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Procedures to Establish Appropriate Minimum Block Sizes for Large Notional Off-Facility Swaps and Block Trades; Final Rule

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Procedures to Establish Appropriate Minimum Block Sizes for Large Notional Off-Facility Swaps and Block Trades; Final Rule Vol. 78 Friday, No. 105 May 31, 2013 Part III Commodity Futures Trading Commission 17 CFR Part 43 Procedures To Establish Appropriate Minimum Block Sizes for Large Notional Off-Facility Swaps and Block Trades; Final Rule VerDate Mar<15>2010 18:49 May 30, 2013 Jkt 229001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\31MYR2.SGM 31MYR2 tkelley on DSK3SPTVN1PROD with RULES2 32866 Federal Register / Vol. 78, No. 105 / Friday, May 31, 2013 / Rules and Regulations COMMODITY FUTURES TRADING Off-Facility Swaps and Block Trades— 1. Policy Goals for Masking the Geographic COMMISSION Final Rules Detail for Swaps in the Other A. Criteria for Distinguishing Among Swap Commodity Asset Class 17 CFR Part 43 Categories in Each Asset Class 2. Proposed Amendments to § 43.4 1. Interest Rate and Credit Asset Classes 3. Application of Proposed § 43.4(d)(4)(iii) RIN 3038–AD08 a. Background and Proposed Appendix E to Part 43— b. Interest Rate Swap Categories Geographic Detail for Delivery or Pricing Procedures To Establish Appropriate i. Interest Rate Swap Data Summary Points Minimum Block Sizes for Large ii. Summary of Proposed Rule a. U.S. Delivery or Pricing Points Notional Off-Facility Swaps and Block c. Credit Swap Categories i. Natural Gas and Related Products i. Credit Swap Data Summary ii. Petroleum and Related Products Trades ii. Credit Swap Data Analysis iii. Electricity and Sources 2. Swap Category in the Equity Asset Class iv. All Remaining Other Commodities AGENCY: Commodity Futures Trading 3. Swap Categories in the FX Asset Class b. Non-U.S. Delivery or Pricing Points Commission. 4. Swap Categories in the Other c. Basis Swaps ACTION: Final rule. Commodity Asset Class d. Comments Received and Commission 5. Comments Regarding Swap Categories Determination SUMMARY: The Commodity Futures Across Asset Classes 4. Further Revisions to Part 43 Trading Commission is adopting B. Appropriate Minimum Block Size a. Additional Contracts Added to regulations to implement certain Methodologies for the Initial and Post- Appendix B to Part 43 statutory provisions enacted by Title VII Initial Periods b. Technical Revisions to Part 43 of the Dodd-Frank Wall Street Reform 1. Phase-in of Appropriate Minimum Block IV. Paperwork Reduction Act Sizes A. Background and Consumer Protection Act. 2. Overview of Proposed Approach B. Description of the Collection Specifically, in accordance with section 3. The 67-Percent Notional Amount 1. § 43.6(g)—Notification of Election 727 of the Dodd-Frank Act, the Calculation for Determination of 2. Amendments to § 43.4(d)(4) and 43.4(h) Commission is adopting regulations that Appropriate Minimum Block Sizes V. Cost-Benefit Considerations define the criteria for grouping swaps 4. Data for Determination of Appropriate A. Background into separate swap categories and Minimum Block Sizes in the Post-Initial B. The Statutory Mandate To Consider the establish methodologies for setting Period Costs and Benefits of the Commission’s 5. Methodology for Determining the Action: Section 15(a) of the CEA appropriate minimum block sizes for Appropriate Minimum Block Sizes by C. Rules Establishing Determination each swap category. In addition, the Asset Class Criteria and Methodology (§ 43.6(a)–(f) Commission is adopting further a. Interest Rate and Credit Default Swaps and (h)) measures under the Commission’s b. Equity 1. Rule Summary regulations to prevent the public c. FX a. Rule 43.6(a) Commission Determination disclosure of the identities, business i. Initial Period Methodology b. Rule 43.6(b) Swap Category transactions and market positions of ii. Post-Initial Period Methodology c. Rules 43.6(c)–(f) and (h) Methods for swaps market participants. d. Other Commodity Determining Appropriate Minimum i. Initial Period Methodology Block Sizes DATES: Effective date: July 30, 2013. ii. Post-Initial Period Methodology 2. Overview of Comments Received FOR FURTHER INFORMATION CONTACT: John 6. Special Provisions for the Determination 3. Costs W. Dunfee, Assistant General Counsel, of Appropriate Minimum Block Sizes for a. Direct Costs Office of the General Counsel, 202–418– Certain Types of Swaps b. Indirect Costs a. Swaps With Optionality 4. Benefits 5396, [email protected]; George Pullen, b. Swaps With Composite Reference Prices 5. Alternatives Economist, 202–418–6709, c. Physical Commodity Swaps a. Commission Determination of Minimum [email protected], or Nhan Nguyen, d. Currency Conversion Block Sizes Special Counsel, 202–418–5932, e. Successor Currencies b. Swap Category Alternatives [email protected], Division of Market C. Procedural Provisions c. Block Methodology Alternatives Oversight; Esen Onur, Economist, Office 1. § 43.6(a) Commission Determination 6. CEA Section 15(a) Factors of the Chief Economist, 202–418–6146, 2. § 43.6(f)(4) and (5) Publication and a. Protection of Market Participants and the [email protected]; Commodity Futures Effective Date of Post-Initial Appropriate Public Minimum Block Sizes b. Efficiency, Competitiveness and Trading Commission, Three Lafayette 3. § 43.6(g) Notification of Election Financial Integrity of Markets Center, 1155 21st Street NW., 4. § 43.7 Delegation of Authority c. Price Discovery Washington, DC 20581. 