[Federal Register Volume 75, Number 211 (Tuesday, November 2, 2010)]
[Proposed Rules]
[Pages 67258-67277]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-27538]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Parts 15 and 20
RIN 3038-AD17
Position Reports for Physical Commodity Swaps
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is proposing reporting regulations that are reasonably
necessary for implementing and enforcing aggregate position limits for
certain physical commodity derivatives. As a result of recent
legislative reforms, the Commission may adopt regulations establishing
aggregate position limits for designated contract market (``DCM'')
physical commodity futures contracts and swaps that are economically
equivalent to such contracts. The Commission currently receives, and
uses for market surveillance purposes, including position limit
enforcement, data on large positions in all physical commodity futures
and option contracts traded on DCMs. However, there is no analogous
reporting structure in place for economically equivalent swaps, which
until recently were largely unregulated financial contracts. The
Commission's proposal would require position reports on economically
equivalent swaps from clearing organizations, their members and swap
dealers. Notably, the proposed regulations also include a sunset
provision. The sunset provision would render the regulations
ineffective upon the Commission's issuance of an order finding that
operating swap data repositories (``SDRs'') are capable of processing
positional data in a manner that would enable the Commission to set and
enforce aggregate position limits.
DATES: Comments must be received on or before December 2, 2010.
ADDRESSES: You may submit comments, identified by RIN number, by any of
the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow instructions for submitting comments.
Agency Web Site: http://www.cftc.gov.
E-mail: [email protected].
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.
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 is exempt from disclosure under the Freedom of
Information Act, a petition for confidential treatment of the exempt
information may be submitted according to the procedure established in
CFTC regulation 145.9 (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: Stephen Sherrod, Acting Deputy
Director, Market Surveillance, (202) 418-5452, [email protected], or
Bruce Fekrat, Senior Special Counsel, Office of the Director, (202)
418-5578, [email protected], Division of Market Oversight, Commodity
Futures Trading Commission, Three Lafayette Centre, 1155 21st Street,
NW., Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
I. Economically Equivalent Swaps
A. Background
The Commodity Exchange Act (``CEA or Act'') of 1936,\1\ as amended
by Title VII of the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 (``Dodd-Frank Act''),\2\ includes provisions
imposing clearing and trade execution requirements on standardized
derivatives as well as comprehensive recordkeeping and reporting
requirements that extend to all swaps, a defined term in CEA section
1a(47). New section 4a(a)(2) of the CEA, as introduced by section 737
of the Dodd-Frank Act, charges the Commission with promulgating
regulations, as appropriate, to limit the amount of positions, other
than bona fide hedge positions, that may be held by any person with
respect to commodity futures and option contracts in exempt and
agricultural commodities \3\ traded on or subject to the rules of a DCM
within 180 and 270 days, respectively, of the legislation's enactment
on July 21, 2010. New section 4a(a)(6)(A) of the Act requires
Commission-set position limits to apply aggregately across DCMs to
contracts that are based on the same commodity. The exempt and
agricultural commodity futures and option contracts for which the
Commission may consider position limits are listed in proposed
regulation 20.2 (``20.2 listed futures contracts'' or ``20.2
contracts''). The list in proposed regulation 20.2, however, is non-
exclusive and preliminary. Should the Commission propose regulations to
establish position limits, it may decide not to propose position limits
for all of the 20.2 listed futures contracts or, alternatively, may
decide to propose
[[Page 67259]]
position limits for futures contracts other than the 20.2 contracts.
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\1\ 7 U.S.C. 1 et seq.
\2\ 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.
\3\ Section 1a(20) of the Act defines the term ``exempt
commodity'' to mean a commodity that is not an excluded commodity or
an agricultural commodity. Section 1a(19) defines the term
``excluded commodity'' to mean, among other things, an interest
rate, exchange rate, currency, credit risk or measure, debt or
equity instrument, measure of inflation, or other macroeconomic
index or measure. Although the term ``agricultural commodity'' is
not defined in the Act, CEA section 1a(9) enumerates a non-exclusive
list of several agricultural-based commodities. The Commission will
consider the issuance of a notice of rulemaking proposing a
definition for the term ``agricultural commodity'' in October of
2010. Although broadly defined, exempt commodity futures contracts
are often viewed as energy and metals products.
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Similar to CEA section 4a(a)(2), new section 4a(a)(5) of the Act
charges the Commission with establishing position limits, including
aggregate position limits, as appropriate, for swaps that are
economically equivalent to DCM contracts in exempt and agricultural
commodities with CFTC-set position limits. The definition of the term
``paired swaps and swaptions'' in proposed regulation 20.1 attempts to
recognize a readily identifiable and partial set of swaps and swaptions
(for ease of reference, collectively ``swaps'') that could potentially
be considered as economically equivalent to 20.2 listed futures
contracts.
As discussed in more detail below, proposed regulation 20.1 defines
paired swaps, and hence economically equivalent swaps, in two ways.
First, paired swaps are defined as swaps that are directly or
indirectly linked to the price of one or more 20.2 listed futures
contract. Second, paired swaps are defined as swaps that are based on
the price of the same commodity for delivery at the same location(s) as
that of a 20.2 listed futures contract, or another delivery location,
with substantially the same supply and demand fundamentals as the
delivery location(s) referenced by a 20.2 listed futures contract. The
paired swap definition's second part therefore proposes to include
swaps that are settled to a price series that is not based on, but is
nonetheless highly correlated to, the price of a 20.2 listed futures
contract.
B. The Necessity of the Proposed Regulations
New section 4a(a)(5) of the Act provides that position limits for
economically equivalent swaps be developed concurrently with position
limits established for DCM contracts in exempt and agricultural
commodities. In order to have the ability to enforce market-specific
and aggregate position limits for the relevant DCM contracts and
economically equivalent swaps, the Commission would require positional
data for DCM contracts and economically equivalent swaps. The
Commission currently obtains DCM futures and option positional data
under parts 15 through 19 and 21 of its regulations,\4\ which derive
their statutory authority in significant part from sections 4a, 4g and
4i of the CEA. In contrast, the Commission has limited access to swaps
positional data. In this regard, the Commission receives positional
data on swaps that are significant price discovery contracts
(``SPDCs'') under part 36 of its regulations. Such contracts are
executed through exempt commercial markets and typically cleared.
SPDCs, however, do not encompass all economically equivalent swaps (as
defined by proposed regulation 20.1 through the term paired swaps).
SPDC positional data would therefore not supply sufficient information
to the Commission to monitor all economically equivalent swaps for
aggregate position limit violations, should such limits be adopted.
Moreover, parts 15 through 19 and 21 of the Commission's regulations do
not apply to uncleared swaps that may be SPDCs. To have consistency in
reporting, regulation 20.2(a) would require SPDCs that are paired swaps
to be reported under proposed part 20 instead of parts 15 through 19
and 21 of the Commission's regulations (which include position
reporting regulations for clearing organizations and futures
intermediaries that are analogous to those proposed herein).
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\4\ Commission regulations referred to herein are found at 17
CFR chapter 1.
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The Commission also receives positional data for some swaps that
are cleared by certain clearing organizations but not listed for
trading (``cleared-only swaps'').\5\ This positional data is received
from a limited number of clearing organizations, and depending on the
contract and the clearing organization, does not necessarily provide
disaggregated data on swaps held by non-clearing member counterparties.
As with SPDCs, cleared-only swaps positional data would not supply
sufficient data to the Commission to monitor for aggregate position
limit violations across DCM contracts with CFTC-set position limits and
economically equivalent swaps. To the extent that cleared-only swaps
are paired swaps, regulation 20.2(a) would require reporting under
proposed part 20 instead of parts 15 through 19 and 21 of the
Commission's regulations.
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\5\ See, e.g., Order (1) Pursuant to Section 4(c) of the
Commodity Exchange Act, Permitting the Chicago Mercantile Exchange
to Clear Certain Over-the-Counter Agricultural Swaps and (2)
Pursuant to Section 4d of the Commodity Exchange Act, Permitting
Customer Positions in Such Cleared-Only Contracts and Associated
Funds To Be Commingled With Other Positions and Funds Held in
Customer Segregated Accounts, 74 FR 12316, 12320 (March 24, 2009)
(requiring reporting under parts 15, 16 and 17 of the Commission's
regulations for cleared-only swaps).
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The Commission notes that the Dodd-Frank Act also provides for the
establishment of SDRs. Once established and operationally able to
receive swaps data, SDRs would have the potential to serve as the
Commission's primary positional data source. The Congressionally
mandated deadline for establishing position limits, however, predates
the deadline for Commission regulations for SDR registration. Thus, the
position reports for physical commodity swaps contemplated by these
proposed regulations would function as a transitional tool until SDRs
are in operation and able to provide the Commission with swap
positional data. If implemented in whole or in part, the Commission may
determine to continue or discontinue the proposed reporting system once
SDRs are operational.
CEA sections 4a and 8a(5), considered in tandem, provide the
statutory authority for these proposed regulations. The Commission
cannot fully effectuate the mandate of section 4a of the Act without an
operational data collection system. In proposing these regulations, the
Commission relies on its CEA section 8a(5) general rulemaking
authority. Section 8a(5) authorizes the Commission ``to make and
promulgate such rules and 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 this Act.'' For the
reasons discussed above, the proposed regulations, in the Commission's
judgment, are reasonably necessary to effectuate CEA section 4a as
amended by the Dodd-Frank Act.
II. The Proposed Regulations
A. Listed Futures Contracts
Section 4a(a)(2) of the Act provides that the Commission shall set,
as appropriate, position limits for exempt and agricultural DCM futures
and option contracts.\6\ The Act also provides that the Commission
shall establish position limits, including aggregate limits, as
appropriate, for swaps that are economically equivalent to futures
contracts (and options thereon or options on commodities) with CFTC-set
position limits. Proposed regulation 20.2 lists a broad set of futures
contracts and options thereon which may be the subject of CFTC-set
position limits. These 20.2 listed futures contracts can be divided
into two categories. The first category contains futures contracts that
have high levels of open interest and significant notional value (and
certain
[[Page 67260]]
related contracts).\7\ The contracts in this category are:
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\6\ New section 4a(a)(2) by its terms also applies to options on
physicals. With respect to options on physicals traded on DCMs, the
current open interest levels in such DCM contracts on the
commodities underlying the 20.2 listed futures contracts are
minimal.
\7\ These contracts can function as anchors to many other DCM
contracts and therefore directly or indirectly correspond to a
substantial fraction of open interest for listed physical commodity
derivatives. See, e.g., Federal Speculative Position Limits for
Referenced Energy Contracts and Associated Regulations, 75 FR 4133,
4154 (January 26, 2010) (``January 2010 proposed regulations for
major energy contracts'') (showing the spoke contracts linked to the
physically delivered NYMEX Crude Oil, Light Sweet futures contract).
Reference DCM Contracts With High Open Interest and Notional Value
(Including Certain Related Contracts)
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Chicago Board of Trade (``CBOT'') Corn.
CBOT Rough Rice.
CBOT Soybeans.
CBOT Soybean Meal.
CBOT Soybean Oil.
CBOT Wheat.
Chicago Mercantile Exchange (``CME'') Feeder Cattle.
CME Live Cattle.
CME Milk Class III.
Comex (``CMX'') Copper Grade 1.
CMX Gold.
CMX Silver.
ICE Futures US (``ICUS'') Cocoa.
ICUS Coffee C.
ICUS Cotton No. 2.
ICUS Frozen Concentrated Orange Juice.
ICUS Sugar No. 11.
ICUS Sugar No. 16.
Kansas City Board of Trade (``KCBT'') Wheat.
Minneapolis Grain Exchange (``MGEX'') Wheat.
NYSELiffe (``NYL'') Gold, 100 Troy Oz.
NYL Silver, 5000 Troy Oz.
New York Mercantile Exchange (``NYMEX'') Cocoa.
NYMEX Coffee.
NYMEX Cotton.
NYMEX Crude Oil, Light Sweet (``WTI'').
NYMEX Gasoline Blendstock (RBOB).
NYMEX Natural Gas.
NYMEX No. 2 Heating Oil, New York Harbor.
NYMEX Palladium.
NYMEX Platinum.
NYMEX Sugar No. 11.
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The contracts in the second category, listed below, do not have
high levels of open interest or represent significant notional values.
However, based on feedback from inquiries posed to swap market
participants relating to the size and level of activity in certain
markets, Commission staff recommended their inclusion in proposed
regulation 20.2.\8\ Such contracts may serve as the pricing basis of a
significant number of swap market transactions, thereby warranting some
measure of Commission scrutiny.
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\8\ Staff tasked with assisting the Commission in developing the
proposed regulations made this recommendation after meeting with or
speaking to 23 outside parties, representing commercial end-users,
commercial merchants, commodity-based swap trading arms of large
financial institutions, futures exchanges, swap data service
providers, and our sister financial regulators. See http://www.cftc.gov/LawRegulation/DoddFrankAct/ExternalMeetings/otc_meetings.html.
