[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]




          HEARING TO REVIEW THE G20 SWAP DATA REPORTING GOALS

=======================================================================

                                HEARING

                               BEFORE THE

        SUBCOMMITTEE ON COMMODITY EXCHANGES, ENERGY, AND CREDIT

                                 OF THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 25, 2016

                               __________

                           Serial No. 114-44

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



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                        COMMITTEE ON AGRICULTURE

                  K. MICHAEL CONAWAY, Texas, Chairman

RANDY NEUGEBAUER, Texas,             COLLIN C. PETERSON, Minnesota, 
    Vice Chairman                    Ranking Minority Member
BOB GOODLATTE, Virginia              DAVID SCOTT, Georgia
FRANK D. LUCAS, Oklahoma             JIM COSTA, California
STEVE KING, Iowa                     TIMOTHY J. WALZ, Minnesota
MIKE ROGERS, Alabama                 MARCIA L. FUDGE, Ohio
GLENN THOMPSON, Pennsylvania         JAMES P. McGOVERN, Massachusetts
BOB GIBBS, Ohio                      SUZAN K. DelBENE, Washington
AUSTIN SCOTT, Georgia                FILEMON VELA, Texas
ERIC A. ``RICK'' CRAWFORD, Arkansas  MICHELLE LUJAN GRISHAM, New Mexico
SCOTT DesJARLAIS, Tennessee          ANN M. KUSTER, New Hampshire
CHRISTOPHER P. GIBSON, New York      RICHARD M. NOLAN, Minnesota
VICKY HARTZLER, Missouri             CHERI BUSTOS, Illinois
DAN BENISHEK, Michigan               SEAN PATRICK MALONEY, New York
JEFF DENHAM, California              ANN KIRKPATRICK, Arizona
DOUG LaMALFA, California             PETE AGUILAR, California
RODNEY DAVIS, Illinois               STACEY E. PLASKETT, Virgin Islands
TED S. YOHO, Florida                 ALMA S. ADAMS, North Carolina
JACKIE WALORSKI, Indiana             GWEN GRAHAM, Florida
RICK W. ALLEN, Georgia               BRAD ASHFORD, Nebraska
MIKE BOST, Illinois
DAVID ROUZER, North Carolina
RALPH LEE ABRAHAM, Louisiana
JOHN R. MOOLENAAR, Michigan
DAN NEWHOUSE, Washington
TRENT KELLY, Mississippi

                                 ______

                    Scott C. Graves, Staff Director

                Robert L. Larew, Minority Staff Director

                                 ______

        Subcommittee on Commodity Exchanges, Energy, and Credit

                    AUSTIN SCOTT, Georgia, Chairman

BOB GOODLATTE, Virginia              DAVID SCOTT, Georgia, Ranking 
FRANK D. LUCAS, Oklahoma             Minority Member
RANDY NEUGEBAUER, Texas              FILEMON VELA, Texas
MIKE ROGERS, Alabama                 SEAN PATRICK MALONEY, New York
DOUG LaMALFA, California             ANN KIRKPATRICK, Arizona
RODNEY DAVIS, Illinois               PETE AGUILAR, California
TRENT KELLY, Mississippi

                                  (ii)
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Scott, Hon. Austin, a Representative in Congress from Georgia, 
  opening statement..............................................     1
    Prepared statement...........................................     2
Scott, Hon. David, a Representative in Congress from Georgia, 
  opening statement..............................................     3

                               Witnesses

Rogers, John L., Chief Information Officer, Commodity Futures 
  Trading Commission, Washington, D.C............................     4
    Prepared statement...........................................     5
Kruse, Tara, Co-Head of Data Reporting and FpML, International 
  Swaps and Derivatives Association, New York, NY................     9
    Prepared statement...........................................    10
Collazo, J.D., Marisol, Managing Director and Chief Executive 
  Officer of DTCC Data Repository, Depository Trust and Clearing 
  Corporation, New York, NY......................................    16
    Prepared statement...........................................    18
Gil, Andres, Director, Center for Capital Markets 
  Competitiveness; Representative, Coalition for Derivatives End-
  Users, Washington, D.C.........................................    24
    Prepared statement...........................................    26
 
          HEARING TO REVIEW THE G20 SWAP DATA REPORTING GOALS

                              ----------                              


                      THURSDAY, FEBRUARY 25, 2016

                  House of Representatives,
   Subcommittee on Commodity Exchanges, Energy, and Credit,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 10:03 a.m., in 
Room 1300 of the Longworth Building, Hon. Austin Scott of 
Georgia [Chairman of the Subcommittee] presiding.
    Members present: Representatives Austin Scott of Georgia, 
Lucas, Neugebauer, LaMalfa, Davis, Kelly, David Scott of 
Georgia, and Aguilar.
    Staff present: Kevin Webb, Paul Balzano, Stephanie Addison, 
Matthew MacKenzie, Nicole Scott, and Carly Reedholm.

