CFTC Announces Review of Swap Data Reporting Regulations

In the most recent example of federal regulatory streamlining, the Commodity Futures Trading Commission (CFTC) announced on July 10 that it will undertake a comprehensive review of the swap data reporting regulations.

As part of this review, the CFTC’s Division of Market Oversight (Division) has opened a 40-day comment period to solicit input from all entities involved in swap reporting. Comments must be received by Aug. 21. The Division expects that adoption by the CFTC of any final rules resulting from the review and full industry implementation would occur by the end of 2019.

Existing swap data reporting regulations are concentrated on Parts 43, 45 and 49 of the CFTC’s regulations, which focus respectively on governing real-time public reporting requirements, swap data recordkeeping and reporting requirements, and requirements specific to Swap Data Repositories (SDRs). Current rules have been criticized for being cumbersome while failing to deliver qualitative information needed by the regulator and by market participants.

The Division announced that its review effort will focus on identifying ways to amend existing regulations and guidance with two goals in mind: to ensure that the CFTC receives accurate, complete and high-quality data on swap transactions for its regulatory oversight role, and to “streamline reporting, reduce messages that must be reported, and right-size the number of data elements that are reported to meet the agency’s priority use-cases for swaps data.”

Specifically, the review will focus on requirements found in Parts 43, 45 and 49 of the CFTC’s Regulations in order to identify certain provisions that may be updated or amended to realize these goals and clarify obligations for reporting counterparties and SDRs.

In its announcement, the Division also released the “Roadmap to Achieve High Quality Swaps Data” to outline its planned review process, which includes two sections of rule changes. The first addresses SDR operations and the confirmation of data accuracy by swap counterparties, while the second concentrates on streamlining reporting workflows, including the standardization of data fields and re-evaluating reporting deadlines to improve data accuracy.

The Division specified in its announcement that although it is focusing its review on the areas identified in the roadmap, it would welcome all ideas on changes to the regulations that could help it meet its goals of improving data quality and streamlining reporting obligations. The Division mentioned that it is in particular looking for ways to leverage the existing processes that SDRs, reporting entities and third-party providers have established. By seeking comments from all entities across the swap market, the Division hopes to maximize efficiency in swap reporting while minimizing any disruptions that rule changes would cause.

The Division added that this latest review is separate from the CFTC’s Project KISS launched on May 3, in response to President Donald Trump’s executive order directing federal agencies to designate a Regulatory Reform Officer and establish a Regulatory Reform Task Force.

Although separate, the Division’s review shares the CFTC’s overall objectives of identifying specific regulatory changes in order to simplify reporting and improve data accuracy and completeness. The review also aligns with CFTC Acting Chairman J. Christopher Giancarlo’s stated goals of overseeing the CFTC as it seeks to “reinterpret its regulatory mission” of promoting economic growth and enhancing U.S. markets while also “right-sizing” its regulatory activities.

Comments may be submitted electronically through the CFTC’s online process. All comments will be posted on the CFTC’s website. Should the CFTC propose any changes to existing regulations, the resulting Notice of Proposed Rulemaking would be subject to notice and comment under the Administrative Procedures Act.