Federal Register/Vol. 85, No. 143/Friday, July 24, 2020/Rules
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Federal Register / Vol. 85, No. 143 / Friday, July 24, 2020 / Rules and Regulations 44693 FOR FURTHER INFORMATION CONTACT: COMMODITY FUTURES TRADING name give-up on SEFs (2018 RFC).1 As Sheri Pippin, Air Transportation COMMISSION described in the 2018 RFC, some SEFs Division (AFS–200), Flight Standards facilitate post-trade name give-up by Service, Federal Aviation 17 CFR Part 37 directly or indirectly disclosing the Administration, 800 Independence identities of swap counterparties to one Avenue SW, Washington, DC 20591; RIN Number 3038–AE79 another after a trade is matched telephone: (202) 267–8166; email: anonymously. The 2018 RFC noted that [email protected]. Post-Trade Name Give-Up on Swap a SEF may effectuate such disclosure SUPPLEMENTARY INFORMATION: Execution Facilities through its own trade protocols or through a third-party service provider Good Cause for Adoption Without Prior AGENCY: Commodity Futures Trading utilized to process and route Notice Commission. transactions to a derivatives clearing ACTION: Section 553(b)(3)(B) of the Final rule. organization (DCO) for clearing. In the 2018 RFC, the Commission questioned Administrative Procedure Act (APA) (5 SUMMARY: The Commodity Futures U.S.C. 551 et seq.) authorizes agencies the necessity of the practice with Trading Commission (CFTC or respect to cleared swaps anonymously to dispense with notice and comment Commission) is issuing a final rule to procedures for rules when the agency executed on a SEF. The Commission prohibit post-trade name give-up for also summarized some of the general for ‘‘good cause’’ finds that those swaps executed, pre-arranged, or pre- procedures are ‘‘impracticable, views on post-trade name give-up of negotiated anonymously on or pursuant various industry participants and unnecessary, or contrary to the public to the rules of a swap execution facility interest.’’ Section 553(d)(3) of the APA requested public comments on the (SEF) and intended to be cleared. The merits of the practice and whether the requires that agencies publish a rule not final rule provides an exception for Commission should prohibit it. less than 30 days before its effective package transactions that include a The Commission received 13 date, except as otherwise provided by component transaction that is not a comment letters in response to the 2018 the agency for good cause found and swap intended to be cleared, including RFC. Most commenters opposed the published with the rule. but not limited to U.S. Treasury swap practice of post-trade name give-up for Because this action merely makes a spreads. anonymously-executed swaps submitted correction to the amendment number of to clearing, and requested that the a published final rule technical DATES: The effective date for this final rule is September 22, 2020. The Commission adopt a regulatory amendment, the FAA finds that notice prohibition. The Securities Industry and and public comment under 5 U.S.C. compliance date for swaps subject to the trade execution requirement under Financial Markets Association (SIFMA) 553(b) is unnecessary. For the same expressed support for the practice and reason, the FAA finds that good cause section 2(h)(8) of the Commodity Exchange Act (CEA or Act) is November concern about the effects of a exists under 5 U.S.C. 553(d) for making prohibition. The views raised in those this rule effective in less than 30 days. 1, 2020. The compliance date for swaps not subject to the trade execution comment letters were considered and Background requirement under section 2(h)(8) of the discussed by the Commission in a CEA is July 5, 2021. proposed rule on post-trade name give- On February 25, 2020, the FAA up issued in December 2019. published the Pilot Professional FOR FURTHER INFORMATION CONTACT: Development final rule (85 FR 10896). Alexandros Stamoulis, Special Counsel, B. December 2019 Proposed Rule After that rule was published, the FAA (646) 746–9792, [email protected], After considering the comments discovered two minor errors in Division of Market Oversight, received in response to the 2018 RFC, §§ 121.409 and 121.424 of Title 14 of the Commodity Futures Trading on December 31, 2019, the Commission Code of Federal Regulations that Commission, 140 Broadway, 19th Floor, published in the Federal Register a required correction. Those errors were New York, NY 10005; Roger Smith, proposed rule to prohibit post-trade corrected in a technical amendment Special Counsel, (202) 418–5344, name give-up for anonymously- published June 30, 2020 (85 FR 39069). [email protected], Division of Market executed and intended-to-be-cleared In the technical amendment, the FAA Oversight, Commodity Futures Trading swaps (Proposal).2 The Proposal listed the amendment number as 121– Commission, 525 West Monroe Street, prohibits a SEF from directly or 282B. Suite 1100, Chicago, Illinois 60661; indirectly, including through a third- Israel Goodman, Special Counsel, (202) Correction party service provider, disclosing the 418–6715, [email protected], Division identity of a counterparty to a swap In the final rule, FR Doc. 2020–12170, of Market Oversight; or Vincent executed anonymously and intended to published on June 30, 2020, at 85 FR McGonagle, Principal Deputy Director, be cleared. The Proposal also requires 39069, make the following correction: (202) 418–5387, [email protected], SEFs to establish and enforce rules 1. On page 39069 in the heading of Division of Enforcement, Commodity prohibiting any person from effectuating the final rule, revise ‘‘Amdt. No. 121– Futures Trading Commission, Three such a disclosure. 