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b. The Types of Information BIS Seeks
Regarding the How Items on the CCL
Could Be Tiered
As described above, there are two
primary aspects to determining how an
item on the CCL should be tiered—(i)
the degree to which the item provides
a military or intelligence advantage to
the United States and (ii) its availability
outside of certain groups of countries.
i. Request for Comments on How Items
on the CCL Could Be Described Based
on the Tier Criteria
BIS seeks public comments on
whether items on the CCL that are
controlled for other than solely AntiTerrorism (AT) or Crime Control (CC)
reasons provide a ‘‘critical,’’
‘‘substantial,’’ or ‘‘significant’’ military or
intelligence advantage to the United
States, as these terms are defined above.
This includes a request for comments on
how existing ECCNs, down to the
subparagraph level, could be further
divided so that their descriptions are
divided by technical or other objective
characteristics consistent with the
‘‘critical,’’ ‘‘substantial,’’ and ‘‘significant’’
criteria. The U.S. Government will make
the final decisions on what types of
CCL-listed items are within the scope of
any of the three tiers and, thus, may or
may not accept suggestions regarding
how items should be tiered.
Nonetheless, BIS is interested in the
public’s comments on the issue of how
CCL-listed items can be described so
that they are distinguished even within
ECCNs by tier.

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ii. Request for Comments on the
Availability of Items on the CCL
BIS also seeks public comments on
whether items with the capabilities and
characteristics described on the CCL,
and controlled for other than solely antiterrorism (AT) reasons or Crime Control
(CC) reasons, are indigenously
developed, produced, or enhanced (a)
almost exclusively in the United States
or (b) in destinations other than
Argentina, Australia, Austria, Belgium,
Bulgaria, Canada, Croatia, the Czech
Republic, Denmark, Estonia, Finland,
France, Germany, Greece, Hungary,
Iceland, Ireland, Italy, Japan, Latvia,
Lithuania, Luxembourg, Netherlands,
New Zealand, Norway, Poland,
Portugal, Romania, Slovakia, Slovenia,
South Korea, Spain, Sweden,
Switzerland, Turkey, Ukraine, or the
United Kingdom. For purposes of this
notice, ‘‘enhanced’’ means that (a) the
basic characteristics, such as accuracy,
capability, performance, or productivity
of the item listed on the CCL are
improved to provide greater

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functionality, and (b) the enhancement
is effected in destinations outside the
above-listed destinations. Information
about the availability of these CCL-listed
items will help BIS and the other
relevant U.S. Government agencies
determine the appropriate tier for these
items.
Public comments should do more
than merely state that specific items are
available outside the United States or
this group of countries. Rather, they
should include specific, objectively
verifiable information regarding the
availability—that is, the indigenous
development, production, or
enhancement of the CCL-listed items.
The types of availability information
that will be most useful to BIS include,
for example, those set out in EAR
section 768.6, which are evidence that
the item is (i) available-in-fact, (ii) from
a non-U.S. source, (iii) in sufficient
quantity, and (iv) of comparable quality.
For example, a public comment
identifying a CCL-listed item as being
manufactured outside the above-listed
countries should ideally include (a)
information about its foreign
manufacturer(s), (b) relevant company
catalogues or print-outs from company
websites that describe the item’s
technical capabilities and parameters,
and (c) a detailed, documented
explanation of why these parameters
equal or exceed those contained in the
relevant ECCN entry. Company claims
that are made in catalogues or Web sites
that are based on accepted international
standards or other internationally
recognized certification authorities are
more likely to be useful to BIS than
claims that are more difficult to
objectively verify.
3. Comments That Are Outside the
Scope of This Notice
As a separate regulatory initiative, BIS
and the State Department are planning
to coordinate on the parallel publishing
of proposed rules in the Federal
Register that would create a definition
of the term ‘‘specially designed’’ that
would be common within the CCL and
that would replace the definition of
‘‘specifically designed’’ in the ITAR.
Accordingly, this notice of inquiry does
not solicit comments pertaining to the
use of this term. In addition, this notice
does not seek public comment on
whether an item should or should not
be controlled on the CCL, whether the
United States should ask any of the four
export control regimes to change the
controls on an item, or whether an item
should be controlled differently for
export and reexport to different
countries. General comments on the
overall reform process or the other

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aspects of current export controls are
similarly outside the scope of this
inquiry.
Comments should be submitted to BIS
as described in the ADDRESSES section of
this notice by February 7, 2011.
Dated: December 6, 2010.
Kevin J. Wolf,
Assistant Secretary of Commerce for Export
Administration.
[FR Doc. 2010–30966 Filed 12–8–10; 8:45 am]
BILLING CODE 3510–33–P

COMMODITY FUTURES TRADING
COMMISSION
17 CFR Part 23
RIN 3038–AC96

Reporting, Recordkeeping, and Daily
Trading Records Requirements for
Swap Dealers and Major Swap
Participants
Commodity Futures Trading
Commission.
ACTION: Notice of proposed rulemaking.
AGENCY:

The Commodity Futures
Trading Commission (Commission or
CFTC) is proposing regulations to
implement new statutory provisions
established under Title VII of the DoddFrank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act).
Section 731 of the Dodd-Frank Act
added new sections 4s(f) and (g) to the
Commodity Exchange Act (CEA), which
set forth reporting and recordkeeping
requirements and daily trading records
requirements for swap dealers and
major swap participants. The proposed
rules would establish the regulatory
standards for compliance with these
new sections of the CEA.
DATES: Submit comments on or before
February 7, 2011.
ADDRESSES: You may submit comments,
identified by RIN number 3038–AC96
and Reporting, Recordkeeping, and
Daily Trading Records Requirements for
Swap Dealers and Major Swap
Participants, by any of the following
methods:
• Agency Web site, via its Comments
Online process: http://
comments.cftc.gov. Follow the
instructions for submitting comments
through the Web site.
• Mail: David A. Stawick, Secretary of
the Commission, Commodity Futures
Trading Commission, Three Lafayette
Centre, 1155 21st Street, NW.,
Washington, DC 20581.
• Hand Delivery/Courier: Same as
mail above.
SUMMARY:

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• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
Please submit your comments using
only one method.
All comments must be submitted in
English, or if not, accompanied by an
English translation. Comments will be
posted as received to http://
www.cftc.gov. You should submit only
information that you wish to make
available publicly. If you wish the
Commission to consider information
that may be exempt from disclosure
under the Freedom of Information Act,
a petition for confidential treatment of
the exempt information may be
submitted according to the established
procedures in § 145.9 of the
Commissions regulations, 17 CFR 145.9.
The Commission reserves the right,
but shall have no obligation, to review,
pre-screen, filter, redact, refuse or
remove any or all of your submission
from http://www.cftc.gov that it may
deem to be inappropriate for
publication, such as obscene language.
All submissions that have been redacted
or removed that contain comments on
the merits of the rulemaking will be
retained in the public comment file and
will be considered as required under the
Administrative Procedure Act and other
applicable laws, and may be accessible
under the Freedom of Information Act.
FOR FURTHER INFORMATION CONTACT:
Sarah E. Josephson, Associate Director,
202–418–5684, [email protected];
Frank N. Fisanich, Special Counsel,
202–418–5949, [email protected]; or
Christopher Hower, Attorney Advisor,
202–418–6703, [email protected];
Division of Clearing and Intermediary
Oversight, Commodity Futures Trading
Commission, Three Lafayette Centre,
1155 21st Street, NW., Washington, DC
20581.
SUPPLEMENTARY INFORMATION:

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I. Background
On July 21, 2010, President Obama
signed the Dodd-Frank Act.1 Title VII of
the Dodd-Frank Act 2 amended the
Commodity Exchange Act (CEA) 3 to
establish a comprehensive regulatory
framework to reduce risk, increase
transparency, and promote market
integrity within the financial system by,
among other things: (1) Providing for the
registration and comprehensive
1 See Dodd-Frank Wall Street Reform and
Consumer Protection Act, Public Law 111–203, 124
Stat. 1376 (2010). The text of the Dodd-Frank Act
may be accessed at http://www.cftc.gov/
LawRegulation/OTCDERIVATIVES/index.htm.
2 Pursuant to Section 701 of the Dodd-Frank Act,
Title VII may be cited as the ‘‘Wall Street
Transparency and Accountability Act of 2010.’’
3 7 U.S.C. 1 et seq.

