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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).

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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. The dealers pull back from trading ....’’14 meetings concerning the proposal.5 The Commission also believes that post- Other commenters similarly argued that Commission also consulted with the trade name give-up for intended-to-be- incumbent swap dealers may exit the U.S. Securities and Exchange cleared swaps is inconsistent with the market or reduce their trading.15 ICI and Commission and foreign regulators on requirement that SEFs provide market MFA, however, characterized this the proposed rule. participants with impartial access to outcome as ‘‘unlikely.’’ 16 MFA stated trading on SEFs, as well as the that competitive market forces would II. Final Rule objectives underlying the prohibition ensure that ‘‘in the unlikely event an After considering the public against SDRs disclosing the identities of individual dealer reduced its offering, comments on the Proposal, the counterparties to swaps anonymously other dealers would quickly step into its Commission is adopting the proposed executed on a SEF and cleared in place.’’ 17 Asserting its experience as a regulations, with certain modifications accordance with STP requirements. ‘‘top liquidity provider’’ in SEF markets, and clarifications discussed below. 1. Promoting Trading on SEFs and Pre- Citadel stated that it does not expect a Specifically, the Commission is trade Price Transparency (CEA Section prohibition on post-trade name give-up amending its part 37 regulations to 5h(e)) to affect its liquidity provision on pre- trade disclosed platforms or its use of 3 See Proposal at 72265–72267. CEA section 5h(e) establishes the pre-trade anonymous trading 4 Comment letters were submitted by the statutory goal of the SEF regulatory protocols.18 Citadel further asserted that following entities: Alternative Investment regime to promote swaps trading on ‘‘other swap dealers share our view, as Management Association (AIMA) (Feb. 17, 2020); SEFs and promote pre-trade price UBS has supported the prohibition and American Bankers Association (ABA) (Mar. 2, transparency in the swaps market.8 In 2020); Americans for Financial Reform Education SIFMA indicated that the views among Fund (AFR) (Mar. 2, 2020); Bank Policy Institute the Proposal, the Commission stated swap dealers ‘are not uniform.’ ’’ 19 (BPI) (Mar. 10, 2020); Better Markets, Inc. (Better that despite available liquidity for Markets) (Mar. 2, 2020); Citadel and Citadel cleared products on certain SEF 10 Id. at 72266. Securities (Citadel) (Letter 1: Mar. 2, 2020, and platforms, the range and number of 11 See SIFMA AMG Letter, at 2; ICI Letter, at 3; Letter 2: Apr. 21, 2020); Citibank, N.A. (Citi) (Mar. MFA Letter, at 6 (‘‘While MFA speaks only on 2, 2020); Coalition for Derivatives End-Users (Mar. active participants may be limited due to market participants’ concerns about behalf of our members, we have heard broadly and 2, 2020); CTC Trading Group, LLC (CTC) (Mar. 10, uniformly from them that the practice of Name 2020); FIA Principal Traders Group (FIA PTG) (Mar. information leakage and anticompetitive Give-Up is the most significant obstacle to their 2, 2020); Financial Services Forum (FSF) (Mar. 2, behavior made possible by post-trade participation on IDB SEFs.’’); Citadel Letter 1, at 3– 2020); Healthy Markets Association (HMA) (Mar. 9, name give-up.9 The Commission also 4 (‘‘Name give-up is the most significant remaining 2020); IHS Markit (Mar. 2, 2020); Investment such barrier preventing buy-side firms from trading Company Institute (ICI) (Mar. 2, 2020); JPMorgan on certain SEFs . . . .’’). 6 The Commission notes that this rule does not Chase & Co. (JPMorgan) (Mar. 2, 2020); Managed 12 See AFR Letter, at 3; CTC Letter, at 1–2; FIA prohibit a SEF from disclosing the identities of all Funds Association (MFA) (Mar. 2, 2020); SIFMA, PTG Letter, at 2; MFA Letter, at 6. of the participants on the SEF to all other on behalf of a majority of SIFMA’s swap dealer 13 participants. However, such disclosure in specific MFA Letter, at 6. members who have expressed a view (Mar. 2, 2020); 14 SIFMA’s Asset Management Group (SIFMA AMG) cases may be prohibited under other provisions of JPMorgan Letter, at 10. 15 (Mar. 2, 2020); ICAP Global Derivatives Limited and the CEA and Commission regulations. In addition, See ABA Letter, at 2; BPI Letter, at 1; FSF tpSEF, Inc. (TP ICAP); and Vanguard (Mar. 2, 2020). the Commission may consider this issue in a future Letter, at 7–8; SIFMA Letter, at 4. 16 5 See Comments for Proposed Rule 84 FR 72262, rulemaking. ICI Letter, at 5; MFA Letter, at 4. available at https://comments.cftc.gov/ 7 7 U.S.C. 12(a)(5). 17 MFA Letter, at 4. PublicComments/CommentList.aspx?id=3066 (last 8 7 U.S.C. 7b–3(e). 18 Citadel Letter 1, at 6. retrieved June 23, 2020). 9 Proposal at 72265–72266. 19 Citadel Letter 1, at 7.

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Commenters in favor of the Proposal reportedly deterred a significant Commission believes that increased also pointed to their experience in other segment of market participants from anonymity is reasonably likely to asset classes where post-trade name making markets on or otherwise similarly enhance trading on SEFs.30 give-up is not practiced, asserting that participating on affected SEFs. Such The Commission intends to study the such markets demonstrate that the market participants have ascribed their state of the swaps market in order to purported negative liquidity impacts lack of participation to several potential observe any changes to trading on SEFs raised by some incumbent swap dealers harms resulting from post-trade name following the implementation of this are unwarranted.20 Commenters give-up, a principal concern being the final rule.31 opposed to the Proposal, however, risk of information leakage allowing Moreover, the Commission finds the asserted that the quality of liquidity in counterparties to glean a SEF reasoning behind claims that incumbent certain fully-anonymous markets has participant’s trading positions and swap dealers may reduce their trading if degraded, even as new types of market strategies.27 The Commission has heard post-trade name give-up is prohibited to participants have entered the repeatedly and consistently from market be at odds with the statutory marketplace.21 participants eager to trade fully- requirements discussed in the following Commenters also asserted that anonymously on SEFs.28 The two sections: To promote fair prohibiting post-trade name give-up Commission expects that many of these competition among market participants would improve price transparency.22 market participants will choose to and impartial access to the market. The Citadel noted that pre-trade anonymous participate on affected SEFs once the reason proffered for a potential pullback execution methods, such as anonymous practice is prohibited, leading to in trading by incumbent swap dealers is order books, will continue to function increased trading. Furthermore, the that post-trade name give-up is on a pre-trade basis as they do today, Commission believes that prohibiting important to ensure that swap dealers providing the same level of price post-trade name give-up will promote can hedge the risk of their client-facing transparency to market participants.23 pre-trade price transparency in the trades.32 In this regard, some market Citadel and MFA opined, however, that swaps market by encouraging a greater participants argue that participation of eliminating post-trade name give-up number, and a more diverse set, of buy-side clients and speculators on pre- should be expected to increase pre-trade market participants to anonymously trade anonymous SEFs (and without the transparency, as more market post bids and offers on affected SEFs. ability to identify them through post- participants are able to participate in With respect to claims made by some trade name give-up) will harm the these trading protocols.24 MFA stated commenters that incumbent swap ability of dealers to hedge reliably.33 that post-trade name give-up has limited dealers may pull back from trading on These arguments can be understood to investor access to affected SEFs, thereby SEFs if post-trade name give-up is imply that greater participation and reducing pre-trade transparency prohibited, the Commission does not competition from certain types of regarding available bids and offers, believe that this prospect justifies market participants (such as buy-side limiting investor choice of trading maintaining the practice. In the clients and speculators) on affected pre- protocols, and creating information Commission’s view, there is not trade anonymous SEFs will harm asymmetries between market convincing evidence, such as research overall market quality and welfare. The participants.25 MFA asserted that or data, supporting the proposition that Commission finds this proposition to be eliminating post-trade name give-up participation and trading on SEFs will at odds with the statutory requirements would facilitate investors selectively decrease as a result of prohibiting post- to promote fair competition among accessing additional liquidity pools and trade name give-up. Rather, the trading protocols, thereby improving Commission believes that fully- Financial and Quantitative Analysis 1–25 (2019) price discovery and pre-trade anonymous trading has facilitated (same); A. Hachmeister & D. Schierek, Dancing in transparency while reducing liquidity and diverse participation in the Dark: Post-Trade Anonymity, Liquidity, and 26 Informed Trading, 34 Review of Quantitative information asymmetries. markets for instruments such as futures, Finance and Accounting 145–177 (2010) (same); J. The Commission believes that equities, and U.S. Treasury securities, Linnainmaa & G. Saar, Lack of Anonymity and the prohibiting post-trade name give-up is and academic literature suggests that Inference from Order Flow, 25 Review of Financial reasonably necessary to facilitate and markets with pre- and post-trade Studies 1,414–1,456 (2012) (same). See also promote trading on SEFs. The practice Treasury Market Practices Group, White Paper on anonymity generally feature greater Clearing and Settlement in the Secondary Market of post-trade name give-up has liquidity than those without.29 The for U.S. Treasury Securities (Jul. 11, 2019) (stating that the emergence of new types of market 20 See Citadel Letter 1, at 7; Citadel Letter 2, at 27 See CFTC Market Risk Advisory Committee participants in the U.S. Treasury securities market 7, FIA PTG Letter, at 1–2, MFA Letter, at 4. Meeting, Panel Discussion: Market’s Response to has ‘‘likely improved overall liquidity through 21 For example, FSF and JPMorgan assert that the Introduction of SEF’s, 133 et seq. (Apr. 2, 2015) enhanced order flow and competition’’). dealer-provided liquidity in some markets has (MRAC Meeting Transcript) at 142–144; Proposal at 30 See, e.g., T. Lee & C. Wang, Why Trade Over- increasingly been replaced by high-frequency 72264; AIMA Letter, at 1; Citadel Letter 1, at 1, 3 the-Counter? When Investors Want Price trading firms that tend to retract liquidity sooner and 10; ICI Letter, at 3; MFA Letter, at 3 and 7; Discrimination, at 26–27 (2019 working paper) than other types of market participants during SIFMA AMG Letter, at 1 and 2; Vanguard Letter, at (predicting that eliminating name give-up in swaps periods of high volatility. FSF Letter, at 9; JPMorgan 2. markets would decrease spreads on SEFs and Letter, at 6 and 9. See also Citi Letter, at 4 note 7 28 See, e.g., supra notes 12–13 and accompanying increase total market participant welfare). (‘‘[D]egradations in liquidity have occurred in other text; Proposal at 72264, notes 31–32 and 31 In this respect, the Commission will endeavor markets that have transitioned to fully anonymous accompanying text; MRAC Meeting Transcript at to conduct a preliminary study on the state of the trading.’’). By contrast, Citadel asserts that it is 140. swaps markets by July 2021, and a further study by ‘‘bank dealers’’ that have withdrawn from SEFs and 29 See, e.g., S. Freiderich & R. Payne, Trading July 2023. U.S. Treasury markets during certain periods of Anonymity and Order Anticipation, 21 Journal of 32 See ABA Letter, at 2; BPI Letter, at 1; Citi market volatility. Citadel Letter 2, at 12. Letter, at 4; FSF Letter, at 3–6; JPMorgan Letter, at 22 Financial Markets 1–24 (2014) (finding that post- Citadel Letter 1, at 4–5; Citadel Letter 2, at 5; trade anonymity improved market liquidity, 4–5; SIFMA Letter, at 4–5; TP ICAP Letter, at 5. MFA Letter, at 4; SIFMA AMG Letter, at 2; particularly for small stocks and stocks with Commenters supporting the Proposal, however, Vanguard Letter, at 1. concentrated trading, which may be more analogous asserted that the proposition that post-trade name 23 Citadel Letter 1, at 4–5. to swaps); T.G. Meling, Anonymous Trading in give-up is necessary for dealer risk management is 24 Id. at 5; Citadel Letter 2, at 5; MFA Letter, at Equities (2019 working paper) (also finding that spurious. See, Better Markets Letter, at 8; Citadel 4. post-trade anonymity improved market liquidity); Letter 1, at 2; Vanguard Letter, at 2. 25 MFA Letter, at 4. P.J. Dennis & P. Sandas, Does Trading 33 See FSF Letter, at 4–6; Citi Letter, at 3; infra 26 Id. Anonymously Enhance Liquidity? Journal of notes 53–57 and accompanying text.