5. § 43.6(h)(6)—Aggregation d. Sound Risk Management Practices SUPPLEMENTARY INFORMATION: 6. § 43.6(i) Eligible Block Trade e. Other Public Interest Considerations Participants D. Cost-Benefit Considerations Relevant to Table of Contents III. Anonymity Protections for the Public the Block Trade/Large Notional Off- Dissemination of Swap Transaction and Facility Swap Election Process (§ 43.6(g)) I. Background Pricing Data 1. Costs Relevant to the Election Process A. The Dodd-Frank Act A. Policy Goals (§ 43.6(g)) B. The Initial Proposal B. Establishing Notional Cap Sizes for a. Incremental, Non-Recurring Expenditure 1. Overview Swap Transaction and Pricing Data To to a Non-Financial End-user, SEF or 2. Public Comments in Response to the Be Publicly Disseminated in Real-Time DCM To Update Existing Technology Initial Proposal 1. Policy Goals for Establishing Notional b. Incremental, Non-Recurring Expenditure C. Issuance of the Real-Time Reporting Cap Sizes to a Non-Financial End-User, SEF or Final Rule 2. Proposed Amendments Related to Cap DCM To Provide Training to Existing D. Further Block Proposal Sizes—§ 43.2 Definitions and § 43.4 Personnel and Update Written Policies 1. Policy Goals Swap Transaction and Pricing Data To and Procedures 2. Summary of Proposed Approach Be Publicly Disseminated in Real-Time c. Incremental, Recurring Expenses to a 3. Overview of Comments Received a. Initial Cap Sizes Non-Financial End-User, DCM or SEF 4. Additional Proposal Regarding b. Post-Initial Cap Sizes and the 75-Percent Associated With Incremental Aggregation of Blocks Notional Amount Calculation Compliance, Maintenance and II. Procedures To Establish Appropriate C. Masking the Geographic Detail of Swaps Operational Support in Connection With Minimum Block Sizes for Large Notional in the Other Commodity Asset Class the Proposed Election Process VerDate Mar<15>2010 20:59 May 30, 2013 Jkt 229001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\31MYR2.SGM 31MYR2 tkelley on DSK3SPTVN1PROD with RULES2 Federal Register / Vol. 78, No. 105 / Friday, May 31, 2013 / Rules and Regulations 32867 d. Incremental, Non-Recurring Expenditure I. Background a large notional swap transaction (block to an SDR To Update Existing trade) for particular markets and A. The Dodd-Frank Act Technology To Capture and Publicly contracts’’ and ‘‘the appropriate time Disseminate Swap Data for Block Trades On July 21, 2010, President Obama delay for reporting large notional swap and Large Notional Off-Facility Swaps signed the Dodd-Frank Wall Street transactions (block trades) to the 2. Comments Received Reform and Consumer Protection Act public.’’ 6 In promulgating regulations 3. Benefits Relevant to the Election Process (‘‘Dodd-Frank Act’’).1 Title VII of the under section 2(a)(13), section (§ 43.6(g)) Dodd-Frank Act 2 amended the 2(a)(13)(E)(iv) directs the Commission to 4. Alternatives 3 Commodity Exchange Act (‘‘CEA’’) to take into account whether public 5. Application of the Section 15(a) Factors establish a comprehensive new disclosure of swap transaction and to § 43.6(g) regulatory framework for swaps and a. Protection of Market Participants and the pricing data ‘‘will materially reduce security-based swaps. This legislation 7 Public market liquidity.’’ was enacted to reduce risk, increase The second statutory requirement b. Efficiency, Competitiveness and transparency and promote market Financial Integrity relevant to this final rule is found in integrity within the financial system by, c. Price Discovery sections 2(a)(13)(E)(i) and 2(a)(13)(C)(iii) d. Sound Risk Management Practices inter alia: (1) Providing for the of the CEA. Through these sections, e. Other Public Interest Considerations registration and comprehensive Congress sought to ‘‘ensure that the E. Costs and Benefits Relevant to regulation of swap dealers (‘‘SDs’’) and public reporting of swap transaction and Anonymity Protections (Amendments to major swap participants (‘‘MSPs’’); (2) pricing data [would] not disclose the § 43.4(d)(4) and (h)) imposing mandatory clearing and trade names or identities of the parties to 1. Amendments to § 43.4(d)(4) execution requirements on standardized [swap] transactions.’’ 8 Accordingly, 2. Amendments to § 43.4(h) derivative products; (3) creating robust § 2(a)(13)(E)(i) of the CEA requires the 3. Costs Relevant to the Amendments to recordkeeping and real-time reporting Commission to protect the identities of § 43.4(d)(4) and (h) regimes; and (4) enhancing the counterparties to mandatorily-cleared 4. Benefits Relevant to the Amendments to Commission’s rulemaking and swaps, swaps excepted from the § 43.4 enforcement authorities with respect to, mandatory clearing requirement, and 5. Alternatives among others, all registered entities and voluntarily-cleared swaps. Section 6. Application of the Section 15(a) Factors intermediaries subject to the 2(a)(13)(C)(iii) of the CEA requires the to the Amendments to § 43.4 Commission’s oversight.
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