Additional DCM Reference Contracts
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CBOT Ethanol.
CBOT Oats.
CME Butter.
CME Cheese.
CME Dry Whey.
CME Hardwood Pulp.
CME Lean Hogs.
CME Non Fat Dry Milk.
CME Random Length Lumber.
CME Softwood Pulp.
NYMEX Brent Financial.
NYMEX Central Appalachian Coal.
NYMEX Hot Rolled Coil Steel.
NYMEX Uranium.
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B. Scope of Economically Equivalent Swaps
The Commission, through the definition of paired swap or paired
swaption (for ease of reference, collectively ``paired swaps'') in
proposed regulation 20.1, defines a subset of swaps that may qualify as
economically equivalent to the DCM contracts listed in proposed
regulation 20.2. Proposed regulation 20.1 identifies paired swaps
(i.e., economically equivalent swaps) in two paragraphs. The first
paragraph of proposed regulation 20.1 defines paired swaps to include
those that directly or indirectly are linked to the price of a 20.2
listed futures contract. This category includes swaps that are
partially or fully settled or priced at a differential to a 20.2 listed
futures contract. The following list provides examples of the types of
swaps that are intended to be covered under the first paragraph of the
proposed definition of paired swap.
1. Directly linked to a listed contract--A swap settled to the
price of the NYMEX Heating Oil Calendar Swap Futures Contract is
directly linked to a 20.2 listed DCM futures contract because the
floating price of the futures contract is equal to the monthly average
settlement price of the first nearby contract month for the NYMEX New
York Harbor No. 2 Heating Oil Futures Contract.
2. Indirectly linked to a listed contract--The ICE WTI Average
Price Option is indirectly linked to a 20.2 listed futures contract
because the floating price of the swap references the ICE WTI 1st Line
Swap Contract which in turn is equal to the monthly average settlement
price of the NYMEX Front Month WTI Crude Futures Contract.
3. Partially settled to a listed contract--A swap settled to the
Argus Sour Crude Index (``ASCI'') (which also underlies the CME Argus
WTI Formula Basis Calendar Month Swap Futures Contract) is partially
settled to a 20.2 listed futures contract.\9\ Because the ASCI index
uses both a physical cash market component and the NYMEX WTI Futures
Contract to establish the level of the index, it would partially settle
to a 20.2 listed futures contract and would be a paired swap under the
first paragraph of the proposed definition.\10\
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\9\ The floating price of the CME futures contract is equal to
the arithmetic average of the ASCI (1st month) outright price from
Argus Media for each business day that the ASCI is determined during
the contract month.
\10\ For a description of the ASCI methodology, see, e.g.,
http://web04.us.argusmedia.com/ArgusStaticContent//Meth/ASCI.pdf.
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4. Priced at a differential to a listed contract--The ICE Henry
Physical Basis LD1 Contract is priced at a differential to a 20.2
listed futures contract because the settlement price is the final
settlement price for natural gas futures (a listed 20.2 contract) as
reported by NYMEX for the specified month plus the contract price.
The second paragraph of the proposed definition of a paired swap
includes swaps that directly or indirectly link to, including being
partially or fully settled or priced at a differential to, the price of
the same commodity for delivery at the same location or locations as
that of a 20.2 listed futures contract. As opposed to paragraph one,
the second paragraph of the definition of paired swap looks to a swap's
connection to the commodity underlying a 20.2 listed futures contract,
and to the delivery locations with a nexus to those delivery locations
specified in a 20.2 listed contract, as opposed to the price of the of
the contract itself. Therefore, in contrast to paragraph one, the
linkage is to the price of the underlying commodity and its physical
marketing channels.
Under paragraph two, a paired swap would include swaps that are
based on the same commodity\11\ as that of a 20.2 listed futures
contract but deliverable at locations that are different than a 20.2
listed futures contract's delivery locations, so long as such locations
have substantially the same supply and demand fundamentals as that of a
20.2
[[Page 67261]]
listed futures contract reference delivery location. The following list
provides examples of the types of swaps that are reportable under the
second paragraph of the definition.
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\11\ As provided in the Commission's January 2010 proposed
regulations for major energy contracts, a commodity will be
considered to be the same (for the purposes of reporting under this
regulation) if such commodity has the same economic characteristics
with respect to grade and quality specifications as those referenced
by a 20.2 listed futures contract.
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1. Same commodity with a delivery point that shares substantially
the same supply and demand fundamentals--An uncleared swap based on a
NYMEX Columbia Gulf, Mainline Natural Gas Index Swap (Platts Gas Daily/
Platts IFERC) Futures Contract provides an example of a futures
contract which references an underlying spot market that is affected by
substantially similar supply and demand forces as the pricing location
to which the NYMEX Natural Gas Futures Contract references. In this
case, the floating price of the NYMEX Columbia Gulf, Mainline Natural
Gas Index Swap (Platts Gas Daily/Platts IFERC) Futures Contract is
equal to the difference in the monthly average prices for Mainline
Midpoint (Midpoint) and the Platts Inside FERC's Gas Market Report
(Platts IFERC) Columbia Gulf Transmission Co., Mainline Index. This
swap would be on based the same commodity as that of a 20.2 listed
contract, but deliverable at a different location. The different
location, however, shares substantially the same supply and demand
fundamentals as the Henry Hub, which is the delivery location for the
NYMEX Natural Gas contract. The swap's delivery location is in close
proximity to the Henry Hub, and there is tight arbitrage between the
two pricing hubs.
2. Same commodity at different locations--The NYMEX Transco, Zone 6
Natural Gas Index Swap (Platts Gas Daily/Platts IFERC) Futures Contract
provides an example of a futures contract which references an
underlying spot market that is interconnected with a spot market to
which the NYMEX Natural Gas Futures Contract references. The floating
price of the NYMEX Transco, Zone 6 Natural Gas Index Swap (Platts Gas
Daily/Platts IFERC) Futures is equal to the difference in the monthly
average prices for the Platts Gas Daily Transco, Zone 6 N.Y. Midpoint
(Midpoint) and the Platts Inside FERC's Gas Market Report (Platts
IFERC) Transco Zone 6 Index (Index) for the stipulated period within
the contract specifications. The index price represents a natural gas
spot market that is physically linked, via the Transco pipeline, to a
spot market (Henry Hub) which is referenced by a 20.2 listed futures
contract.
C. Reporting Under the Proposed Regulations
1. Reports by Clearing Organizations
Regulation 20.3 proposes to collect paired swap reports from
clearing organizations. Clearing organizations are defined in proposed
regulation 20.1 as persons or organizations that act as a medium
between clearing members for the purpose of clearing swaps or swaptions
or effecting settlements of swaps or swaptions. The intent of the
definition, which is modeled on the definition used in Commission
regulation 15.00 (the definitional section for the Commission's large
trader reporting rules), is to apply the reporting regulations only to
entities that perform clearing functions as clearing intermediaries and
counterparties to each side of a swap for the purpose of clearing the
trade. The proposed definition is intended to cover entities that are
commonly known as clearing organizations, regardless of their
registration status with the Commission. It is not meant to apply to
financial institutions or parties to swaps that provide counterparties
with financing, credit support, or hold collateral to facilitate or to
ensure that payments are made under the terms of a paired swap.
Pursuant to proposed regulation 20.3, clearing organizations, for
paired swap positions, would report the aggregate proprietary and
aggregate customer accounts of each clearing member of that clearing
organization. Proposed regulation 20.1 defines clearing member as any
person who is a member of, or enjoys the privilege of clearing trades
in its own name through, a clearing organization. The paired swap
positions would be reported to the Commission as futures equivalent
positions in terms of a swap's related 20.2 listed futures contract.
Proposed Appendix A to this part provides several examples of the
methods used for converting swap positions into futures equivalent
positions. The proposed regulations would ask for reporting in futures
equivalents because such conversions are made by entities that deal in
swaps to effectively manage residual price risks by entering into 20.2
listed futures contracts. Reporting in futures equivalents would result
in a measure of equivalency between positions in paired swaps and their
related 20.2 listed futures contracts, and it would allow for the
enforcement of aggregate position limits across futures and swaps
should the Commission adopt such limits.
As required under paragraph (a) and (b) of proposed regulation
20.3, each clearing organization would submit to the Commission a data
record that identifies either gross long and gross short futures
equivalent positions if the record corresponds to a paired swap
position, or gross long and gross short futures equivalent positions on
a non-delta-adjusted basis if the data record corresponds to a paired
swaption position. A data record (for the purposes of this rulemaking)
can be thought of as a grouped subset of the overall set of reported
data elements that communicates a unique (non-repetitive) positional
message to the Commission.
Clearing organizations would be required to report a data record
for each clearing member for each reporting day, which is defined in
proposed regulation 20.1 as the daily period of time between a clearing
organization or reporting entity's usual and customary last internal
valuation of paired swaps or swaptions and the next such period. In
order to provide clearing organizations with some flexibility in
determining daily operational cycles that would coincide with their
obligation to provide clearing member reports on a daily basis, the
proposed definition would permit such cycles of time to vary for
different clearing organizations, so long as the daily period of time
is consistently observed and the Commission is notified, upon its
request, of the manner by which a cycle is calculated. Data records
would be reported electronically in a manner consistent with current
Commission practice.
The positional data elements in paragraphs (a) and (b) of proposed
regulation 20.3 would require daily reports for each aggregated
proprietary account and each aggregated customer account, by each
cleared product, and by each futures equivalent month. Each data record
would indicate the commodity reference price with which each cleared
product is associated. As defined in proposed regulation 20.1, a
commodity reference price is the price series used by the parties to a
swap or swaption to determine payments made, exchanged, or accrued
under the terms of that swap or swaption. In addition, data records for
swaptions would be required to be broken down further by expiration
date, put or call indicator, and strike price. Proposed Appendix B to
part 20 includes examples of data records that would be required of
clearing organizations. The examples in Appendix B are provided to
facilitate the public's ability to comment on these reports, and if
adopted as part of a final rulemaking, increase a clearing
organization's familiarity with the type of reporting the regulations
would require.
[[Page 67262]]
In addition to reports for clearing members, clearing organizations
would, pursuant to proposed regulation 20.3(c), be required to provide
to the Commission, for each futures equivalent month, end of reporting
day settlement prices for each cleared product and deltas for every
unique swaption put and call, expiration date, and strike price. This
second daily report would provide the type of information that is
necessary to assign a weight to a trader's positions.
2. Reports by Reporting Entities
Proposed regulation 20.4 would require reporting entities to report
proprietary positions in paired swaps and their paired swap
counterparty positions. Proposed regulation 20.1 identifies a reporting
entity as a clearing member or a swap dealer as defined in section 1a
of the CEA and as subject to definitional changes that may be made
through the issuance of Commission regulations.
The definition of reporting entity is intended to identify
financial firms that regularly make markets in swaps, as well as
divisions or subsidiaries of large commercial swap market participants
that provide risk management services to other commercial entities in
the normal course of their business operations. Proposed regulation
20.4 is intended to require reports from such financial firms and not
from commercial end-users with swaps activities of limited scope. By
requiring reporting from these large market participants, proposed
regulation 20.4 could provide visibility into the majority of paired
swaps trading activity without burdening commercial entities that may
have less experience with compliance and reporting requirements
stemming from the regulation of financial institutions.\12\ The
Commission solicits comment specifically on the proposed definition of
reporting entity and the sufficiency of the market visibility gained by
requiring reports only from a limited set of market participants.
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\12\ The proposed definition of reporting entity includes an
exemption from the definition of reporting entity for entities that
are not commonly known as swap dealers.
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Proposed regulation 20.4 would require reporting entities to
provide the Commission with positional reports only if the reporting
entities hold reportable paired swap positions. Proposed regulation
20.1 defines a reportable position as a position, in any one futures
equivalent month, comprised of fifty or more futures equivalent paired
swaps or swaptions based on the same commodity. This proposed level is
calibrated to capture data on a sufficiently large percentage of paired
swap positions and was arrived at after consultation with multiple
market participants.\13\ The Commission specifically requests comment
on whether this reporting level is appropriate relative to the size of
positions held by paired swap counterparties.
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\13\ See http://www.cftc.gov/LawRegulation/DoddFrankAct/ExternalMeetings/otc_meetings.html.
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Once a reporting entity's paired swaps position meets or exceeds
the fifty futures equivalent paired swaps or swaptions threshold,
proposed regulation 20.1 defines all other paired swap positions held
by the reporting entity (in the commodity that initially caused the
reporting entity's positions to be deemed reportable) to be part of the
entity's reportable position.\14\ Clearing members and other reporting
entities would follow the same procedure for determining if their
proprietary positions or any counterparty positions are reportable to
the Commission. As with clearing member reports that would be provided
by clearing organizations to the Commission under proposed regulation
20.3, proposed regulation 20.4 would require paired swap positions to
be represented and reported in futures equivalents. Without a common
method of accounting for positions in swaps and futures, aggregate
positions could potentially not be enforceable, should the Commission
promulgate such limits.