282B’’ to read ‘‘121–384’’. Lafayette Centre, 1151 21st Street NW, In the Proposal, the Commission Issued under authority provided by 49 Washington, DC 20581. reasoned that a prohibition on post- U.S.C. 106(f), 106(g), 44701(a), and Sec. SUPPLEMENTARY INFORMATION: trade name give-up may (1) advance the 206 of Public Law 111–216, 124 Stat. statutory objectives of promoting swaps 2348 (49 U.S.C. 44701 note) in I. Background Washington, DC, on July 9, 2020. A. November 2018 Request for Comment 1 Post-Trade Name Give-up on Swap Execution Facilities, 83 FR 61571 (Nov. 30, 2018). ‘‘Post-trade Brandon Roberts, On November 30, 2018, the name give-up’’ refers to the practice of disclosing Executive Director, Office of Rulemaking. Commission published in the Federal the identity of each swap counterparty to the other after a trade has been matched anonymously. [FR Doc. 2020–15229 Filed 7–23–20; 8:45 am] Register a request for comment 2 Post-Trade Name Give-up on Swap Execution BILLING CODE 4910–13–P regarding the practice of post-trade Facilities, 84 FR 72262 (Dec. 31, 2019). VerDate Sep<11>2014 16:42 Jul 23, 2020 Jkt 250001 PO 00000 Frm 00009 Fmt 4700 Sfmt 4700 E:\FR\FM\24JYR1.SGM 24JYR1 jbell on DSKJLSW7X2PROD with RULES 44694 Federal Register / Vol. 85, No. 143 / Friday, July 24, 2020 / Rules and Regulations trading on SEFs and fair competition prohibit post-trade name give-up for stated that fully-anonymous trading among market participants; (2) further swaps anonymously executed, pre- (i.e., without post-trade name give-up) the objectives underlying the arranged, or pre-negotiated on or would likely encourage more prohibition against swap data pursuant to the rules of a SEF and participants to trade on those repositories (SDRs) disclosing the intended to be cleared. New § 37.9(d) platforms.10 The Proposal requested identity of a counterparty to a swap that prohibits a SEF from directly or public comments on how a prohibition is anonymously executed and cleared in indirectly disclosing the identity of a on post-trade name give-up would accordance with the Commission’s counterparty to any such swap, and impact trading and pre-trade price straight-through processing (STP) requires a SEF to establish and enforce transparency on affected SEFs. requirements; and (3) promote impartial rules that prohibit any person from Several commenters on the Proposal access on SEFs.3 doing so.6 The final rule, however, stated that prohibiting post-trade name The Commission requested comments contains an exception for package give-up would remove a significant on all aspects of the Proposal, and also transactions that include a component barrier to increased participation on solicited comments through targeted transaction that is not a swap intended certain SEF platforms,11 and that questions relating to whether and how to be cleared. prohibiting the practice would lead to the proposed rule, if adopted, (1) would an increase in the number of A. Statutory Authorities advance the statutory and regulatory participants trading on affected SEFs.12 goals described above; (2) might impact CEA section 8a(5) authorizes the MFA, for example, stated that its aspects of market quality and liquidity; Commission to make and promulgate members are ‘‘eager’’ to participate on and (3) should be tailored. Overall, the such rules and regulations as, in the affected SEFs and ‘‘to have the ability to Commission received comment letters judgment of the Commission, are transact cleared swaps anonymously; on the Proposal from 20 different reasonably necessary to effectuate any of similar to how they currently trade in respondents: 13 public interest and the provisions or to accomplish any of other asset classes (e.g., equities, industry groups; two global banks with the purposes of the CEA.7 The futures, foreign exchange, and affiliated swap dealers; two global Commission believes that prohibiting Treasuries, among others).’’ 13 market makers; a global asset manager; the practice of post-trade name give-up JPMorgan, on the other hand, opined a SEF operator; and a third-party for intended-to-be-cleared swaps is that ‘‘the more likely outcome of provider of derivatives trade processing reasonably necessary to promote trading banning [post-trade name give-up] will services.4 Additionally, Commission of swaps on SEFs and fair competition be to reduce overall trading on SEFs, as staff participated in several ex parte among market participants.