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market participants and impartial access ‘‘promotes competition and attracts SEF regulation 37.202,42 which requires a on SEFs. The Commission believes that trading by providing market participants SEF to provide market participants with maintaining post-trade anonymity, multiple protocols from which to impartial access to its market(s), where it is reasonable to do so, will choose depending on their business including, among other things, criteria better align with the statutory models and preferences.’’ 39 By governing such access that are framework discussed below and level ‘‘limiting the methods through which ‘‘impartial, transparent and applied in a the playing field for market participants SEFs can operate and compete with fair and non-discriminatory manner.’’ 43 of all types and sizes to trade and each other,’’ JPMorgan argued, banning In this context, ‘‘impartial’’ means fair, compete on affected SEFs without post-trade name give-up ‘‘would clearly unbiased, and unprejudiced.44 The exposing sensitive swap transaction reduce innovation and reduce impartial access requirement allows information. competition ‘among . . . markets,’ thus participants to compete on a level playing field, and additional liquidity 2. Promoting Fair Competition Among in fact contravening Section 3(b)’s 40 providers to participate on SEFs.45 Market Participants (CEA Section 3(b)) mandate.’’ The Commission is not persuaded by In the Proposal, the Commission CEA Section 3(b) specifies that a comments that prohibiting post-trade stated that post-trade name give-up may purpose of the CEA is to promote fair name give-up would itself impair result in a ‘‘discriminatory effect’’ competition among market against certain market participants, and 34 competition or innovation. Post-trade participants. In the Proposal, the name give-up is an ancillary post-trade that the Commission preliminarily Commission noted commenters’ stated protocol, and not a method of execution. believed post-trade name give-up concerns about information leakage and The prohibition of post-trade name give- undermines the policy goals of the anticompetitive behavior made possible up, as proposed and adopted by the impartial access requirement, namely, by post-trade name give-up. The Commission, applies to all SEFs and all to: (1) Ensure that market participants Commission reasoned that greater pre-trade anonymous execution can compete on a level playing field; participation on SEFs resulting from a methods. It does not proscribe SEFs and (2) allow additional liquidity prohibition on post-trade name give-up 46 from offering any existing execution providers to participate on SEFs. The would advance the goal of promoting method, nor does it prevent SEFs from Commission also stated its preliminary competition on SEFs.35 The developing new execution methods. assessment that promoting a fully- Commission stated that the proposed Moreover, the Commission is concerned anonymous trading environment rule may also advance the CEA’s goal of without post-trade name give-up would fostering fair competition among market by other commenters’ assertions that post-trade name give-up enables better fulfill the goals of the impartial participations by reducing opportunities 47 anticompetitive behavior. Regardless of access requirement. The Proposal for information leakage associated with asked for public comments on whether post-trade name give-up.36 the prevalence or magnitude of such behavior, the Commission believes that post-trade name give-up undermines the In response to the Proposal, several stated goals of impartial access. commenters emphasized the view that prohibiting post-trade name give-up will reduce the opportunity for such Several commenters stated that post- post-trade name give-up is an trade name give-up creates an uneven or anticompetitive practice and/or permits behavior to occur, and is therefore reasonably necessary to promote fair unfair playing field by conferring swap dealers to engage in certain benefits to select market participants anticompetitive behavior,37 and some competition among market participants on pre-trade anonymous SEF markets (large incumbent swap dealers) and commenters opined that prohibiting the permitting such market participants to practice may lead to greater competition for cleared swaps. The Commission believes that prohibiting post-trade engage in discriminatory trading among dealers and liquidity practices.48 AFR stated that post-trade providers.38 Conversely, JPMorgan name give-up will address concerns about information leakage and asserted that post-trade name give-up 42 17 CFR 37.202. discriminatory behavior that market 43 17 CFR 37.202(a). 34 7 U.S.C. 5(b). participants claim have dissuaded them 44 See Core Principles and Other Requirements for 35 Proposal at 72266. from accessing pre-trade anonymous SEFs, 78 FR 33476, 33508 (June 4, 2013). 36 Id. liquidity pools to date, thereby 45 Id. 37 See AFR Letter, at 2–3; Better Markets Letter, removing barriers to greater 46 Proposal at 72267. at 11–12 (‘‘[T]he gleaning of trading interest and participation and competition. 47 Id. trade information and the apparent consequences of 48 See AFR Letter, at 3 (‘‘Post-trade name give-up the practice of Post-Trade Name Give-Up—to 3. Providing Market Participants With exposes liquidity providers to several risks, permit dealers to exit order books with non-dealer Impartial Access to the Market (CEA including the risk of retaliation from large participation and trade with informational competitors and the risk of revealing information advantages—conflict with the CEA’s overarching Section 5h(f)(2)(B) and CFTC Regulation relevant to trading strategies to competitors. Smaller statutory objectives to ‘promote . . . fair 37.202) liquidity providers and new entrants would tend to competition among boards of trade, other markets be more vulnerable to these dangers.’’); Better and market participants’ . . . .’’); Citadel Letter 1, CEA section 5h(f)(2)(B) requires a SEF Markets Letter, at 9; Citadel Letter 1, at 3–4 and 6 at 1; Citadel Letter 2, at 5 and 10; HMA Letter, at to establish and enforce trading, trade (‘‘[S]wap dealers are able to use name give-up as a 2; MFA Letter, at 3; SIFMA AMG Letter, at 1. processing, and participation rules that post-trade check to ensure that they are only 38 See CTC Letter, at 1–2 (‘‘[W]e would expect provide market participants with transacting with other swap dealer counterparties abolishing name give-up to increase liquidity 41 on [interdealer broker] SEFs, thereby maintaining provision on SEFs given increased participation ‘‘impartial access’’ to the market. The dealer-only liquidity pools in direct contradiction from buy-side firms, which should in turn drive Commission implemented this statutory of statutory impartial access requirements.’’); enhanced participation from liquidity providers.’’); requirement by adopting CFTC Citadel Letter 2, at 10 (‘‘[W]e note the experience ICI Letter, at 5 (‘‘[P]rohibiting post-trade name give- of Citadel Securities entering the swaps market as up could encourage competition among dealers to a new liquidity provider, where we witnessed how the extent post-trade name give-up today gives a 39 JPMorgan Letter, at 10. certain other swap dealers can use name give-up for few dominant dealers in the market leverage over 40 Id. at 11. See also FSF Letter, at 10 (‘‘Contrary purposes that are inconsistent with the buy-side participants and other dealers.’’); MFA to what is argued in the [Proposal] and by Commission’s impartial access requirements. Letter, at 4 (‘‘[N]ew liquidity providers may be able commenters, banning name give-up would itself Immediately following our entry as a new liquidity to enter the market more easily, which will impair competition (certainly, innovation and provider, this included certain incumbent swap diversify sources of liquidity and increase competition among markets) . . . .’’). dealers asking [interdealer broker] SEFs to cancel competition.’’). 41 7 U.S.C. 7b–3(f)(2)(B). executed trades upon learning through name give-

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name give-up thereby ‘‘undermines manage adverse selection costs.’’ 55 Citi participants such as swap dealers.58 impartial access and reduces the similarly commented that ‘‘[i]f new However, the practice of post-trade number of competitive liquidity participants will be enticed to join name give-up purportedly to avoid providers on SEFs.’’ 49 Commenters also [dealer-to-dealer] SEFs, some adverse selection risk, in the asserted that prohibiting post-trade presumably may be participants that Commission’s view, leads to a similar name give-up would lead to additional, quote speculatively and intermittently, result, and therefore conflicts with the more diversified sources of liquidity on thereby diluting the reliable and purposes of the impartial access SEFs.50 JPMorgan, on the other hand, consistent nature of quoting and trading requirement imposed by CEA section opined that although eliminating post- that is the hallmark of [dealer-to-dealer] 5h(f)(2)(B). Finally, the comment that a trade name give-up ‘‘might draw certain SEFs.’’ 56 In a related argument, FSF potential ‘‘discriminatory effect’’ could market participants to trade on . . . asserted that post-trade name give-up be used to justify market intervention SEFs that are fully anonymous, it may makes request-for-quote (RFQ) pricing simply because certain market drive others (e.g., dealers) away. ‘‘more tailored and efficient’’ by participants prefer it misses the point. Therefore, it is not clear that prohibiting allowing dealers to ensure their RFQ The Commission’s view here is based [post-trade name give-up] would further clients are not trading on dealer-to- not upon the mere preference of certain 51 the goal of impartial access ....’’ dealer order books, or if they are, market participants, but rather upon the entirety of facts and circumstances JPMorgan also argued that the concept quoting them wider spreads via RFQ to presented, the discriminatory manner in of ‘‘discriminatory effect’’ is accommodate a greater anticipated risk which post-trade name give-up is ‘‘amorphous’’ and could be used to of hedging the balance sheet capacity justify other market interventions applied, and the realized effect of post- allocated to such clients.57 simply because certain market trade name give-up as a disincentive to participants prefer it.52 After considering all comments, the access and participation by certain types For commenters opposed to a Commission believes that post-trade of market participants and not others. name give-up undermines the policy prohibition on post-trade name give-up, 4. Information Privacy and Prohibition goals of the impartial access the crux of their opposition is the notion Against Post-Trade Name Give-up at an requirement, and that prohibiting the that prohibiting the practice may SDR (CEA Section 21(c)(6) and CFTC impose ‘‘adverse selection’’ risk on practice is reasonably necessary to Regulation 49.17(f)(2)) incumbent swap dealers.53 FSF effectuate the purposes of section explained that ‘‘dealers prefer to match 5h(f)(2)(B) of the Act. The Commission CEA section 21(c)(6) requires an SDR with the natural other side of a trade finds that the practice of post-trade to maintain the privacy of any and all (e.g., another dealer generally seeking to name give-up effectively discriminates swap transaction information that it maintain a risk-neutral position)’’ as against certain market participants and receives from a swap dealer, opposed to other market participants, counterparty, or any other registered has deterred participants from joining or 59 such as speculators, who may impose trading in a meaningful way on SEFs entity. In implementing this statutory provision, the Commission promulgated adverse selection costs.54 According to that employ the practice. The use of regulation 49.17(f) to address the scope FSF, swap dealers use post-trade name post-trade name give-up to discriminate of access a market participant may have give-up to ascertain ‘‘what types of between certain types of market to swap data maintained by an SDR. For market participants are generally participants in order to maximize trading’’ on pre-trade anonymous SEFs, swaps executed anonymously on a SEF trading with one type of market and cleared in accordance with the and ‘‘maximize the chances of trading participant and avoid trading with with the natural other side and thus Commission’s STP requirements, another—or to dissuade certain types of § 49.17(f)(2) prohibits an SDR from market participants from trading on a providing a counterparty to a swap with up that their counterparty was Citadel Securities.’’); SEF—undermines the policy goals of SIFMA AMG Letter, at 2. access to the identity of the other 49 AFR Letter, at 3. the impartial access requirement to counterparty or its clearing member.60 50 CTC Letter, at 1–2; FIA PTG Letter, at 2; AFR ensure that market participants can In adopting this provision, the Letter, at 3; MFA Letter, at 4; Better Markets Letter, compete on a level playing field and to Commission explained that this swap at 5. allow additional liquidity providers to transaction information is subject to the 51 JPMorgan Letter, at 12. participate on SEFs. Further, in statutory privacy protections because, in 52 Id. See also FSF Letter, at 11. But cf. Better Markets Letter, at 10 (‘‘[I]mpartial access would implementing § 37.202(a), the the Commission’s view, swap essentially become a fiction if certain classes of SEF Commission rejected the notion that a counterparties would not otherwise participants could be targeted with trading SEF could limit access to its trading know one another’s identity if the swap practices, like Post-Trade Name Give-Up, that not systems to certain types of market were submitted to clearing via STP.61 In only impose, but are meant to impose, disparate economic costs and trading limitations on the Proposal, the Commission stated competitors . . . .’’). 55 Id. that post-trade name give-up undercuts 53 See ABA Letter, at 2; BPI Letter, at 1; FSF 56 Citi Letter, at 3. the intent of § 49.17(f)(2) and the Letter, at 4–5; SIFMA Letter, at 3. FSF explained 57 See FSF Letter, at 5 (‘‘Name give-up allows a congressional objectives of CEA section adverse selection in this context as follows. dealer, over time (not just at the point of execution), 21(c)(6). Therefore, the Commission ‘‘[I]nstead of facing a speculator on the other side to more accurately assess its risk of providing of a trade, who is more likely to trade in the same balance sheet capacity to a particular client and reasoned, prohibiting post-trade name direction on other venues or trade in one direction determine how it should quote to the client in order give-up would help to advance the in a small size on one venue in order to push the to achieve the same desired return on capital for objectives underlying the statutory price in a certain direction so that it can trade in trading with that client as with another, e.g., by the opposite direction on a different venue at a quoting a tighter price to [an RFQ requester that 58 better price, dealers prefer to match with the natural does not trade in the dealer-to-dealer order book See Core Principles and Other Requirements for other side of a trade (e.g., another dealer generally SEFs] than [an RFQ requester the dealer has seen Swap Execution Facilities, 78 FR 33476, 33507– seeking to maintain a risk-neutral position). Such trade frequently in order book SEFs].’’). FSF 33508 (June 4, 2013). ‘‘naturals’’ are more likely to be hedging all their explained that the price that a dealer gives a client 59 7 U.S.C. 24a(c)(6). residual accumulated risk, rather than trading in a over RFQ depends on the costs of hedging the 60 17 CFR 49.17(f)(2). manner that would move the price in an client-facing trade, and the dealer’s available 61 Swap Data Repositories—Access to SDR Data unfavorable direction.’’ FSF Letter, at 5. liquidity for hedging depends in turn on whether by Market Participants, 79 FR 16673–16674 (Mar. 54 FSF Letter, at 4–5. the client will also be accessing that liquidity. Id. 26, 2014).