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regulation of swap dealers and major
swap participants; (2) imposing clearing
and trade execution requirements on
standardized derivative products; (3)
creating rigorous recordkeeping and
real-time reporting regimes; and (4)
enhancing the Commission’s
rulemaking and enforcement authorities
with respect to all registered entities
and intermediaries subject to the
Commission’s oversight.
Section 731 of the Dodd-Frank Act
amends the CEA by adding a new
Section 4s, which sets forth a number of
requirements for swap dealers and
major swap participants. Specifically,
sections 4s(f) and 4s(g) of the CEA
establish reporting and recordkeeping
requirements and daily trading records
requirements for swap dealers and
major swap participants.
Section 4s(f)(1) requires swap dealers
and major swap participants to ‘‘make
such reports as are required by the
Commission by rule or regulation
regarding the transactions and positions
and financial condition of the registered
swap dealer or major swap
participant.’’ 4 Under sections
4s(f)(1)(B)(i) and (ii), the Commission is
authorized to prescribe the books and
records requirements of ‘‘all activities
related to the business of swap dealers
or major swap participants,’’ regardless
of whether or not the entity has a
prudential regulator. All books and
records shall be open to inspection and
examination by any representative of
the Commission, and under section
4s(f)(1)(D), books and records relating to
security-based swap agreements also
must be open to inspection and
examination by the Securities and
Exchange Commission.
Section 4s(g)(1) requires that swap
dealers and major swap participants
‘‘maintain daily trading records of the
swaps of the registered swap dealer and
major swap participant and all related
records (including related cash and
forward transactions) and recorded
communications, including electronic
mail, instant messages, and recordings
of telephone calls.’’ Section 4s(g)(3)
requires that daily trading records for
each swap transaction be identifiable by
counterparty, and section 4s(g)(4)
specifies that swap dealers and major
swap participants maintain a ‘‘complete
audit trail for conducting
comprehensive and accurate trade
reconstructions.’’
The Commission would adopt the
regulations discussed below pursuant to
4 Recordkeeping

related to the swap dealer’s or
major swap participant’s financial condition reports
will be prescribed in separate rulemaking proposals
and are not included in the proposed rules below.

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authority granted under sections
4s(h)(1)(D), 4s(h)(3)(D), 4s(f), 4s(g), and
8a(5) of the CEA.5 The Dodd-Frank Act
requires the Commission to promulgate
these provisions by July 15, 2011.
The proposed regulations reflect
consultation with staff of the following
agencies: (i) The Securities and
Exchange Commission; (ii) the Board of
Governors of the Federal Reserve
System; (iii) the Office of the
Comptroller of the Currency; and
(iv) the Federal Deposit Insurance
Corporation. Staff from each of these
agencies has had the opportunity to
provide oral and/or written comments
to the proposal, and the proposed
regulations incorporate elements of the
comments provided.
The Commission requests comment
on all aspects of the proposed
regulations, as well as comment on the
specific provisions and issues
highlighted in the discussion below.
The Commission further requests
comment on an appropriate effective
date for final regulations, including
comment on whether it would be
appropriate to have staggered or delayed
effective dates for some regulations
based on the nature or characteristics of
the activities or entities to which they
apply. Moreover, the Commission
recognizes that there will be differences
in the size and scope of the business of
particular swap dealers and major swap
participants. Therefore, comments are
solicited on whether certain provisions
of the proposed regulations should be
modified or adjusted to reflect the
differences among swap dealers and
major swap participants.
II. Proposed Regulations
A. General Records Requirements
Section 4s(f)(1)(B) of the CEA requires
registered swap dealers and major swap
participants to keep records of all
activities related to their business.
Section 4s(f)(2) directs the Commission
to adopt rules governing recordkeeping
for swap dealers and major swap
participants.
Proposed § 23.201 sets forth the
records swap dealers and major swap
participants must maintain. The records
required under the proposed rule would
include full and complete swap
transaction information, including all
documents on which swap information
is originally recorded. Under proposed
§ 23.201(a)(1), such records would be
required to be maintained in a manner
5 Section 8a(5) of the CEA authorizes the
Commission to promulgate such regulations as, in
the judgment of the Commission, are reasonably
necessary to effectuate any of the provisions or to
accomplish any of the purposes of the CEA.

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that is identifiable and searchable by
transaction and by counterparty. The
rule would require retention of all
documents customarily generated in
accordance with market practice that
demonstrate the existence and nature of
the transaction.
Proposed § 23.201(a)(2) would require
retention of records of each position
held by the swap dealer or major swap
participant, identified by product and
counterparty. Position records would be
required to be linked to transaction
records in a manner that permitted
identification of the transaction that
established the position. Position
information would be retained in
accordance with Commission
regulations under part 45, which
provides for unique product identifiers
and unique counterparty identifiers.
Proposed § 23.201(a)(3) would require
swap dealers and major swap
participants to maintain records for
transactions executed on a swap
execution facility (SEF) or designated
contract market (DCM) or cleared by a
derivatives clearing organization (DCO).
It should be noted, that for transactions
that are executed on a SEF or DCM, or
cleared on a DCO, many of the
requirements of the daily trading record
rule, described below, would be easily
achieved through procedures
established by the SEF, DCM, or DCO
(e.g., confirming the transaction, valuing
the transaction, or margining the
position).
Proposed § 23.201(b) would require
that swap dealers and major swap
participants keep basic business
records, including, among other things,
minutes from meetings of the entity’s
governing body, organizational charts,
and documentation of audits conducted.
Additionally, certain financial records,6
records of complaints 7 against
personnel, and marketing materials
would be required to be kept. Under
proposed § 23.201(c), swap dealers and
major swap participants would be
required to maintain records of
information required to be submitted to
a swap data repository.
6 Financial condition reporting, including
reporting for compliance with capital rules, will be
proposed in a separate rulemaking.
7 A complaint is defined in proposed rule 23.200
as any formal or informal complaint, grievance,
criticism, or concern communicated to the swap
dealer or major swap participant in any format
relating to, arising from, or in connection with, any
trading conduct or behavior or with the swap dealer
or major swap participant’s performance (or failure
to perform) any of its regulatory obligations, and
includes any and all observations, comments,
remarks, interpretations, clarifications, notes, and
examinations as to such conduct or behavior
communicated or documented by the complainant,
swap dealer, or major swap participant.

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Finally, under proposed § 23.201(d)
swap dealers and major swap
participants would be required to
maintain records of information
required to be reported on a real-time
public basis and records of information
relating to large notional swaps in
accordance with proposed part 43 and
CEA section 2(a)(13).8 Specifically, with
regard to large notional swaps, swap
dealers and major swap participants
should retain a record of the rationale
for determining that the swap is a large
notional swap in accordance with new
part 43 of the Commission regulations.
Additionally, for the purposes of realtime reporting under part 43, if less
specific information relating to a
required data field is reported to protect
the identities of the parties to a swap
(e.g., underlying asset or tenor), a swap
dealer or major swap participant must
retain a record of the rationale for why
reporting less specific information is
necessary to protect the anonymity of
the parties to the swap.
The Commission requests comment
on all aspects of proposed § 23.201. In
particular, the Commission solicits
comment on the following questions:
• Should the Commission provide
greater specificity on the requirement
that transaction records be kept in a
form and manner identifiable and
searchable by transaction and
counterparty?
• Are there additional types of
records that should be required to be
kept by swap dealers and major swap
participants? For example, should drafts
of documents be kept?
B. Daily Trading Records
Section 4s(g)(1) of the CEA requires
that swap dealers and major swap
participants maintain daily trading
records of their swaps and ‘‘all related
records (including related cash and
forward transactions).’’ This section also
requires that swap dealers and major
swap participants maintain recorded
communications, including electronic
mail, instant messages, and recordings
of telephone calls. Section 4s(g)(2)
provides that the daily trading records
shall include such information as the
Commission shall require by rule or
regulation. Section 4s(g)(3) requires that
daily trading records for each swap
transaction be identifiable by
counterparty, and section 4s(g)(4)
specifies that swap dealers and major
swap participants maintain a ‘‘complete
audit trail for conducting
8 The

proposed real-time reporting rules under
part 43 are available on the Commission’s Web site
at http://www.cftc.gov.

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comprehensive and accurate trade
reconstructions.’’
Proposed § 23.202 would prescribe
daily trading record requirements,
which would include trade information
related to pre-execution, execution, and
post-execution data. Proposed
§ 23.202(a) would require swap dealers
and major swap participants to ensure
(1) that they preserve all information
necessary to conduct a comprehensive
and accurate trade reconstruction for
each swap, and (2) that they maintain
each transaction record as a separate
electronic file identifiable and
searchable by transaction and
counterparty.
Proposed § 23.202(a)(1) would require
registrants to keep pre-execution trade
information. This would include
records of all oral and written
communications that lead to the
execution of a swap, whether
communicated by telephone, voicemail,
facsimile, instant messaging, chat
rooms, electronic mail, mobile device,
or other digital or electronic media. This
rule would require swap dealers and
major swap participants to maintain
recordings of telephone calls and other
communications created in the normal
course of its business, but would not
establish an affirmative new
requirement to create recordings of all
telephone conversations if the complete
audit trail requirement can be met
through other means, such as electronic
messaging or trading.
Significant technological
advancements in recent years,
particularly with respect to the cost of
capturing and retaining copies of
electronic material, including telephone
communications, have made the
prospect of establishing recordkeeping
requirements for digital and electronic
communications more economically
feasible and systemically prudent.
Evidence of these trends was examined
in March 2008 by the United Kingdom’s
Financial Services Authority (‘‘FSA’’),
which studied the issue of mandating
the recording and retention of voice
conversations and electronic
communications.9 The FSA issued a
Policy Statement detailing its findings
and ultimately implemented rules
relating to the recording and retention of
such communications, including a
recent determination that all financial
service firms will be required to record
any relevant communication by
9 Financial Services Authority, ‘‘Policy Statement:
Telephone Recording: recording of voice
conversations and electronic communications,’’
(March 2008).