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\14\ In order to verify that a reporting entity's paired swap
positions are no longer above the threshold, the proposed definition
of reportable position would also encompass positions in paired
swaps held by the reporting entity on the first day after which the
reporting entity's paired swap positions are no longer reportable.
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To determine what to report under proposed regulation 20.4,
reporting entities would separately consider proprietary positions,
counterparty positions, and positions in controlled accounts. For each
actual swap or swaption account that includes a paired swap or swaption
in which the reporting entity is reportable, such entities would be
required to provide for each reporting day a data record that either
identifies long and short paired swap positions (if the record pertains
to swap positions) or long and short non-delta-adjusted paired swaption
positions and long and short delta-adjusted swaption positions (if the
record pertains to swaptions positions). For uncleared paired swaps,
the proposed regulations would require a reporting entity to use
economically reasonable and analytically supported deltas.
As proposed under regulation 20.4, this information would be
grouped separately by swap or swaption account that is a part of a
reportable account, by futures equivalent month, by cleared or
uncleared contracts, by commodity reference price, and by clearing
organization, if the data record pertains to cleared swaps. Data
records pertaining to cleared swaption positions under the proposed
regulations would be further grouped by put or call, expiration date,
and strike price. Uncleared swaption positions, however, would not be
required to be grouped by put or call, expiration date, and strike
price. The reports provided under proposed regulation 20.4 would also
include identifiers for the commodity underlying the reportable
position, the counterparties of the account and the 102S filing
identifier, as described in more detail below, assigned by the
reporting entity to the owner(s) of the account, as well as the
controller(s) of the account. Proposed Appendix B to this part includes
several examples of required records.
3. Series S Filings
Proposed regulation 20.5(a) would require a 102S filing for the
identification of the direct owner or controller of a ``reportable
account'' by the reporting entity holding or carrying the account. The
102S filing would consist of the ``name, address, and contact
information of the direct owner or controller of the reportable
account'' and a ``brief description of the nature of such person's
paired swaps and swaptions' market activity'' (e.g., whether it is an
omnibus account for another broker or an individual account). The
reporting entity is required to submit a 102S filing only once for each
person associated with a reportable account.
Once an account holder or controller is reportable, the Commission
may contact the trader directly and require that the trader file a more
detailed identification report, a 40S filing. The Commission would
require a 40S filing if a trader has become reportable for the first
time and is not known to the Commission. A 40S filing would consist of
the submission of a CFTC Form 40 ``Statement of Reporting Trader.'' As
the current version of Form 40 covers information on positions in
futures and options, the trader would be required to complete the form
as if the form covered
[[Page 67263]]
information related to positions in paired swaps and swaptions.\15\
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\15\ The Commission plans to revise Form 40 in the future so
that the form would explicitly target information on paired swaps
and swaptions positions as well as futures and options positions.
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The 102S filings and the 40S filing together would allow the
Commission to identify the person(s) owning the account or controlling
its trading, the person to contact regarding trading, the nature of the
account, whether the reported account is related--by financial interest
or control--to another account, and the principal occupation or
business of the account owner. The filings also would provide the
Commission information on whether the account is being used for hedging
cash market exposure.
Commission staff would use the information in these two filings to
determine if the reported account corresponds to a new trader or is an
additional account of an existing trader. If the account is an
additional one of an existing trader, it would then be aggregated with
that of other related accounts currently being reported. By properly
identifying and aggregating accounts, Commission surveillance staff
would be able to assess a trader's compliance with speculative position
limits across futures and swaps markets, should the Commission adopt
such limits.
4. Maintenance of Books and Records
Proposed regulation 20.6 would impose recordkeeping requirements on
reporting clearing organizations, reporting entities, and persons with
reportable swaps positions. Proposed regulation 20.6(a) would require
clearing organizations to keep records of transactions in paired swaps
or swaptions. Proposed regulation 20.6(b) would require reporting
entities and persons with reportable positions to maintain ``books and
records * * * showing all records for transactions concerning all
reportable positions.'' In addition, reporting entities and persons
with reportable positions would be required to keep books and records
on ``transactions in the cash commodity'' and its products and
byproducts, and ``all commercial activities'' that are hedged in 20.2
listed futures contract, ``or options thereon,'' or paired swaps and
swaptions. These recordkeeping requirements are very similar to those
in current regulation 18.05.
The recordkeeping duties imposed by proposed regulation 20.6 are to
be in accordance with the requirements of regulation 1.31. Most
pertinently, regulation 1.31(a)(1) requires that these transaction
records be kept for five years, the first two of which they ``shall be
readily accessible.'' Such books and records ``shall be open to
inspection by any representative of the Commission.''
These recordkeeping requirements would allow the Commission to have
ready access to records that would enable Commission staff to
reconstruct the transaction history of reported positions. These
requirements would ensure that data records submitted to the Commission
could be audited. In addition, these records would enable Commission
staff to better reconstruct trading activity that may have had a
material impact on the price discovery process.
The recordkeeping burden imposed by proposed regulation 20.6 is not
anticipated to be high. These requirements are not unlike the
recordkeeping requirements imposed by Congress in new CEA section
4r(c)(2) on all swap market participants, and by the Commission on
those entities with reportable futures accounts under the existing
recordkeeping provision of regulation 18.05.
5. Form and Manner of Reporting
Proposed regulation 20.7(a) provides that the Commission would
specify, in writing to persons required to report, the format, coding
structure, and electronic data transmission procedures for these
reports and submissions. The purpose of this provision would be to
provide notice on how the Commission would determine the means by which
the part 20 reports are to be formatted and submitted.
6. Delegation of Authority
Proposed regulation 20.8 delegates certain of the Commission's
proposed part 20 authority to the Director of the Division of Market
Oversight and through the Director to other employee or employees as
designated by the Director. The delegated authority extends to: (1)
Issuing a special call for a 40S or 102S filing; and (2) providing
instructions or determining the format, coding structure, and
electronic data transmission procedures for submitting data records and
any other information required under proposed part 20. The purpose of
this delegation provision is to facilitate the ability of the
Commission to respond to changing market and technological conditions
for the purpose of ensuring timely and accurate data reporting.
7. Sunset Provision
Proposed regulation 20.9 includes a sunset provision. The sunset
provision would render the proposed regulations ineffective and
unenforceable upon the Commission's finding (through the issuance of an
order) that operating SDRs are capable of processing positional data in
a manner that would enable the Commission to effectively surveil paired
swaps trading and paired swap markets. Proposed regulation 20.9 also
provides the Commission with the authority to retain the effectiveness
and enforceability of any requirement in part 20, such as the reporting
of deltas for uncleared paired swaps or the reporting of paired swap
positions in futures equivalents, should the Commission determine that
such reporting is of material value to conducting market surveillance.
D. Solicitation of Comments
Pursuant to the Dodd-Frank Act, the Commission will refine the
definition of swap dealer in CEA section 1a. The Commission solicits
comments on whether it should delay the implementation of proposed part
20 to sixty days following a final Commission rulemaking further
defining the term swap dealer. The Commission also specifically
requests comments on any role self-regulatory organizations could play
in gathering positional data on paired swaps. In addition, the
Commission solicits comments on alternative approaches that may be
employed to gather positional data on paired swaps.
III. Related Matters
A. Cost-Benefit Analysis
1. Introduction
Section 15(a) of the Act requires that the Commission, before
promulgating a regulation under the Act or issuing an order, consider
the costs and benefits of its action. By its terms, CEA section 15(a)
does not require the Commission to quantify the costs and benefits of a
new regulation or determine whether the benefits of the regulation
outweigh its costs. Rather, CEA section 15(a) simply requires the
Commission to ``consider the costs and benefits'' of its action.
CEA section 15(a) specifies that costs and benefits shall be
evaluated in light of the following considerations: (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. Accordingly, the Commission could, in its discretion,
give greater weight to any of the five considerations and could, in its
discretion, determine that,
[[Page 67264]]
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 Act.
2. Costs
As mentioned above, under CEA section 4a(a)(2), the Commission has
been directed to establish position limits, as appropriate, on traders
in certain physical commodity futures and swaps markets within 180 or
270 days of the enactment of the Dodd-Frank Act, for exempt and
agricultural commodities, respectively. As explained in this release,
the Commission lacks the information it needs with respect to paired
swaps to be able to conduct surveillance for limits that may be
established under CEA section 4a.
In developing these proposed regulations, the Commission has aimed
to minimize the cost and burden associated with reporting positional
data to the Commission. As discussed above, the Commission has tailored
the regulations to conform to the market structure for cleared and
uncleared paired swaps. The cost of proposed part 20 regulations would
be borne by firms that are clearing organizations reporting under
proposed regulation 20.3 and clearing member reportable entities
reporting under proposed regulation 20.4. For such firms, the
additional cost to implement a reporting system is expected to be
minimal since the Commission understands these firms track their own
and their counterparties' positions for risk-management purposes.
Although the Commission has proposed a reporting system for cleared
paired swaps that resembles the large trader reporting system, the
Commission proposes a structurally different reporting system for
uncleared paired swaps. The structure of the uncleared paired swaps
market is not as centralized as the cleared paired swaps market: There
is no central counterparty that corresponds to a clearing organization
in the uncleared paired swaps market. The Commission believes that swap
dealers may be counterparties to a significant portion of the market
for uncleared paired swaps and swaptions.
Accordingly, the Commission has proposed to require position
reporting from swap dealers. These firms are to report their positions
as well as those of their counterparties, provided that they are above
the ``reportable position'' level. These firms have the
creditworthiness to be able to negotiate a substantial swaps portfolio
in paired swaps across many counterparties. As is the case for clearing
member reportable entities, it is likely that creating or purchasing an
information technology system that can present such a firm's net
position exposures on a daily basis would not be an overly burdensome
marginal expense, since the Commission understands swap dealers track
their exposures for risk management purposes.
For counterparties that would be subject to the recordkeeping
requirements of proposed regulation 20.6, it should be noted that these
requirements would place new burdens (in terms of reporting and
retaining information on cash market transactions) only on persons that
are reportable solely in paired swaps. This is because recordkeeping
requirements are imposed by Congress with respect to all swaps in new
section 4r(c)(2) of the CEA. Likewise, counterparties that hold
reportable futures positions (in addition to reportable paired swaps
positions) are currently subject to existing recordkeeping requirements
under regulation 18.05. Thus, the Commission believes that these
additional burdens, in marginal terms, are not expected to be overly
burdensome, given that firms collect information on their commercial
activities in the normal course of business operations.
3. Benefits
As discussed above, implementing proposed part 20 would enable the
Commission to monitor and enforce position limits, if established by
the Commission, to diminish, eliminate, or prevent excessive
speculation; to deter and prevent market manipulation; ensure
sufficient market liquidity for bona fide hedgers; and to ensure that
the price discovery function of the underlying market is not disrupted.
By enabling the Commission to monitor compliance with position limits
to address these concerns, the Commission would be better able to
protect the price discovery process (CEA section 15(a)(2)(C)) and
market participants and the public from the threats of excessive
speculation and price manipulation (CEA section 15(a)(2)(A)).
In addition to providing increased market transparency through the
reporting of paired swap positions to the Commission, the Commission
would be better able to first, protect market participants and the
public (CEA section 15(a)(2)(A)) and second, increase the efficiency
and competitiveness of the markets (CEA section 15(a)(2)(B)). The
extension of the Commission's surveillance activities to these paired
swap markets would help ensure the integrity of these markets and
thereby protect market participants and the public from disruptive
trading, price manipulation, and the effects of market congestion.
Further, with the extension, the Commission would be able to expand its
Commitments of Traders report to include aggregate position data on the
paired swaps markets, and thus, would provide the public, including
market participants, greater transparency into the constitution of
markets covered by the proposed part. This increased transparency may
reduce the informational asymmetries in the paired swap markets and
thereby improve the efficiency of the market and promote competition.
4. Conclusion
The Commission, after considering the CEA section 15(a) factors,
finds that the expected incremental cost imposed by proposed part 20 is
outweighed by the expected benefit. Accordingly, the Commission has
determined to propose part 20. The Commission invites public comment on
its cost-benefit considerations. Commenters are also are invited to
submit any data or other information that they may have quantifying or
qualifying the costs and benefits of proposed part 20.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA'') requires Federal agencies,
in proposing regulations, to consider the impact of those regulations
on ``small entities.'' \16\ The proposed regulations detailed in this
release would affect organizations including registered derivatives
clearing organization (``DCOs''), clearing members (many of whom would
be registered with the Commission already as futures commission
merchants (``FCMs'')), swap dealers, and persons who have reportable
paired swaps positions and otherwise have not been reportable based on
futures positions.