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privacy protections in CEA section particular, post-trade name give-up is subject to the clearing requirement.73 TP 21(c)(6) and the Commission’s generally unnecessary where a swap is ICAP reasoned that a SEF may not know regulations thereunder.62 executed on a SEF and submitted to a whether parties to a voluntarily-cleared Several commenters agreed with the DCO for clearing.68 Accordingly, the swap will in fact submit the swap to a Commission’s assessment in the Commission proposed in § 37.9(d) to DCO, as the parties may do so Proposal that post-trade name give-up prohibit disclosing the identity of a themselves post-execution.74 TP ICAP undercuts the intent of CEA section counterparty to a swap executed stated that ‘‘it would be difficult, if not 21(c)(6) and § 49.17(f)(2).63 FSF, on the anonymously and ‘‘intended to be impossible, to impose a restriction on other hand, asserted that name give-up cleared.’’ The Commission specifically [post-trade name give-up] post- is not comparable to an SDR disclosing requested public comments on whether execution when it is not known whether counterparty information since, in FSF’s any operational, credit and settlement, the transaction will be submitted for view, market participants choose to legal, or similar issues exist that would clearing.’’ 75 have their names disclosed by trading still require post-trade name give-up for The Commission declines to narrow on a SEF that practices post-trade name an intended-to-be-cleared swap. The the prohibition as requested by TP ICAP give-up.64 FSF also asserted that ‘‘[i]f Commission also requested public and is adopting § 37.9(d), as proposed, Congress wanted to extend the privacy comments on whether it should narrow to include swaps that are intended to be requirement to SEFs, it certainly would the scope of the proposed prohibition cleared. The Commission continues to have done so.’’ 65 on post-trade name give-up to swaps believe that there is no need for post- After considering commenters’ required to be cleared under section trade name give-up if a swap is executed arguments, the Commission continues 2(h)(1) of the Act or swaps subject to the on a SEF and submitted to a DCO for to believe that post-trade name give-up trade execution requirement under clearing pursuant to STP requirements. undermines the objectives underlying section 2(h)(8) of the Act. Narrowing the prohibition to apply only CEA section 21(c)(6) and § 49.17(f)(2) The Commission received a number to swaps required be cleared under thereunder. In response to commenters of comments opposing limiting the section 2(h)(1) of the Act would unduly who noted CEA section 21(c)(6) scope of the prohibition.69 MFA narrow its scope and hamper the addresses SDRs and not SEFs, the opposed narrowing the scope of the statutory and regulatory objectives Commission does not believe this prohibition to swaps required to be underlying the prohibition. Whether or reflects a Congressional intent to permit cleared or subject to the trade execution not a swap is intended to be cleared is post-trade name give-up on SEFs. As the requirements, asserting that doing so a material term that affects trade pricing Commission noted in the Proposal, the ‘‘would mute the overall effectiveness of and trade processing workflows, and it Congressional intent to protect the the Proposed Rule ....’’70 Similarly, is something a SEF should be able to privacy of trading information, Citadel asserted that the rationale for determine at the time of execution.76 including trader identities, is evident in prohibiting post-trade name give-up However, to the extent a SEF’s current other statutory provisions.66 While applies equally to all swaps intended to systems do not indicate whether a swap some market participants willingly be cleared, not just swaps subject to the is intended to be cleared, the participate on SEF platforms practicing clearing requirement or trade execution Commission notes that the SEF must post-trade name give-up, others are requirement and, therefore, ‘‘there is no make necessary adjustments to its reportedly deterred from doing so due to rational basis for drawing such a systems and processes to ensure that it concerns over the privacy of their swap distinction.’’ 71 Citadel and FIA PTG, can determine whether a swap is transaction information.67 The however, requested that the intended to be cleared before permitting Commission believes that prohibiting Commission clarify that ‘‘intended to be post-trade name give-up.77 The post-trade name give-up is consistent cleared’’ be interpreted to mean swaps Commission recognizes that some SEFs with Congressional intent and will that are intended to be submitted for may need time to make such further the objectives underlying CEA clearing contemporaneously with adjustments, and the Commission is section 21(c)(6) and statutory provisions execution, and not include swaps that similarly aimed at protecting private begin as uncleared transactions and are 73 TP ICAP Letter, at 2. information of market participants. later submitted to clearing.72 TP ICAP, 74 Id. on the other hand, asserted that any 75 Id. TP ICAP also asserted that the Proposal B. Application of the Rule ‘‘does not accommodate the necessity of Name prohibition on post-trade name give-up Give-Up in transactions that are executed and 1. Scope of Swaps Covered should be limited to, at most, swaps cleared across time zones.’’ Id. TP ICAP stated that In the Proposal, the Commission in such circumstances, transactions executed in one 68 time zone may remain bilateral transactions until stated its preliminary belief that, with Proposal at 72267. The Commission also noted that STP requirements for transactions subject to the relevant clearing house opens in another time respect to operational, credit and clearing obviate the need for counterparty name zone, and post-trade name give-up would be settlement, and legal issues in disclosure. Id. necessary for the parties to manage counterparty 69 See AFR Letter, at 3; Citadel Letter 1, at 4; FIA credit risk until the trade can be submitted to the clearing house. 62 Proposal at 72266. PTG Letter, at 2; ICI Letter, at 5; MFA Letter, at 5–6. 76 Furthermore, the Commission notes that a 63 See Better Markets Letter, at 11; Citadel Letter 70 MFA Letter, at 5. SEF’s knowledge of whether or not a swap is 1, at 4; FIA PTG Letter, at 2–3; ICI Letter, at 4. 71 Citadel Letter 1, at 4 (asserting that name give- intended to be cleared is relevant to real-time 64 See FSF Letter, at 10–11. up has no justification where: (1) the Commission’s reporting and STP requirements. See 17 CFR 43.3(b) 65 FSF Letter, at 11. See also SIFMA Letter, at 5; STP requirements ensure that a swap is quickly and Appendix A to Part 43; 17 CFR 39.12(b)(7). TP ICAP Letter, at 6. submitted to, and accepted or rejected by, a DCO 77 As discussed in the following section below, 66 Proposal at 72266, note 62. CEA Section 8(a), (and is considered void ab initio if rejected); and (2) the prohibition on post-trade name give-up applies for example, prohibits the Commission from the two trading counterparties do not have credit, equally to swaps that are pre-arranged or pre- publication of data and information that would operational, or legal exposure to each other at any negotiated by a broker on an anonymous basis. disclose the business transactions or market stage). Therefore, a SEF must also ensure that its rules, positions of any person and trade secrets or names 72 See FIA PTG Letter, at 2; Citadel Letter 1, at systems, and processes require and enable brokers of customers. 7 U.S.C. 12(a). 4; Citadel Letter 2, at 16. Citadel noted that ‘‘SEFs to engage in such pre-arrangement or pre- 67 See, e.g., Proposal at 72263–72264 (discussing may offer pre-trade anonymous trading protocols negotiation without compromising counterparty market participants’ concerns over ‘‘information for swaps that begin as uncleared and then are anonymity, and to reliably determine whether a leakage’’ that could expose a counterparty’s trading ‘backloaded’ into clearing by the trading swap is intended to be cleared prior to engaging in positions, strategies and/or objectives). counterparties at a later time.’’ Id. name give-up.