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employees on their work cell phones.10
Similar rules that mandate recording of
certain voice and/or telephone
conversations have been promulgated
by the Hong Kong Securities and
Futures Commission 11 and by the
Autorite´ des Marche´s Financiers in
France,12 and have been recommended
by the International Organization of
Securities Commissions (IOSCO).13
While technological advancements
have made capturing and retaining such
material more economically feasible,
modern technologies likewise have
altered the methods by which market
participants conduct their business,
especially the means through which
such persons communicate solicitations,
bids, offers, orders, instructions, trading,
and prices.
On February 5, 2009, the
Commission’s Division of Market
Oversight (DMO) issued an advisory,
which made clear that the existing
language of § 1.35 of the Commission’s
regulations ‘‘appl[ies] to records that are
created or retained in an electronic
format, including e-mail, instant
messages, and other forms of
communication created or transmitted
electronically for all trading.’’ 14 The
advisory, which specifically addresses
the Commission’s recordkeeping
requirements as applicable to futures
commission merchants, introducing
brokers, and DCM members, states that
‘‘[t]he Commission’s recordkeeping
regulations, by their terms, do not
distinguish between whatever medium
is used to record the information
covered by the regulations, including
e-mails, instant messages, and any other
form of communication created or
transmitted electronically.’’
It is also noteworthy that the
Commission’s enforcement success in
cases involving market manipulation
and false reporting often has correlated
10 Julia Werdigier, ‘‘Britain to Tape Traders’ Cell
Phones to Fight Fraud,’’ New York Times (Nov. 12,
2010).
11 Code of Conduct for Persons Licensed by or
Registered with the Securities and Futures
Commission para. 3.9 (2010) (H.K.).
12 General Regulation of the Autorite
´ des Marche´s
Financiers art. 313–51 (2010) (Fr.).
13 Press Release, International Organization of
Securities Commissions, ‘‘IOSCO Publishes
Recommendations to Enhance Commodity Futures
Markets Oversight,’’ (Mar. 5, 2009), http://
www.iosco.org/news/pdf/IOSCONEWS137.pdf. The
IOSCO members on the committee formulating the
recommendations included Brazil, Canada (Ontario
and Quebec), Dubai, France, Germany, Hong Kong,
Italy, Japan, Norway, Switzerland, the United
Kingdom, and the United States.
14 A copy of the advisory, titled ‘‘Advisory for
Futures Commission Merchants, Introducing
Brokers, and Members of a Contract Market over
Compliance with Recordkeeping Requirements,’’ is
available on the Commission’s Web site at http://
www.cftc.gov.

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directly with the existence of highquality recordings of voice
communications and of electronic
communications between the persons
involved. Conversely, the Commission’s
enforcement capabilities have been
limited in cases where such voice
recordings and copies of electronic
communications were not available.
Accordingly, the Commission is
proposing § 23.202(a)(1), which would
require swap dealers and major swap
participants to maintain records of all
communications provided or received
concerning information that leads to the
execution of a swap, whether conveyed
by telephone, voicemail, facsimile,
instant messaging, chat rooms,
electronic mail, mobile device, or other
digital or electronic media. As noted
above, the proposed § 23.202(a) would
require that each recorded
communication be maintained as a
separate electronic file identifiable and
searchable by transaction and
counterparty.
The Commission solicits comments
on the potential costs and effects of
requiring that all pre-execution
communications be recorded.
Additionally, the Commission requests
comment on whether it should require
a record of the source of quotations,
including the source of any input if the
quotation is generated by a formula or
model. Comments also are requested
regarding whether the retention period
for pre-execution communications
should be shorter than the retention
period applicable to other business
records.
Proposed § 23.202(a)(2) would require
the recording of execution information,
including all terms of each swap and the
date and time, to the nearest minute,
that the swap was executed. Postexecution data, such as records of all
confirmations, reconciliations, and
margining of swaps would be required
under proposed § 23.202(a)(3). The
collateralization of risk exposure
resulting from the business of the swap
dealer or major swap participant would
be recorded under § 23.202(a)(4).
Proposed § 23.202(b) would require
that swap dealers and major swap
participants retain information of cash
or forward transactions that are related
to swaps as required by section 4s(g)(1).
Proposed § 23.200 defines a related cash
or forward transaction as ‘‘a purchase or
sale for immediate or deferred physical
shipment or delivery of an asset related
to a swap where the swap and the
related cash or forward transaction are
used to hedge, mitigate the risk of, or
offset one another.’’ The recordkeeping
requirements for related cash and
forward transactions generally track the

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same requirements as swaps. The
Commission believes that requiring one
approach to recordkeeping will be
simpler for swap dealers and major
swap participants to implement and
will provide the Commission with
information necessary for its regulatory
oversight.
The Commission requests comment
on all aspects of proposed § 23.202.
With respect to records regarding
related cash and forward transactions,
the Commission solicits comment upon
whether the Commission has provided
sufficient clarity concerning what type
of information would be required to be
retained. The Commission also requests
comment on whether it should require
swap dealers and major swap
participants to keep records related to
high frequency trading, and what the
nature of those records should be.
C. Retention and Inspection of Records
Proposed § 23.203 prescribes the form
and manner in which records shall be
retained, and prescribes the period of
time for which maintenance of records
is required. Generally speaking, § 23.203
corresponds to the recordkeeping
requirements of § 1.31 insofar as records
are required to be kept for a period of
at least 5 years, and shall be readily
accessible for the first two years of that
period.
Proposed § 23.203(a) would require
that records be kept at the principal
place of business of the swap dealer or
major swap participant. If the principal
place of business is outside of the
United States, then the swap dealer or
major swap participant must provide
the requested records at a place
designated by a representative of the
Commission within 72 hours of
receiving the request.
Proposed § 23.203(b) would require
that all records be maintained in
accordance with § 1.31 of the
Commission’s regulations, except that
records of, or related to, each swap
transaction be retained until the
termination, maturity, expiration,
transfer, assignment, or novation of the
swap, and for five years after such time.
In other words, the swap dealer or major
swap participant must maintain records
for the life of the swap or the period in
which the entity holds the position on
its books (whichever is shorter), plus
five additional years. Additionally,
records of any swap data must be
maintained in accordance with
requirements under part 45, which was
recently proposed by the Commission.15
15 The proposed rules under part 45 are available
on the Commission’s Web site at http://
www.cftc.gov.

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In addition to any other comments on
retention and inspection requirements,
the Commission requests comment on
the approach it has proposed for the
retention of swap data.
D. Reports to Swap Data Repositories
and Real-time Public Reporting
Section 4(s)(f)(1)(A) of the CEA
requires each registered swap dealer and
major swap participant to make such
reports as are required by the
Commission by rule or regulation
regarding the transactions and positions
and financial condition of the registered
swap dealer or major swap participant.
Proposed § 23.204 implements the
reporting requirements of Commission
rules to be prescribed under CEA
section 4r(a) related to reporting of
swaps to a swap data repository.
Proposed § 23.205 implements the
reporting requirements of Commission
rules to be prescribed under CEA
section 2(a)(13) related to real-time
public reporting of swap transactions
and pricing data.16 Each of the reports
required under the proposed rules
would assist the Commission to monitor
the swap markets and the operations of
swap dealers and major swap
participants and to enforce their
compliance with the Commission’s
rules.
III. Related Matters

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A. Regulatory Flexibility Act
The Regulatory Flexibility Act
(RFA) 17 requires that agencies consider
whether the rules they propose will
have a significant economic impact on
a substantial number of small entities.
The Commission previously has
established certain definitions of ‘‘small
entities’’ to be used in evaluating the
impact of its regulations on small
entities in accordance with the RFA.18
The proposed rules would affect swap
dealers and major swap participants.
Swap dealers and major swap
participants are new categories of
registrants. Accordingly, the
Commission has not previously
addressed the question of whether such
persons are, in fact, small entities for
purposes of the RFA. The Commission
previously has determined, however,
that futures commission merchants are
not small entities for purposes of the
RFA.19 The Commission’s
16 In a recent release of proposed Part 43 and
pursuant to CEA section 2(a)(13)(A), reporting
parties, for the purposes of real-time public
reporting, will be obligated to report certain data
fields relating to swaps ‘‘as soon as technologically
practicable’’ following the execution of a swap.
17 5 U.S.C. 601 et seq.
18 47 FR 18618, Apr. 30, 1982.
19 Id. at 18619.