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\16\ 5 U.S.C. 601 et seq.
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The Commission has previously determined that DCOs \17\ and FCMs
\18\ are not ``small entities'' for purposes of the RFA. As noted
above, a reportable paired swaps position would include 50 or more
paired swaps positions in a futures equivalent month. The Commission
notes this threshold is higher than the minimum 25 contract reporting
levels in effect for futures positions under regulation 15.03.
Previously, the Commission had determined that the reporting levels in
regulation 15.03 would not affect small
[[Page 67265]]
entities.\19\ The Commission does not believe that entities who meet
the proposed larger quantitative threshold would constitute small
entities for RFA purposes.
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\17\ 66 FR 45604, 45609 (August 29, 2001).
\18\ Policy Statement and Establishment of Definitions of
``Small Entities'' for Purposes of the Regulatory Flexibility Act,
47 FR 18618, 18619 (Apr. 30, 1982).
\19\ Id. at 18620 (excluding large traders from the definition
of small entity).
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Accordingly, the Commission does not expect the regulations, as
proposed herein, to have a significant impact on a substantial number
of small entities. Therefore, the Chairman, on behalf of the
Commission, hereby certifies, pursuant to 5 U.S.C. 605(b), that the
proposed regulations would not have a significant economic impact on a
substantial number of small entities. The Commission invites the public
to comment on whether the entities covered by these proposed
regulations should be considered small entities for purposes of the
RFA.
C. Paperwork Reduction Act
1. Overview
The Paperwork Reduction Act (``PRA'') \20\ imposes certain
requirements on Federal agencies 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 ``Part 20--
Position Reports for Physical Commodity Swaps'' (OMB control number
3038-NEW). If adopted, responses to this collection of information
would be mandatory.
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\20\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------
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. OMB has not yet assigned a control
number to the new collection for proposed part 20. The requirements of
new part 20 are not currently covered by any existing OMB control
number.
The Commission is submitting this proposal to OMB for review in
accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11.
As noted earlier, in section 737 of the Dodd-Frank Act, Congress
amended section 4a of the CEA to require the Commission to establish,
as appropriate, aggregate position limits for futures contracts traded
on a DCM and for economically equivalent swaps. Pursuant to new section
4a(a)(2)(B) of the CEA, Congress mandated that the Commission set these
position limits within 180 days of enactment of the Dodd-Frank Act for
exempt commodities and 270 days for agricultural commodities. In order
to enforce regulations establishing position limits for economically
equivalent swaps, the Commission has determined that it first needs to
establish the reporting regulations proposed herein. Given the short
timeframe in which the Commission must determine whether to set
position limits under the Dodd-Frank Act, the Commission has determined
that it needs to adopt a swaps reporting system on an expedited basis
to comply with the statutory deadline contained in new section
4a(a)(2)(B) of the CEA.
2. Information Provided and Recordkeeping Duties
As a result of the Dodd-Frank Act, new part 20 proposes putting
into place reporting requirements for ``clearing organizations'' and
``reporting entities'' and recordkeeping requirements for these firms
in addition to firms that become reportable because of a reportable
paired swap or swaption positions. Accordingly, the Commission is
seeking a new and separate control number for reporting from ``clearing
organizations'' and ``reporting entities'' (collectively
``respondents'') and recordkeeping for firms that become reportable
because of a reportable paired swap or swaption position operating in
compliance with the requirements of proposed part 20. Upon OMB's
approval and assignment of a new control number specifically for the
collection of information and recordkeeping requirements of proposed
part 20, the Commission intends to submit the necessary documentation
to OMB to enable it to apply a new OMB control number exclusively for
part 20 reports.
Proposed part 20 would result in the collection of information on
``paired swaps and swaptions'' positions as defined in proposed
regulation 20.1. Specifically, proposed part 20 provides for three new
kinds of reports:
1. Under proposed regulation 20.3, swap ``clearing organizations''
would provide daily reports of relevant position and clearing data.
2. Under proposed regulation 20.4, ``reporting entities'' would
produce position reports on a daily basis on their own and individual
counterparty accounts. Within this class of ``reporting entities,''
there are two categories of ``reporting entities:'' (a) ``clearing
members'' and (b) ``swap dealers'' that are not clearing members. The
former category, ``clearing members,'' would include many firms that
are currently registered as FCMs with the Commission. The Commission
estimates that a total of 180 swap dealers transact in physical
commodity swaps and thereby may be reporting entities under proposed
part 20 (clearing members and non-clearing members combined).
3. Finally, under proposed regulation 20.5, all ``reporting
entities'' would submit identifying information to the Commission on
new reportable accounts through a 102S filing.
In addition to creating these reporting requirements, proposed
regulation 20.6 would impose recordkeeping requirements for (1)
clearing organizations, (2) reporting entities, and (3) persons with
``reportable positions'' in the covered futures contract listed in
proposed regulation 20.2 or ``paired swaps or swaptions.'' Proposed
regulation 20.6(a) would require clearing organizations to maintain
``all records of transactions in paired swaps or swaptions'' on
clearing organizations. Proposed regulation 20.6(b) would require
reporting entities and ``persons with reportable positions'' to
maintain for all commodities in which it holds a reportable position
``all records for transactions * * * in the cash commodity * * * [and]
its products and byproducts'' and in ``commercial activities''
underlying a hedge in a covered futures contract or in paired swaps or
swaptions. These provisions extend those recordkeeping requirements
currently applicable to those traders holding reportable positions in
futures contracts, as currently found in regulation 18.05, to those
traders holding reportable positions in swaps.
The Commission estimates that the recordkeeping requirements of
proposed regulation 20.6 would not be overly burdensome. For the firms
subject to the reporting and recordkeeping requirements of proposed
regulation 20.6, it should be noted that these requirements are not
unlike the recordkeeping requirements imposed by Congress in the new
CEA section 4r(c)(2) of the CEA and by existing recordkeeping
regulation 18.05. If a firm subject to these recordkeeping requirements
was previously reportable due to a futures position in the relevant
commodity above the ``reporting level'' (see regulation 15.03), then
the proposed regulation 20.6(b) recordkeeping burdens would not be new,
as that firm would already be subject to these requirements under
regulation 18.05. If a firm becomes subject to the proposed regulation
20.6 recordkeeping requirements only because of a reportable swaps
position (not because of a futures position above
[[Page 67266]]
the reportable level) then the requirements contained in the proposal
add only the duty to keep records on ``all commercial activities that a
reporting entity or person hedges'' to the swaps-related recordkeeping
duties imposed by CEA section 4r(c)(2). These additional burdens are
not expected to be substantial, given that in the normal course of
business firms would collect this information on their commercial
activities.
The Commission estimates that implementing proposed part 20 would
create a total annual reporting and recordkeeping hour burden of 79,503
hours across 705 firms. Based on a weighted average wage rate of
$74.36,\21\ this would amount to an annualized labor cost of $5.9
million. In addition, the Commission estimates that total annualized
capital/start-up, operating, and maintenance costs \22\ would amount to
a combined $32.7 million. This overall total reporting and
recordkeeping hour burden is the sum of estimated burdens for the three
reporting categories and the three recordkeeping categories mentioned
above.
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\21\ The Commission staff's estimates concerning the wage rates
are based on salary information for the securities industry compiled
by the Securities Industry and Financial Markets Association
(``SIFMA''). The $74.36 per hour is derived from figures from a
weighted average of salaries and bonuses across different
professions from the SIFMA Report on Management & Professional
Earnings in the Securities Industry 2009, modified to account for an
1,800-hour work-year and multiplied by 1.3 to account for overhead
and other benefits. The wage rate is a weighted national average of
salary and bonuses for professionals with the following titles (and
their relative weight); ``programmer (senior)'' (60% weight),
``compliance advisor (intermediate)'' (20%), ``systems analyst''
(10%), and ``assistant/associate general counsel'' (10%).
\22\ The capital/start-up cost component of ``annualized
capital/start-up, operating, and maintenance costs'' is based on an
initial capital/start-up cost that is straight-line depreciated over
five years.
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Reporting burdens:
1. Proposed regulation 20.3 clearing organization reports would
account for 938 of these annual reporting and recordkeeping hours.
These hours would be spread across 5 respondents. Annualized capital/
start-up, operating, and maintenance costs for all affected clearing
organizations combined would be approximately $100,000.\23\
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\23\ All of the capital cost estimates in these estimates are
based on a 5 year, straight-line depreciation.
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2. Proposed regulation 20.4 reporting entity reports would have two
separate burden estimates based on the kind of reporting entity
providing the report:
a. Clearing member (80 clearing member/swap dealers plus 20
clearing member/non-swap dealers) reporting entity reports would create
an annual reporting and recordkeeping burden of 25,000 hours spread
across 100 respondents. Annualized capital/start-up, operating, and
maintenance costs for all firms in this category combined would be
approximately $6 million.
b. Swap dealer non-clearing member reporting entity reports would
create an annual reporting and recordkeeping burden of 37,500 hours
spread across 100 respondents. Annualized capital/start-up, operating,
and maintenance costs for all firms in this category combined would be
approximately $8 million.
3. Proposed regulation 20.5 reporting entity 102S submissions would
create an annual reporting and recordkeeping burden of 1,800 hours
spread across 200 firms. Annualized capital/start-up, operating, and
maintenance costs for all reporting entities combined providing these
reports would be approximately $1 million.
4. 40S submissions by persons with reportable positions under
proposed regulation 20.5(b) in paired swaps would create an annual
reporting and recordkeeping burden of 165 hours and would affect 500
firms. Annualized capital/start-up, operating, and combined maintenance
costs for all firms providing 40S filings would be approximately $4.5
million.
Recordkeeping burdens:
1. Proposed regulation 20.6(a) recordkeeping duties for clearing
organizations would account for 100 of these annual reporting and
recordkeeping hours. These hours would be spread across 5 firms.
Annualized capital/start-up, operating, and maintenance costs to meet
the recordkeeping requirements of proposed regulation 20.6(a) would be
approximately $100,000 spread across all affected clearing
organizations.
2. Proposed regulation 20.6(b) reporting entity recordkeeping
duties would have two separate burden estimates based on the kind of
reporting entity providing the report:
a. Clearing member (80 clearing member/swap dealers plus 20
clearing member/non-swap dealers) reporting entity recordkeeping would
create an annual reporting and recordkeeping burden of 2,000 hours
spread across 100 respondents. Annualized capital/start-up, operating,
and maintenance costs for all firms in this category of recordkeeping
reporting entities would be approximately $2 million.
b. Swap dealer non-clearing member reporting entity recordkeeping
would create an annual reporting and recordkeeping burden of 2000 hours
spread across 100 respondents. Annualized capital/start-up, operating,
and maintenance costs for all firms in this category of recordkeeping
reporting entities would be approximately $2 million.
3. Proposed regulation 20.6(b) recordkeeping duties for persons
with reportable positions in swaps (these firms were previously not
reportable) would create an annual reporting and recordkeeping burden
of 10,000 hours spread across 500 firms. Annualized capital/start-up,
operating, and maintenance costs for all traders in this category
combined would be approximately $11.5 million.
3. Confidentiality
The Commission would 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 Act
strictly prohibits the Commission, unless specifically authorized by
the Act, from making public ``data and information that would
separately disclose the business transactions or market positions of
any person and trade secrets or names of customers.'' \24\ The
Commission also is required to protect certain information contained in
a government system of records according to the Privacy Act of 1974, 5
U.S.C. 552a.
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\24\ 7 U.S.C. 12(a)(1).
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4. Comments on Information Collection
The Commission invites the public and other Federal agencies to
comment on any aspect of the reporting and recordkeeping burdens
discussed above. 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
would 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
[[Page 67267]]
comments can be summarized and addressed in the final regulation
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 release. Consequently,
a comment to OMB is most assured of being fully effective if received
by OMB (and the Commission) within 30 days after publication of this
notice of proposed rulemaking.
List of Subjects
17 CFR Part 15
Brokers, Commodity futures, Reporting and recordkeeping
requirements.
17 CFR Part 20
Physical commodity swaps, Swap dealers, Reporting and recordkeeping
requirements.
For the reasons stated in the preamble, the Commodity Futures
Trading Commission proposes to amend 17 CFR parts 15 and 20 as follows:
PART 15--REPORTS--GENERAL PROVISIONS
1. The authority citation for part 15 is revised to read as
follows:
Authority: 7 U.S.C. 2, 5, 6a, 6c, 6f, 6g, 6i, 6k, 6m, 6n, 7,
7a, 9, 12a, 19, and 21, as amended by Title VII of the Dodd-Frank
Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124
Stat. 1376 (2010).
2. Revise the heading and introductory text in Sec. 15.00 to read
as follows:
Sec. 15.00 Definitions of terms used in parts 15 to 19, and 21 of
this chapter.