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therefore providing a later compliance § 37.9(d)(3) to state that the phrase JPMorgan and FSF stated that the date for voluntarily-cleared swaps, as ‘‘executed anonymously’’ for purposes Commission should provide an further described below. Finally, in of §§ 37.9(d)(1) and (2) includes a swap exception to the post-trade name give- response to the comments from Citadel that is pre-arranged or pre-negotiated up prohibition for package transactions and FIA PTG, the Commission clarifies anonymously, including by a that include an uncleared swap or that ‘‘intended to be cleared’’ should be participant of the SEF. In addition, the security component.86 interpreted to mean swaps that are Commission is deleting the original text The Commission agrees with intended to be submitted for clearing of proposed § 37.9(d)(3), which the commenters that the post-trade name contemporaneously with execution. Commission believes is superfluous.82 give-up prohibition should not apply to Accordingly, if a swap begins as an 3. Package Transactions an uncleared swap or non-swap uncleared transaction and then is In the Proposal, the Commission component of a package transaction. voluntarily submitted for clearing by the recognized that a limited exception to Uncleared swap and non-swap counterparties at a later time, the swap the post-trade name give-up prohibition components of package transactions would not be considered ‘‘intended to may be necessary for cleared swaps that may create bilateral credit, operational, be cleared,’’ and therefore would not be are components of package transactions and/or legal exposures that require the subject to the prohibition on post-trade that include uncleared swap counterparties to know each other’s name give-up.78 components.83 Uncleared swap identities. For uncleared components of components create bilateral credit, a package transaction, post-trade name 2. Trades Pre-arranged or Pre-negotiated operational, and/or legal exposures that give-up enables market participants to by a Broker the counterparties must manage on an perform credit checks on counterparties A number of commenters ongoing basis. Therefore, the prior to finalizing the transaction. The recommended the Commission clarify Commission requested public comments practice also allows counterparties to that the prohibition on post-trade name on the necessity and scope of an manage credit exposure and payment give-up applies to a swap that is pre- exception to the post-trade name give- obligations arising from the bilateral arranged or pre-negotiated by a broker up prohibition for package transactions. nature of such uncleared transactions. on an anonymous basis and thereafter The Commission also requested In the case of U.S. Treasury securities, submitted for execution on a SEF.79 comments on whether an exception post-trade name give-up may still be Commenters stated that doing so would should be provided for package necessary to accommodate trading help ensure that market participants transactions involving any non-swap mechanisms and infrastructures cannot evade the prohibition on post- instrument, including U.S. Treasury currently used for U.S. Treasury swap trade name give-up.80 For example, securities. spreads that do not allow for Citadel stated that voice brokers, Commenters agreed that a prohibition anonymous clearing and settlement of operating either within a SEF or through on post-trade name give-up should not the Treasury component of such an affiliated introducing broker, may apply to components of a package transactions.87 Therefore, the seek to evade a prohibition on post- transaction that are uncleared swaps or Commission believes that a limited trade name give-up by pre-negotiating or non-swap instruments. Commenters exception to the prohibition is pre-arranging trades anonymously and differed on whether the Commission appropriate at this time for package then disclosing counterparty identities should provide an explicit exception in transactions that include a component prior to formally executing the the regulation. FIA PTG, MFA and that is an uncleared swap or a non- transaction on the SEF.81 Citadel argued that while uncleared and swap.88 The Commission will continue To address this concern, the non-swap components of package Commission is revising proposed transactions should not be subject to a trade operational workflows, so this treatment prohibition on post-trade name give-up, would be consistent with current market practice. 78 This includes swaps that are ‘‘backloaded’’ into an explicit exclusion in the regulation is FIA PTG Letter, at 2; Citadel Letter 1, at 9; Citadel clearing as described by Citadel. See supra note 72. not necessary.84 These commenters Letter 2, at 17. The Commission notes that its STP regulations 86 See FSF Letter, at 6 and 15; JPMorgan Letter, apply to all swaps cleared through a DCO, reasoned that, by its very terms, the at 6 and 19. Similarly, SIFMA stated that any including voluntarily-cleared swaps. Those proposed prohibition applies to swaps prohibition on post-trade name give-up should requirements are designed to (1) ensure that swaps intended to be cleared; thus, where a exempt package transactions that involve a non- are processed and accepted or rejected promptly package transaction contains a cleared swap component. Without such an exemption, from clearing, and (2) require swap dealers, SEFs SIFMA argued, SEFs will be required to change the and DCOs to coordinate with one another to ensure swap component and another uncleared operational flow of both the swap component and they have the capacity to accept or reject trades as swap or a non-swap component, the the non-swap/security component of the package quickly as technologically practicable if fully prohibition would not apply to the transaction. SIFMA Letter, at 6. SIFMA raised automated systems were used. 17 CFR 23.610, uncleared swap or non-swap component concern that ‘‘the changes necessary for this 37.702(b), 39.12(b)(7). of the transaction.85 In contrast, infrastructure have not been considered in the cost/ 79 See AIMA Letter, at 2; Citadel Letter 1, at 11; benefit analysis, and have not been analyzed Citadel Letter 2, at 17–18; FIA PTG Letter, at 2; enough to consider unintended consequences.’’ Id. MFA Letter, at 7. In a related comment, TP ICAP 82 As proposed, § 37.9(d)(3) read as follows: The 87 To the extent that counterparties may be noted that the Commission should consider provisions in paragraphs (d)(1) and (d)(2) of this facilitating package transactions that involve a additional exceptions or guidance ‘‘where a swap section shall not apply with respect to any method ‘‘security,’’ as defined in section 2(a)(1) of the is arranged off-SEF (e.g., by an Introducing Broker) of execution whereby the identity of a counterparty Securities Act of 1933 or section 3(a)(10) of the [and] submitted for execution and clearing through is disclosed prior to execution of the swap. The Securities Exchange Act of 1934, or any component a SEF to a [DCO]’’ where a prohibition on name Commission notes that the removal of this language agreement, contract, or transaction over which the give-up ‘‘would . . . be incongruous because the from the final regulation is not intended to be a Commission does not have exclusive jurisdiction, counterparties will already know one another’s substantive revision or change the intended the Commission does not opine on whether such identity at the point of execution.’’ TP ICAP Letter, meaning or effect of the final rule. Notwithstanding activity complies with other applicable laws and at 7. this revision, the final rule does not apply to regulations. 80 Citadel Letter 1, at 11; Citadel Letter 2, at 17– execution methods that are not pre-trade 88 TP ICAP commented that the Commission 18; CTC Letter, at 2; FIA PTG Letter, at 2; MFA anonymous, such as name-disclosed RFQ. should also consider an exception or additional Letter, at 7. The Commission notes that the ban on 83 Proposal at 72267. guidance in cases where ‘‘a swap is a component post-trade name give-up is subject to the 84 See FIA PTG Letter, at 2; MFA Letter, at 5–6; of a package transaction involving another Commission’s broad anti-evasion requirements. Citadel Letter, at 9; Citadel Letter 2, at 17. component that is not cleared at the same DCO.’’ 81 Citadel Letter 1, at 2; Citadel Letter 2, at 17– 85 Citadel and FIA PTG also stated that each TP ICAP Letter, at 7. The Commission believes that 18. component of a package already faces distinct post- Continued

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to monitor the operational development structure package transactions to allow and, therefore, ‘‘work-up sessions on of these markets, and encourages SEFs post-trade name give-up or to evade the [interdealer broker] SEFs will function and market participants to address prohibition on post-trade name give-up just as they do today in order to existing operational limitations so that that the Commission is adopting in this facilitate trading in size.’’ 94 Citadel also any need for post-trade name give-up final rule. In that regard, the final rule stated that claims to the contrary ‘‘are may be further diminished. adopted herein is subject to the easily disproven by looking at the U.S. Accordingly, the Commission is Commission’s broad anti-evasion Treasury market, where work-ups are revising proposed § 37.9(d) by adding requirements. commonly employed on interdealer § 37.9(d)(4), which provides a limited The Commission emphasizes that this platforms even though name give-up is exception to the post-trade name give- exception does not limit, prohibit, or not used.’’ 95 MFA further argued that up prohibition for a swap that is otherwise restrain SEFs or market prohibiting post-trade name give-up intended to be cleared, when it is a participants from developing and would benefit trading protocols such as component of a package transaction that utilizing trading functionalities, auctions, portfolio compression, and/or includes a component transaction that is operational workflows, or workup sessions by increasing buy-side not an intended-to-be-cleared swap. The infrastructures for package trades that access and participation.96 post-trade name give-up prohibition, as are fully anonymous, and do not utilize The Commission agrees that post- adopted in this release, prohibits SEFs post-trade name give-up. The trade name give-up is not necessary for from directly or indirectly disclosing the Commission encourages SEFs and workup sessions. The reasons given by identity of a counterparty to a swap that market participants to continue to work commenters for why they view post- is anonymously executed, pre-arranged to eliminate the technological and/or trade name give-up as an important or pre-negotiated on or pursuant to the operational need for post-trade name aspect of workup sessions are rules of a SEF and intended to be give-up. The Commission will continue essentially the same reasons espoused cleared. Because the components of a to monitor whether the exception in for the purported benefits of post-trade package transaction are priced or quoted § 37.9(d)(4) can be refined as trading name give-up generally, i.e., ensuring together as one economic transaction, functionalities, operational workflows, reliable hedging and avoiding adverse the disclosure of the identity of a and/or infrastructure continue to selection for incumbent swap dealers.97 counterparty to any component of a develop in the future. The Commission does not find that package transaction effectively discloses 4. Workups workup sessions present a particular the counterparty identity for all need for post-trade name give-up that is components of that package transaction. In the Proposal, the Commission distinct from pre-trade anonymous As such, if a SEF were to disclose the requested public comments on how, if order books. Accordingly, the identity of a counterparty to the at all, a prohibition on post-trade name Commission does not believe it is uncleared swap or non-swap component give-up would affect trading protocols necessary or appropriate to include an of a package transaction, the SEF would such as auctions, portfolio compression, exception for workups. also be indirectly disclosing the identity and/or workup sessions. JPMorgan and of the counterparty to the intended-to- FSF asserted that post-trade name give- 5. Error Trades be-cleared swap component of the up is an integral part of workup Commenters also addressed the package transaction; and such indirect protocols, and the Proposal will impair potential impact of a prohibition on disclosure is otherwise prohibited under workup protocols and adversely affect post-trade name give-up on error trade the regulation. Therefore, the dealers’ ability to hedge.90 These corrections. TP ICAP asserted that a Commission believes that a limited commenters asserted that a dealer’s prohibition would prevent an efficient exception to the post-trade name give- willingness to offer greater size through means for correcting trade errors, up prohibition for package transactions a workup may depend on (1) who its specifically, in cases ‘‘[w]here a party to with uncleared swap and non-swap counterparty is, in particular whether a swap identifies an error that requires components is necessary to provide the counterparty is likely to be able to coordination with its counterparty.’’ 98 clarity and regulatory certainty to SEFs execute on the full size the dealer is TP ICAP therefore identified error trade and market participants. willing to offer, 91 and (2), as FSF stated, correction among issues ‘‘that require The exception will apply, for whether the counterparty might impose the Commission to consider exceptions example, to U.S. Treasury swap spreads adverse selection costs on the dealer and additional guidance.’’ 99 Similarly, involving an intended-to-be-cleared upon knowing its trading interests.92 FSF stated that post-trade name give-up swap and a U.S. Treasury security. FSF suggested that if the Commission However, the Commission emphasizes proceeds with a prohibition on post- 94 Citadel Letter 1, at 6. Citadel added that, that the exception is limited in scope. trade name give-up, it should exclude similarly, a pre-trade anonymous auction or Many package transactions are traded from the prohibition any SEF that compression exercise should not require post-trade name give-up for intended-to-be-cleared swaps. Id. anonymously and involve only obtains a material portion of its trading intended-to-be-cleared swaps, and the 95 Citadel Letter 2, at 11. Citadel further stated volume, over a specified period, through that ‘‘there is nothing unique about transactions prohibition on post-trade name give-up workups.93 executed via work-up compared to other will apply to these transactions in full.89 In contrast, Citadel and MFA asserted anonymously-executed cleared swaps that would The Commission notes that this that post-trade name give-up is not require the disclosure of counterparty identities exception is intended to accommodate post-trade. In the fully anonymous U.S. Treasury necessary for workup sessions. Citadel market, work-ups account for a significant trading and settlement workflows for asserted that if a trading protocol is pre- percentage of overall trading activity.’’ Id. (citing to certain package transactions as they trade anonymous, there is no need to M.J. Fleming, E. Schaumburg & R. Yang, The exist today. It is not an invitation to disclose the trading counterparties in Evolution of Workups in the U.S. Treasury Securities Market, Liberty Street Economics Blog order to engage in a work-up session (Aug. 20, 2015)). such an exception or guidance is not necessary at 96 this time, and further submits that an explanation MFA Letter, at 6. 90 as to what the issue or underlying problem could See FSF Letter, at 2; JPMorgan Letter, at 7. 97 See supra notes 32, 33, 53, 54, 55 and be in such cases has not been provided. 91 FSF Letter, at 4; JPMorgan Letter, at 7. accompanying text. 89 For example, ‘‘curve’’ and ‘‘butterfly’’ trades 92 FSF Letter, at 4. 98 TP ICAP Letter, at 7. involving only intended-to-be-cleared swaps. 93 FSF Letter, at 15. 99 Id.

