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CFTC takes a small shovel to swap data stables

The CFTC has published its proposed amendments to Part 45 Reporting Rules in the Federal Register. The proposal’s 166 pages are a partial answer to the panoply of concerns raised in the March 2014 questionnaire, which highlighted inconsistencies between SDRs, onerous data standardisation requirements, ambiguity for end-users and duplication of data throughout the clearing process, pointing to deep-seated problems in swap data quality and utility. Then-Commissioner Scott O’Malia characterised “big data” as “the commission’s biggest problem” (a high bar to jump given their annual Budget woes), and stating that submitted data was “unusable in its current form”. The proposal aims to clarify the Part 45 rules as they apply to cleared swaps, removing confusion engendered by the “mirror swap” clearing process. It makes a clear distinction between:

  • An “original” or “alpha” swap- a swap that has been accepted for clearing by a DCO
  • A “clearing” or “beta” or “gamma” swap- a swap created by the DCO with itself as a counterparty

The proposal uses this categorisation to delineate reporting responsibilities:

  • Original swaps. SEFs, DCMs and reporting counterparties would continue to report primary economic terms. They would no longer have to report: confirmation data and continuation data. SDs/MSPs would no longer have to submit daily valuation data on original swaps.
  • Clearing swaps. DCOs would report PET, confirmation and continuation data for all clearing swaps. DCOs would be obliged to assign a unique swap identifier (USI) to all clearing swaps, including the USI on the DCO- reported termination of the original swap.

While the need to report any data on the necessarily short-lived original swap is open to question, the proposal introduces vital clarification to the different phases of the clearing process, effectively shifting the burden of reporting onto the DCOs. It is a first step on a long road, the Agency will also have to tackle a number of other issues before it can even declare the data “dragon” wounded, not least of which is its own data-analysis disability. The proposal relates only to cleared swaps, under ex-Chairman Gensler, the Part 45 rules relating to uncleared swaps were made exhaustively clear; their full application, however, still awaits the exhaustion of a long chain of no-action letters.  Comments must be submitted by 30 October 2015.


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