  OPENING STATEMENT OF HON. AUSTIN SCOTT, A REPRESENTATIVE IN 
                     CONGRESS FROM GEORGIA

    The Chairman. Good morning. I want to start today by 
thanking you for joining the Commodity Exchanges, Energy, and 
Credit Subcommittee for our first meeting of 2016.
    As many of you may remember, the full House Committee on 
Agriculture held a hearing last July on the implementation of 
Dodd-Frank over the 5 years since it was passed. That hearing 
highlighted some of the remaining challenges that regulators 
must still tackle to complete the derivatives market reforms 
envisioned by world leaders in the aftermath of the 2008 global 
financial crisis. The purpose of today's hearing is to dive 
deeper on one issue in particular and that is the status of 
swap data reporting goals and to better understand what work 
remains to be completed.
    In response to the crisis, a crucial goal of the G20 
financial reform commitments was to bring about greater 
regulatory transparency in the over-the-counter derivatives 
marketplace.
    With that focus, the United States imposed broad data 
collection requirements for OTC derivatives and established 
swap data repositories to collect and maintain swap data under 
the Dodd-Frank Act. The 5 years since the enactment of Dodd-
Frank have seen some significant progress in the reporting of 
the OTC derivatives trades and several clear victories in the 
quest for market transparency.
    However, this progress remains uneven, and major gaps 
remain in translating that progress in data reporting to 
meaningful market oversight. Data collection alone is not 
sufficient to achieve the goal of increased regulatory 
transparency. Real insight into global systemic risk requires 
that regulators be able to aggregate data accurately from 
different SDRs here in the United States and across global 
jurisdictions.
    Market participants have raised serious concerns about the 
status of regulatory transparency efforts. This Committee has 
heard testimony about the lack of common data standards and 
common reporting standards. This lack of standardization 
unfortunately falls at many points on the reporting spectrum, 
from inconsistency among global regulators on trade reporting 
requirements to undefined data collection requirements from the 
CFTC. Even something as simple as a defined way to record a 
date hasn't been established. Imagining the variety of possible 
variations for that one simple data point, do you start with 
the month or do you start with the year, helps illustrate the 
larger issue at hand.
    I think we all agree that there is little regulatory value 
in non-standardized, non-aggregatable data. The question at 
hand then is how to continue moving the ball forward to achieve 
needed market transparency and, importantly, how to do so 
without forcing artificial standardization and a one-size-fits-
all approach unto a highly customized market, especially in 
regard to the non-financial commodity swaps relied upon by end-
users for risk management.
    We hope to leave this hearing with a better understanding 
of the progress made towards meeting the reporting and 
transparency goals set forth by the G20, as well as market 
participants' and the CFTC's role in that process. In the end, 
the success or failure of our financial reform efforts cannot 
be judged by the list of rules finalized by the CFTC. Real 
reform requires coordination between global regulators to 
create a coherent system of regulation that fosters market 
access and promotes market integrity.
    We are fortunate to be joined by a panel of distinguished 
witnesses here to share their views from both the regulatory 
and market participant perspectives. Thank you to each of you 
for appearing before us today. We look forward to hearing your 
perspective on these issues and appreciate the time and effort 
you've put forward to be here.
    [The prepared statement of Mr. Austin Scott follows:]

 Prepared Statement of Hon. Austin Scott, a Representative in Congress 
                              from Georgia
    Good morning. I want to start today by thanking you for joining the 
Commodity Exchanges, Energy, and Credit Subcommittee for our first 
meeting of 2016.
    As many of you may remember, the full House Committee on 
Agriculture held a hearing last July on the implementation of Dodd-
Frank over the 5 years since it was passed. That hearing highlighted 
some of the remaining challenges that regulators must still tackle to 
complete the derivatives market reforms envisioned by world leaders in 
the aftermath of the 2008 global financial crisis. The purpose of 
today's hearing is to dive deeper on one issue in particular--the 
status of swap data reporting goals--and to better understand what work 
remains to be completed.
    In response to the crisis, a crucial goal of the G20 financial 
reform commitments was to bring about greater regulatory transparency 
in the over-the-counter (OTC) derivatives marketplace.
    With that focus, the United States imposed broad data collection 
requirements for OTC derivatives and established swap data repositories 
(SDRs) to collect and maintain swap data under the Dodd-Frank Act. The 
5 years since the enactment of Dodd-Frank have seen some significant 
progress in the reporting of OTC derivatives trades and several clear 
victories in the quest for market transparency.
    However, this progress remains uneven, and major gaps remain in 
translating that progress in data reporting to meaningful market 
oversight. Data collection alone is not sufficient to achieve the goal 
of increased regulatory transparency. Real insight into global systemic 
risk requires that regulators be able to aggregate data accurately from 
different SDRs here in the United States and across global 
jurisdictions.
    Market participants have raised serious concerns about the status 
of regulatory transparency efforts. This Committee has heard testimony 
about the lack of common data standards and common reporting 
requirements.
    This lack of standardization unfortunately falls at many points on 
the reporting spectrum, from inconsistency among global regulators on 
trade reporting requirements to undefined data collection requirements 
from the CFTC. Even something as simple as a defined way to record a 
date hasn't been established. Imagining the variety of possible 
variations for that one simple data point--do you start with the month 
or do you start with the year--helps illustrate the larger issue at 
hand.
    I think we all agree that there is little regulatory value in non-
standardized, non-aggregatable data. The question at hand, then, is how 
to continue moving the ball forward to achieve needed market 
transparency. And, importantly, how to do so without forcing artificial 
standardization and a one-size-fits-all approach unto a highly 
customized market, especially in regard to the non-financial commodity 
swaps relied upon by end-users for risk management.
    We hope to leave this hearing with a better understanding of the 
progress made towards meeting the reporting and transparency goals set 
forth by the G20, as well as market participants' and the CFTC's role 
in that process. In the end, the success or failure of our financial 
reform efforts cannot be judged by the list of rules finalized by the 
CFTC. Real reform requires coordination between global regulators to 
create a coherent system of regulation that fosters market assess and 
promotes market integrity.
    We are fortunate to be joined by a panel of distinguished witnesses 
who are here to share their views from both the regulatory and market 
participant perspectives. Thanks to each of you for appearing before us 
today. We look forward to hearing your perspectives on these issues and 
appreciate the time and effort you've put forward to be here.
    With that, I'll recognize our Ranking Member, Mr. Scott, for any 
remarks he'd like to make.

    The Chairman. With that, I will recognize our Ranking 
Member, Mr. Scott, for any remarks he would like to make.