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‘‘will remain necessary for additional adjustments to its systems 0074.’’ 109 Collection 3038–0074 is counterparties to correct operational or and processes to ensure that it can currently in force with its control clerical errors resulting in a trade being determine whether a swap is intended number having been provided by OMB. rejected.’’ 100 Citadel disagreed with to be cleared, and therefore subject to However, the rule adopted herein does these commenters, stating that ‘‘[i]n the the prohibition on post-trade name give- not impose any new recordkeeping or event of an operational or clerical error, up. information collection requirements, the SEF can facilitate the correction of Accordingly, the Commission is and therefore contains no requirements the error without disclosing a adopting a phased compliance schedule. subject to the PRA. counterparty’s identity ....’’101 Specifically, for swaps subject to the The Commission does not believe that C. Cost-Benefit Considerations post-trade name give-up is necessary or trade execution requirement under CEA Section 15(a) of the CEA requires the appropriate to resolve error trades for section 2(h)(8), SEFs must commence Commission to consider the costs and pre-trade anonymous and intended-to- compliance with the requirements of benefits of its actions before be-cleared swaps. A SEF can § 37.9(d) no later than November 1, promulgating a regulation under the intermediate communications if 2020. For swaps not subject to the trade CEA.110 Section 15(a) further specifies necessary, and otherwise facilitate error execution requirement under CEA that costs and benefits shall be trade corrections, without disclosing section 2(h)(8), SEFs must commence evaluated in light of five broad areas of counterparty identities.102 Accordingly, compliance with the requirements of market and public concern: (1) the Commission declines to adopt an § 37.9(d) no later than July 5, 2021. Protection of market participants and exception to the prohibition on post- III. Related Matters the public; (2) efficiency, trade name give-up for error trade competitiveness, and financial integrity corrections. Therefore, any SEF offering A. Regulatory Flexibility Act of futures markets; (3) price discovery; trading in swaps subject to the (4) sound risk management practices; prohibition must ensure its rules and The Regulatory Flexibility Act and (5) other public interest 106 procedures for error trades allow for (RFA) requires Federal agencies to considerations. The Commission error trade remediation without consider whether the rules they propose considers the costs and benefits disclosure of the identities of will have a significant economic impact resulting from its discretionary counterparties to one another. on a substantial number of small entities determinations with respect to the and, if so, to provide an analysis Section 15(a) factors. C. Compliance Dates regarding the economic impact on those The Commission is adopting The Commission recognizes the final entities. The final rule adopted by the amendments to part 37 of the rule adopted herein may require SEFs to Commission will directly affect SEFs. Commission’s regulations to prohibit modify, in varying degrees, their rules The Commission has previously post-trade name give-up for swaps and operations with respect to trading determined that SEFs are not ‘‘small anonymously executed, pre-arranged, or and trade processing systems, error entities’’ for the purpose of the RFA.107 pre-negotiated on or pursuant to the trades, and compliance programs.103 Therefore, the Chairman, on behalf of rules of a SEF and intended to be The Commission also recognizes that the Commission, hereby certifies, cleared. Section 37.9(d) of the the modifications required—and the pursuant to 5 U.S.C. 605(b), that the rule Commission’s regulations adopted time necessary to implement them— adopted herein will not have a herein prohibits a SEF from directly or may vary for different swap products. significant economic impact on a indirectly, including through a third- The Commission anticipates that substantial number of small entities. party service provider, disclosing the compliance with the final rule will be identity of a counterparty to any such simpler to implement for required B. Paperwork Reduction Act swap. The regulation also requires SEFs transactions due to the fact that the The Paperwork Reduction Act to establish and enforce rules that methods of execution for such (PRA) 108 imposes certain requirements prohibit any person from effectuating 104 transactions are limited. Permitted on Federal agencies, including the such a disclosure. The baseline for this consideration of transactions may require more time to Commission, in connection with their costs and benefits with respect to the establish compliance, given that a SEF conducting or sponsoring any collection rule adopted herein is the status quo, may offer any method of execution for of information, as defined by the PRA. 105 which includes the existing practice of such transactions. Furthermore, for The Commission may not conduct or post-trade name give-up for cleared swaps that are not subject to mandatory sponsor, and a person is not required to swaps on some SEFs, and the current clearing, a SEF may need to make respond to, a collection of information regulatory requirements that do not unless it displays a currently valid 100 explicitly prohibit post-trade name give- FSF Letter, at 15. Office of Management and Budget 101 Citadel Letter 1, at 10. See also Citadel Letter up for cleared swaps anonymously 2, at 17. (OMB) control number. The executed, pre-arranged, or pre- 102 The Commission’s view on this issue is Commission has previously received a negotiated on or pursuant to the rules of consistent with its stated view in the Proposal. See control number from OMB that includes a SEF. The prohibition does not apply Proposal at 72267, note 78. the collection of information associated 103 to uncleared swaps or SEF trading This includes establishing rules to prohibit with part 37 of the Commission’s post-trade name give-up, as required under systems and platforms that are not pre- § 37.9(d)(2). regulations. The title for this collection trade anonymous; and the final rule 104 17 CFR 37.9(a) defines ‘‘required transaction’’ of information is ‘‘Core Principles and includes an exception for package as a transaction involving a swap that is subject to Other Requirements for Swap Execution transactions that include components the trade execution requirement in section 2(h)(8) Facilities, OMB control number 3038– of the Act, and provides that required transactions that are not intended-to-be-cleared shall be executed on a SEF through an order book or RFQ to no less than three market participants. 106 5 U.S.C. 601 et seq. 109 See OMB Control No. 3038–0074, available at 105 17 CFR 37.9(c) (defining ‘‘permitted 107 See Core Principles and Other Requirements https://www.reginfo.gov/public/do/ transaction’’ as any transaction not involving a for Swap Execution Facilities, 78 FR 33476, 33548 PRAOMBHistory?ombControlNumber=3038-0074 swap that is subject to the trade execution (June 4, 2013). (last retrieved June 23, 2020). requirement in section 2(h)(8) of the Act). 108 44 U.S.C. 3501 et seq. 110 7 U.S.C. 19(a).

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swaps. Much of the swaps trading on anonymously’’ shall include a swap that additional costs with respect to swaps SEFs today occurs on disclosed trading is pre-arranged or pre-negotiated that are not subject to mandatory systems and platforms that display the anonymously, including by a clearing, insofar as its systems and identities of potential counterparties to participant of the SEF. The proposed processes must be adjusted to ensure one another before execution occurs. rule does not include this provision, that it is determined whether a swap is Such is the case, for example, with which is intended to clarify that the intended to be cleared prior to many RFQ systems offered by SEFs. prohibition on name disclosure also permitting post-trade name give-up to The Commission notes that this applies in cases where a broker pre- occur. The Commission is adopting a consideration of costs and benefits is negotiates or pre-arranges a trade phased compliance schedule based on based on the understanding that the anonymously. The final rule also whether a swap is subject to the trade swaps market functions internationally, includes an exception for package execution requirement. The extended with many transactions involving U.S. transactions that include a component compliance period for swaps not subject firms taking place across international transaction that is not an intended-to- to the trade execution requirement will boundaries, with some Commission be-cleared swap, and a staggered delay the benefits associated with the registrants being organized outside of compliance schedule depending on rule for certain swaps, but should also the United States, with leading industry whether a swap is subject to the trade mitigate the costs to SEFs associated members typically conducting execution requirement. with compliance with the rule. operations both within and outside the The Commission anticipates the United States, and with industry 1. Costs direct cost of complying with § 37.9(d) members commonly following The Commission recognizes that the for market participants to be at or near substantially similar business practices final rule adopted herein may require zero and has received no comments to wherever located. Where the SEFs to modify their rules and the contrary. With respect to potential Commission does not specifically refer operations in varying degrees, indirect costs of the proposed rule, to matters of location, the below including, potentially, with respect to commenters opposing the Proposal discussion of costs and benefits refers to trading and trade processing systems, argued that it will harm liquidity by the effects of the final rules on all swaps error trades, and compliance programs; causing incumbent swap dealers to exit activity subject to the proposed and and that these modifications are likely the market or reduce their trading and amended regulations, whether by virtue to impose costs. For example, the liquidity they provide.114 Several of the activity’s physical location in the § 37.9(d)(2) requires SEFs to establish proponents of the Proposal disputed United States or by virtue of the and enforce rules to prohibit any person these assertions. ICI and MFA activity’s connection with or effect on from directly or indirectly, including characterized this outcome as U.S. commerce under CEA section through a third-party service provider, ‘‘unlikely.’’ 115 MFA stated that 2(i).111 disclosing the identity of a counterparty competitive market forces would ensure The Commission has endeavored to to a swap that is executed anonymously that ‘‘in the unlikely event an individual assess the expected costs and benefits of and intended to be cleared. Complying dealer reduced its offering, other dealers the final rulemaking in quantitative with § 37.9(d)(2) will require a SEF to would quickly step into its place.’’ 116 terms, where possible. In situations file such rules with the Commission in Asserting its experience as a ‘‘top where the Commission is unable to accordance with part 40 of the liquidity provider’’ in SEF markets, quantify the costs and benefits, the Commission’s regulations. The Citadel stated that it does not expect a Commission identifies and considers Commission estimates that filing such prohibition on post-trade name give-up the costs and benefits of the adopted rules may take up to 50 hours, which is to affect its liquidity provision on RFQ rule in qualitative terms. The lack of unlikely to be a major cost burden on platforms or its use of pre-trade data and information to estimate those SEFs. The Commission also recognizes anonymous trading protocols.117 Citadel costs is attributable in part to the nature that the modifications required—and further asserted that ‘‘other swap dealers of the final rule and uncertainty about the time necessary to implement them— share our view, as UBS has supported the potential responses of market may vary for different swap products. the prohibition and SIFMA indicated participants to the implementation of The Commission believes that these that the views among swap dealers ‘are the final rule. The Commission costs will be relatively small as not uniform.’ ’’ 118 Commenters also recognizes that potential indirect costs compared to a SEF’s overall operating pointed to their experience in other and benefits of the prohibition on post- costs. In the Proposal, the Commission asset classes where post-trade name trade name give-up adopted herein— stated a preliminary assessment that the give-up is not practiced, asserting that i.e., those relating to effects on trading direct costs in implementing and such markets demonstrate that the behavior, liquidity, and competition— complying with the proposed rule purported negative liquidity impacts may be impossible to accurately predict would not be material, and that the raised by incumbent swap dealers are or quantify prior to implementation of costs of adjusting affected SEF protocols unwarranted.119 the rule. in order to comply would be The Commission believes that The final rule differs from the negligible.112 The Commission incumbent swap dealers will continue proposed rule in several ways. Section requested that SEFs provide estimates of to provide liquidity on the affected SEFs 37.9(d)(3) of the final rule states that for any direct costs they would incur.113 as long as it is in their business interest purposes of the rule, the term ‘‘executed The Commission received no such to do so and notes that the apparent comments. The Commission anticipates desire of other entities to provide 111 7 U.S.C. 2(i). Section 2(i)(1) applies the swaps that compliance with the final rule will provisions of both the Dodd-Frank Act and be simpler and less costly to implement 114 See ABA Letter, at 2; BPI Letter, at 1; FSF Commission regulations promulgated under those Letter, at 7–8; SIFMA Letter, at 4. provisions to activities outside the United States for swaps that are subject to the clearing 115 ICI Letter, at 5; MFA Letter, at 4. that have a direct and significant connection with requirement. The Commission 116 activities in, or effect on, commerce of the United MFA Letter, at 4. recognizes that a SEF may incur 117 States. Section 2(i)(2) makes them applicable to Citadel Letter 1, at 6. activities outside the United States that contravene 118 Citadel Letter 1, at 7. Commission rules promulgated to prevent evasion 112 Proposal at 72269. 119 See Citadel Letter 1, at 7; Citadel Letter 2, at of Dodd-Frank. 113 Id. 7, FIA PTG Letter, at 1–2, MFA Letter, at 4.

