CFTC Chairman Massad Extends No-Action Relief on SEF Data Reporting

In a speech to the DerivOps North America 2015 conference, Commodity Futures Trading Commission Chairman Timothy Massad spoke about the future of swaps market regulation. Comparing it to the regulation of futures on the 40th anniversary of his organization, he spoke about the need to balance transparency and reliability while not stifling future growth of the industry. He believes that progress has been made so far but that more work is needed.

He also extended the agency’s no-action relief for SEF confirmations and confirmation data reporting, which will alleviate the need to maintain copies of ISDA Master Agreements for all trades and to report confirmation data on uncleared swaps to swap data repositories until March 31, 2016.

The wide-ranging speech discussed a number of different areas. First among them was the need to revise the current set of regulations so they work for – not against -- industry players:

“Over the last ten months, one of our priorities has been to work on fine-tuning the new rules so that the new framework works effectively and efficiently for market participants. In particular, we have made a number of changes to address concerns of commercial end-users who depend on these markets to hedge commercial risk day in and day out, because it is vital that these markets continue to serve that essential purpose. This has included adjustments to reporting requirements and measures to facilitate access to these markets by end-users. We will continue to do this where appropriate. With reforms as significant as these, such a process is to be expected. We are also working on finishing the few remaining rules mandated by Dodd-Frank, such as margin for uncleared swaps and position limits.”

Massad spoke about the need to make sure clearinghouses themselves were run effectively in the event of a catastrophe:

“Oversight of clearinghouses has been another key priority. Under the new framework, clearinghouses play an even more critical role than before. So we have also been focused on making sure clearinghouses operate safely and have resiliency. We did a major overhaul of our clearinghouse supervisory framework over the last few years. Today we are focused on having strong examination, compliance and risk surveillance programs. And while our goal is to never get to a situation where recovery or resolution of a clearinghouse must be contemplated, we are working with fellow regulators, domestically and internationally, on the planning for such contingencies, in the event there is ever a problem that makes such actions necessary.”

In the context of extending no-action relief for SEF data reporting, Massad also highlighted past use of no-action letters for temporary relief as firms attempt to achieve compliance and regulatory objectives and areas of future use:

“This no-action letter also provides relief for SEFs regarding their obligation to report Confirmation Data on uncleared swaps to SDRs. SEFs have expressed concern that to comply with their reporting obligations for uncleared swaps, they might be required to obtain trade terms from the same ISDA Master Agreements or other underlying documentation that, as I have just discussed, are not otherwise available to them. In light of these concerns, this relief clarifies that SEFs need only report such Confirmation Data for uncleared swaps as they already have access to without undergoing this additional burden. I would note that SEFs must to continue to report all “Primary Economic Terms” data for uncleared swaps – as well as the Confirmation Data they do in fact have – as soon as technologically practicable. I would also note that the counterparties to the trade have ongoing reporting obligations for uncleared swaps.”

To see his full remarks, including greater description for the use of no-action letters for error trades and data, please click here.