  OPENING STATEMENT OF HON. DAVID SCOTT, A REPRESENTATIVE IN 
                     CONGRESS FROM GEORGIA

    Mr. David Scott of Georgia. Thank you, Chairman Scott. 
Getting data on swaps is one of the three main goals of Dodd-
Frank. The lack of data to form an overall picture of what is 
happening in the markets was a major contributor to our 
financial crisis. This hearing is an excellent follow-up to the 
Dodd-Frank at 5 years hearing we had in July where we aimed to 
make inroads to completing the G20's vision of implementing 
clearing, margining, electronic execution, data reporting, and 
capital standards.
    Here before us now today is the challenge of getting 
aggregate data from many repositories in many different 
jurisdictions. I agree with the Office for Financial Research 
who noted that good data are essential for good policy 
decisions, and data gaps and lack of data access hinder 
policymakers, hinder supervisors, and hinders regulators from 
understanding and addressing the vulnerabilities in individual 
institutions and markets across our financial system.
    The CFTC has an important mission and will be unable to 
complete it without a data system that works for those 
reporting as well as the CFTC using the data. I am happy today 
to see every part of this industry represented here with the 
panel from every part of the data collection process. And I am 
confident that with input from everyone involved, we will be 
able to put together a system that works.
    So I would like to thank you, Mr. Rogers, you, Ms. Kruse, 
Ms. Collazo, and Mr. Gil for being here today, and I look 
forward to hearing your testimony. Thank you, Mr. Chairman.
    The Chairman. The chair would request that other Members 
submit their opening statements for the record so the witnesses 
may begin their testimony and to assure that there is ample 
time for questions.
    The chair would like to remind Members that they will be 
recognized for questioning in order of seniority for Members 
who were present at the start of the hearing. After that, 
Members will be recognized in order of their arrival. I 
appreciate Members' understanding.
    Witnesses are reminded to limit their oral presentation to 
5 minutes. All written statements will be included in the 
record. You should have a timer in front of you that is pretty 
accurate.
    Now I would like to introduce the witnesses. Mr. John 
Rogers, Chief Information Officer, Commodity Futures Trading 
Commission, Washington, D.C.; Ms. Tara Kruse, Co-Head of Data 
Reporting for FpML, ISDA, New York, New York; Ms. Marisol 
Collazo, Managing Director and CEO of DTCC Data Repository, 
Depository Trust and Clearing Corporation, New York, New York; 
and Mr. Andres Gil, Director, Center for Capital Markets 
Competitiveness and Representative, Coalition for Derivatives 
End-Users, Washington, D.C.
    Mr. Rogers, please begin when you are ready.

         STATEMENT OF JOHN L. ROGERS, CHIEF INFORMATION
OFFICER, COMMODITY FUTURES TRADING COMMISSION, WASHINGTON, D.C.

    Mr. Rogers. Thank you Chairman Scott, Ranking Member Scott, 
and Members of this Subcommittee. I am pleased to update you on 
the CFTC's progress in achieving the G20's swap data reporting 
goals.
    I am the Director of the CFTC's Office of Data and 
Technology and serve in the role of Chief Information Officer. 
In this capacity, I oversee the technology and data functions 
of the Commission.
    As you know, increased data reporting was a key objective 
of the G20 agreement and Dodd-Frank.
    The CFTC has made significant progress since 2008 where 
there was virtually no reporting of swaps positions or 
transactions. During the crisis, a lack of data made it 
difficult for regulators and market participants to assess the 
exposures and interconnectedness of major institutions.
    Today, all swaps, whether cleared or uncleared, are 
reported to swaps data repositories. Public websites are 
providing price and volume information for individual swaps 
transactions in real-time. This facilitates efficient price 
discovery for all market participants, including end-users such 
as farmers, ranchers and commercial businesses of all types.
    As a regulator, the CFTC's ability to oversee the swaps 
market has dramatically improved. But building this system is 
complicated and an ongoing task. It is time and resource 
intensive requiring constant updates and refinements as we 
understand the data better.
    As a result, the Commission is working to ensure the data 
it receives is clean, consistent, accurate, and timely. It is 
collaborating with market participants to analyze exactly what 
data should be reported, how it should be reported, by whom, 
and when. And the agency is working with industry and other 
nations to harmonize and standardize our efforts.
    One of the issues the CFTC is taking action to address is 
the variation in how the same data from different 
counterparties is reported. This causes problems when it comes 
to aggregating and analyzing this information. To address this 
issue, CFTC staff recently requested public comment on 
technical specifications for the reporting of 120 priority data 
elements. This followed months of work to identify areas where 
standardization or clarification is needed. From this feedback, 
the Commission will develop proposals that specify the form, 
manner, and allowable values that each data element may have. 
In fact, just this week the Commission held a public hearing of 
the CFTC's Technology Advisory Committee to discuss this issue 
among others.
    The Commission is also working towards obtaining complete 
data. Some required fields are not reported by participants, 
and SDRs do not believe they have the authority to reject data 
if it is incomplete. CFTC Chairman Massad recently underscored 
his belief that the CFTC should change its rules so that SDRs 
have a greater ability to improve the quality of data before it 
arrives at the CFTC. Staff is looking closely at this 
possibility.
    Further, the CFTC is working to develop a uniform, 
effective means to identify swaps and swap activity by 
participant, transaction, and product type throughout the swap 
lifecycle. And we are at the forefront to addressing all these 
issues internationally.
    I am pleased to co-chair the international task force that 
is leading global harmonization efforts.
    Finally, the Commission continues to fine tune its rules to 
clarify which entities have an obligation to report data and 
what data must be reported. It is paying particular attention 
to the needs of commercial market participants, ultimately 
working to eliminate reporting obligations that are not 
necessary.
    Thank you, Mr. Chairman, and Members of this Committee. Let 
me conclude by reiterating that this swap data reporting effort 
is a significant, global undertaking. Completing it properly 
will take time. But I believe the agency has made significant 
progress in just a few short years. Thank you again for 
inviting me. I welcome your thoughts and questions.
    [The prepared statement of Mr. Rogers follows:]