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liquidity once post-trade name give-up access to additional sources of liquidity In order to evaluate the expected is prohibited suggests that overall and will have more pre-trade price benefits of implementing the rule, the liquidity is not likely to decline. information on which to transact’’; 129 Commission reviewed several empirical A number of commenters asserted and that ‘‘increasing competition should studies examining prior experiences that without post-trade name give-up on lower transaction costs, thereby with changes in post-trade anonymity. dealer-to-dealer SEFs, pricing and facilitating dealer hedging.’’ 130 As detailed in the Proposal, the studies liquidity offered by dealers to clients via The Commission continues to believe covered the experiences in U.S. RFQ or over-the-counter (OTC) may that prohibiting post-trade name give-up securities markets and a wide range of suffer.120 Some of these commenters is likely to increase competition on foreign financial markets and, on stated that post-trade name give-up affected SEFs, which in turn should balance, support the premise that post- helps dealers predict their hedging costs lead to lower overall transaction trade anonymity promotes trading and tailor their pricing on RFQ SEFs.121 costs.131 The Commission is basing its liquidity. Commenters in favor of the They argued that prohibiting the belief on several studies described in prohibition of name give-up cited other practice would likely result in inferior the benefits section below, finding that studies that further support the benefits pricing for clients on RFQ SEFs.122 post-trade anonymity tends to reduce of fully-anonymous trading. Similarly, commenters asserted that trading costs and lead to better price Commenters not in favor of prohibiting post-trade name give-up enables dealers quotes and lower realized spreads.132 post-trade name give-up did not provide to hedge the risk they accumulate by Nevertheless, the Commission data, evidence, or studies regarding the providing liquidity to clients off-SEF.123 acknowledges that it is theoretically impact of post-trade anonymity. FSF argued that if dealers widen possible that the prohibition on post- Specifically, as discussed in more spreads as a result of a prohibition on trade name give-up could lead to detail in the Proposal, the Commission post-trade name give-up, commercial increased trading costs associated with reviewed six event studies focusing on end users may be disproportionately some OTC swaps, even if, as the post-trade anonymity in various equity harmed because they rely more Commission anticipates, it leads to exchanges around the world, most of exclusively on dealer pricing and improved liquidity and lower which document an improvement in generally do not trade in cleared swaps transaction costs for swaps traded on liquidity. The Commission on SEFs.124 The Coalition for SEFs. One study reviewed by the acknowledges that none of these studies Derivatives End-Users (Coalition) stated Commission, as discussed below, examine a change in post-trade that they ‘‘have heard from bank swap describes a theoretical scenario, where anonymity for a swaps market, but the dealers that the Proposed Rule would post-trade anonymity in swaps and studies do provide real-world evidence result in less liquidity and worse pricing bond markets could lead to an increase on the effects on liquidity in a range of on SEFs, which in turn may increase in OTC spreads and a simultaneous markets when the rules for post-trade costs for derivatives end users hedging decrease in spreads on exchanges that anonymity are changed. Hence, they transactions in the non-cleared OTC ultimately improves overall welfare of provide the most instructive empirical derivatives markets.’’ 125 The Coalition market participants.133 evidence available regarding a proposed also stated that they ‘‘have heard from change in such rules. Four of these 2. Benefits other market participants that, under the studies, which focus on European Proposed Rule, liquidity would increase The Commission believes that equity markets, provide evidence of a and result in better pricing on SEFs, implementing the rule may reduce liquidity improvement associated with which in turn may drive down costs for information asymmetries and improve post-trade anonymity,134 which could derivatives end-users in the non-cleared liquidity, particularly on affected SEFs, be attributed to a reduction of OTC derivatives markets.’’ 126 The and may reduce transaction costs and information leakage.135 A study on the Coalition further stated that it ‘‘lacks the bid-ask spreads. The practice of post- 2003 introduction of post-trade empirical data and institutional trade name give-up and the prospect of anonymity on the NASDAQ platform knowledge to reach a firm conclusion as information leakage have reportedly found no evidence that best quotes were to the effects of the Proposed Rule on deterred a significant segment of market improved,136 while a study on the South the ability of end-users to access participants from making markets on or Korea Exchange found that reducing efficient and economical markets to otherwise participating on affected post-trade anonymity led to lower hedge their commercial risks.’’ 127 SEFs. The Commission expects that realized spreads.137 The Commission SIFMA AMG and Citadel each many of these market participants will generally disagreed with the notion that choose to participate on these SEFs once 134 S. Freiderich & R. Payne, Trading Anonymity client pricing will be harmed by a the practice is prohibited, leading to and Order Anticipation, 21 Journal of Financial prohibition on post-trade name give- increased liquidity. Increased liquidity Markets 1–24 (2014); T.G. Meling, Anonymous up.128 Citadel asserted that, ‘‘if Trading in Equities (2019 working paper); P.J. may benefit market participants by Dennis & P. Sandas, Does Trading Anonymously anything, pricing should become more making it easier to execute transactions, Enhance Liquidity?, Journal of Financial and competitive, as buy-side firms gain especially larger transactions, quickly Quantitative Analysis 1–25 (2019); A. Hachmeister and without undue price impact. & D. Schierek, Dancing in the Dark: Post-Trade 120 See ABA Letter, at 2; Citi Letter, at 3–4; FSF Anonymity, Liquidity, and Informed Trading, 34 Letter, at 2 and 5–6; JPMorgan Letter, at 5–6. Review of Quantitative Finance and Accounting 129 Citadel Letter 1, at 7. 145–177 (2010). 121 See JPMorgan Letter, at 5–6; FSF Letter, at 2; 130 Citadel Letter 2, at 11. 135 Citi Letter, at 3. S. Freiderich & R. Payne, Trading Anonymity 131 See Proposal at 72269. and Order Anticipation, 21 Journal of Financial 122 See Citi Letter, at 3–4; FSF Letter, at 5–6. 132 The Commission does note that reductions in Markets 1–24 (2014); J. Linnainmaa & G. Saar, Lack 123 ABA Letter, at 3; FSF Letter, at 2 and 5; Citi transaction costs may lead to a reduction in profits of Anonymity and the Inference from Order Flow, Letter, at 3–4. for incumbent liquidity providers and thus, these 25 Review of Financial Studies 1,414–1,456 (2012). 124 See FSF Letter, at 2 and 7. lower costs may be perceived as a cost for those 136 K. Benhami, Liquidity providers’ valuation of 125 Coalition Letter, at 1. liquidity providers, even as it is perceived as a anonymity: The NASDAQ Market Makers evidence 126 Id. benefit for other market participants. (2006 working paper). 127 Id. at 2. 133 T. Lee & C. Wang, Why Trade Over-the- 137 T.P. Pham, et al., Intra-day Revelation of 128 See Citadel Letter 1, at 7; Citadel Letter 2, at Counter? When Investors Want Price Discrimination Counterparty Identity in the World’s Best-Lit Market 11; SIFMA AMG Letter, at 2. (2019 working paper). (2016 working paper).

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believes that on balance the empirical traders will continue to trade via RFQ causal statements regarding the causes evidence presented in these academic in order to minimize exposure of their and effects of the observed variation. studies supports the benefits of trading intentions, and that spreads in The second study, which provides a anonymous trading. this venue will stay high to reflect this theoretical model of a generic OTC As discussed in more detail in the situation. On the other hand, market, concluded that sophisticated Proposal, the Commission also reviewed uninformed traders will migrate to the investors, who have access to multiple several theoretical studies. The studies order book and trade more, because market makers or other investors, face present models with various levels of spreads will decline due to the lower transaction costs.144 The authors post-trade disclosure in different increased activity. They predicted that theorized that the availability of other settings, and the results offer insight overall welfare would increase because trading counterparties (i.e., more into the trade-offs associated with the aggregate benefits of increased competition) forces market makers to changes in post-trade anonymity, electronic trading at low spreads would provide better pricing. The Commission notwithstanding the fact that the studies more than offset the aggregate costs to agrees with the broad conclusion that did not directly examine the case of informed traders who remain concerned more active, competitive markets are bilateral disclosure of counterparty about information leakage. The study is welfare enhancing. identities immediately after each trade. Several commenters addressed the consistent with the Commission’s The Commission found that the results Commission’s review of academic recognition of the trade-offs in of these theoretical studies were mixed. studies in the Proposal. FSF, SIFMA, One study, for example, focused on the prohibiting post-trade name give-up. JPMorgan and TP ICAP each asserted post-trade public disclosure of the Citadel cited two additional studies that the studies on equity markets cited trades of insiders in equity markets, and that the Commission did not consider in in the Proposal’s Cost-Benefit the authors concluded that public the Proposal, but which it has now Considerations (CBC) are not relevant disclosure of insider trades accelerates reviewed.141 These studies examined because equity markets are not the price discovery process.138 the effect of various levels of comparable to the swaps market.145 JP Therefore, the results suggest that post- intermediation (i.e., access to multiple Morgan stated that ‘‘swap markets have trade anonymity might strengthen market makers) on liquidity in OTC many fewer participants, of which asymmetric information problems in the markets and may be closer to the setting institutional participants constitute a far market and lead to subsequently of the swaps market. One study larger proportion, much lower trading reduced liquidity by exacerbating the provided an empirical evaluation of the frequency, far greater variation in market maker’s adverse selection implications of the OTC market tradeable products, and much larger problem. Another study concluded that structure for non-financial firms in the typical trade sizes.’’ 146 The Coalition public disclosure can reduce the foreign exchange derivatives market.142 requested a quantitative analysis of the informational efficiency of prices and The authors documented extensive costs and benefits for commercial end reduce market liquidity, because discriminatory pricing by dealers, who users.147 BPI, FSF, Citi and JPMorgan informed traders reduce trading in order appeared to favor sophisticated further asserted that the CBC is not to preserve their informational customers, defined as those customers sufficient and that further study is advantage.139 necessary.148 The Commission also examined one transacting high volume with multiple counterparties. However, clients trading Better Markets, Citadel and AFR each theoretical study that explicitly commented that the Proposal, including addresses the practice of post-trade on RFQ platforms, where they can request quotes from multiple dealers the consideration of costs and benefits name give-up. The study, considered in therein, provides a sufficient basis with more detail in the Proposal, modeled simultaneously, appeared to receive competitive pricing irrespective of the which to move forward with a final the investor choice between OTC rule.149 Citadel also argued that the markets and electronic order books.140 level of their sophistication which leads the authors to conclude that Proposal is consistent with the The authors supported that the OTC Commission’s previous decision in discriminatory pricing could be market can detect and attract implementing part 37 not to limit SEF uninformed traders (i.e., hedgers who potentially eliminated with the use of a centralized order book. Finally, the are demanding liquidity but do not 144 D. Duffie, N. Gaˆrleanu, & L.G. Pedersen, possess market moving information) by authors argued that the lack of Valuation in Over-the-Counter Markets, Review of offering them lower spreads, which centralized dissemination of transaction Financial Studies, Vol. 20, No. 5 (2007). results in an increase in spreads for prices provides dealers with an 145 See FSF Letter, at 9; SIFMA Letter, at 3; informed traders (i.e., traders who information advantage compared to JPMorgan Letter, at 9; TP ICAP Letter, at 5. 146 JPMorgan Letter, at 9. See also FSF Letter, at demand liquidity in order to profit from clients, which enables them to extract 9 (‘‘The swap markets have many fewer the trade) in an electronic order book, as information rents.143 The Commission participants, much lower trading volume, far greater well as a decrease in average spreads recognizes the empirical fact that variation in tradable products, and much larger and an increase in total volume. The trading costs appear to differ across typical trade sizes.’’). 147 Coalition Letter, at 2. The Commission notes authors concluded that a prohibition on different venues and for different that it is not possible to conduct a quantitative post-trade name give-up would likely traders, as this study emphasizes. analysis of the costs and benefits to commercial end lead to an increase in overall welfare. Nonetheless, the Commission finds that users of a prohibition on post-trade name give-up They reasoned that, in the absence of the design of the study precludes strong prior to finalizing the rule, because there is no data post-trade name give-up, informed on the effects until after the rule is implemented. 148 See BPI Letter, at 2; FSF Letter, at 12; Citi 141 See Citadel Letter 2, at 16. Letter, at 3; JPMorgan Letter, at 13–14. See also 138 S. Huddart, J.S., Hughes & C.B. Levine, Public 142 H. Hau, P. Hoffmann, S. Langfield, & Y. ABA Letter, at 2 (‘‘[W]e see no relevant data cited Disclosure and Dissimulation of Insider Trades, Timmer, Discriminatory pricing of over-the-counter in the Proposed Rule to support the contention that Econometrica, Vol. 69, No. 3 (May 2001), 665–681. derivatives (2017 working paper). We note that, the prohibition would attract sufficient additional 139 A.M. Buffa, Insider Trade Disclosure, Market while the paper focuses on the foreign exchange non-dealer market participants to CLOB SEFs to Efficiency, and Liquidity (2014 working paper). derivatives market, its conclusions regarding the outweigh these negative consequences.’’). 140 T. Lee & C. Wang, Why Trade Over-the- impact of multi-dealer RFQ platforms are generally 149 See AFR Letter, at 1; Better Markets Letter, at Counter? When Investors Want Price Discrimination applicable across markets. 5; Citadel Letter 1, at 11; Citadel Letter 2, at 14– (2019 working paper). 143 Id. 15.

