CFTC Staff Withdraws Elements of the FAQ on Reporting of Cleared Swaps; Seeks Public Comment on CME Rule 1001 (with Lofchie Comment)

The CFTC has withdrawn parts of its "Frequently Asked Questions on Reporting of Cleared Swaps," which are now under consideration by the CFTC as part of its review of a request from the Chicago Mercantile Exchange for approval of CME Rule 1001 ("Regulatory Reporting of Swap Data"). Specifically, the staff withdrew the following questions, and their corresponding answers:

• "Which party has the authority to select the particular SDR for purposes of cleared swap reporting?"
• "May a DCM, SEF or DCO that is also registered as an SDR or legally affiliated with an SDR require counterparties to use their 'captive' SDR for reporting swap transactions?"
• "Where must the resulting swaps created through the clearing process be reported?"

CME's Rule 1001 provides that:

"[f]or all swaps cleared by the Clearing House, and resulting positions, creation and continuation data shall be reported to CME's swap data repository for purposes of complying with applicable CFTC rules governing the regulatory reporting of swaps. Upon the request of a counterparty to a swap cleared at the Clearing House, the Clearing House shall provide the same creation and continuation data to a swap data repository selected by the counterparty as the Clearing House provided to CME's swap data repository under the preceding sentence[.]"

If the CME rule were adopted, trade data with respect to trades cleared by the CME's Clearing House would be reported to the CME's SDR.

Comments Due: December 21, 2012. Submit comments here.

Lofchie Comment: The CFTC had previously taken the view that market participants could determine the SDR to which they sent their trade information, or, to put it the opposite way, the CFTC had provided that the CME could not require market participants clearing through the CME to send their trade data to the CME's captive SDR. This position was the subject of a legal challenge by the CME as reported in the attached news item. The news item links to the CME's complaint against the CFTC; see page 10 of the complaint for a discussion of the relevant questions in the FAQ that are being withdrawn. Notably, the CFTC did not provide any explanation as to why it elected to withdraw its position and instead to seek comment on the CME's proposed rule.

See: Revised FAQ on Reporting of Cleared Swaps.See also: CFTC Press Release Regarding Comment Request for CME Rule 1001.