   Prepared Statement of John L. Rogers, Chief Information Officer, 
         Commodity Futures Trading Commission, Washington, D.C.
    Thank you Chairman Scott, Ranking Member Scott, and Members of this 
Subcommittee. I am pleased to be here today to update you on the 
Commodity Futures Trading Commission's (CFTC) progress in achieving the 
G20's swap data reporting goals.
    The CFTC oversees the futures, options, and swaps markets. As you 
know, these markets are vital to our economy, affecting the prices we 
all pay for food, energy, and other goods and services. They do this by 
providing farmers, ranchers and businesses of all types with the 
ability to manage costs and hedge commercial risk.
    I am the Director of the CFTC's Office of Data and Technology and 
serve in the role of Chief Information Officer (CIO). In this capacity, 
I oversee the technology and data functions of the Commission. I am 
responsible for strategic planning, data management, systems 
development, infrastructure operations, information technology (IT) 
security and technology planning.
    In 2010, the role of the CIO changed significantly. As you know, 
swap data reporting was one of the key goals of G20 agreement, and was 
later codified in the Dodd-Frank Act. As a result, the CFTC's 
responsibilities in this area were expanded following Dodd-Frank's 
enactment.
Background
    Since the passage of the Dodd Frank, the Commission has adopted 
rules for data reporting that have fundamentally changed how we view 
the markets. For example, in the fall of 2008, there was effectively no 
reporting of swap transactions or positions. During the crisis, this 
lack of information made it difficult for regulators and market 
participants to assess the exposures of major institutions, or the 
interconnectedness of those exposures. In fact, the opaque nature of 
this market may have contributed to excessive risk-taking in the first 
place.
    Today, we see a different landscape. Increased data reporting has 
provided greater transparency to market participants. Regulators have a 
greater ability to assess systemic risk in the market.
    For example, currently all swaps, whether cleared or uncleared, 
must be reported to swap data repositories (SDRs). There are four SDRs 
operating in the United States, and there are two dozen 
internationally. The Commission has requirements for which market 
participants must report, what and when they must report, and how they 
operate.
    Increased transparency and access to information on swaps has 
benefited the public. For example, SDRs' public websites provide price 
and volume information for individual swap transactions in real-time. 
This facilitates efficient price discovery for all market participants, 
including end-users such as farmers, ranchers and commercial 
businesses. In addition, the CFTC provides a Weekly Swaps Report that 
gives an aggregate snapshot of the market, sliced and diced in various 
ways. Users of swaps also have access to data through swap execution 
facility (SEF) platforms and other vendors that facilitate price 
discovery.
    This transparency has also fostered private sector innovation that 
is further promoting the public good. For example, some companies are 
analyzing swap execution facility (SEF) data and packaging it in a way 
that provides a more comprehensive picture of what's happening on SEFs 
at any given time. Other companies are enhancing public data by 
aggregating information from SDRs in real-time.
    As a regulator, the CFTC reaps the benefits of this data as well. 
Our ability to oversee the swaps market has dramatically improved. As 
with futures and options data, swaps data is critical in helping the 
CFTC fulfill its core mission.
    Over the years, the Commission has built a sophisticated 
surveillance system for futures that relies on inputs from 
clearinghouses, clearing members and large traders. Examples of this 
data include clearing member positions by house and customer account, 
as well as by individual customer; large trader reporting; the amounts 
of both initial margin held, and variation margin paid and received; as 
well as the financial resources of firms. These and other inputs allow 
staff to look at market risk, liquidity risk, credit risk and 
concentration risk on a daily basis--all at the clearinghouse, clearing 
member, and trader level. For example, this helps the Commission to 
stress test exposures and back test the adequacy of margin coverage, 
all of which is important to oversight of the markets.
    The CFTC is now building swaps into these risk surveillance 
systems, to identify and monitor swaps activities and exposures. This 
allows the CFTC to stress test those exposures, compare them to 
available margin, and look at potential systemic issues. The Commission 
looks at activity and risk at the clearinghouse, clearing member, swap 
dealer and large customer level. With uncleared exposures, the CFTC 
focuses on activity between counterparties, the interconnectedness of 
large institutions, and other areas.
    In addition to risk surveillance, the agency uses swaps data for 
enforcement, economic analysis of market trends, and evaluation of new 
products.
    In all of these areas, swaps data has helped the agency do more to 
create an efficient and accurate reporting system. It is a significant 
undertaking. Futures reporting relies on a relatively small number of 
reporting entities. Moreover, contracts are highly standardized. 
Therefore, our reporting rules for futures are considerably less 
complex. In contrast, swaps make up thousands of entities reporting on 
an infinite variety of transactions. Because swaps can be traded on a 
variety of platforms or bilaterally, the Commission has worked to 
design a system that can analyze and aggregate swaps data from across 
all these execution and clearing venues. It is important to have a 
reporting system that recognizes this variation, but still enables us 
to aggregate where appropriate. In addition, swaps can go through many 
stages and changes, making it critical to track that swap through its 
lifecycle.
    Building this system is complicated and time consuming. It requires 
constant updates and refinements, as we understand the data better. The 
Commission is collaborating with market participants and other nations 
in this work, to harmonize and standardize our efforts. Indeed, this is 
not something the CFTC can do on its own. The Commission requires data 
that is clean, consistent, accurate and timely. And we are continuing 
to work with market participants to analyze exactly what data should be 
reported, how it should be reported, by whom and when. Above all, we 
are working to achieve an efficient and effective process to help us 
achieve these goals.
Improving Data Reporting
    The Commission is taking on a number of initiatives to improve the 
accuracy, efficiency and timeliness of data reporting. They include the 
following:
    Making Sure the Data is Consistent and High Quality. The Commission 
is working to ensure the data it receives is more consistent and high-
quality than today. Today, there can be variation in how the same 
information from different counterparties is reported to the SDRs, and 
in how the SDRs themselves transmit the same information to us. And 
this occurs even with relatively simple pieces of information.
    For example, a simple foreign exchange benchmark or a credit 
default swap index may be reported seven or eight different ways by 
market participants. This causes problems when it comes to aggregating 
and analyzing this information.
    To address the issue, in December, CFTC staff requested public 
comment on technical specifications for the reporting of 120 priority 
data elements. Our request for public input marks the culmination of 
months of work to identify priority areas where standardization or 
