Troutman Sanders LLP: The CFTC Proposes Swap Data Recordkeeping and Reporting Requirements for Pre-Enactment and Transition Swaps

April 27, 2011. The Commodities Futures Trading Commission (the “CFTC”) published on April 25, 2011, its notice of proposed rule making regarding the “Swap Data Recordkeeping and Reporting Requirements: Pre-Enactment and Transition Swaps” (the “Proposed Rule”). The Proposed Rule would establish the various recordkeeping and reporting standards applicable to (1) swaps entered into prior to July 21, 2010, the terms of which have not expired as of such date (“Pre-Enactment Swaps”), and (2) swaps entered into on or after July 21, 2010, and prior to the “compliance date” (“Transition Swaps”). For the compliance date, the CFTC intends to establish a single date for the commencement of all swap data reporting pursuant to the Dodd-Frank Act in its final swap data reporting regulation. The Proposed Rule further distinguishes the reporting and recordkeeping requirements based on (1) Pre-Enactment Swaps and Transition Swaps in existence on or after April 25, 2011, and (2) Pre-Enactment Swaps and Transition Swaps expired or terminated prior to April 25, 2011.

The Proposed Rule provides minimum recordkeeping requirements for all swap market participants, including end-users, which may include certain “primary economic terms data” and other data over the life of the swap. Along with “what” must be kept, the Proposed Rule provides “how” the records must be kept, providing a required retention period and a retrieval requirement that requires certain counterparties to have records which are “readily accessible via real time electronic access.”

The Proposed Rule’s reporting requirements provide proposals related to what information and data must be initially reported, which includes various identifiers, including the new “Unique Counterparty Identifiers” which must be obtained by all reporting counterparties. For certain Pre-Enactment Swaps and Transition Swaps, the reporting of “swap continuation data” will also be required for the life of the swap. Similar to other proposed rules, the determination of the reporting counterparty is according to the Dodd-Frank Act’s hierarchy of counterparty types in which Swap Dealers outrank Major Swap Participants, who outrank non-Swap Dealers or non-Major Swap Participants (e.g., end-users). The Dodd-Frank Act’s hierarchical method further provides that contracts between two end-users, or any swap with counterparties at the same hierarchical level, must select the counterparty obligated to report. For more information or questions regarding the Proposed Rule or any related topic, please contact Brian Harms at 404-885-3682 or John Leonti at 212-704-6173.