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determination was based, in part, upon
the obligation of futures commission
merchants to meet the minimum
financial requirements established by
the Commission to enhance the
protection of customers’ segregated
funds and protect the financial
condition of futures commission
merchants generally.20 Like futures
commission merchants, swap dealers
will be subject to minimum capital and
margin requirements and are expected
to comprise the largest global financial
firms. In addition, the Commission is
required to exempt from swap dealer
designation any entities that engage in
a de minimis level of swaps dealing in
connection with transactions with or on
behalf of customers. The Commission
anticipates that this exemption would
exclude small entities from registration.
For essentially the same reasons that
futures commission merchants have
previously been determined not to be
small entities and in light of the
exemption from the definition of swap
dealer for those engaging in a de
minimus level of swap dealing, the
Commission is hereby proposing that
swap dealers not be considered ‘‘small
entities’’ for purposes of the RFA for this
rulemaking.
The Commission also has determined
previously that large traders are not
‘‘small entities’’ for RFA purposes.21 In
that determination, the Commission
considered that a large trading position
was indicative of the size of the
business. Major swap participants, by
statutory definition, maintain
substantial positions in swaps or
maintain outstanding swap positions
that create substantial counterparty
exposure that could have serious
adverse effects on the financial stability
of the United States banking system or
financial markets. Accordingly, for
purposes of the RFA for this
rulemaking, the Commission is hereby
proposing that major swap participants
not be considered ‘‘small entities’’ for
essentially the same reasons that large
traders have previously been
determined not to be small entities.
Moreover, the Commission is carrying
out Congressional mandates by
proposing this regulation. Specifically,
the Commission is proposing these
regulations to comply with the DoddFrank Act, the aim of which is to reduce
systemic risks presented by swap
dealers and swap market participants
through comprehensive regulation. The
Commission does not believe that there
are regulatory alternatives to those being
proposed that would be consistent with

the statutory mandate. Accordingly, the
Chairman, on behalf of the Commission,
hereby certifies pursuant to 5 U.S.C.
605(b) that the proposed rules will not
have a significant economic impact on
a substantial number of small entities.
B. Paperwork Reduction Act
The Paperwork Reduction Act
(PRA) 22 imposes certain requirements
on Federal agencies (including the
Commission) in connection with their
conducting or sponsoring any collection
of information as defined by the PRA.
This proposed rulemaking would result
in new collection of information
requirements within the meaning of the
PRA. The Commission therefore is
submitting this proposal to the Office of
Management and Budget (OMB) for
review in accordance with 44 U.S.C.
3507(d) and 5 CFR 1320.11. The title for
this collection of information is
‘‘Reporting, Recordkeeping, and Daily
Trading Records Requirements for Swap
Dealers and Major Swap Participants.’’
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless it
displays a currently valid control
number. The OMB has not yet assigned
this collection a control number.
The collection of information under
these proposed regulations is necessary
to implement certain provisions of the
CEA, as amended by the Dodd-Frank
Act. Specifically, it is essential to
ensuring that each swap dealer and
major swap participant maintains
records of all the activities related to its
business including, but not limited to,
daily trading records and transaction
reporting as required by section 4s(f) of
the Act. The recordkeeping requirement
also is necessary for a complete audit
trail to conduct comprehensive and
accurate trade reconstructions.
Commission staff would use the
information required to be preserved or
reported when conducting the
Commission’s examination and
oversight program with respect to the
applicable registrants.
If the proposed regulations are
adopted, responses to this collection of
information would be mandatory. The
Commission will protect proprietary
information according to the Freedom of
Information Act and 17 CFR part 145,
‘‘Commission Records and Information.’’
In addition, section 8(a)(1) of the CEA
strictly prohibits the Commission,
unless specifically authorized by the
CEA, from making public ‘‘data and
information that would separately
disclose the business transactions or
market positions of any person and

20 Id.
21 Id.

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trade secrets or names of customers.’’
The Commission is also required to
protect certain information contained in
a government system of records
according to the Privacy Act of 1974,
5 U.S.C. 552a.
1. Information Provided by Reporting
Entities/Persons
Swap dealers and major swap
participants would be required to
comply with the recordkeeping
requirements of §§ 23.201, 23.202, and
23.203 and the reporting requirements
of §§ 23.204 and 23.205. The proposed
regulations generally would require
swap dealers and major swap
participants to keep transaction and
position records of their swaps
(including daily trading records of
swaps and related cash and forward
transactions); to maintain specified
business records (including records
related to the swap dealer’s or major
swap participant’s governance, financial
status, and complaints); to report certain
swap transaction data to swap data
repositories; to satisfy certain real time
public reporting requirements; and to
maintain records of information
reported to swap data repositories and
for real time public reporting purposes.
The annual burden associated with
these proposed regulations is estimated
to be 2,096 hours, at an annual cost of
$209,600 for each swap dealer and
major swap participant. Burden means
the total time, effort, or financial
resources expended by persons to
generate, maintain, retain, disclose, or
provide information to or for a federal
agency. This hourly burden primarily
results from the recordkeeping
obligations that would be imposed by
proposed §§ 23.201 and 23.202.
Specifically, the Commission
anticipates that swap dealers and major
swap participants will spend
approximately eight hours per trading
day (2,016 hours per year) compiling
and maintaining transaction records,
including daily trading records. The
Commission believes that swap dealers
and major swap participants already
maintain the vast majority of the
required transaction records
(particularly execution and postexecution records) as part of their
customary and usual business practices
and that any additional expenditure
generally would be limited to the costs
associated with developing and
preserving certain pre-execution data
and communications set forth in
proposed § 23.202, which currently may
not be kept by affected registrants (for
example, records of oral and written
communications and records related to
quotes, bids, and offers) as well as the

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time required to input any unique
transaction terms into electronic
recordkeeping systems. The
Commission believes that registrants
will expend an additional 63 hours per
year compiling daily records of their
positions, identified by product and
counterparty, as required by proposed
§ 23.201.
The Commission estimates that each
swap dealer and major swap participant
will spend 5 hours per year compiling
the complaint records required by the
proposed regulations. This
approximation is based on the belief
that the affected registrants primarily
engage in principal to principal
transactions, which are less likely to
generate complaints than transactions
conducted on an agency basis. It also
assumes that most registrants possess
pre-existing complaint recordkeeping
systems and thus, any hourly burden
imposed would be limited to the time
required to document and retain the
specific complaint information
mandated by the rule that is not already
kept. Finally, the Commission estimates
the hourly burden associated with
compliance with the marketing
communication recordkeeping
requirement to be approximately 12
hours per year. The Commission expects
that swap dealers and market
participants presently maintain records
of most of their marketing presentations,
advertisements, sales literature, and
marketing communications as part of
their customary business practices and,
thus, any new hourly burden is limited
to the requirement to maintain a record
of compliance with relevant marketing
regulations.
The Commission believes that several
aspects of the rule would not result in
any additional hourly burdens upon
affected registrants. For example, the
required records of transactions
executed on a swap execution facility or
designated contract market or
transactions cleared by a designated
clearing organization would be the same
transaction and daily trading records
accounted for previously and, therefore,
have not been assigned an extra hourly
burden. The Commission also expects
that swap dealers and major swap
participants currently make and/or
maintain their meeting minutes;
organizational charts; the resumes of
relevant managers; records of their
assets, liabilities, income, and expenses;
and other governance or financial
records in the ordinary course of their
businesses.
Finally, the Commission does not
anticipate that the requirements to
report swap transactions to swap data
repositories in accordance with

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proposed § 23.204, to engage in real
time public reporting of swap
transaction and pricing data in
accordance with proposed § 23.205, and
to maintain the electronic systems and
procedures necessary to report
transactions and data in the manner
required by the regulations would result
in any additional hourly burdens or
costs to swap dealers and major swap
participants other than those set forth in
the recently proposed part 45
regulations for swap data recordkeeping
and reporting 23 and in the recently
proposed part 43 regulations governing
real-time public reporting of swap
transaction data 24 promulgated as part
of the Commission’s implementation of
the Dodd-Frank Act.
It is not currently known how many
swap dealers and major swap
participants will become subject to
these rules, and this will not be known
to the Commission until the registration
requirements for these entities become
effective after July 16, 2011, the date on
which the Dodd-Frank Act becomes
effective. The Commission believes that
there are likely to be approximately 200
swap dealers and 50 major swap
participants that would be required to
register with the Commission. It has
chosen to take a more conservative
approach for PRA purposes, however,
and has estimated that there will be a
combined number of 300 swap dealers
and major swap participants who will
be required to comply with the
recordkeeping and reporting obligations
imposed by the proposed regulations.
The Commission estimated the number
of affected entities based on industry
data.
According to recent Bureau of Labor
Statistics, the mean hourly wage of an
23 The proposed rules are available on the
Commission’s Web site at http://www.cftc.gov. The
Commission has estimated the average hour burden
incurred by swap dealers and major swap
participants in connection with reporting to swap
data repositories to be 2,080 hours. This estimate
was based upon the assumption that a significant
number of swap dealers and major swap
participants would dedicate the equivalent of at
least one full time employee to ensuring
compliance with the relevant reporting obligations
(2,080 hours = 52 weeks × 5 days × 8 hours). The
Commission noted that it believed this assumption
to be reasonable due to the volume of swap
transactions to be processed by such entities, the
information required by proposed regulations and
the frequency with which reports would be made.
The Commission also estimated the cost of the
obligation to report a unique swap identifier to
other registered entities and swap participants to be
6 annual burden hours per entity and the estimated
cost of reporting their ownership and affiliation
information into a confidential database to be
2 hours per entity.
24 The Commission has estimated that swap
dealers and major swap participants will incur
2,080 annual burden hours in connection with the
real-time reporting requirements.