clarification is needed. This included feedback from a 2014 concept 
release on this issue as well as constructive input from our Technology 
Advisory Committee.
    The priority fields include a number of swap data reporting topics, 
such as counterparties, price, clearing, product, periodic reporting, 
orders, options, notional amount and many others. The Commission will 
use public comments to develop proposals that specify the form, manner 
and allowable values that each data element can have.
    Making Sure the Data is Complete. The Commission also is working 
towards obtaining complete data. There are a number of challenges here. 
Some required fields are not reported by participants, and SDRs don't 
believe they have the authority to reject data if it is incomplete. 
Though we have seen an improvement across a number of data fields, 
there is additional work to do. In the past, CFTC Chairman Massad has 
underscored his belief that the CFTC should change its rules so that 
SDRs have a greater ability to improve the quality of data before it 
arrives at the CFTC. Staff is looking closely at this possibility.
    Refining Swap Identifiers. The CFTC is working to develop a 
uniform, effective means to identify swaps and swap activity by 
participant, transaction and product type throughout the swap 
lifecycle. These include the Legal Entity Identifier (LEI) as well as 
the Unique Transaction Identifier (UTI) and Unique Product Identifier 
(UPI). The LEI is the most advanced. It is a critical way to identify a 
specific entity and its activities. There are more than 400,000 LEIs 
today.
    Our goal is to expand the usefulness of the LEI so that it can be 
used to identify related entities--and aggregate positions or 
transactions among them, something that cannot be done efficiently 
today.
    Aggregation is particularly important given that many market 
participants have a number of affiliates. The Commission currently can 
aggregate entities manually by name, but that is time consuming and not 
always accurate. The CFTC is working closely with the LEI Regulatory 
Oversight Committee (ROC) and other regulators to develop solutions 
that will address this challenge. The LEI ROC is a group of more than 
70 public authorities from more than 40 countries. Its mission is to 
coordinate and oversee the development of a worldwide framework for 
LEIs, known as the Global LEI System.
    International Efforts. The Commission is also a leader in 
addressing these issues internationally. The CFTC co-chairs an 
international task force that is leading the effort to harmonize data 
reporting standards. This has been formed under the auspices of 
Committee on Payments and Market Infrastructures (CPMI) and the 
International Organization of Securities Commissions (IOSCO), and it 
involves many representatives from regulators in the G20 nations. I am 
pleased to co-chair this task force.
    One of the task force's projects is to standardize the reporting of 
data fields by proposing definitions and formats for each field. The 
task force recently published an initial consultative document 
containing a batch of data fields. The CFTC is coordinating its in-
house standardization efforts with this international work.
    In addition, that same international task force on data is 
developing a standardized unique transaction identifier, which is 
similar to our unique swap identifier. This will enable regulators to 
track a particular swap through its lifecycle.
    This international forum is also developing a standardized unique 
product identifier, which will enable regulators to classify swaps by 
product type. They expect to issue guidance on both the UTI and UPI 
this year. This work will enable us to track swaps and aggregate data 
much more effectively.
    Clarifying Reporting Obligations and Eliminating Unnecessary 
Reporting Obligations. The Commission has also endeavored to clarify 
who has the obligation to report data and what data must be reported. 
It is also working to eliminate reporting obligations that are not 
necessary.
    For example, CFTC staff made it clear that SEFs do not have an 
obligation to report confirmation data they do not possess--such as 
confirmation data that is incorporated from an underlying Master 
Agreement. Commission staff have made clear that SEFs only need to 
report the primary economic terms and such other confirmation data to 
which they already have access. This relieves SEFs of any obligation to 
obtain an underlying Master Agreement or similar documentation.
    The Commission has also proposed modifications to the rules 
governing record-keeping and reporting of cleared swaps. Under the 
current regime, if a swap is transacted on a SEF, it is reported to an 
SDR. If that ``alpha'' swap is then cleared, the so-called ``beta'' and 
``gamma'' swaps that are created as a result are also reported. But 
those two new swaps might be reported to a different SDR than the one 
to which the original alpha swap was reported, and there might not be 
any record of the termination of the alpha swap. This creates 
confusion.
    Recently, the Commission proposed to fix these issues by creating a 
simple, consistent process for the reporting of cleared swaps. That 
means clarifying the reporting obligations of the clearinghouse where 
the swap is cleared. If adopted by the Commission, this clarification 
will help ensure that there are not multiple records of a swap that can 
lead to erroneous double counting, and that accurate valuations of 
swaps are provided on an ongoing basis. It will eliminate unnecessary 
reporting requirements. It will help to reduce reporting costs and 
improve the quality of swap data. And it will improve the Commission's 
ability to trace swaps from execution through clearing.
    The CFTC is taking other actions to eliminate reporting certain 
obligations when unnecessary. For example, the Commission has proposed 
eliminating the obligation of commercial participants to report trade 
options to SDRs, as to ensure the benefits outweigh the costs.
    Further, CFTC staff has eliminated the Index Investment Data 
report, which we produce monthly. This is a survey of index-related 
holdings of certain traders and dealers. The report was started before 
our current swap reporting rules were implemented.
    Enforcing Reporting Obligations. Equally important to our data 
efforts is the need to enforce reporting obligations. For those 
industry participants who do not make timely, complete and accurate 
reporting, the Commission has carried out enforcement actions. 
Recently, the Commission fined a major global bank $2.5 million for 
repeated failures to comply with swap reporting obligations, including 
failing to report swaps and failing to correct errors in its reporting. 
And since the beginning of 2014, the CFTC has brought actions against 
six other institutions, including other major banks and an exchange, 
for various types of reporting violations. Promoting compliance in 
record-keeping and reporting, and holding those who are not in 
compliance accountable, remains an important priority.
Conclusion
    Thank you, Mr. Chairman and Members of this Committee. Let me 
conclude by reiterating that this swap data reporting effort is a 
significant, global undertaking. As with any such effort, completing it 
properly will take time.
    However, there should be no doubt that this is a priority and the 
Commission has made substantial progress. During the crisis, regulators 
and market participants were unaware of what the swaps market truly 
looked like. Today, we have much greater transparency into those 
markets, which benefits regulators, lawmakers and market participants 
alike. As the CFTC refines the data and reporting system over time, we 
will further enhance that transparency and thereby, the resiliency of 
our financial system.
    Thank you for again for inviting me. I welcome your thoughts and 
questions.

