CFTC Proposes Revisions to Swaps Reporting for Continued Geographic Masking and International Harmonization
The CFTC proposed revisions to Part 43 ("Real-Time Public Reporting") and Part 45 ("Swap Data Recordkeeping and Reporting Requirements") to expand the use of unique product identifiers ("UPIs") and amend reporting fields. The proposed amendments are intended to improve data quality, improve risk monitoring and further efforts toward international harmonization.
The SEC stated the proposed amendments (i) "allow for continued geographic masking after the designation of the UPI and product classification system for swaps in the other commodity asset class"; (ii) "implement conforming changes in connection with the geographic masking requirement"; (iii) add reportable data fields to "promote international harmonization" and (iv) further the Commission's surveillance and analysis activities in addition to non-substantive revisions.
The comment deadline for the proposed amendments will be 60 days after publication in the Federal Register, and use of the UPI for these asset classes is expected by no later than January 29, 2024.
CFTC Commissioner Statements:
Chairman Rostin Behnam said that the proposed amendments would enhance the CFTC's dataset, fortify risk monitoring and extend the UPI to the Other Commodity asset class for improved international harmonization and data accuracy.
Commissioner Kristin N. Johnson offered some historical context on amendments to swap reporting requirements comparing it to the 2008 financial crisis; she emphasized the importance of international harmonization, UPI implementation and geographic masking for enhancing regulatory oversight.
Commissioner Summer K. Mersinger expressed "serious reservations" about certain revisions within the proposal that require the reporting of new CFTC-specific data elements that are not implemented in other jurisdictions. She said that the additional proposals are "poorly sourced, not well justified, and quite burdensome from a compliance perspective."
Commissioner Caroline D. Pham emphasized the need to incorporate feedback from the Global Markets Advisory Committee for better trade reporting and reduced compliance burdens.
Commentary
As suggested by Commissioners Mersinger and Pham, the most interesting and potentially concerning aspects of the proposal are found in the additional data elements, particularly those that the CFTC identifies as "CFTC elements" that are not intended to harmonize with international coordination. These require careful consideration as a technical matter, as they will require firms to coordinate transaction reporting and trade confirmations. Certain aspects of the proposals will also require consideration as a business matter, as information that may have not been previously made public will be made so, if the changes are implemented.
The CFTC is proposing to add a number of data elements relating to "custom baskets" in order to "address exposure risks and to allow for the linking of constituents of a custom basket for cross-basket analysis, among other analyses." These elements would apply for Part 45, not Part 43 (i.e., would not be publicly disseminated), and the CFTC noted that it only currently requires one data element relating to custom baskets - a "custom basket indicator" - to be publicly disseminated. The CFTC said that its surveillance efforts make it necessary to identify the constituents of a custom basket consistent with SEC Regulation SBSR.
The CFTC also proposed to add a new "Crypto asset underlying indicator" data element to require firms to identify transaction underliers that include crypto assets.