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employee under occupation code 11–
3031, ‘‘Financial Managers,’’ (which
includes operations managers) that is
employed by the ‘‘Securities and
Commodity Contracts Intermediation
and Brokerage’’ industry is $74.41.25
Because swap dealers and major swap
participants include large financial
institutions whose operations
management employees’ salaries may
exceed the mean wage, the Commission
has estimated the cost burden of these
proposed regulations based upon an
average salary of $100 per hour.
Accordingly, the estimated hour
burden was calculated as follows:
Recordkeeping: Transaction Records
(including Daily Trading Records)
Number of registrants: 300.
Frequency of collection: Daily.
Estimated number of responses per
registrant: 252 [252 trading days].
Estimated aggregate number of
responses: 75,600 [300 registrants × 252
trading days].
Estimated annual burden per
registrant: 2,016 hours [252 trading days
× 8 hours per trading day].
Estimated aggregate annual hour
burden: 604,800 hours [300 registrants ×
252 trading days × 8 hours per trading
day].
Recordkeeping: Position Records
Number of registrants: 300.
Frequency of collection: Daily.
Estimated number of responses per
registrant: 252 [252 trading days].
Estimated aggregate number of
responses: 75,600 [300 registrants × 252
trading days].
Estimated annual burden per
registrant: 63 hours [252 trading days ×
.25 hours per record].
Estimated aggregate annual hour
burden: 18,900 hours [300 registrants ×
252 trading days × .25 hours per record].
Recordkeeping: Complaints
Number of registrants: 300.
Frequency of collection: As needed.
Estimated number of responses per
registrant: 5.
Estimated aggregate number of
responses: 1,500 [300 registrants × 5
complaints per registrant].
Estimated annual burden per
registrant: 5.
Estimated aggregate annual hour
burden: 1,500 [300 registrants × 5
complaints per registrant].
Recordkeeping: Marketing
Communications
Number of registrants: 300.
Frequency of collection: As needed.
Estimated number of responses per
registrant: 12 (monthly compilation of
records).

Estimated aggregate number of
responses: 3,600 [300 registrants × 12
monthly compilations].
Estimated annual burden per
registrant: 12 hours [1 hour × 12
months].
Estimated aggregated annual hour
burden: 3,600 [300 registrants × 12
monthly compilations].
Based upon the above, the aggregate
hour burden cost for all registrants is
628,800 burden hours and $62,880,000
[628,800 × $100 per hour].
In addition to the per hour burden
discussed above, the Commission
anticipates that swap dealers and major
swap participants may incur certain
start-up costs in connection with the
proposed recordkeeping obligations.
Such costs would include the
expenditures related to developing and
installing new technology or reprogramming or updating existing
recordkeeping technology and systems
to enable the swap dealer or major swap
participant to collect, capture, process,
maintain, and re-produce any newly
required records. The Commission
believes that swap dealers and major
swap participants generally could adapt
their current infrastructure to
accommodate the new or amended
technology and thus no significant
infrastructure expenditures would be
needed. The Commission estimates the
programming burden hours associated
with technology improvements to be
160 hours.
According to recent Bureau of Labor
Statistics, the mean hourly wages of
computer programmers under
occupation code 15–1021 and computer
software engineers under program codes
15–1031 and 1032 are between $34.10
and $44.94.26 Because swap dealers and
major swap participants generally will
be large entities that may engage
employees with wages above the mean,
the Commission has conservatively
chosen to use a mean hourly
programming wage of $60 per hour.
Accordingly, the start-up burden
associated with the required
technological improvements would be
$9,600 [$60 × 160 hours] per affected
registrant or $2,880,000 in the aggregate.

25 http://www.bls.gov/oes/current/oes113031.htm.

26 http://www.bls.gov/oes/current/oes113031.htm.

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2. Information Collection Comments
The Commission invites the public
and other federal agencies to comment
on any aspect of the recordkeeping
burdens discussed above. The
Commission specifically request
comment upon its determination that
certain of the proposed recordkeeping
requirements would not impose any
additional information collection

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burdens upon affected registrants and
the appropriateness of the burden hours
attributed to other recordkeeping
obligations.27 Pursuant to 44 U.S.C.
3506(c)(2)(B), the Commission solicits
comments in order to: (i) Evaluate
whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information will have practical utility;
(ii) evaluate the accuracy of the
Commission’s estimate of the burden of
the proposed collection of information;
(iii) determine whether there are ways
to enhance the quality, utility, and
clarity of the information to be
collected; and (iv) minimize the burden
of the collection of information on those
who are to respond, including through
the use of automated collection
techniques or other forms of information
technology.
Comments may be submitted directly
to the Office of Information and
Regulatory Affairs, by fax at (202) 395–
6566 or by e-mail at
[email protected]. Please
provide the Commission with a copy of
submitted comments so that all
comments can be summarized and
addressed in the final rule preamble.
Refer to the ADDRESSES section of this
notice of proposed rulemaking for
comment submission instructions to the
Commission. A copy of the supporting
statements for the collections of
information discussed above may be
obtained by visiting RegInfo.gov. OMB
is required to make a decision
concerning the collection of information
between 30 and 60 days after
publication of this document in the
Federal Register. Therefore, a comment
is best assured of having its full effect
if OMB receives it within 30 days of
publication.
C. Cost-Benefit Analysis
Section 15(a) of the CEA 28 requires
the Commission to consider the costs
and benefits of its actions before issuing
a rulemaking under the CEA. By its
terms, section 15(a) does not require the
Commission to quantify the costs and
benefits of a new regulation or to
determine whether the benefits of the
rule outweigh its costs; rather, it
requires that the Commission ‘‘consider’’
the costs and benefits of its actions.
27 The Commission notes that, because it has not
regulated swap dealers, swap market participants,
or the swaps market in the past, it has not
previously collected data on the number of
particular swap market participants or the average
number of daily transactions in which particular
types of swaps market participants engage.
28 7 U.S.C. 19(a).

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Federal Register / Vol. 75, No. 236 / Thursday, December 9, 2010 / Proposed Rules
Section 15(a) further specifies that
costs and benefits of a proposed
rulemaking shall be evaluated in light of
five broad areas of market and public
concern: (1) Protection of market
participants and the public; (2)
efficiency, competitiveness, and
financial integrity of futures markets; (3)
price discovery; (4) sound risk
management practices; and (5) other
public interest considerations. The
Commission may, in its discretion, give
greater weight to any one of the five
enumerated considerations and could,
in its discretion, determine that,
notwithstanding its costs, a particular
regulation was necessary or appropriate
to protect the public interest or to
effectuate any of the provisions or to
accomplish any of the purposes of the
CEA.
Summary of proposed requirements.
The proposed regulations would
implement certain provisions of section
731 of the Dodd-Frank Act, which adds
new sections 4s(f) and 4s(g) to the
Commodity Exchange Act. The
proposed regulations would set forth
certain duties imposed upon swap
dealers and major swap participants
registered with the Commission with
regard to recordkeeping and reporting of
information and data in connection with
such entities’ activities in the swap
market.
Costs. With respect to costs, the
Commission has determined that for
swap dealers and major swap
participants, costs to institute
recordkeeping and reporting systems
and personnel in order to satisfy the
new regulatory requirements are far
outweighed by the benefits to the
financial system as a whole. As
described above, it is expected that the
any additional cost imposed by the
recordkeeping requirements of proposed
regulations 23.201, 23.202, and
23.203 29 would be minimal because the
information and data required to be
recorded is information and data a
prudent swap dealer or major swap
participant would already maintain
during the ordinary course of its
business. Moreover, most swap dealers
and major swap participants have
adequate, existing resources and
recordkeeping structures that are
capable of adjusting to the new
regulatory framework without material
diversion of resources away from
commercial operations.
Benefits. With respect to benefits, the
Commission has determined that the
29 As discussed previously, the cost burdens
associated with the reporting requirements
contained in proposed regulation 23.204 and 23.205
are addressed in separately proposed rulemakings.

