CFTC Proposes Amendment to Definition of ''Material Terms'' for Purposes of Swap Portfolio Reconciliation

The CFTC proposed excluding certain data fields from the definition of material terms under CFTC Rule 23.500(g) (Swap Documentation Definitions).

The proposed rule generally would codify relief granted previously by CFTC staff in their Letter No. 13-31, subject to certain modifications, and allow firms to exclude certain information reported under CFR Part 45 (Swap Data Recordkeeping and Reporting Requirements) for purposes of portfolio reconciliations under CFTC Rule 23.502 (Portfolio Reconciliation).

The CFTC proposed to exclude the following data fields from the definition of material terms:

• an indication that the swap will be allocated;
• if the swap is to be allocated, or is a post-allocation swap, the legal entity identifier of the agent;
• the block trade indicator;
• with respect to a cleared swap, the execution timestamp;
• with respect to a cleared swap, the timestamp for submission to a Swap Data Repository (SDR);
• the clearing indicator; and
• the clearing venue.

The CFTC indicated that the proposed excluded data fields modify those that were excluded by CFTC Letter No. 13-31. They modify the previously excluded data fields by (i) amending the execution timestamp data field to be specific to cleared swaps, (ii) amending the timestamp for submission to an SDR data field to be specific to cleared swaps, (iii) removing the data field that contains an indication of whether the clearing requirement exception in CEA Section 02(h)(7) (Exceptions) has been elected with respect to an uncleared swap and (iv) removing the data field that contains the identity of the counterparty electing the clearing requirement exception in CEA Section 02(h)(7).