    The Chairman. Ms. Kruse? Ms. Kruse?

 STATEMENT OF TARA KRUSE, CO-HEAD OF DATA REPORTING AND FpML, 
              INTERNATIONAL SWAPS AND DERIVATIVES
                   ASSOCIATION, NEW YORK, NY

    Ms. Kruse. Chairman Scott, Ranking Member Scott, and 
Members of the Committee, thank you for the opportunity to 
testify today. My name is Tara Kruse, and I am Co-Head of Data 
Reporting and FpML at the International Swaps and Derivatives 
Association.
    A central component of the G20 commitments in Pittsburgh 
was the reporting of derivatives to trade repositories in order 
to increase transparency and enable regulators to spot risk 
concentrations. Recognizing derivative markets are global, the 
G20 committed to use consistent standards in order to avoid 
fragmentation and regulatory arbitrage.
    Substantial efforts have been made toward realizing these 
commitments. Today, derivatives trades in the United States are 
reported to trade repositories. An increasing number of 
transactions are reported globally.
    Despite these advancements, U.S. regulators have struggled 
to fully understand and optimize the data being reported and 
are not in a position to have a complete picture of either 
domestic or global risk exposures. This visibility is impeded 
by the failure to use globally consistent standards that 
facilitate efficient, accurate data reporting that is suitable 
for aggregation and systemic risk analysis.
    Contributing to the challenge is the fact that each 
regulator has developed a unique set of reporting requirements 
and devised its own list of reportable data fields. This not 
only makes reporting complex and more costly for derivatives 
users, but it means the data cannot be aggregated to obtain a 
clear view of global derivatives trading activity.
    Let me illustrate this important point with a very simple 
analogy. Imagine if every car dealership in the United States 
and around the world was required to report basic facts about 
each and every car that it sold, including the car's size. Due 
to differences in regulatory oversight of these dealerships, 
some dealers reported size as the car's weight. Others as the 
number of passengers it held, yet others as its length or its 
horsepower.
    The solution is for regulators to work together and with 
the industry to agree on a core list of systemically important 
data fields that are reported in a consistent manner based on 
existing data and messaging standards. ISDA stands ready to 
help in this regard. We have worked to develop standard 
taxonomies and standard messaging language, and we are 
currently leading an industry initiative to develop standard 
product identifiers.
    ISDA and its members would suggest several concrete steps 
that could be taken to improve data reporting and systemic risk 
monitoring, while at the same time reducing the cost and 
complexity for market participants.
    First, CPMI-IOSCO should lead global data harmonization. 
Agreement on common data standards should be achieved in 
coordination with the efforts of the Harmonization Group of 
global regulators established by CPMI and IOSCO. This group has 
issued consultations on standard transaction and product 
identifiers, as well as reportable data elements. Consistency 
on these standards is key to achieving greater harmonization. 
It is important the CFTC and SEC are aligned with this global 
initiative and do not engage in further overlapping and 
potentially contradictory data proposals.
    Second, data fields should be specified and based on 
existing market standards. Regulators should work with industry 
to ensure regulatory requirements closely align with prevailing 
industry-defined terms and practices. All data elements 
required by regulators to meet their objectives should be 
explicitly specified in the regulations. Existing derivatives 
messaging standards, such as Financial products Markup 
Language, or FpML, should be leveraged where possible.
    Third, domestic regulators should align on data rules. 
Given that both the CFTC and the SEC developed reporting rules 
in response to the same piece of legislation, the rationale for 
issuing different requirements is difficult to comprehend. The 
split between swaps and security-based swaps undermines the 
ability of the Commissions to aggregate their data and provide 
Congress with a holistic view of risk in the U.S. derivatives 
market.
    Finally, reporting requirements should be rationalized and 
streamlined. Regulators should determine what data they need to 
monitor systemic risk and simplify reporting requirements 
accordingly. Certain data fields are currently required to be 
reported or proposed to be required that offer little insight 
into risk. This increases the volume of data that needs to be 
analyzed, to little benefit, and increases the cost and 
complexity of reporting which in turn undermines data quality. 
Regulators should agree on a meaningful set of globally 
consistent data fields that enables them to meet their 
regulatory objectives. Regulators should also assign the sole 
responsibility for both the reporting of data and the accuracy 
of the data for a transaction to a single party which is best 
situated to do so, thereby reducing the cost and burden to end-
users.
    Thank you for inviting me to speak today on this important 
topic. ISDA is a strong proponent of improving the accuracy, 
consistency, and efficiency of transaction reporting while 
mitigating its costs and burdens. We stand ready to help. Thank 
you.
    [The prepared statement of Ms. Kruse follows:]