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proposed regulations would require a
swap dealer or major swap participant
to keep records and make reports that
will result in reduced risk and greater
market integrity in the swap market.
Reporting to swap data repositories
under 23.204 will provide regulators
with a more transparent view of the
swap market when such data is
aggregated. Such reporting would
further the goal of avoiding market
disruptions and financial losses to
market participants and the general
public. Therefore, the Commission
believes it is prudent to prescribe
recordkeeping and reporting
requirements for swap dealers and
major swap participants.
The proposed regulations also would
promote appropriate back office data
management, thereby fostering better
risk management. The proposed
regulations also would reward
efficiency insofar as swap dealers and
major swap participants that operate
efficiently would have lower operating
costs and thus would require fewer
resources to comply with the
regulations. Finally, the proposed
regulations are designed to ensure that
swap dealers and major swap
participants can sustain their market
operations and meet their financial
obligations to market participants, thus
contributing to the integrity of the
financial markets. Therefore, the
Commission believes it is prudent to
require risk management requirements
for swap dealers and major swap
participants.
Public Comment. The Commission
invites public comment on its costbenefit considerations. Commentators
are also invited to submit any data or
other information that they may have
quantifying or qualifying the costs and
benefits of the proposed rules with their
comment letters.
List of Subjects in 17 CFR Part 23
Antitrust, Commodity futures,
Conduct standards, Conflict of Interests,
Major swap participants, Reporting and
recordkeeping, Swap dealers, Swaps.
For the reasons stated in this release,
the Commission proposes to amend 17
CFR part 23 as proposed to be added by
FR Doc. 2010–29024, published on
November 23, 2010 (75 FR 71379) as
follows:
PART 23—SWAP DEALERS AND
MAJOR SWAP PARTICIPANTS
1. The authority citation for part 23 to
read as follows:
Authority: 7 U.S.C. 1a, 2, 6, 6a, 6b, 6b–
1, 6c, 6p, 6r, 6s, 6t, 9, 9a, 12, 12a, 13b, 13c,
16a, 18, 19, 21.

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2. Subpart F, (consisting of §§ 23.200,
23.201, 23.202, 23.203, 23.204 and
23.205) is added to read as follows:
Subpart F—Reporting, Recordkeeping, and
Daily Trading Records Requirements for
Swap Dealers and Major Swap Participants
Sec.
23.200 Definitions.
23.201 Required records.
23.202 Daily trading records.
23.203 Records; retention and inspection.
23.204 Reporting to swap data repositories.
23.205 Real-time public reporting.

Subpart F—Reporting, Recordkeeping,
and Daily Trading Records
Requirements for Swap Dealers and
Major Swap Participants
§ 23.200

Definitions.

For purposes of subpart F, the
following terms shall be defined as
provided.
(a) Business trading unit means any
department, division, group, or
personnel of a swap dealer or major
swap participant or any of its affiliates,
whether or not identified as such, that
performs or is involved in any pricing,
trading, sales, purchasing, marketing,
advertising, solicitation, structuring, or
brokerage activities on behalf of a
registrant.
(b) Clearing unit means any
department, division, group, or
personnel of a registrant or any of its
affiliates, whether or not identified as
such, that performs any proprietary or
customer clearing activities on behalf of
a registrant.
(c) Complaint means any formal or
informal complaint, grievance,
criticism, or concern communicated to
the swap dealer or major swap
participant in any format relating to,
arising from, or in connection with, any
trading conduct or behavior or with the
swap dealer or major swap participant’s
performance (or failure to perform) any
of its regulatory obligations, and
includes any and all observations,
comments, remarks, interpretations,
clarifications, notes, and examinations
as to such conduct or behavior
communicated or documented by the
complainant, swap dealer, or major
swap participant.
(d) Counterparty means any party to
a derivative. When referring to a
derivative between a swap dealer or
major swap participant and any other
person, ‘‘counterparty’’ means such
other person.
(e) Executed means the completion of
the execution process.
(f) Execution means, with respect to a
swap, an agreement by the parties
(whether orally, in writing,

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electronically, or otherwise) to the terms
of a swap that legally binds the parties
to such swap terms under applicable
law.
(g) Governing body typically means,
with respect to:
(1) A sole proprietorship, the
proprietor;
(2) A corporation, its board of
directors;
(3) A partnership, any general partner;
(4) A limited liability company or
limited liability partnership, the
manager, managing member or those
members vested with management
authority; and
(5) Any other person, the body or
person with ultimate decision-making
authority over the activities of such
person.
(h) Prudential regulator has the
meaning given to such term in section
1a(39) of the Commodity Exchange Act
and includes the Board of Governors of
the Federal Reserve System, the Office
of the Comptroller of the Currency, the
Federal Deposit Insurance Corporation,
the Farm Credit Association, and the
Federal Housing Finance Agency, as
applicable to the swap dealer or major
swap participant. The term also
includes the Federal Deposit Insurance
Corporation, with respect to any
financial company as defined in section
201 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act or
any insured depository institution
under the Federal Deposit Insurance
Act, and with respect to each affiliate of
any such company or institution.
(i) Registered entity has the meaning
given to such term in section 1a(40) of
the Commodity Exchange Act, and
includes boards of trade designated as
contract markets, derivatives clearing
organizations, swap execution facilities,
and swap data repositories.
(j) Related cash or forward transaction
means a purchase or sale for immediate
or deferred physical shipment or
delivery of an asset related to a swap
where the swap and the related cash or
forward transaction are used to hedge,
mitigate the risk of, or offset one
another.
(k) Swap confirmation means the
consummation (electronically or
otherwise) of legally binding
documentation (electronic or otherwise)
that memorializes the agreement of the
parties to all the terms of the swap. A
confirmation must be in writing
(whether electronic or otherwise) and
must legally supersede any previous
agreement (electronically or otherwise).
§ 23.201

Required records.

(a) Transaction and position records.
Each swap dealer and major swap

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participant shall keep full, complete,
and systematic records, together with all
pertinent data and memoranda, of all its
swaps activities. Such records shall
include:
(1) Transaction records. Records of
each transaction, including all
documents on which transaction
information is originally recorded. Such
records shall be kept in a form and
manner identifiable and searchable by
transaction and by counterparty, and
shall include:
(i) All documents customarily
generated in accordance with market
practice that demonstrate the existence
and nature of an order or transaction,
including, but not limited to, records of
all orders (filled, unfilled, or cancelled);
correspondence; journals; memoranda;
ledgers; confirmations; risk disclosure
documents; statements of purchase and
sale; contracts; invoices; warehouse
receipts; documents of title; and
(ii) The daily trading records required
to be kept in accordance with § 23.202.
(2) Position records. Records of each
position held by each swap dealer and
major swap participant, identified by
product and counterparty, including
records reflecting whether each position
is ‘‘long’’ or ‘‘short’’ and whether the
position is cleared. Position records
shall be linked to transaction records in
a manner that permits identification of
the transactions that established the
position.
(3) Records of transactions executed
on a swap execution facility or
designated contract market or cleared
by a derivatives clearing organization.
Records of each transaction executed on
a swap execution facility or designated
contract market or cleared by a
derivatives clearing organization
maintained in compliance with the Act
and Commission regulations.
(b) Business records. Each swap
dealer and major swap participant shall
keep full, complete, and systematic
records of all activities related to its
business as a swap dealer or major swap
participant, including but not limited to:
(1) Governance.
(i) Minutes of meetings of the
governing body and relevant committee
minutes, including handouts and
presentation materials;
(ii) Organizational charts for its
governing body and relevant
committees, business trading unit,
clearing unit, risk management unit, and
all other relevant units or divisions;
(iii) Biographies or resumes of
managers, senior supervisors, officers,
and directors;
(iv) Job descriptions for manager,
senior supervisor, officer, and director

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positions, including job responsibilities
and scope of authority;
(v) Internal and external audit, risk
management, compliance, and
consultant reports (including
management responses); and
(vi) Business and strategic plans for
the business trading unit.
(2) Financial records.
(i) Records reflecting all assets and
liabilities, income and expenses, and
capital accounts as required by the Act
and Commission regulations; and
(ii) All other financial records
required to be kept under the Act and
Commission regulations.
(3) Complaints.
(i) A record of each complaint
received by the swap dealer or major
swap participant concerning any
partner, member, officer, employee, or
agent. The record shall include the
complainant’s name, address, and
account number; the date the complaint
was received; the name of all persons
identified in the complaint; a
description of the nature of the
complaint; the disposition of the
complaint, and the date the complaint
was resolved.
(ii) A record indicating that each
counterparty of the swap dealer or major
swap participant has been provided
with a notice containing the physical
address, email or other widely available
electronic address, and telephone
number of the department of the swap
dealer or major swap participant to
which any complaints may be directed.
(4) Marketing and sales materials. All
marketing and sales presentations,
advertisements, literature, and
communications, and a record
documenting that the swap dealer or
major swap participant has complied
with, or adopted policies and
procedures reasonably designed to
establish compliance with, all
applicable federal requirements,
Commission regulations, and the rules
of any self-regulatory organization of
which the swap dealer or major swap
participant is a member.
(c) Records of data reported to a swap
data repository. With respect to each
swap, each swap dealer and major swap
participant shall identify, retain, and
produce for inspection all information
and data required to be reported in
accordance with part 45 of this chapter,
along with a record of the date and time
the swap dealer or major swap
participant made the report.
(d) Records of real-time reporting
data.
(1) Each swap dealer and major swap
participant shall identify, retain, and
produce for inspection all information
and data required to be reported in

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Federal Register / Vol. 75, No. 236 / Thursday, December 9, 2010 / Proposed Rules
accordance with part 43 of this chapter,
along with a record of the date and time
the swap dealer or major swap
participant made the report.
(2) When the swap dealer or major
swap participant reports a less specific
data field in accordance with part 43 of
this chapter in order to protect the
anonymity of the participants to such
swap as permitted under part 43 of this
chapter, the record shall contain the
rationale for reporting a less specific
data field.
(3) Each swap dealer and major swap
participant shall identify and retain a
record of any determination that any
swap is a block trade or large notional
swap, as defined in part 43 of this
chapter. When the swap dealer or major
swap participant enters into such a
swap, the record shall contain the
rationale for determining that the swap
is a large notional swap, in accordance
with part 43 of this chapter.

