc. 2012-10918 Filed 5-4-12; 8:45 am]

BILLING CODE 6351-01-P

Last Updated: May 7, 2012