 Prepared Statement of Tara Kruse, Co-Head of Data Reporting and FpML, 
    International Swaps and Derivatives Association,\1\ New York, NY
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    \1\ Today, ISDA has over 850 member institutions from 67 countries. 
These members comprise a broad range of derivatives market 
participants, including corporations, investment managers, government 
and supranational entities, insurance companies, energy and commodities 
firms, and international and regional banks. In addition to market 
participants, members also include key components of the derivatives 
market infrastructure, such as exchanges, clearing houses and 
repositories.
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    Chairman Scott, Ranking Member Scott, and Members of the 
Subcommittee, thank you for the opportunity to testify today.
    It's now more than 6 years since the Group of 20 (G20) nations 
gathered in Pittsburgh and agreed to a set of commitments to reform the 
over-the-counter derivatives market. A central component of those 
commitments was the reporting of derivatives to trade repositories in 
order to increase transparency and enable regulators to spot risk 
concentrations. Recognizing derivatives markets are global, the G20 
committed to implement consistent standards on a global basis in order 
to avoid fragmentation and regulatory arbitrage.
    Over the past few years, substantial efforts have been made toward 
realizing this commitment. Today, virtually all derivatives trades in 
the U.S. are reported to a trade repository. An increasing number of 
jurisdictions around the world have also imposed such a requirement.
    However, while the letter of the commitment is being realized, the 
spirit of this sound public policy goal is not.
    U.S. regulators have struggled to fully understand and optimize the 
data being reported. Also, they are not in a position today to receive 
a complete picture of global risk exposure. This comprehension is 
impeded by a lack of regulatory endorsed, globally consistent standards 
that facilitate efficient, accurate data reporting that is suitable for 
aggregation and systemic risk analysis.
    Contributing to the challenge is the fact that each regulator has 
developed a unique set of reporting requirements and devised its own 
list of reportable fields. This not only makes reporting complex and 
costly for derivatives users, but it means the data cannot be 
aggregated to obtain a clear view of global derivatives trading 
activity.
    This is not just a case of divergent reporting rules between 
different countries. There are also differences in reporting 
requirements within the same jurisdiction. For instance, the CFTC and 
SEC require different data to be reported and have set different 
parameters to determine which trades should be subject to reporting. 
These differences are unnecessary and prevent regulators from meeting 
the G20 objective of monitoring and mitigating systemic risk. They also 
run counter to regulators' commitment to implement consistent global 
standards.
    Let me illustrate this important problem with a simple analogy. 
Imagine if every car dealership in the U.S. and around the world was 
required to report basic facts about each and every car sold, including 
the car's size. Due to differences in regulatory oversight of all of 
these dealerships, some dealers reported size as the car's weight. 
Others as the number of passengers it held. Yet, others as its length 
or its horsepower.
    As the example makes clear, the answer here is not to require more 
data to be reported. Instead, regulators should work together and with 
the industry to agree on globally consistent reporting requirements, as 
well as data and messaging standards. ISDA stands ready to help in this 
regard. We've worked to develop standard taxonomies and a standard 
messaging language, and we are currently leading an industry initiative 
to develop standard product identifiers.
    ISDA and its members would suggest several concrete steps that 
could be taken to improve data reporting and systemic risk monitoring, 
while at the same time reducing cost and complexity for reporting 
parties.

   CPMI-IOSCO Should Lead Global Data Harmonization

      Agreement on common standards should be achieved in coordination 
        with the Committee on Payments and Market Infrastructure (CPMI) 
        and International Organization of Securities Commissions 
        (IOSCO) which have established a Harmonization Group comprised 
        of global regulators. CPMI-IOSCO has issued consultations on 
        standard transaction and product identifiers, as well as other 
        data elements. Consistency on these standards is paramount to 
        achieving greater harmonization. It's important the CFTC and 
        SEC are aligned with this global initiative and do not engage 
        in further overlapping and potentially contradictory data 
        proposals.

   Data Fields Should be Specified and Based on Existing Market 
        Standards

      Regulators should work with industry initiatives, such as ISDA's 
        Symbology project,\2\ to ensure regulatory requirements closely 
        align with prevailing industry defined terms and practices. All 
        data elements required by regulators to meet their objectives 
        should be explicitly defined in the regulations. Existing 
        derivatives messaging standards, such as Financial products 
        Markup Language \3\ (FpML), should be leveraged where possible.
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    \2\ http://www2.isda.org/functional-areas/symbology/.
    \3\ http://www.fpml.org/.

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   Domestic Regulators Should Align on Data Rules

      The CFTC and SEC rules should be aligned. Given both agencies 
        developed reporting rules in response to the same piece of 
        legislation, the rationale for issuing different requirements 
        is difficult to comprehend. The split between swaps and 
        security-based swaps is a creation of the U.S. regulatory 
        system which undermines the ability of the CFTC and SEC to 
        aggregate their data and provide Congress with a holistic view 
        of risk in the U.S. derivatives market.