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§ 23.202

Daily trading records.

(a) Daily trading records for swaps.
Each swap dealer and major swap
participant shall make and keep daily
trading records of all swaps it executes,
including all documents on which
transaction information is originally
recorded. Each swap dealer and major
swap participant shall ensure that its
records include all information
necessary to conduct a comprehensive
and accurate trade reconstruction for
each swap. Each swap dealer and major
swap participant shall maintain each
transaction record as a separate
electronic file identifiable and
searchable by transaction and
counterparty.
(1) Pre-execution trade information.
Each swap dealer and major swap
participant shall make and keep preexecution trade information, including,
at a minimum, records of all oral and
written communications provided or
received concerning quotes,
solicitations, bids, offers, instructions,
trading, and prices, that lead to the
execution of a swap, whether
communicated by telephone, voicemail,
facsimile, instant messaging, chat
rooms, electronic mail, mobile device or
other digital or electronic media. Such
records shall include, but are not
limited to:
(i) Reliable timing data for the
initiation of the trade that would permit
complete and accurate trade
reconstruction; and
(ii) A record of the date and time, to
the nearest minute, using Coordinated
Universal Time (UTC), by timestamp or
other timing device, for each quotation
provided to, or received from, the
counterparty prior to execution.

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(2) Execution trade information. Each
swap dealer and major swap participant
shall make and keep trade execution
records, including:
(i) All terms of each swap, including
all terms regarding payment or
settlement instructions, initial and
variation margin requirements, option
premiums, payment dates, and any
other cash flows;
(ii) The trade ticket for each swap
(which, together with the time of
execution of each swap, shall be
immediately recorded electronically for
further processing);
(iii) The unique swap identifier, as
required by § 45.4(a) of this chapter, for
each swap;
(iv) A record of the date and time of
execution of each swap, to the nearest
minute, using Coordinated Universal
Time (UTC), by timestamp or other
timing device;
(v) The name of the counterparty with
which each such swap was executed,
including its unique counterparty
identifier, as required by § 45.4(b) of this
chapter;
(vi) The date and title of the
agreement to which each swap is
subject, including but not limited to,
any master swap netting agreement or
swap credit support agreement;
(vii) The product name of each swap,
including its unique product identifier,
as required by § 45.4(c) of this chapter;
(viii) The price at which the swap was
executed;
(ix) Fees or commissions and other
expenses, identified by transaction; and
(x) Any other information relevant to
the swap.
(3) Post-execution trade information.
Each swap dealer and major swap
participant shall make and keep records
of post-execution trade information
containing an itemized record of all
relevant post-trade processing and
events.
(i) Records of post-trade processing
and events shall include all of the
following, as applicable:
(A) Confirmation;
(B) Termination;
(C) Novation;
(D) Amendment;
(E) Assignment;
(F) Netting;
(G) Compression;
(H) Reconciliation;
(I) Valuation;
(J) Margining;
(K) Collateralization; and
(L) Central clearing.
(ii) Each swap dealer and major swap
participant shall make and keep a
record of all swap confirmations, along
with the date and time, to the nearest
minute, using Coordinated Universal

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76675

Time (UTC), by timestamp or other
timing device; and
(iii) Each swap dealer and major swap
participant shall make and keep a
record of each swap portfolio
reconciliation, including the number of
portfolio reconciliation discrepancies
and the number of swap valuation
disputes (including the time-toresolution of each valuation dispute and
the age of outstanding valuation
disputes, categorized by transaction and
counterparty);
(iv) Each swap dealer and major swap
participant shall make and keep a
record of each swap portfolio
compression exercise in which it
participates, including the dates of the
compression, the swaps included in the
compression, the identity of the
counterparties participating in the
exercise, the results of the compression,
and the name of the third-party entity
performing the compression, if any; and
(v) Each swap dealer and major swap
participant shall make and keep a
record of each swap that it centrally
clears, categorized by transaction and
counterparty.
(4) Ledgers. Each swap dealer and
major swap participant shall make and
keep ledgers (or other records) reflecting
the following:
(i) Payments and interest received;
(ii) Moneys borrowed and moneys
loaned;
(iii) The daily calculation of the value
of each outstanding swap;
(iv) The daily calculation of current
and potential future exposure for each
counterparty;
(v) The daily calculation of initial
margin to be posted by the swap dealer
or major swap participant for each
counterparty and the daily calculation
of initial margin to be posted by each
counterparty;
(vi) The daily calculation of variation
margin payable to or receivable from
each counterparty;
(vii) The daily calculation of the value
of all collateral, before and after
haircuts, held by or posted by the swap
dealer or major swap participant;
(viii) All transfers of collateral,
including any substitutions of collateral,
identifying in sufficient detail the
amounts and types of collateral
transferred; and
(ix) All charges against and credits to
each counterparty’s account, including
funds deposited, withdrawn, or
transferred, and charges or credits
resulting from losses or gains on
transactions.
(b) Daily trading records for related
cash and forward transactions. Each
swap dealer and major swap participant
shall make and keep daily trading

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Federal Register / Vol. 75, No. 236 / Thursday, December 9, 2010 / Proposed Rules

records of all related cash or forward
transactions it executes, including all
documents on which the related cash or
forward transaction information is
originally recorded. Each swap dealer
and major swap participant shall ensure
that its records include all information
necessary to conduct a comprehensive
and accurate trade reconstruction for
each related cash or forward transaction.
Each swap dealer and major swap
participant shall maintain each
transaction record as a separate
electronic file identifiable and
searchable by transaction and by
counterparty. Such records shall
include, but are not limited to:
(1) A record of all oral and written
communications provided or received
concerning quotes, solicitations, bids,
offers, instructions, trading, and prices,
that lead to the conclusion of a related
cash or forward transaction, whether
communicated by telephone, voicemail,
facsimile, instant messaging, chat
rooms, electronic mail, mobile device or
other digital or electronic media;
(2) Reliable timing data for the
initiation of the transaction that would
permit complete and accurate trade
reconstruction;
(3) A record of the date and time, to
the nearest minute, using Coordinated
Universal Time (UTC), by timestamp or
other timing device, for each quotation
provided to, or received from, the
counterparty prior to execution;
(4) A record of the date and time of
execution of each related cash or
forward transaction, to the nearest
minute, using Coordinated Universal
Time (UTC), by timestamp or other
timing device;
(5) All terms of each related cash or
forward transaction;
(6) The price at which the related cash
or forward transaction was executed;
and
(7) A record of the daily calculation
of the value of the related cash or
forward transaction and any other
relevant financial information.

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§ 23.203 Records; retention and
inspection.

(a) Location of records. (1) All records
required to be kept by a swap dealer or
major swap participant by the Act and
by Commission regulations shall be kept
at the principal place of business of the
swap dealer or major swap participant
or such other principal office as shall be
designated by the swap dealer or major
swap participant. If the principal place
of business is outside of the United
States, its territories or possessions, then
upon the request of a Commission
representative, the swap dealer or major
swap participant must provide such

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records as requested at the place in the
United States, its territories, or
possessions designated by the
representative within 72 hours after
receiving the request.
(2) Contact information. Each swap
dealer and major swap participant shall
maintain for each of its offices a listing,
by name or title, of each person at that
office who, without delay, can explain
the types of records the swap dealer or
major swap participant maintains at that
office and the information contained in
those records.
(b) Record retention. (1) The records
required to be maintained by this
chapter shall be maintained in
accordance with the provisions of
§ 1.31, except as provided in paragraphs
(b)(2) and (3) of this section. All records
required to be kept by the Act and by
Commission regulations shall be kept
for a period of five years from the date
the record was made and shall be
readily accessible during the first two
(2) years of the five-year period. All
such records shall be open to inspection
by any representative of the
Commission, the United States
Department of Justice, or any applicable
prudential regulator. Records relating to
swaps defined in section 1a(47)(A)(v)
shall be open to inspection by any
representative of the Commission, the
United States Department of Justice, the
Securities and Exchange Commission,
or any applicable prudential regulator.
(2) Records of any swap or related
cash or forward transaction shall be kept
until the termination, maturity,
expiration, transfer, assignment, or
novation date of the transaction, and for
a period of five years after such date.
Such records shall be readily accessible
until the termination, maturity,
expiration, transfer, assignment, or
novation date of the transaction and
during the first two years of the 5-year
period following such date. All such
records shall be open to inspection by
any representative of the Commission,
the United States Department of Justice,
or any applicable prudential regulator.
Records relating to swaps defined in
section 1a(47)(A)(v) shall be open to
inspection by any representative of the
Commission, the United States
Department of Justice, the Securities
and Exchange Commission, or any
applicable prudential regulator.
(3) Records of any swap data reported
in accordance with part 45 of this
chapter shall be maintained in
accordance with the requirements of
§ 45.2 of this chapter.

