FIA Urges Further Consideration of CFTC Swap Reporting Initiatives

Commentary by Nihal Patel

In a comment letter, the Futures Industry Association ("FIA") supported the CFTC's decision to extend the comment deadline on proposed swap reporting amendments and urged the CFTC to put aside further amendments to verification requirements until the CFTC has more fully addressed Swap Data Repository ("SDR") data fields and validation.

FIA said that the various CFTC initiatives relating to swap reporting need to be considered "holistically" and that the CFTC should not consider verification requirements until it finalizes other, related measures. FIA also offered "initial comments" on the CFTC proposal. FIA said that:

  • the CFTC should, prior to imposing new verification requirements, streamline data fields and leverage existing processes. FIA argues that "foundational measures are likely to resolve a large population of any existing data irregularities." FIA also noted that a large portion of the market is already covered by requirements to have policies and procedures to correct data and that adding new verification requirements will have little marginal benefit relative to increased costs, particularly for non-swap dealer reporting counterparties.

  • if additional verification requirements are imposed, the CFTC should take a "principles-based approach" that accommodates various systems and processes used by market participants, particularly in the case of non-dealer market participants.

  • the CFTC should not require notification to the director of the DMO if errors cannot be corrected within three business days.

The CFTC proposal addressed by FIA letter was previously covered here.

Commentary

From a process standpoint, the FIA letter is on the mark. While acknowledging that it is difficult to comment on a proposal that is a piece of a bigger whole that has yet to be revealed, FIA highlights key concerns with the proposal as published. FIA recognizes implicitly that the swap reporting initiatives are a work in progress. Getting significant policy points in, at this stage - and perhaps most significantly, publicly - helps move the discussion forward.

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