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access to just swap dealers, and analogous to swaps markets than The Commission has determined not to therefore the Commission can rely on its markets for larger and more liquid adopt this alternative. The Commission cost-benefit considerations for that stocks with a broader array of market notes that whether a swap is intended rulemaking to support a prohibition on participants. to be cleared is a material term that post-trade name give-up.150 Citadel Commenters who objected to the affects trade pricing and trade further argued that claims by some application of the studies did not processing workflows, and it is commenters that commercial end-users provide evidence to support the something that SEF should be able to transacting swaps off-SEF might be argument that the differences between determine at the time of execution, negatively affected by the Proposal the anonymous order books in swaps including for voluntarily-cleared swaps. conflicts with academic research.151 and equity markets would prevent the Thus, the Commission believes that the The Commission notes that liquidity improvement associated with final rule, which applies the prohibition commenters who support prohibiting greater post-trade anonymity, as to voluntarily-cleared swaps, will post-trade name give-up generally suggested by the empirical studies in enable a larger scope of swaps to receive considered the academic studies equity markets. Accordingly, the the benefits associated with the discussed in the Proposal to be Commission agrees with those regulation, including, potentially, informative, while commenters who commenters who stated that the studies greater participation and improved oppose the prohibition assert that the are instructive for U.S. swap markets, liquidity. However, to ensure that SEFs studies are not informative because since they share the use of pre-trade are provided with adequate time to swaps markets are different than equity anonymous order books and these make any necessary changes to their markets. The Commission acknowledges studies appear to be of markets that are systems, the Commission is providing a that there are differences between the more analogous to swap markets than phased compliance schedule, as equity markets in most of these any other empirical study the discussed above. empirical studies and the U.S. swaps Commission or commenters have A number of commenters suggested markets. Further, the Commission identified.152 that before implementing a full post- understands that the equity markets The Commission believes that trade name give-up prohibition, the examined do not generally mirror the prohibiting post-trade name give-up is Commission should implement a time- exact dealer-centric swaps markets reasonably likely to improve liquidity limited pilot program that would under consideration. Nonetheless, the on SEFs, particularly on affected pre- trade anonymous markets, as additional prohibit post-trade name give-up for wide range of markets, time periods, 153 and experiences considered in the market participants choose to some, but not all, products. These empirical studies leads the Commission participate on these markets once post- commenters asserted that a pilot to conclude that the value of trade name give-up is prohibited. The program would allow the Commission anonymous trading is well-established. Commission has not found convincing to assess the impact of a post-trade Moreover, to the extent that liquidity evidence that a prohibition on post- name give-up prohibition before provision in swaps markets is more trade name give-up will have net requiring market-wide changes. The concentrated than in the most active liquidity-reducing effects. Rather, the Commission has determined not to and liquid equity markets, the empirical Commission notes that the evidence adopt this alternative. A temporary pilot studies that provide evidence on smaller from the studies, as discussed above, program may provide market equity markets, or on the less liquid suggests that markets with pre- and participants with different incentives stocks in a given market, might be most post-trade anonymity generally feature than a permanent rule and thus may not informative. greater liquidity than those without. be indicative of the efficacy of a Some of the equity markets studied Moreover the Commission is concerned permanent rule. As Citadel noted, ‘‘a may be deeper and more liquid than the that the status quo may facilitate short-term pilot would be easily U.S. swaps market. However, several of information asymmetries and hinder susceptible to manipulation. Given their the markets studied are equity markets access and participation on affected commercial interests in maintaining the that are smaller than the U.S. equity SEFs for many market participants. The status quo and privileged position as market (e.g., Finland, Norway, and Commission believes that the rule as liquidity providers, the incumbent Sweden), and therefore potentially more adopted may benefit market participants dealer banks could temporarily provide comparable to the swaps markets in the by reducing these information worse pricing for instruments covered U.S. For example, one of the early asymmetries and will increase by the name give-up prohibition in empirical studies on the participation on these SEF platforms. order to dictate the pilot results.’’ 154 implementation of post-trade anonymity The Commission agrees that a pilot on the London Stock Exchange in 2001 3. Consideration of Alternatives program could create an incentive to finds that liquidity improvements were TP ICAP suggested the alternative that engage in such conduct, but a more pronounced for small stocks and any prohibition on post-trade name permanent prohibition will not. stocks with higher trading give-up should be limited to, at most, FSF and JP Morgan suggested the concentration, which were potentially swaps subject to the clearing alternative approach whereby the subject to larger information requirement rather than all swaps that Commission would require every order asymmetries. The Commission notes are intended to be cleared, because a book SEF that offers post-trade name that, with respect to the smaller SEF may not know whether the parties give-up to design a method that would universe of liquidity providers, markets to a voluntarily-cleared swap will permit its participants to opt out of post- for smaller stocks could be more submit the swap to a DCO, as the parties trade name give-up, which could be may do so themselves post-execution. through a parallel, fully-anonymous 150 Citadel Letter 2, at 14. order book, or by allowing participants 151 Citadel Letter 2, at 15. Citadel cited two 152 Citi did suggest that the Commission study the to opt-out of post-trade name give-up on academic studies that it asserted ‘‘suggests that effects of post-trade anonymity on the emerging commercial end-users may not be best-served by market bond market. Citi Letter, at 4. The maintaining the current status quo.’’ Id. These Commission does not have jurisdiction over 153 See Citi Letter, at 5; JPMorgan Letter, at 14; studies show that access to multiple market makers emerging market bonds and does not have access FSF Letter, at 14. reduces trading costs. to the relevant data. 154 Citadel Letter 2, at 16.

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an order-by-order basis.155 In the view may provide the benefits associated prospect of information leakage. The of FSF, this approach would provide with increased participation. The Commission expects participation on freedom for market participants to reasons given by JPMorgan and FSF SEFs to increase as a result, leading to transact in the manner in which they relating to why they view post-trade greater competition. wish to, while providing the option of name give-up to be an important aspect c. Price Discovery fully-anonymous trading to buy-side of workup sessions are essentially the clients concerned with undesirable same reasons espoused for the The Commission believes that by information leakage.156 The purported benefits of post-trade name increasing participation and Commission has determined not to give-up generally, i.e., avoiding adverse competition on SEFs, the final rule will adopt this alternative. The Commission selection and ensuring reliable hedging decrease information asymmetries believes that post-trade name give-up is for incumbent swap dealers. between market participants, allowing likely to persist wherever it is Some commenters proposed an market participants to attain broader permitted, and that this alternative alternative of not applying the knowledge of pricing across more SEFs, would provide little or no benefit while prohibition on post-trade name give-up thereby enhancing SEF trading as a still imposing costs on SEFs that are at to error trade corrections. Commenters mechanism for price discovery. least as high as those of a full asserted that post-trade name give-up d. Sound Risk Management Practices prohibition (as SEFs would need to remains necessary for counterparties to change their systems to allow opting correct operational or clerical errors Similarly, increased participation and out). The Commission agrees with resulting in a trade being rejected for competition on SEFs and decreased Citadel’s statement that one ‘‘would clearing. Citadel disagreed with these information asymmetry among market expect incumbent dealer banks not to commenters, noting that SEFs can participants is likely to enhance SEF agree to opt-out of name give-up, facilitate the correction of errors without trading as a mechanism for risk meaning that very little would change disclosing the identities of management. 157 on [interdealer broker] SEFs.’’ counterparties. The Commission has e. Other Public Interest Considerations FSF suggested an alternative whereby determined not to adopt this alternative. Post-trade name give-up is the Commission would exclude from A SEF can intermediate inconsistent with provisions intended to the prohibition on post-trade name give- communications, if necessary, and protect the privacy of a swap up any SEF that obtains a material otherwise facilitate error trade counterparty’s trading information. portion of its trading volume, over a corrections without disclosing Prohibiting post-trade name give-up will specified period, through workups. counterparty identities. The help to effectuate the statutory privacy JPMorgan and FSF asserted that post- Commission acknowledges that some protections under CEA section 21(c)(6) trade name give-up is an integral part of SEFs may incur additional costs that apply to this information. workup protocols, and the prohibition associated with ensuring that their rules Moreover, the Commission believes that will impair workup protocols and and procedures for error trades allow for the prohibition is reasonably likely to adversely affect dealers’ ability to hedge error trade remediation without lead to enhanced liquidity and lower via adverse selection. In contrast, disclosure of the identities of transaction costs. Citadel and MFA assert that post-trade counterparties to one another. The name give-up is not necessary for Commission notes that designated D. Antitrust Considerations workup sessions. Citadel asserted that if contract markets resolve error trades a trading protocol is pre-trade Section 15(b) of the CEA requires the without engaging in name give-up, and Commission to take into consideration anonymous, there is no need to disclose SEFs already intermediate the the trading counterparties in order to the public interest to be protected by the resolution of error trades to varying antitrust laws and endeavor to take the engage in a workup session and, degrees. The Commission believes that therefore, workup sessions will function least anticompetitive means of the additional costs some SEFs may achieving the purposes of the CEA, in just as they do today. Citadel also stated incur to employ anonymous error trade that claims to the contrary ‘‘are easily issuing any order or adopting any remediation are relatively modest. 159 disproven by looking at the U.S. Commission rule or regulation. The Treasury market, where work-ups are 4. Section 15(a) Factors Commission believes that the public commonly employed on interdealer interest to be protected by the antitrust a. Protection of Market Participants and laws is generally to protect competition. platforms even though name give-up is the Public not used.’’ 158 MFA further argued that In the Proposal, the Commission prohibiting post-trade name give-up The final rule is intended to protect requested comments on whether: (1) would benefit trading protocols such as market participants and the public by The proposed rulemaking implicates auctions, portfolio compression, and/or advancing the statutory goals of: (1) any other specific public interest to be workup sessions by increasing buy-side Promoting swaps trading and pre-trade protected by the antitrust laws; (2) the access and participation. price transparency on SEFs; (2) fostering proposed rulemaking is anticompetitive, The Commission has determined not fair competition among market and if it is, what are anticompetitive to adopt this alternative. The participants; (3) providing market effects; and (3) there are less Commission agrees with those participants with impartial access to anticompetitive means of achieving the comments asserting that post-trade SEFs; and (4) maintaining the privacy of relevant purposes of the CEA that would name give-up is not necessary for swap transaction information. otherwise be served by adopting the proposed rules. workup sessions and that post-trade b. Efficiency, Competitiveness, and The Commission does not anticipate anonymity will not make workup Financial Integrity of the Markets sessions more difficult or costly and that the amendments to part 37 that it The final rule is intended to enhance is adopting today will result in 155 FSF Letter, at 14, JPMorgan Letter, at 15. competitiveness in the swap markets by anticompetitive behavior, but instead, 156 FSF Letter, at 14. removing an effective barrier to believes that the amendments will 157 See Citadel Letter 2, at 16. participation on SEFs for many market 158 Citadel Letter 2, at 11. participants who are concerned with the 159 7 U.S.C. 19(b).