As used in parts 15 to 19, and 21 of this chapter:
* * * * *
3. Add part 20 to read as follows:
PART 20--POSITION REPORTS FOR PHYSICAL COMMODITY SWAPS
Sec.
20.1 Definitions.
20.2 Covered contracts.
20.3 Clearing organizations.
20.4 Reporting entities.
20.5 Series S filings.
20.6 Maintenance of books and records.
20.7 Form and manner of reporting and submitting information or
filings.
20.8 Delegation of authority to the Director of the Division of
Market Oversight.
20.9 Sunset provision.
Appendix A to Part 20--Guidelines on Futures Equivalancy
Appendix B to Part 20--Explanatory Guidance on Data Record Layouts
Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6c, 6f, 6g, 6t, 12a, 19, as
amended by Title VII of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, Pub. L. 111-203, 124 Stat. 1376 (2010).
Sec. 20.1 Definitions.
As used in, and solely for the purposes of, this part:
Account controller means a person that by power of attorney or
otherwise directs trading for an account.
Business day means ``business day'' as that term is defined in
Sec. 1.3 of this chapter.
Cleared product means a paired swap or swaption that a clearing
organization offers or accepts for clearing.
Clearing member means any person who is a member of, or enjoys the
privilege of, clearing trades in its own name through a clearing
organization.
Clearing organization means the person or organization that acts as
a medium between clearing members for the purpose of clearing swaps or
swaptions or effecting settlements of swaps or swaptions.
Closed swap or closed swaption means a swap or swaption that has
been settled, exercised, closed out, or terminated.
Commodity reference price means the price series (including
derivatives contract and cash market prices or price indices) used by
the parties to a swap or swaption to determine payments made,
exchanged, or accrued under the terms of the contracts.
Controlled account means ``controlled account'' as defined in Sec.
1.3 of this chapter.
Counterparty means, from the perspective of one side to a contract,
the person that directly corresponds to the other side of the contract.
Futures equivalent means an economically equivalent amount of one
or more futures contracts that represents a position or transaction in
one or more paired swaps or swaptions consistent with the conversion
guidelines in Appendix A of this part.
Open swap or swaption means a swap or swaption that has not been
closed.
Paired swap or paired swaption means an open swap that is:
(1) Directly or indirectly linked, including being partially or
fully settled on, or priced at a differential to, the price of any
commodity futures contract listed in Sec. 20.2; or
(2) Directly or indirectly linked, including being partially or
fully settled on, or priced at a differential to, the price of the same
commodity for delivery at the same location, or locations with
substantially the same supply and demand fundamentals, as that of a
commodity futures contract listed in Sec. 20.2.
Person means any ``person'' as that term is defined in Sec. 1.3 of
this chapter.
Reportable account or consolidated account that is reportable means
a consolidated account that includes a reportable position.
Reportable position means:
(1) A position, in any one futures equivalent month, comprised of
fifty or more futures equivalent paired swaps or swaptions based on the
same commodity underlying a futures contract listed in Sec. 20.2,
grouped separately by swaps and swaptions, then grouped by gross long
contracts on a futures equivalent basis or gross short contracts on a
futures equivalent basis;
(2) For a consolidated account (described in Sec. 20.4(a)) that
includes a reportable position as defined in paragraph (1) of this
definition, all other positions in that account that are based on the
commodity that renders the account reportable; and
(3) The first reporting day on which a consolidated account
(described in Sec. 20.4(a)) no longer in fact includes a reportable
position as described in paragraph (1) of this definition (because on
such day, the reporting entity's consolidated account shall be
considered and treated as if it in fact included reportable positions
as described in paragraph (1) of this definition.
Reporting day means the period of time between a clearing
organization or reporting entity's usual and customary last internal
valuation of paired swaps or swaptions and the next such period, so
long as the period of time is consistently observed on a daily basis
and the Commission is notified, upon its request, of the manner by
which such period is calculated and any subsequent changes thereto.
Reporting entity, means:
(1) A clearing member; or
(2) Swap dealer as that term is defined in section 1a of the Act
and any Commission definitional regulations adopted thereunder, unless
determined otherwise by the Commission for the purpose of excluding
entities that are not commonly known as swap dealers from the reporting
requirements of Sec. 20.4.
Swap means (other than a swaption) ``swap'' as defined in section
1a of the Act and any Commission definitional regulations adopted
thereunder.
Swaption means an option to enter into a swap or a physical
commodity
[[Page 67268]]
option included in the definition of ``swap'' under section 1a of the
Act and any Commission definitional regulations adopted thereunder.
Swap or swaption account means an account for swaps or swaptions
maintained at a clearing organization or reporting entity.
Sec. 20.2 Covered contracts.
(a) All paired swaps and swaptions, unless specifically provided
otherwise, shall be reported pursuant to the requirements and
conditions of this part and shall not be reported under parts 15
through 19, or 21 of this chapter.
(b) The futures and option contracts listed by designated contract
markets for the purpose of reports filed and information provided under
this part are as follows:
Covered Agricultural and Exempt Futures Contracts
------------------------------------------------------------------------
-------------------------------------------------------------------------
Chicago Board of Trade (``CBOT'') Corn.
CBOT Ethanol.
CBOT Oats.
CBOT Rough Rice.
CBOT Soybean Meal.
CBOT Soybean Oil.
CBOT Soybeans.
CBOT Wheat.
Chicago Mercantile Exchange (``CME'') Butter.
CME Cheese.
CME Dry Whey.
CME Feeder Cattle.
CME Hardwood Pulp.
CME Lean Hogs.
CME Live Cattle.
CME Milk Class III.
CME Non Fat Dry Milk.
CME Random Length Lumber.
CME Softwood Pulp.
COMEX (``CMX'') Copper Grade 1.
CMX Gold.
CMX Silver.
ICE Futures U.S. (``ICUS'') Cocoa.
ICUS Coffee C.
ICUS Cotton No. 2.
ICUS Frozen Concentrated Orange Juice.
ICUS Sugar No. 11.
ICUS Sugar No. 16.
Kansas City Board of Trade (``KCBT'') Wheat.
Minneapolis Grain Exchange (``MGEX'') Wheat.
NYSELiffe (``NYL'') Gold, 100 Troy Oz.
NYL Silver, 5000 Troy Oz.
New York Mercantile Exchange (``NYMEX'') Cocoa.
NYMEX Brent Financial.
NYMEX Central Appalachian Coal.
NYMEX Coffee.
NYMEX Cotton.
NYMEX Crude Oil, Light Sweet.
NYMEX Gasoline Blendstock (RBOB).
NYMEX Hot Rolled Coil Steel.
NYMEX Natural Gas.
NYMEX No. 2 Heating Oil, New York Harbor.
NYMEX Palladium.
NYMEX Platinum.
NYMEX Sugar No. 11.
NYMEX Uranium.
------------------------------------------------------------------------
Sec. 20.3 Clearing organizations.
(a) Reporting data records. For each reporting day, with respect to
paired swaps or swaptions, clearing organizations shall report to the
Commission, separately for each clearing member's proprietary and
customer account, unique groupings of the data elements in paragraph
(b) of this section (to the extent that there are such corresponding
elements), in a single data record, so that each reported record is
distinguishable from every other reported record (because of differing
data values, as opposed to the arrangement of the elements).
(b) Populating reported data records with data elements. Data
records reported under paragraph (a) of this section shall include the
following data elements:
(1) An identifier assigned by the Commission to the clearing
organization;
(2) The identifier assigned by the clearing organization to the
clearing member;
(3) The identifier assigned by the clearing organization for a
cleared product;
(4) The reporting day;
(5) A proprietary or customer account indicator;
(6) The futures equivalent month;
(7) The commodity reference price;
(8) Long swap positions;
(9) Short swap positions;
(10) A swaption put or call side indicator;
(11) A swaption expiration date;
(12) A swaption strike price;
(13) Long non-delta-adjusted swaption positions; and
(14) Short non-delta-adjusted swaption positions.
(c) End of reporting day data. For all futures equivalent months,
clearing organizations shall report end of reporting day settlement
prices for each cleared product and deltas for every unique swaption
put and call, expiration date, and strike price.
Sec. 20.4 Reporting entities.
(a) Consolidated accounts. Each reporting entity shall combine all
paired swap and swaption positions:
(1) That are proprietary positions (swaps and swaptions to which
the reporting entity is a counterparty), in a single consolidated
account that it shall attribute to itself;
(2) That are positions directly owned by a reporting entity's
counterparty, in a single consolidated account that it shall attribute
to that specific counterparty; and
(3) That are positions under the direction of an account
controller, in a single consolidated account that it shall attribute to
that specific account controller.
(b) Reporting data records. Reporting entities shall report to the
Commission, for each reporting day, and separately for each
consolidated account described in paragraphs (a)(1) through (a)(3) of
this section that is reportable, unique groupings of the data elements
in paragraph (c) of this section (to the extent that there are such
corresponding elements), in a single data record, so that each reported
record is distinguishable from every other reported record (because of
differing data values, as opposed to the arrangement of the elements).
(c) Populating reported data records with data elements. Data
records reported under paragraph (b) of this section shall include the
following data elements:
(1) An identifier assigned by the Commission to the reporting
entity;
(2) An identifier assigned by the reporting entity to each swap or
swaption account;
(3) A 102S identifier assigned by the reporting entity to the owner
of such accounts;
(4) A 102S identifier assigned by the reporting entity to the
controller of such accounts;
(5) The name of each owner of such accounts;
(6) The name of each controller of such accounts;
(7) The reporting day;
(8) The identifier for the cleared product assigned by the clearing
organization (cleared only);
(9) The commodity underlying the reportable positions;
(10) The futures equivalent month;
(11) A cleared or uncleared indicator;
(12) A clearing organization identifier;
(13) The commodity reference price;
(14) A bi-lateral trade indicator;
(15) Long paired swap positions;
(16) Short paired swap positions;
(17) A swaption put or call side indicator (cleared only);
(18) A swaption expiration date (cleared only);
(19) A swaption strike price (cleared only);
(20) Long non-delta-adjusted paired swaption positions;
(21) Short non-delta-adjusted paired swaption positions;
(22) Long delta-adjusted paired swaption positions (non-cleared
only, using economically reasonable and analytically supported deltas);
[[Page 67269]]
(23) Short delta-adjusted paired swaption positions (non-cleared
only, using economically reasonable and analytically supported deltas);
(24) Long paired swap or swaption notional value (non-cleared
only); and
(25) Short paired swap or swaption notional value (non-cleared
only).
Sec. 20.5 Series S filings.
(a) 102S filing.
(1) When a consolidated account first becomes reportable, the
reporting entity holding or carrying the account shall submit a 102S
filing, which shall consist of the name, address, and contact
information of the direct owner or controller of the reportable account
and a brief description of the nature of such person's paired swaps and
swaptions market activity.
(2) A reporting entity may submit a 102S filing only once for each
person, even if such persons at various times have multiple reportable
positions in the same or different paired swaps or swaptions; however,
reporting entities must update a 102S filing if the information
provided is no longer accurate.
(3) Reporting entities shall submit a 102S filing within three days
following the first day a consolidated account first becomes reportable
or at such time as instructed by the Commission upon special call.
(b) 40S filing. Every person who holds or controls a reportable
position shall after a special call upon such person by the Commission
file with the Commission a 40S filing at such time and place as
directed in the call. A 40S filing shall consist of the submission of a
Form 40, which shall be completed by such person as if any references
to futures or option contracts were references to paired swaps or
swaptions as defined in Sec. 20.1.
Sec. 20.6 Maintenance of books and records.
(a) Every clearing organization shall keep all records of
transactions in paired swaps or swaptions in accordance with the
requirements of Sec. 1.31 of this chapter.
(b) Every reporting entity or person with reportable positions
shall keep books and records, in accordance with the requirements of
Sec. 1.31 of this chapter, showing all records for transactions
concerning all reportable positions, including records for transactions
in the cash commodity in which the reporting entity or other person is
reportable, its products and byproducts, and all commercial activities
that a reporting entity or person hedges by taking a position in the
contracts listed in Sec. 20.2 or paired swaps and swaptions.
Sec. 20.7 Form and manner of reporting and submitting information or
filings.
Unless otherwise instructed by the Commission, a clearing
organization or reporting entity shall submit data records and any
other information required under this part to the Commission as
follows:
(a) Using the format, coding structure, and electronic data
transmission procedures approved in writing by the Commission; and
(b) Not later than 9 a.m. eastern time on the next business day
following the reporting day or at such other time as instructed by the
Commission.
Sec. 20.8 Delegation of authority to the Director of the Division of
Market Oversight.
