CFTC Proposes Rule Amendments to Enhance Swap Data Quality

The Commodity Futures Trading Commission proposed the first of three sets of rule amendments designed to enhance the accuracy of swaps data reported to and maintained by swap data repositories. The initial proposed rule amendments would, among other things, require each SDR to implement procedures reasonably designed to verify the accuracy of swap data it receives from swap execution facilities, designated contract markets, reporting counterparties or third-party service providers, and to require reporting counterparties to verify the accuracy of their reporting in accordance with an SDR’s procedures. The rule amendments would also heighten the CFTC’s general oversight of swap data reporting and SDRs. The CFTC is proposing three sets of rule amendments in response to comments received to its July 2017 Roadmap to Achieve High Quality Swap Data (click here to access). The objective of the first set of rules is to achieve the operations review goals of the Roadmap, mainly to: (1) confirm the accuracy of swap data; (2) improve the “clarity and consistency” of SDR regulations; and (3) heighten the CFTC’s oversight of SDRs. 

Although Commissioner Dawn Stump voted in favor of issuing the first round of rule amendments for public comment, she questioned whether the recommendations were a “solution in search of a problem.” Commissioner Rostin Behnam also voted in favor of authorizing the proposal but objected to language in the recommended rule amendments that would require SDR chief compliance officers to take “reasonable steps” to resolve any conflict of interest at the SDR. Mr. Behnam claimed this language is inconsistent with statutory language that expressly requires the CCO to “resolve any conflicts of interest that may arise” and may undermine CCOs authority within the SDR. 

Comments to the CFTC’s proposed rule amendments will technically be accepted for only 75 days following their publication in the Federal Register; however, the CFTC will reopen the comment period on these rule amendments proposals when it publishes its other two sets of related proposed rule amendments to allow market participants to comment on all SDR proposed rule amendments together.