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promote greater competition on, and Authority: 7 U.S.C. 1a, 2, 5, 6, 6c, 7, 7a– Appendices to Post-Trade Name Give- among, SEFs. In the proposal, the 2, 7b–3, and 12a, as amended by Titles VII Up on Swap Execution Facilities— Commission encouraged comments and VIII of the Dodd-Frank Wall Street Commission Voting Summary, from the public on any aspect of the Reform and Consumer Protection Act, Pub. L. Chairman’s Statement, and rulemaking that may have the potential 111–203, 124 Stat. 1376. Commissioners’ Statements to be inconsistent with the antitrust ■ 2. In § 37.9, add paragraph (d) to read Appendix 1—Commission Voting laws or be anticompetitive in nature. Summary The Commission received two as follows: On this matter, Chairman Tarbert and comments asserting that the proposed § 37.9 Methods of execution for required Commissioners Quintenz, Behnam, Stump, rule may be anticompetitive. JPMorgan and permitted transactions. commented that prohibiting post-trade and Berkovitz voted in the affirmative. No * * * * * Commissioner voted in the negative. name give-up ‘‘would itself impair competition and pose an unreasonable (d) Counterparty anonymity. (1) Appendix 2—Joint Supporting restraint on trade by forcing dealers to Except as otherwise required under the Statement of Chairman Heath P. trade fully anonymously in order to Act or the Commission’s regulations, a Tarbert, Commissioner Rostin Behnam, access a [central-limit order-book], even swap execution facility shall not and Commissioner Dan M. Berkovitz directly or indirectly, including through though dealers prefer [post-trade name As we have previously stated,1 it is a 160 give-up] ....’’ FSF similarly a third-party service provider, disclose fundamental principle of exchange-style commented that ‘‘banning name give-up the identity of a counterparty to a swap trading systems that the buyer and seller of would itself impair competition that is executed anonymously and a given financial instrument have no reason (certainly, innovation and competition intended to be cleared. to know—and do not know—one another’s identity.2 This levels the playing field for among markets) and unnecessarily push (2) A swap execution facility shall dealers to trade fully anonymously in counterparties of all sizes and types by establish and enforce rules that prohibit order to access an Order Book SEF, allowing traders to enter and exit the market any person from directly or indirectly, without exposing their trading positions and despite their bona fide preference for 3 161 including through a third-party service strategies. As a result, markets with pre- and name give-up.’’ As stated above, the post-trade anonymity are generally not only Commission disagrees with comments provider, disclosing the identity of a counterparty to a swap that is executed fairer, but also feature greater liquidity, a that prohibiting post-trade name give-up more diverse set of market participants, and would impair competition. Post-trade anonymously and intended to be greater competition.4 name give-up is an ancillary post-trade cleared. protocol, and not a method of execution. (3) For purposes of paragraphs (d)(1) 1 Joint Statement of Chairman Heath Tarbert, It does not proscribe SEFs from offering and (2) of this section, ‘‘executed Commissioner Rostin Behnam, and Commissioner any existing execution method, nor does Dan Berkovitz in Support of Proposed Rule anonymously’’ shall include a swap that Restricting Post-Trade Name Give-Up (Dec. 18, it prevent SEFs from developing new is pre-arranged or pre-negotiated 2019). execution methods. Moreover, the anonymously, including by a 2 See, e.g., Peter A. McKay, CME and CBOT to Commission is concerned by other participant of the swap execution Close Loophole, Wall St. J. (Apr. 15, 2006) (‘‘When commenters’ assertions that post-trade stocks are traded on public exchanges, investors facility. generally don’t know who they are buying from or name give-up enables anticompetitive selling to. On futures exchanges, most investors 162 (4) For a package transaction that behavior, and the Commission expect the same thing when trading believes that prohibiting post-trade includes a component transaction that is electronically.’’). name give-up will reduce the not a swap intended to be cleared, 3 See, e.g., Peter Madigan, CFTC to Test Role of opportunity for such behavior to occur, disclosing the identity of a counterparty Anonymity in SEF Order Book Flop, Risk (Nov. 21, shall not violate paragraph (d)(1) or (2) 2014) (noting arguments that anonymity creates a and is therefore reasonably necessary to more egalitarian market); Managed Funds promote fair competition among market of this section. For purposes of this Association (‘‘MFA’’), Position Paper: Why participants. The Commission has paragraph, a ‘‘package transaction’’ Eliminating Post-Trade Name Disclosure Will considered the rulemaking and related consists of two or more component Improve the Swaps Market 8 (Mar. 31, 2015) (arguing that ‘‘markets should remain anonymous to comments to determine whether it is transactions executed between two or create a level playing field for all participants’’); anticompetitive and continues to more counterparties where: CFTC Market Risk Advisory Committee, Panel believe that these amendments to part (i) Execution of each component Discussion: Market’s Response to the Introduction 37 will not result in anticompetitive of SEFs 139 (Apr. 2, 2015) (‘‘MRAC Meeting transaction is contingent upon the Transcript’’) (noting buy-side reticence to use SEF behavior. execution of all other component order books with name give-up because of potential transactions; and uncontrolled information leakage). This can prevent List of Subjects in 17 CFR Part 37 price discrimination based on the identity of the Swaps, Swap execution facilities. (ii) The component transactions are counterparty. priced or quoted together as one 4 See, e.g., MRAC Meeting Transcript, supra note For the reasons stated in the 3, at 154 (explaining that anonymous order books economic transaction with simultaneous have facilitated liquidity and diverse participation preamble, the Commodity Futures or near-simultaneous execution of all Trading Commission amends 17 CFR in markets for other instruments, such as equities components. and futures); S. Freiderich & R. Payne, Trading part 37 as follows: Anonymity and Order Anticipation, 21 Journal of Issued in Washington, DC, on June 29, Financial Markets 1–24 (2014) (finding that post- PART 37—SWAP EXECUTION 2020, by the Commission. trade anonymity improved market liquidity, FACILITIES particularly for small stocks and stocks with Robert Sidman, concentrated trading, which may be more analogous Deputy Secretary of the Commission. to swaps); Treasury Market Practices Group, White ■ 1. The authority citation for part 37 Paper on Clearing and Settlement in the Secondary continues to read as follows: Note: The following appendices will not Market for U.S. Treasury Securities (Jul. 11, 2019) appear in the Code of Federal Regulations. (stating that emergence of new types of market participants in the fully anonymous U.S. Treasury 160 JPMorgan Letter, at 10. securities market has ‘‘likely improved overall 161 FSF Letter, at 10. liquidity through enhanced order flow and 162 See supra note 37 and accompanying text. competition’’).

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In the swaps market, a number of swap where it is possible to do so—is key to two impact of the Final Rule, and make execution facilities (‘‘SEFs’’) provide for post- statutory goals for the SEF regime: (1) adjustments in the future, if necessary. trade disclosure of the name of the Promoting swaps trading on SEFs 9 and (2) For example, the Final Rule includes a counterparty, a practice that is known as promoting fair competition among market significant exception for package transactions ‘‘name give-up.’’ This protocol is a vestige of participants, including through impartial that include a component transaction that is the pre-Dodd-Frank era, when few swaps access to a SEF’s trading platform.10 Indeed, not a swap intended-to-be-cleared. The were centrally cleared and market we hope the rule will help attract a diverse exception would include U.S. Treasury swap participants needed to know their set of additional market participants who spread package trades involving an intended- counterparty’s identity to manage the have been deterred from trading on these to-be-cleared swap and a U.S. Treasury associated credit risk. Given the advent of platforms by the practice of post-trade name security component. These package central clearing, many have appropriately give-up, but remain interested in bringing transactions are rarely traded on dealer-to- questioned the continuing need for post-trade liquidity and competition to SEFs. client platforms, but make up a significant name give-up for cleared swaps. Others have The issue of name give-up can be a bit of portion of volume on dealer-to-dealer gone further, criticizing the practice as a lightning rod, sometimes inciting platforms. Recognizing this important anticompetitive, an obstacle to broad and passionate disagreements between difference between markets is a small but diverse participation on SEFs, and stakeholders. We and CFTC staff stand ready necessary accommodation to ensure package potentially inconsistent with numerous to work with market participants and market trades can continue to be efficiently executed provisions of the Commodity Exchange Act operators to resolve any new issues that may in light of this mandated change to market (‘‘CEA’’) and Commission regulations. arise as the rule is implemented. We hope trading protocols. In 2019, after considering responses to a that all parties to this debate can The Final Rule also adopts staggered request for comment on the issue,5 the constructively move forward together toward compliance deadlines, with the most liquid Commission issued a proposed rule the goals of sound derivatives regulation and swaps coming into compliance first, and less (‘‘Proposal’’) to restrict name give-up such robust financial markets. liquid swaps becoming subject to the ban in that trades that are executed anonymously July 2021. In the interim, the Commission on-SEF and cleared would remain Appendix 3—Supporting Statement of plans to conduct a preliminary study of the anonymous after execution.6 Public Commissioner Brian Quintenz Final Rule’s impact on SEF trading by July comments on the Proposal reflected a variety I will vote in favor of today’s final rule to 2021, with a further study to be conducted of differing viewpoints and interests. The by July 2023. These studies will allow the agency carefully considered all comments in prohibit post-trade name give-up practices for swaps executed, pre-arranged, or pre- Commission to assess if the ban on post-trade crafting the final rule we voted to approve name give-up is, in fact, increasing today. negotiated anonymously on or pursuant to the rules of a swap execution facility (SEF) competition and liquidity on SEFs, as the ban We believe the final rule reflects a is intended to do. If a more fulsome analysis balanced approach, is workable, and will and intended-to-be-cleared (Final Rule). As I have noted previously, I have reveals that the ban has not yielded its improve overall market vibrancy. The rule expected benefits, or may not be appropriate prohibits name give-up for swaps that are concerns about the government banning an established trading practice that has evolved for certain products given their liquidity executed anonymously and intended to be profile, I expect further adjustments will be cleared. However, it does not apply to swaps from natural market forces to support swaps liquidity provision. Client swap activity is made to maintain a well-functioning swaps that are not intended to be executed market. anonymously, such as trades done via a inherently dealer and relationship-sourced. Lastly, I would like to thank staff of the name-disclosed request for quote. The rule That is why the name-disclosed Request for Division of Market Oversight for working also includes a limited exception for package Quote (RFQ) model has been highly favored with my staff to incorporate many of my transactions 7 with at least one component over the anonymous Central Limit Order comments into the Final Rule. that is an uncleared swap or a non-swap Book (CLOB) model in the client market. instrument. This exception reflects current Although the Final Rule predicts that the ban [FR Doc. 2020–14343 Filed 7–23–20; 8:45 am] technological and operational realities that on name give-up will result in increased BILLING CODE 6351–01–P require counterparty disclosure for the non- participation and competition in the dealer- swap or non-cleared swap component of to-dealer market, I remain concerned that such trades.8 In addition, the rule includes a banning post-trade name give-up will phased implementation schedule to allow negatively impact dealers’ ability to hedge DEPARTMENT OF HOMELAND SEFs and market participants time to adjust efficiently on existing inter-dealer platforms, SECURITY to the changes. which will ultimately lead to a degradation We believe the rule’s fundamental in the pricing and liquidity provision of U.S. Customs and Border Protection objective—protecting trading anonymity swaps trading on dealer-to-client platforms. I am also doubtful that new entrants into the 19 CFR Part 122 5 wholesale market will use the advantages of CFTC Request for Comment on Post-Trade Name [CBP Dec. 20–10] Give-Up on Swap Execution Facilities, 83 FR that participation to add any meaningful 61,571 (Nov. 30, 2018). liquidity in the client market, making it even 6 Post-Trade Name Give-Up on Swap Execution less certain that the benefits of enhanced Technical Amendment to List of User Facilities, 84 FR 72262 (Dec. 31, 2019). competition hoped for in this Final Rule will Fee Airports: Addition of Four Airports 7 The rule defines a ‘‘package transaction’’ as be passed through to end-users. ‘‘consist[ing] of two or more component Despite my concerns, I am supporting the AGENCY: U.S. Customs and Border transactions executed between two or more Final Rule because it adopts an important Protection; DHS. counterparties where: (i) Execution of each exception from the prohibition, as well as an ACTION: Final rule; technical component transaction is contingent upon the incremental approach that will give the amendment. execution of all other component transactions; and Commission and market participants time to (ii) the component transactions are priced or quoted together as one economic transaction with transition into compliance, observe the SUMMARY: This document amends U.S. simultaneous or near-simultaneous execution of all Customs and Border Protection (CBP) components.’’ 9 CEA section 5h(e), 7 U.S.C. 7b–3(e). In this regulations by revising the list of user 8 As noted in the preamble to the final rule, we regard, the CFTC intends to complete a preliminary fee airports to reflect the designation of urge SEFs and their participants to work towards study of the state of swaps markets one year after an infrastructure that ultimately does support the initial phase of the rule takes effect, and to user fee status for four additional anonymous post-trade processing for packages follow up with further study after the rule has been airports: New York Stewart including certain cleared non-swap components in effect for three years. International Airport in New Windsor, (e.g., U.S. Treasuries). The preamble to the final 10 CEA section 3(b), 7 U.S.C. 5(b) (listing fair New York; Lakeland Linder rule also notes the Commission’s intention to competition among market participants as a goal of monitor market developments and evaluate the the CEA); CEA section 5h(f)(2)(B)(i) (requiring a SEF International Airport in Lakeland, continued need for the package transaction to establish and enforce rules to provide Florida; Boca Raton Airport in Boca exception in the future. participants impartial access to the market). Raton, Florida; and Ontario

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