(a) The Commission hereby delegates, until it orders otherwise, to
the Director of the Division of Market Oversight or such other employee
or employees as the Director may designate from time to time, the
authority:
(1) In Sec. 20.5(a)(3) for issuing a special call for a 102S
filing;
(2) In Sec. 20.5(b) for issuing a special call for a 40S filing;
(3) In Sec. 20.7 for providing instructions or determining the
format, coding structure, and electronic data transmission procedures
for submitting data records and any other information required under
this part.
(b) The Director of the Division of Market Oversight may submit to
the Commission for its consideration any matter which has been
delegated in this section.
(c) Nothing in this section prohibits the Commission, at its
election, from exercising the authority delegated in this section.
Sec. 20.9 Sunset provision.
(a) Except as otherwise provided in paragraph (b) of this section,
the sections of this part shall become ineffective and unenforceable
upon a Commission finding that, through the issuance of an order,
operating swap data repositories are processing positional data and
that such processing will enable the Commission to effectively surveil
trading in paired swaps and swaptions and paired swap and swaption
markets.
(b) The Commission may determine, in its discretion, to maintain
the effectiveness and enforceability of any section of this part, or
any requirement therein, in an order issued under paragraph (a) of this
section, upon finding that such sections, or requirements therein,
provide the Commission with positional data or data elements that
materially improves the accuracy and surveillance utility of the
positional data processed by swap data repositories.
Appendix A to Part 20--Guidelines on Futures Equivalency
The following examples illustrate how swaps should be converted
into futures equivalents. In general the total notional quantity for
each swap should be apportioned to referent futures months based on
the fraction of days remaining in the life of the swap during each
referent futures month to the total duration of the swap, measured
in days. The terms used in the examples are to be understood in a
manner that is consistent with industry practice.
Example 1--Fixed for Floating WTI Crude Oil Swap Linked to a DCM
Contract
------------------------------------------------------------------------
------------------------------------------------------------------------
Reference price................... Daily official next to expire
contract price for the NYMEX Light
Sweet Crude Oil Futures Contract
(``WTI'') in $/bbl through the
NYMEX spot month.
Fixed Price....................... $80.00 per barrel.
Floating Price.................... The arithmetic average of the
reference price during the pricing
period.
Notional Quantity................. 100,000 bbls/month.
Calculation Period................ One month.
Fixed Price Payer................. Company A.
Floating Price Payer.............. Company B.
Settlement Type................... Financial.
Swap Term......................... Six full months from January 1 to
June 30.
Floating Amount................... Floating Price * Notional Quantity.
Fixed Amount...................... Fixed Price * Notional Quantity.
------------------------------------------------------------------------
[[Page 67270]]
NYMEX WTI trading in the next to expire futures contract ceases
on the third business day prior to the 25th of the calendar month
preceding the contract month. For simplicity in this example, the
last trading day in each WTI futures contract is shown as the 22nd
of the month.
Futures equivalent position on January 1
Total Notional Quantity = 6 months * 100,000 bbls/month = 600,000
bbls
1,000 bbl = 1 futures contract
Therefore 600,000 bbls/1,000 bbls/contract = 600 futures equivalent
contracts
Total number of days in swap term = 31 + 28 + 31 + 30 + 31 + 30 =
181
Futures Equivalent Position of Swap on January 1
----------------------------------------------------------------------------------------------------------------
Company A Company B
Dates swap in force Referent futures Fraction of days position (long) position
month [dagger] (short) [dagger]
----------------------------------------------------------------------------------------------------------------
January 1-January 22............... February............. 22/181 73 73
January 23-February 22............. March................ 31/181 103 103
February 23-March 22............... April................ 28/181 93 93
March 23-April 22.................. May.................. 31/181 103 103
April 23-May 22.................... June................. 30/181 99 99
May 23-June 22..................... July................. 31/181 103 103
June 23-June 30th.................. August............... 8/181 27 27
-----------------------------------------------------
Total.......................... ..................... 181/181 601 601
----------------------------------------------------------------------------------------------------------------
[dagger] Contracts rounded to the nearest integer.
Futures equivalent position on January 2
Total Notional Quantity = Remaining swap term * 100,000 bbls/month =
596,685 bbls
1,000 bbl = 1 futures contract
Therefore 596,685 bbls/1,000 bbls/contract = 597 futures equivalent
contracts
Total number of days = 30 + 28 + 31 + 30 + 31 + 30 = 180
Futures Equivalent Position of Swap on January 2
[Example 1 continued]
----------------------------------------------------------------------------------------------------------------
Company A Company B
Dates swap in force Referent futures Fraction of days position (long) position
month [dagger] (short) [dagger]
----------------------------------------------------------------------------------------------------------------
January 2-January 22............... February............. 21/180 70 -70
January 23-February 22............. March................ 31/180 103 -103
February 23-March 22............... April................ 28/180 93 -93
March 23-April 22.................. May.................. 31/180 103 -103
April 23-May 22.................... June................. 30/180 99 -99
May 23-June 22..................... July................. 31/180 103 -103
June 23-June 30th.................. August............... 8/180 27 -27
-----------------------------------------------------
Total.......................... ..................... 180/180 597 -597
----------------------------------------------------------------------------------------------------------------
[dagger] Contracts rounded to the nearest integer.
Example 2--Fixed for Floating Corn Swap
------------------------------------------------------------------------
------------------------------------------------------------------------
Reference price................... Daily official next to expire
contract price for the CBOT Corn
Futures Contract in $/bushel
through the CBOT spot month.
Fixed Price....................... $5.00 per bushel per month.
Floating Price.................... The arithmetic average of the
reference price during the pricing
period.
Calculation Period................ One month.
Notional Quantity................. 1,000,000 bushels/month.
Fixed Price Payer................. Company A.
Floating Price Payer.............. Company B.
Settlement Type................... Financial.
Swap Term......................... Six full months from January 1 to
June 30.
Floating Amount................... Floating Price * Notional Quantity.
Fixed Amount...................... Fixed Price * Notional Quantity.
------------------------------------------------------------------------
Last trading day in the nearby CBOT Corn futures contract is the
business day preceding the 15th of the contract month. For
simplicity in this example, the last trading day in each Corn
futures contract is shown as the 14th of the month. Futures contract
months for corn are March, May, July, September, and December.
Futures equivalent position on January 1
Total Notional Quantity = 6 contract months * 1,000,000 bushels/
month = 6,000,000 bushels
5,000 bushels = 1 futures contract
Therefore 6,000,000 bushels/5,000 bushels/contract = 1,200 futures
equivalent contracts
Total days = 31 + 28 + 31 + 30 + 31 + 30 = 181
[[Page 67271]]
Futures Equivalent Position of Swap on January 1
----------------------------------------------------------------------------------------------------------------
Company A Company B
Dates swap in force Referent futures Fraction of days position position
month (long)[dagger] (short)[dagger]
----------------------------------------------------------------------------------------------------------------
January 1-March 14................. March................ 73/181 483 -483
March 15-May 14.................... May.................. 61/181 404 -404
May 15-June 30..................... July................. 47/181 311 -311
-----------------------------------------------------
Total.......................... ..................... 181/181 1,198 -1,198
----------------------------------------------------------------------------------------------------------------
[dagger] Contracts rounded to the nearest integer.
Example 3--Fixed For Floating NY RBOB (Platts) Calendar Swap Futures
------------------------------------------------------------------------
------------------------------------------------------------------------
Reference price................... Platts Oilgram next to expire
contract Price Report for New York
RBOB (Barge) through the NYMEX spot
month.
Fixed Price....................... $1.8894 per gallon.
Floating Price.................... For each contract month, the
floating price is equal to the
arithmetic average of the high and
low quotations from Platts Oilgram
Price Report for New York RBOB
(Barge) for each business day that
it is determined during the
contract month.
Calculation Period................ One quarter.
Notional Quantity................. 84 million gallons/quarter.
Fixed Price Payer................. Company A.
Floating Price Payer.............. Company B.
Settlement Type................... Financial.
Swap Term......................... Six full months from January 1 to
June 30.
Floating Amount................... Floating Price * Notional Quantity.
Fixed Amount...................... Fixed Price * Notional Quantity.
------------------------------------------------------------------------
NYMEX NY RBOB (Platts) Calendar Swap Futures Contract month ends
on the final business day of the contract month. For simplicity in
this example, the last trading day in each futures contract is shown
as the final day of the month.
Futures equivalent position on January 1
Total Notional Quantity = 2 quarters * 84 million = 168 million
gallons
42,000 gallons = 1 futures contract
Therefore 168 million/42,000 gallons/futures contract = 4,000
futures equivalent contracts
Total number of days = 31 + 28 + 31 + 30 + 31 + 30 = 181
Futures Equivalent Position of Swap on January 1
----------------------------------------------------------------------------------------------------------------
Company A Company B
Dates swap in force Referent futures Fraction of days position position
month (long)[dagger] (short)[dagger]
----------------------------------------------------------------------------------------------------------------
January 1-March 31................. April................ 90/181 1989 -1989
April 1-June 30.................... July................. 91/181 2011 -2011
-----------------------------------------------------
Total.......................... ..................... 181/181 4000 4000
----------------------------------------------------------------------------------------------------------------
[dagger] Contracts rounded to the nearest integer.
Example 4--Calendar Spread Swap
------------------------------------------------------------------------
------------------------------------------------------------------------
Reference price................... The difference between the next to
expire contract price for the NYMEX
WTI Futures contract and the
deferred contract price for the
NYMEX WTI Futures contract.
Fixed Price....................... $80 per barrel.
Floating Price.................... The arithmetic average of the
reference price during the pricing
period.
Calculation Period................ One month.
Notional Quantity................. 100,000 bbls/month.
Fixed Price Payer................. Company A.
Floating Price Payer.............. Company B.
Settlement Type................... Financial.
Swap Term......................... Six full months from January 1 to
June 30.
Floating Amount................... Floating Price * Notional Quantity.
Fixed Amount...................... Fixed Price * Notional Quantity.
------------------------------------------------------------------------
NYMEX WTI trading in the next to expire futures contract ceases
on the third business day prior to the 25th of the calendar month
preceding the contract month. For simplicity in this example, the
last trading day in each WTI futures contract is shown as the 22nd
of the month.
Futures equivalent position on January 1
Total Notional Quantity = 6 months * 100,000 bbls/month = 600,000
bbls
1,000 bbl = 1 futures contract
Therefore 600,000 bbls/1,000 bbls/contract = 600 futures equivalent
contracts
Total number of days = 31 + 28 + 31 + 30 + 31 + 30 = 181
[[Page 67272]]
Futures Equivalent Position of Swap on January 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Applicable next to Company A Company B Applicable Company A Company B
Dates swap in force Fraction of expire futures position position deferred futures position Position
days month (long)[dagger] (short)[dagger] month (short)[dagger] (long)[dagger]
--------------------------------------------------------------------------------------------------------------------------------------------------------
January 1-January 22........... 22/181 February........... 73 -73 March............. -73 73
January 23-February 22......... 31/181 March.............. 103 -103 April............. -103 103
February 23-March 22........... 28/181 April.............. 93 -93 May............... -93 93
March 23-April 22.............. 31/181 May................ 103 -103 June.............. -103 103
April 23-May 22................ 30/181 June............... 99 -99 July.............. -99 99
May 23-June 22................. 31/181 July............... 103 -103 August............ -103 103
June 23-June 30th.............. 8/181 August............. 27 -27 September......... -27 27
-------------- --------------------------------- --------------------------------
Total...................... 181/181 ................... 601 -601 .................. -601 601
--------------------------------------------------------------------------------------------------------------------------------------------------------
[dagger] Contracts rounded to the nearest integer.
Example 5--Columbia Gulf Mainline Basis Swap (Platts IFERC) Futures
------------------------------------------------------------------------
------------------------------------------------------------------------
Reference price................... The next issue of the Inside FERC's
Gas Market Report (``Platts
IFERC'') Columbia Gulf Transmission
Co. Mainline Index (``Index'') and
the next to expire NYMEX (Henry
Hub) Natural Gas Futures contract
final settlement price.
Fixed Price....................... $0.05 per MMBtu per month.
Floating Price.................... The Floating Price for each contract
month will be equal to the Platts
Inside FERC's Gas Market Report
(``Platts IFERC'') Columbia Gulf
Transmission Co. Mainline Index
(``Index'') published in the table
titled ``Prices of Spot Gas
Delivered to Pipelines'' in the
first regular issue of the contract
month minus the NYMEX (Henry Hub)
Natural Gas Futures contract final
settlement price for the
corresponding contract month.
Calculation Period................ Monthly.
Notional Quantity................. 10,000 MMBtu/calendar day.
Fixed Price Payer................. Company A.
Floating Price Payer.............. Company B.
Settlement type................... Financial.
Swap Term......................... One month from January 1 to January
31.
Floating Amount................... Floating Price * Notional Quantity *
calendar days in the month.
Fixed Amount...................... Fixed Price * Notional Quantity *
calendar days in the month.