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§ 23.204 Reports to swap data
repositories.

(a) Reporting of swap transaction data
to swap data repositories. Each swap
dealer and major swap participant shall
report all information and data in
accordance with part 45 of this chapter.
(b) Electronic reporting of swap
transaction data. Each swap dealer and
major swap participant shall have the
electronic systems and procedures
necessary to transmit electronically all
information and data required to be
reported in accordance with part 45 of
this chapter.
§ 23.205

Real-time public reporting.

(a) Real-time public reporting of swap
transaction and pricing data. Each swap
dealer and major swap participant shall
report all information and swap
transaction and pricing data required to
be reported in accordance with the realtime public recording requirements in
part 43 of this chapter.
(b) Electronic reporting of swap
transaction data. Each swap dealer and
major swap participant shall have the
electronic systems and procedures
necessary to transmit electronically all
information and data required to be
reported in accordance with part 43 of
this chapter.
Issued in Washington, DC, on December 1,
2010, by the Commission.
David A. Stawick,
Secretary of the Commission.

Appendices to Reporting,
Recordkeeping, and Daily Trading
Records Requirements for Swap
Dealers and Major Swap Participants—
Commission Voting Summary and
Statements of Commissioners
Note: The following appendices will not
appear in the Code of Federal Regulations.

Appendix 1—Commission Voting
Summary
On this matter, Chairman Gensler and
Commissioners Dunn, Sommers, Chilton and
O’Malia voted in the affirmative.

Appendix 2—Statement of Chairman
Gary Gensler
I support the proposed rule regarding
reporting, recordkeeping and daily trading
records for swap dealers and major swap
participants. The rule establishes the records
to be maintained by swap dealers and major
swap participants and the required reporting
by such entities. This proposal will help
increase transparency and promote market
integrity. The proposed rules are consistent
with the Congressional requirement that
swap dealers and major swap participants

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Federal Register / Vol. 75, No. 236 / Thursday, December 9, 2010 / Proposed Rules
comply with rigorous recordkeeping and
real-time reporting regimes.

and 3 p.m., by calling the Disclosure
Officer at (703) 905–5034 (not a toll-free
call).
FOR FURTHER INFORMATION CONTACT: The
FinCEN regulatory helpline at (800)
949–2732 and select Option 6.
SUPPLEMENTARY INFORMATION:

[FR Doc. 2010–30884 Filed 12–8–10; 8:45 am]
BILLING CODE 6351–01–P

DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506–AB02

Financial Crimes Enforcement
Network: Anti-Money Laundering
Program and Suspicious Activity
Report Filing Requirements for
Residential Mortgage Lenders and
Originators
Financial Crimes Enforcement
Network (‘‘FinCEN’’), Treasury.
ACTION: Notice of proposed rulemaking.
AGENCY:

FinCEN, a bureau of the
Department of the Treasury
(‘‘Treasury’’), is issuing proposed rules
defining non-bank residential mortgage
lenders and originators as loan or
finance companies for the purpose of
requiring them to establish anti-money
laundering programs and report
suspicious activities under the Bank
Secrecy Act.
DATES: Written comments on this notice
of proposed rulemaking (‘‘NPRM’’) must
be submitted on or before February 7,
2011.
SUMMARY:

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ADDRESSES:

FinCEN: You may submit comments,
identified by Regulatory Identification
Number (RIN) 1506–AB02, by any of the
following methods:
• Federal E-rulemaking Portal:
http://www.regulations.gov. Follow the
instructions for submitting comments.
Include 1506–AB02 in the submission.
Refer to Docket Number FINCEN–2010–
0001.
• Mail: FinCEN, P.O. Box 39, Vienna,
VA 22183. Include 1506–AB02 in the
body of the text. Please submit
comments by one method only.
Comments submitted in response to this
NPRM will become a matter of public
record. Therefore, you should submit
only information that you wish to make
publicly available.
Inspection of comments: Public
comments received electronically or
through the U.S. Postal Service sent in
response to a notice and request for
comment will be made available for
public review as soon as possible on
http://www.regulations.gov. Comments
received may be physically inspected in
the FinCEN reading room located in
Vienna, Virginia. Reading room
appointments are available weekdays
(excluding holidays) between 10 a.m.

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I. Background
The Bank Secrecy Act (‘‘BSA’’) 1
authorizes the Secretary of the Treasury
(the ‘‘Secretary’’) to issue regulations
requiring financial institutions to keep
records and file reports that the
Secretary determines ‘‘have a high
degree of usefulness in criminal, tax, or
regulatory investigations or proceedings,
or in the conduct of intelligence or
counterintelligence activities, including
analysis, to protect against international
terrorism.’’ 2 In addition, the Secretary is
authorized to impose anti-money
laundering program requirements on
financial institutions.3 The authority of
the Secretary to administer the BSA has
been delegated to the Director of
FinCEN.4
A. Anti-Money Laundering Programs
Financial institutions are required to
establish anti-money laundering
(‘‘AML’’) programs that include, at a
minimum: (1) The development of
internal policies, procedures, and
controls; (2) the designation of a
compliance officer; (3) an ongoing
employee training program; and (4) an
independent audit function to test
programs.5 When prescribing minimum
standards for AML programs, FinCEN
must ‘‘consider the extent to which the
requirements imposed under [the AML
program requirement] are
commensurate with the size, location,
and activities of the financial
institutions to which such regulations
apply.’’ 6
The BSA defines the term ‘‘financial
institution’’ to include, in part, ‘‘a loan
or finance company.’’ 7 On April 29,
2002, and again on November 6, 2002,
FinCEN temporarily exempted this
1 ‘‘Bank Secrecy Act’’ is the name that has come
to be applied to the Currency and Foreign
Transactions Reporting Act (Titles I and II of Pub.
L. 91–508), its amendments, and the other statutes
referring to the subject matter of that Act. These
statutes are codified at 12 U.S.C. 1829b, 12 U.S.C.
1951–1959, and 31 U.S.C. 5311–5314 and 5316–
5332, and notes thereto.
2 31 U.S.C. 5311.
3 31 U.S.C. 5318(h).
4 See Treasury Order 180–01 (Sept. 26, 2002).
5 31 U.S.C. 5318(h).
6 Public Law 107–56 § 352(c), 115 Stat. § 322,
codified at 31 U.S.C. 5318 note. Public Law 107–
56 is the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism Act of 2001 (‘‘USA
PATRIOT Act’’).
7 31 U.S.C. 5312(a)(2)(P).

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76677

category of financial institution, among
others, from the requirement to establish
an AML program.8 The purpose of the
temporary exemption was to enable
Treasury and FinCEN to study the
exempted categories of institutions and
to consider the extent to which AML
requirements should be applied to them,
taking into account their specific
characteristics and money laundering
vulnerabilities.
The statutory mandate that all
financial institutions establish an antimoney laundering program is a key
element in the national effort to prevent
and detect money laundering and the
financing of terrorism. This NPRM
proposes to apply the AML program
requirement to companies performing
specified services in connection with
residential mortgages. This would put
these institutions on par with
depository institutions performing such
services in this respect.9
B. Suspicious Activity Reporting
Programs
With the enactment of 31 U.S.C.
5318(g) in 1992,10 Congress authorized
the Secretary to require financial
institutions to report suspicious
transactions. As amended by the USA
PATRIOT Act, subsection (g)(1) states:
The Secretary may require any financial
institution, and any director, officer,
employee, or agent of any financial
institution, to report any suspicious
transaction relevant to a possible violation of
law or regulation.

There has been a regulatory gap
between the BSA’s coverage of
depository institutions and residential
mortgage lenders and originators in that
the latter are currently not subject to
BSA requirements, the Suspicious
Activity Report (‘‘SAR’’) foremost among
them. Imposing a SAR requirement
would address this regulatory gap.
Moreover, a SAR requirement would
potentially expand the kinds of
activities being reported to FinCEN’s
BSA database, thereby giving our
regulatory and law enforcement partners
a more complete picture, both on a
systemic and case-specific level, of
8 See 31 CFR 103.170; 67 FR 21113 (Apr. 29,
2002), as amended at 67 FR 67549 (Nov. 6, 2002)
and corrected at 67 FR 68935 (Nov. 14, 2002).
9 See 31 CFR 103.120.
10 31 U.S.C. 5318(g) was added to the BSA by
section 1517 of the Annunzio-Wylie Anti-Money
Laundering Act, Title XV of the Housing and
Community Development Act of 1992, Public Law
102–550; it was expanded by section 403 of the
Money Laundering Suppression Act of 1994 (the
Money Laundering Suppression Act), Title IV of the
Riegle Community Development and Regulatory
Improvement Act of 1994, Public Law 103–325, to
require designation of a single government recipient
for reports of suspicious transactions.

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