The Securities and Exchange Commission and Commodity Futures Trading Commission recently adopted interim final rules for the reporting of swaps that were entered into prior to the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act and had not expired as of July 21, 2010 (“pre-enactment swaps”). The adoption of these rules was mandated by the Dodd-Frank Act, which required the SEC and CFTC to adopt rules for the reporting of pre-enactment swaps within 90 days of the enactment of the Dodd-Frank Act.
The requirements of the SEC and CFTC rules are substantially similar. They require specified counterparties to pre-enactment swaps to provide to a registered swap data repository or the relevant Commission:
- a copy of the transaction confirmation, in electronic form, if available, or in written form, if there is no electronic copy; and
- the time, if available, the transaction was executed.
In addition, a counterparty to a pre-enactment swap is required to report to the relevant Commission upon request any information relating to such swap during the time that the interim final temporary rule is in effect. Such information may include actual trade data as well as summary trade data. Summary data may include a description of the types of a swap dealer’s counterparties or types of reference entities, or the total number of pre-enactment swaps entered into by the dealer and some measure of the frequency and duration of those contracts.
The new rules require the following parties to report swaps:
- with respect to a swap in which only one counterparty is a swap dealer or major swap participant, the swap dealer or major swap participant must report the swap;
- with respect to a swap in which one counterparty is a swap dealer and the other counterparty is a major swap participant, the swap dealer must report the swap;
- with respect to any other swap, the parties to the swap must select a reporting party.
Each counterparty to a pre-enactment swap that may be required to report such swap must retain information and documents relating to the terms of the transaction. Specifically, such counterparties must retain all information and documents, if available, to the extent and in such form as they currently exist, relating to the terms of the swap, including but not limited to:
- any information necessary to identify and value the transaction;
- the date and time of execution of the transaction;
- all information from which the price of the transaction was derived;
- whether the transaction was accepted for clearing by any clearing agency or derivatives clearing organization, and, if so, the identity of such clearing agency or derivatives clearing organization;
- any modification(s) to the terms of the transaction; and
- the final confirmation of the transaction.
The record retention requirements are effective immediately. Reporting obligations will become effective on the earlier of (i) the compliance dates established by the SEC and CFTC in future rulemaking or (ii) 60 days after a registered swap data repository commences operations.