------------------------------------------------------------------------
NYMEX Henry Hub Natural Gas Futures Contract trading ceases
three business days prior to the first day of the delivery month.
For simplicity in this example, the last trading day in the futures
contract is shown as the 28th of the month.
Futures equivalent position on January 1
Total Notional Quantity for each leg = 1 month * 31 days/month *
10,000 MMBtu/day = 310,000 MMBtu
10,000 MMBtu = 1 futures contract
Therefore 310,000 MMBtu/10,000 MMBtu/contract = 31 futures
equivalent contracts
Total number of days = 31
Futures Equivalent Position of Swap on January 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Company B
Company A position in
position in Company A Columbia Company B
Columbia position in Gulf position in
Dates swap in force Fraction of Referent futures month Gulf NYMEX (Henry Transmission NYMEX (Henry
days Transmission Hub) natural Co. mainline Hub) natural
Co. mainline gas futures natural gas gas futures
natural gas (short) (short) (long)
(long) MMBtu MMBtu
--------------------------------------------------------------------------------------------------------------------------------------------------------
January 1-January 28.......................... 28/31 February.......................... [dagger][dag -28 [dagger][dag 28
ger][dagger] ger][dagger]
January 29-January 31......................... 3/31 March............................. ............ -3 ............ 3
-------------- -------------------------------------------------------
Total..................................... 31/31 .................................. ............ -31 ............ 31
--------------------------------------------------------------------------------------------------------------------------------------------------------
[dagger][dagger][dagger] Note: Because there is no underlying position taken in a basis contract, for reporting purposes, only enter the futures
equivalent contract quantities into the corresponding futures.
Example 6--WTI Swaption (Call)
------------------------------------------------------------------------
------------------------------------------------------------------------
Swaption Style.................... American.
Option Type....................... Call.
Swaption Start Date............... Jan 1 of the current year.
Swaption End Date................. June 30 of the current year.
Strike Price...................... $80.50/bbl.
Notional Quantity................. 100,000 bbl/month.
Calculation Period................ One month.
[[Page 67273]]
Reference Price................... Daily official next to expire
contract price for WTI NYMEX Crude
Oil Futures Contract in $/bbl
through the NYMEX spot month.
Fixed Price....................... $80.00 per barrel per month.
Floating Price.................... The arithmetic average of the
reference price during the pricing
period.
Settlement Type................... Financial.
Swap Term......................... One month from July 1 to July 31 of
the current year.
Floating Amount................... Floating Price * Notional Quantity.
Fixed Amount...................... Fixed Price * Notional Quantity.
------------------------------------------------------------------------
NYMEX WTI trading ceases on the third business day prior to the
25th of the calendar month preceding the delivery month. For
simplicity in this example, the last trading day in each WTI futures
contract is shown as the 22nd of the month.
Futures equivalent position on January 1
Total Notional Quantity = 1 month * 100,000 bbls/month = 100,000
bbls
1,000 bbl = 1 futures contract
Therefore 100,000 bbls/1,000 bbls/contract = 100 futures equivalent
contracts
Total number of days = 31
Gross Position on January 1
----------------------------------------------------------------------------------------------------------------
Company A Company B
Dates swap in force Referent futures Fraction of days position position
month (long)[dagger] (short)[dagger]
----------------------------------------------------------------------------------------------------------------
July 1-July 22..................... August............... 22/31 70 -70
July 23--July 31................... September............ 9/31 29 -29
-----------------------------------------------------
Total.......................... ..................... 31/31 99 99
----------------------------------------------------------------------------------------------------------------
[dagger] Contracts rounded to the nearest integer.
Delta [dagger][dagger] Adjusted Position and Futures Equivalent Position on January 1
----------------------------------------------------------------------------------------------------------------
August September
Date -----------------------------------------------------------------------
Delta Position Delta Position
----------------------------------------------------------------------------------------------------------------
January 1............................... .2 14 .2 5
----------------------------------------------------------------------------------------------------------------
[dagger][dagger] Deltas should be calculated in an economically reasonable and analytically supportable basis.
Example 7--WTI Collar Swap
------------------------------------------------------------------------
------------------------------------------------------------------------
Swaption Style.................... American.
Swaption Start Date............... Jan 1 of the current year.
Swaption End Date................. June 30 of the current year.
Call strike Price................. $70.00 per bbl.
Put strike price.................. $90.00 per bbl.
Notional Quantity................. 100,000 barrels per month.
Calculation Period................ One month.
Reference Price................... Daily official next to expire
contract price for WTI NYMEX Crude
Oil in $/bbl through the NYMEX spot
month.
Fixed Price....................... $80.00 per barrel.
Floating Price.................... The arithmetic average of the
reference price during the pricing
period.
Settlement Type................... Financial.
Swap Term......................... One month from July 1 to July 31 of
the current year.
Floating Amount................... Floating Price * Notional Quantity.
Fixed Amount...................... Fixed Price * Notional Quantity.
------------------------------------------------------------------------
NYMEX WTI trading ceases on the third business day prior to the
25th of the calendar month preceding the delivery month. For
simplicity in this example, the last trading day in each WTI futures
contract is shown as the 22nd of the month.
Futures equivalent position on January 1
Total Notional Quantity = 1 month * 100,000 bbls/month = 100,000
bbls
1,000 bbl = 1 futures contract
Therefore 100,000 bbls/1,000 bbls/contract = 100 futures equivalent
contracts
Total number of days = 31
Gross Position on January 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Company A position Company B position
Dates swap in force Referent futures month Fraction of ---------------------------------------------------------------
days Call Put Call Put
--------------------------------------------------------------------------------------------------------------------------------------------------------
July 1-July 22............................ August...................... 22/31 70.97 70.97 -70.97 -70.97
[[Page 67274]]
July 23-July 31........................... September................... 9/31 29.03 29.03 -29.03 -29.03
-------------------------------------------------------------------------------
Total................................. ............................ 31/31 100 100 -100 -100
--------------------------------------------------------------------------------------------------------------------------------------------------------
Company (A) Delta[dagger] Adjusted Position on January 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
August September
-----------------------------------------------------------------------------------------------
Date Long call Short put Long call Short put
-----------------------------------------------------------------------------------------------
Delta Position Delta Position Delta Position Delta Position
--------------------------------------------------------------------------------------------------------------------------------------------------------
January 1............................................... .7 49 .3 -21 .7 20 .3 -8
--------------------------------------------------------------------------------------------------------------------------------------------------------
[dagger] Deltas should be calculated in an economically reasonable and analytically supportable basis.
Futures Equivalent Position on January 1
----------------------------------------------------------------------------------------------------------------
August [dagger][dagger] September [dagger][dagger]
Date -----------------------------------------------------------------------
Long Short Long Short
----------------------------------------------------------------------------------------------------------------
January 1............................... 70 0 28 0
----------------------------------------------------------------------------------------------------------------
[dagger][dagger] Contracts rounded to the nearest integer.
Appendix B to Part 20--Explanatory Guidance on Data Record Layouts
Record Layout Examples for Sec. 20.3
The following example (in Tables 1, 2 and 3) covers reporting
for a particular clearing organization. ``Clearing Organization
One'' would report, for the 27th of September 2010, the following
eleven unique data record submissions. Each data record submission
represents a unique position, as indicated by Sec. 20.3, held by a
clearing member of Clearing Organization One. Paragraph (a) of Sec.
20.3 broadly outlines the data elements that determine unique
positions for reports on clearing member positions. Paragraphs (b)
of Sec. 20.3 present all of the data elements that should be
submitted in reference to a particular data record for a particular
clearing member (in Table 1). Paragraph (c) identifies data elements
that would comprise end of day record data on cleared products (in
Tables 2 and 3). Therefore, paragraphs (b) and (c) of Sec. 20.3
present all of the data elements that should be submitted in
reference to a particular data record. Paragraphs (a) and (c) are
reproduced below.
(a) Reporting data records. For each reporting day, with respect
to paired swaps or swaptions, clearing organizations shall report to
the Commission, separately for each clearing member's proprietary
and customer account, unique groupings of the data elements in
paragraph (b) of this section (to the extent that there are such
corresponding elements), in a single data record, so that each
reported record is distinguishable from every other reported record
(because of differing data values, as opposed to the arrangement of
the elements).
(c) End of reporting day data. For all futures equivalent
months, clearing organizations shall report end of reporting day
settlement prices for each cleared product and deltas for every
unique swaption put and call, expiration date, and strike price.
Because CFTC designated Clearing Organization One (in this
example) currently has two clearing members, ``Clearing Members
One'' and ``Clearing Member Two.'' positions cleared for these two
distinct clearing members would be subdivided.
In the following example it is assumed that the clearing member
accounts are either proprietary or customer (but not both) and
therefore data record submissions do not have to be delineated by
these account types. However, if clearing members did have both
proprietary and customer accounts, then a clearing organization
would have to further subdivide these clearing member data records
by these two account types.
Clearing Member One currently has five positions with multiple
cleared product IDs and futures equivalent months/years, and
therefore these positions also constitute separate data records.
Clearing Member Two currently has six positions with the
following varying characteristics: Cleared product IDs; futures
equivalent months/years; commodity reference prices; swaption
positions that involve both puts and calls; and multiple strike
prices. Accordingly, these positions must be reported in separate
data records. An illustration of how these records would appear is
included in Table 1 below. Clearing Organization One would also have
to report the corresponding swaption position deltas, strike prices,
expiration dates, and settlement prices and swap settlement prices.
An illustration of these submissions is included in Tables 2 and 3
below.
Table 1--Data Records Reported Under Paragraphs (a) and (b) of Sec. 20.3
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Proprietary/ Futures
Data records CFTC clearing org Clearing org Clearing org Reporting day customer account equivalent month Commodity reference price
ID clearing member ID cleared product ID indicator and year
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Data record 1.................... CCI--ID--1........ CM--ID--2......... CP--04............ 9/27/2010......... C................... Nov-10........... NYMEX NY Harbor No. 2.
Data record 2.................... CCO--ID--1........ CM--ID--2......... CP--04............ 9/27/2010......... C................... Oct-10........... NYMEX NY Harbor No. 2.
Data record 3.................... CCI--ID--1........ CM--ID--2......... CP--02............ 9/27/2010......... C................... Nov-10........... NYMEX Henry Hub.
Data record 4.................... CCO--ID--1........ CM--ID--2......... CP--02............ 9/27/2010......... C................... Oct-10........... NYMEX Henry Hub.
Data record 5.................... CCI--ID--1........ CM--ID--2......... CP--02............ 9/27/2010......... C................... Nov-10........... NYMEX Henry Hub.
Data record 6.................... CCO--ID--1........ CM--ID--2......... CP--02............ 9/27/2010......... C................... Oct-10........... NYMEX Henry Hub.
Data record 7.................... CCO--ID--1........ CM--ID--1......... CP--03............ 9/27/2010......... P................... Mar-11........... NYMEX Light Sweet.
[[Page 67275]]
Data record 8.................... CCO--ID--1........ CM--ID--1......... CP--03............ 9/27/2010......... P................... Feb-11........... NYMEX Light Sweet.
Data record 9.................... CCO--ID--1........ CM--ID--1......... CP--01............ 9/27/2010......... P................... Mar-11........... NYMEX Light Sweet.
Data record 10................... CCO--ID--1........ CM--ID--1......... CP--01............ 9/27/2010......... P................... Feb-11........... NYMEX Light Sweet.
Data record 11................... CCO--ID--1........ CM--ID--1......... CP--01............ 9/27/2010......... P................... Jan-11........... NYMEX Light Sweet.
NDR.............................. Yes............... Yes............... Yes............... Yes............... Yes................. Yes.............. No.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Non-delta
Data records Long swap position Short swap Put/call Swaption Swaption strike adjusted long Non-delta adjusted short swaption
position indicator expiration date price swaption position position
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Data record 1.................... 0 5000 .................. ................. ................. ................. ........................................
Data record 2.................... 0 2000 .................. ................. ................. ................. ........................................
Data record 3.................... .................. .................. C 7/29/2011 5.59 2000 0
Data record 4.................... .................. .................. C 7/29/2011 5.59 18000 0
Data record 5.................... .................. .................. P 7/29/2011 5.50 100 30
Data record 6.................... .................. .................. P 7/29/2011 5.50 900 270
Data record 7.................... 5000 0 .................. ................. ................. ................. ........................................
Data record 8.................... 5000 0 .................. ................. ................. ................. ........................................
Data record 9.................... 429 1286 .................. ................. ................. ................. ........................................
Data record 10................... 2281 6843 .................. ................. ................. ................. ........................................
Data record 11................... 1290 3871 .................. ................. ................. ................. ........................................
NDR.............................. No No Yes Yes Yes No No
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The bottom row of Table 1 indicates whether data elements
for which any difference in one of the elements constitutes a reason
for a new data record (NDR).
