New CFTC Rules for Swap Data Reporting

CFTC has made changes to the Swap Data Reporting Rules, which have come into effect from April 2022. These changes would affect the following parties.

• Derivatives Clearing Organisations (DCOs)

• Counterparties to derivative transactions; and

• Swap Data Repositories (SDRs)

Officially, as per the press release, the following are the changes.

• Registration with Alternative Compliance for Non-US Derivatives Clearing Organisations

• Amendments to Real-Time Public Reporting Requirements (Part 43)

• Amendments to Swap Data Recordkeeping and Reporting Requirements (Part 45)

• Amendments to the CFTC's Regulations Relating to Certain Swap Data Repositories and Data Reporting Requirements (Part 43, 45 and 49 verification)

• Supplement Notice of Proposed Rulemaking related to Bankruptcy Regulations (Part 190)

In brief and for a simpler understanding the following are the changes.

1. Reporting counterparties must reconcile their books and records against reports provided by the swap data repository (SDR). In case of any discrepancies the reporting counterparty must correct the reports within seven business days of discovering the error or ommission. If the reporting counterparty cannot correct the error or ommission within seven business days, then the reporting counterparty must notify the CFTC's Divison of Market Oversight and include a remediation plan.

2. A framework has been created to allow certain non-US clearing organisations to register with CFTC while relying largely on their home country regulatory regimes.

3. The size and threshold for block trades reporting has changed. The new proposed time is T+2 (48 hours from the time of the trade).

4. For post-priced swaps, the swap data will not be published to the market until after pricing occurs. However, reporting counterparties may still be required to report post-priced swaps to an SDR before the price is set. The following is the amended rule in Part 43 of CFTC rules.
   
   The post-priced swaps must be reported by the earlier of:
   (a) the price being determined; or
   (b) 11:59:59 pm eastern time on the execution date.
   
   Then once the price data is determined, it must be reported as soon as technologically practicable ("ASATP").

5. Reduction in reporting requirements for swaps executed with prime brokers to avoid duplication.

6. The new rules requires SDRs to make swap transaction and pricing data available to public for at least one year.

7. Standardisation of the number of reporting fields to 128 data fields

8. Removing the use of Unique Swap Identifiers (USI) completely, and instead using the Unique Transaction Identifiers (UTI), in an effort to match global standards

9. Swap Dealers (SDs) will be required to report daily margin and colalteral data for uncleared swaps.

10. Non-Swap Dealers and Major Swap Participants (MSPs) will not be required to report valuation, margin or collateral information.

11. The deadline for transaction reporting would change. Currently, the CFTC requires all OTC derivatives trades to be reported on ASATP (As soon as technologically possible). The new rules would require Swap Dealers (SDs), Major Swap Participants (MSPs) and Derivatives Clearing Organisations (DCOs) to report data on T+1 basis, while non-Swap Dealers and others would be required to report their trades on T+2 basis.