Table 2--Example of Data Records Required Under Sec. 20.3(c) for Cleared Swaption Products
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Swaption
CFTC clearing Clearing org Reporting Futures Commodity reference Swaption Swaption Put/call daily
Data records org ID cleared product day equivalent month price expiration strike price indicator Delta settlement
ID and year date price
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Data record 1................... CCI--ID--1...... CP--02.......... 9/27/2010 Nov-10.......... NYMEX Henry Hub..... 7/29/2011 5.59.......... C............. .5............ 6.25
Data record 2................... CCO--ID--1...... CP--02.......... 9/27/2010 Oct-10.......... NYMEX Henry Hub..... 7/29/2011 5.59.......... C............. .5............ 5.50
Data record 3................... CCI--ID--1...... CP--02.......... 9/27/2010 Nov-10.......... NYMEX Henry Hub..... 7/29/2011 5.50.......... P............. .2............ 4.53
Data record 4................... CCO--ID--1...... CP--02.......... 9/27/2010 Oct-10.......... NYMEX Henry Hub..... 7/29/2011 5.50.......... P............. .2............ 4.78
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Table 3--Example of Data Records Required Under Sec. 20.3(c) for Cleared Swap Products
--------------------------------------------------------------------------------------------------------------------------------------------------------
Swap daily
Data records CFTC clearing org ID Clearing org cleared Reporting day Futures equivalent Commodity reference settlement
product ID month and year price price
--------------------------------------------------------------------------------------------------------------------------------------------------------
Data record 1................... CCI--ID--1.......... CP--04.............. 9/27/2010 Nov-10.............. C................... 20.35
Data record 2................... CCO--ID--1.......... CP--04.............. 9/27/2010 Oct-10.............. C................... 10.50
Data record 3................... CCO--ID--1.......... CP--03.............. 9/27/2010 Mar-11.............. P................... 15.00
Data record 4................... CCO--ID--1.......... CP--03.............. 9/27/2010 Feb-11.............. P................... 21.00
Data record 5................... CCO--ID--1.......... CP--01.............. 9/27/2010 Mar-11.............. P................... 17.50
Data record 6................... CCO--ID--1.......... CP--01.............. 9/27/2010 Feb-11.............. P................... 21.65
Data record 7................... CCO--ID--1.......... CP--01.............. 9/27/2010 Jan-11.............. P................... 12.50
--------------------------------------------------------------------------------------------------------------------------------------------------------
Record Layout Example for Sec. 20.4
In this example, ``Reporting Entity One'' would report for the
27th of September 2010, the following twelve unique data records
under Sec. 20.4. Each data record represents a unique part of a
reportable position in the same commodity held by Reporting Entity
One. Paragraph (b) of Sec. 20.4 outlines the data elements that
determine unique positions; paragraph (b) is reproduced below.
(b) Reporting data records. Reporting entities shall report to
the Commission, for each reporting day, and separately for each
consolidated account described in paragraphs (a)(1) through (a)(3)
of this section that is reportable, unique groupings of the data
elements in paragraph (c) of this section (to the extent that there
are such corresponding elements), in a single data record, so that
each reported record is distinguishable from every other reported
record (because of differing data values, as opposed to the
arrangement of the elements).
In the following example it is assumed that Reporting Entity One
currently clears with one clearing organization and therefore the
[[Page 67276]]
data records do not have to be delineated by clearing organization.
However, if Reporting Entity One did use multiple clearing
organizations, then it would have to further subdivide its data
submissions by each clearing organization.
Reporting Entity One currently has twelve positions with the
following varying characteristics: account owners; account
controllers; futures equivalent months/years; clearing organization
cleared products; swaptions that were either cleared or uncleared;
commodity reference prices; and whether the trade was entered into
on or off execution facilities. Accordingly, these positions
constitute separate data records. An illustration of how these
records would appear is included in Table 4 below.
Table 4--Example of Data Records Reported Under Sec. 20.4(c)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Commission Reporting entity
Data records reporting entity client account 102S Owner ID 102S Controller Account owner Account Reporting day Clearing org cleared
ID number ID name controller name product ID
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Data record 1.................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--04
Data record 2.................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--04
Data record 3.................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--04
Data record 4.................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--04
Data record 5.................... CRE--ID--1........ ACCT--3........... CONTROL--2........ OWNER--1......... XYZ Corp......... FED Corp......... 9/27/2010......... CP--03
Data record 6.................... CRE--ID--1........ ACCT--4........... CONTROL--2........ OWNER--2......... WVU Corp......... FED Corp......... 9/27/2010......... CP--03
Data record 7.................... CRE--ID--1........ ACCT--2........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--03
Data record 8.................... CRE--ID--1........ ACCT--5........... CONTROL--1........ OWNER--2......... WVU Corp......... ABC Corp......... 9/27/2010......... CP--03
Data record 9.................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... ....................
Data record 10................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... ....................
Data record 11................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--01
Data record 12................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--01
NDR Uncleared.................... Yes............... Yes............... No................ No............... No............... No............... Yes............... No
NDR Cleared...................... Yes............... Yes............... No................ No............... No............... No............... Yes............... Yes
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Futures Cleared/
Data records Commodity equivalent uncleared CFTC clearing Commodity Execution Long swap Short swap
code month and year indicator org identifier reference price facility position position
--------------------------------------------------------------------------------------------------------------------------------------------------------
Data record 1................ HO1.......... Feb-11........ C.............. CCO--ID--1.... Platts Oilgram EX1.......... 1989....... 0
Price Report
for New York
No. 2 (Barge).
Data record 2................ HO1.......... Jan-11........ C.............. CCO--ID--1.... Platts Oilgram EX2.......... 2011....... 0
Price Report
for New York
No. 2 (Barge).
Data record 3................ HO1.......... Feb-11........ C.............. CCO--ID--1.... NYMEX NY Harbor EX1.......... 0.......... 5000
No. 2.
Data record 4................ CL........... Jan-11........ C.............. CCO--ID--1.... NYMEX NY Harbor EX3.......... 0.......... 2000
No. 2.
Data record 5................ CL........... Feb-11........ C.............. CCO--ID--1.... NYMEX Light EX1.......... 5000....... 0
Sweet.
Data record 6................ CL........... Feb-11........ C.............. CCO--ID--1.... NYMEX Light EX1.......... 5000....... 0
Sweet.
Data record 7................ CL........... Feb-11........ C.............. CCO--ID--1.... NYMEX Light EX7.......... 429........ 1286
Sweet.
Data record 8................ CL........... Feb-11........ C.............. CCO--ID--1.... NYMEX Light EX1.......... 1571....... 4714
Sweet.
Data record 9................ NG........... Nov-10........ U.............. U............. NYMEX Henry Hub. NOEX......... ........... ...........
Data record 10............... NG........... Oct-10........ U.............. U............. NYMEX Henry Hub. NOEX......... ........... ...........
Data record 11............... NG........... Nov-10........ C.............. CCO--ID--1.... NYMEX Henry Hub. EX1.......... ........... ...........
Data record 12............... NG........... Oct-10........ C.............. CCO--ID--1.... NYMEX Henry Hub. EX1.......... ........... ...........
NDR Uncleared................ No........... Yes........... Yes............ No............ Yes............. Yes.......... No......... No
NDR Cleared.................. No........... Yes........... Yes............ Yes........... No.............. Yes.......... No......... No
--------------------------------------------------------------------------------------------------------------------------------------------------------
Short swap or
Non-delta Non-delta Delta adjusted Delta adjusted Long swap or swaption
Data records Put/call Swaption expiration Swaption adjusted long adjusted short long swaption short swaption swaption notional notional
indicator date strike price swaption swaption position position value position value
position position position
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Data record 1................... ................ ................... .............. ................ ................ .............. .............. .................... .............
Data record 2................... ................ ................... .............. ................ ................ .............. .............. .................... .............
Data record 3................... ................ ................... .............. ................ ................ .............. .............. .................... .............
Data record 4................... ................ ................... .............. ................ ................ .............. .............. .................... .............
Data record 5................... ................ ................... .............. ................ ................ .............. .............. .................... .............
Data record 6................... ................ ................... .............. ................ ................ .............. .............. .................... .............
Data record 7................... ................ ................... .............. ................ ................ .............. .............. .................... .............
Data record 8................... ................ ................... .............. ................ ................ .............. .............. .................... .............
Data record 9................... ................ ................... .............. 2000............ 0............... 1000.......... 0............. 111800000........... 0
Data record 10.................. ................ ................... .............. 18000........... 0............... 9000.......... 0............. 1006200000.......... 0
Data record 11.................. P............... 7/29/2011.......... 5.55.......... 100............. 30.............. 20............ 6............. .................... .............
Data record 12.................. P............... 7/29/2011.......... 5.55.......... 900............. 270............. 180........... 54............ .................... .............
NDR Uncleared................... No.............. Yes................ No............ No.............. No.............. No............ No............ No.................. No
NDR Cleared..................... Yes............. Yes................ Yes........... No.............. No.............. No............ No............ No.................. No
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The bottom two rows in Table 4 indicate whether, for
uncleared and cleared swaps and swaptions, data elements for which
any difference in one of the elements constitutes a reason for a new
data record (NDR).
Issued by the Commission this 19th day of October 2010 in
Washington, DC.
David Stawick,
Secretary of the Commission.
Note: The following attachments will not appear in the Code of
Federal Regulations.
Statement of Chairman Gary Gensler
Position Reports for Physical Commodity Swaps
October 19, 2010
I support the proposed large trader reporting rulemaking for
physical commodity swaps. The Commission currently receives data on
large
[[Page 67277]]
positions in all physical commodity futures traded on DCMs and uses it
for market surveillance purposes, including position limit enforcement.
With today's proposed rule, we would have an analogous reporting system
for swaps.
The proposal would require position reports on economically
equivalent swaps from clearing organizations, their members and swap
dealers. This will enable the CFTC to receive such data until swap data
repositories are in operation and capable of fulfilling the
Commission's need for this information.
Concurring Statement of Commissioner Jill E. Sommers
Relating to the Commission's Proposal on Position Reports for Physical
Commodity Swaps and Swaptions
October 19, 2010
I support this proposal to receive daily position reports for
physical commodity swaps and swaptions because I believe it furthers
our continued effort to expand transparency into swap markets and
because I believe it is critical that the Commission receive this
information as soon as possible. I recognize that this proposal is a
precursor to the Commission moving forward with a proposal on the
imposition of position limits. That said, my vote in support of this
proposal today should not in any way be interpreted as expressing
support for moving forward with the imposition of position limits by
the deadlines set forth in Dodd-Frank.
In July and August 2009, the Commission held three public hearings
to discuss imposition of position limits in energy markets. Five months
later, in January 2010, the Commission issued a proposed rule imposing
position limits in four enumerated energy contracts. I had grave
concerns about moving forward with position limits on those four
contracts, and accordingly voted against the proposal. My grave
concerns about moving forward with position limits have not been eased,
and in fact, have only been heighted by certain provisions of Dodd-
Frank.
Section 737 of Dodd-Frank states that the Commission shall by rule,
regulation, or order establish limits on the amount of positions, as
appropriate, that may be held by any person. This section requires the
limits to be aggregated across markets and related products and to be
imposed within 180 days for energy and metals contracts, and 270 days
for agricultural contracts.
In my view, no position limit is appropriate if it is imposed
without the benefit of receiving and fully analyzing complete data
concerning the open interest in each market. Only then is the
Commission able to properly consider the size of each market and
calibrate a limit that is appropriate for each market. Currently, the
Commission does not have complete data and will not have complete data
until swap data repositories are up and running and all swap market
data is reported to swap data repositories or to the Commission. I
believe that, optimistically, the earliest this reporting can happen
will be by the end of 2011. Again that is an optimistic estimate.
Because of the 180 and 270 day requirements in Dodd-Frank, as we
sit here today, the Commission is tentatively planning a November 30
public meeting to vote on proposed speculative position limits for
exempt and agricultural commodities. Mind you, by November 30 the
Commission will not have garnered any data from the proposed rule we
are discussing today, because it, or some modified version of it,
probably will not be effective in final form by November 30. In
addition, by November 30, swap data repositories will still be at least
one year away from operating. Even if the proposed rule we are
discussing today were effective by November 30, it will not provide
complete information sufficient to impose position limits.
Under these circumstances, when considering the imposition of
aggregate position limits on exempt and agricultural commodities, I
believe the Commission should find that imposing such limits is not
appropriate in the absence of full and complete data and analysis on
the open interest in each market. I believe it is a mistake to
interpret the arbitrary 180 day and 270 day deadlines as somehow
trumping the requirement that the Commission make an appropriateness
determination before imposing any position limits.
This is an issue that I will be following closely, and I look
forward to hearing the views of the public and market participants on
this issue.
[FR Doc. 2010-27538 Filed 11-1-10; 8:45 am]
BILLING CODE 6351-01-P