   Reporting Requirements Should be Rationalized and 
        Streamlined

      Regulators should determine what data they need to monitor 
        systemic risk and simplify reporting requirements accordingly. 
        Certain data fields are currently required to be reported or 
        proposed to be required that offer little insight into risk. 
        This increases the volume of data that needs to be analyzed, to 
        little benefit, and increases the cost and complexity of 
        reporting which undermines data quality. Regulators should 
        agree on a meaningful set of globally consistent data fields 
        that enables them to meet their regulatory objectives. Further, 
        regulators should assign the sole responsibility for the 
        reporting of accurate data for a transaction to a single party 
        which is best situated to provide timely, complete data.
          * * * * *
    I'd like to address these issues in more detail. Before I do, I 
would like to stress that ISDA supports the intent of the G20 and the 
Dodd-Frank Act to improve transparency in derivatives markets and to 
ensure regulators have the information they need to monitor systemic 
risk. ISDA has worked with its members to drive implementation of this 
objective, for example, in its work to develop common taxonomies and 
messaging standards. ISDA's work to drive implementation is also 
exemplified by the recent establishment of the ISDA Symbology project 
to develop a common product identifier for regulatory and reference 
data purposes. This initiative will incorporate the recommendations 
made by CPMI-IOSCO.
    This is consistent with our mission statement: ISDA fosters safe 
and efficient derivatives markets to facilitate effective risk 
management for all users of derivative products. In fact, our strategy 
statement was recently modified to emphasis the importance of a safe, 
efficient market infrastructure for derivatives trading, clearing and 
reporting.
    Since ISDA's inception 30 years ago, the Association has worked to 
reduce credit and legal risks in the derivatives market and to promote 
sound risk management practices and processes. This includes the 
development of the ISDA Master Agreement, the standard legal agreement 
for derivatives, and related collateral documentation as well as our 
work to ensure the enforceability of netting.
1. CPMI-IOSCO Should Lead Global Data Harmonization
    The implementation of trade reporting was intended to improve 
transparency in the derivatives markets and mitigate systemic risk. G20 
leaders also committed to take action at the national and international 
level to raise standards together to implement global standards 
consistently in a way that ensures a level playing field and avoids 
fragmentation of markets, protectionism and regulatory arbitrage. 
Progress has been made on the former objective, but full realization of 
this goal cannot be achieved without significant advancement on the 
latter.
    Under the CFTC's Parts 43, 45 and 46 regulations reporting to trade 
repositories has been live in part since December 31, 2012 and 
reporting across asset classes and by all U.S. participants to swaps 
has been in place since April of 2013. Data regarding swaps that were 
live on or after the enactment of the Dodd-Frank Act or which have been 
transacted since have been and continue to be reported to trade 
repositories. Despite the availability of swap data to the public and 
to the CFTC, questions remain regarding whether the CFTC is collecting 
the most useful data set and whether such data is consistent and 
accurate enough to monitor market risk.
    The successful implementation and oversight of the Legal Entity 
Identifier to uniquely identify parties to a transaction is proof that 
global regulatory collaboration can result in standards that are 
extremely valuable to market risk analysis. With the LEI as precedent, 
ISDA strongly supports the ongoing efforts of the CPMI-IOSCO 
Harmonization Group to develop recommendations for global standards for 
trade identifiers (UTI), product identifiers (UPI) and other reportable 
data elements. ISDA worked with its members to develop industry 
standards for trade identifiers and product identifiers in the absence 
of global regulatory standards and developed best practices to improve 
the consistency of reporting. Although these have been used 
successfully by a majority of market participants for reporting across 
the globe, comprehensive use can only be achieved through regulatory 
endorsement and mandates.
    ISDA has provided substantive feedback to the first three 
derivatives data consultations issued by CPMI-IOSCO, including one on 
an initial batch of other data elements (the ``ODE Consultation''),\4\ 
such as notional and clearing status. The CFTC is currently taking 
comments on a Draft Technical Specifications for Certain Swap Data 
Elements (``Technical Specifications''). While we commend the CFTC for 
addressing the acknowledged and necessary corrections in its data 
rules, it is not being done in concert with other regulatory reforms. 
Despite the CFTC's role as co-chair of the Harmonisation Group and the 
active participation of CFTC staff in its sub-groups, for many of the 
data elements which were also part of the ODE Consultation, the 
Technical Specifications asks different questions and makes different 
proposals for the naming of data elements as well as their descriptions 
and allowable values.
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    \4\ http://www2.isda.org/attachment/NzkzNA==/CPMI-
IOSCO%20Response_ODE_9%20
Oct%202015_FINAL.pdf.
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    ISDA believes the CFTC has missed an important opportunity to focus 
its resources on inputting to global harmonization goals and instead 
has replicated or repurposed those efforts. Any further consultation or 
proposed rulemaking by the CFTC with respect to its reporting 
regulations should align with and be fully-inclusive of all information 
from the efforts of the Harmonisation Group with the goal of a single 
industry-wide transition to the globally recommended data standards of 
CPMI-IOSCO determined in accordance with its responsibilities as 
assigned by the Financial Stability Board.\5\
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    \5\ http://www.fsb.org/wp-content/uploads/pr_140919.pdf.
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2. Data Fields Should Be Specified and Based on Existing Market 
        Standards
    Limitations on the usefulness of the collected data to analyze 
systemic risk is not attributable to missing data as much as it is 
about the quality and consistency of the data that is collected. Each 
relevant national regulator has issued its own version of reporting 
requirements and its own list of reportable data fields that are not 
always based on existing industry standard terms, definitions and 
messaging standards for derivatives. In some cases, the trade terms 
required to be reported are not explicitly specified in the regulations 
but instead left to SDRs and market participants to determine. These 
approaches complicate the task of reporting and undermine data quality 
since parties are required to interpret the data desired by the 
regulator or transform the data in a way that may not align with how 
the economics of the trade were agreed between the parties and 
represented in the legal confirmation for the transaction.
    Regulators would make significant headway in improving the rules if 
they follow three principles:

  1.  Use of industry standards where possible.

  2.  Provide appropriate oversight and commitment to market 
            participants so they can develop industry-based solutions.

  3.  Be specific when developing data requirements.
Regulators Should Use Industry Standards Where Possible
    The market can't trade without certain convention and standards, 
just like our interstate system can't function without consistent and 
specific traffic rules. The marketplace has already developed data and 
trading conventions that can be readily applied on a global basis to 
support the data harmonization efforts. The following standards already 
exist for (i) the name, definition and values of the key economic terms 
of derivatives transactions and (ii) messaging representation of these 
data elements for reporting. Global standards for trade reporting 
should be aligned with, and benefit from, these existing industry 
standards.
Product Definitions
    ISDA product definitions are incorporated by reference into 
confirmations for derivations transactions. The terms they define are 
the market standard references, providing legal certainty to 
counterparties on the economic terms of their transactions. The CFTC, 
SEC and other global regulators should align with these terms and 
definitions for the sake of specificity, accuracy, and efficiency. 
There is no value in redefining the framework for legal agreement of 
derivatives transactions for the purposes of reported data. Rather, the 
reported data should seek to mirror the terms and values as they are 
agreed and confirmed between the parties to the transactions to ensure 
harmonization between the execution confirmation and reporting 
processes.
    Using alternative terms, definitions and values for reported 
transactional data requires parties to transform their trade data to 
represent it in an inconsistent manner solely for the purposes of 
reporting. This greatly increases the challenge of reconciling SDR data 
back to a reporting counterparty's source systems or the confirmation, 
and inhibits bilateral reconciliation since a non-reporting 
counterparty will not have transformed their data in accordance with 
the relevant reporting regulations. These challenges are further 
exacerbated when the parties are required to represent the data for the 
same trade differently when reporting to multiple jurisdictions. It is 
not practical for parties to create, report and maintain several 
different data representations of the same trade without impinging on 
the clarity and certainty of the transactions terms. Aligning reporting 
regulations with the applicable established product definitions is the 
more accurate and appropriate baseline for representing reported data.
Messaging Standards
    The other key to leveraging existing trade representation is 
through the use of established reporting standards that are designed 
from, and align with, the ISDA product definitions. FpML is the 
predominant messaging standard for OTC derivatives, facilitating both 
the electronic confirmation and electronic reporting of transactions. 
Significant enhancements have been made to FpML to support both global 
and jurisdictional reporting regulations. Although there are obvious 
benefits to doing so, reported data does not have to be submitted 
electronically via FpML for the reporting regulations to benefit from 
the standards it has established for uniformly identifying certain 
trade terms and values. For instance, FpML developed the only industry 
standard values for ``Business Days'' which are the geographical and 
non-geographical calendars by which payment dates and settlement dates 
are adjusted (e.g., NYSE Business Day). The CFTC recognized this, 
referring to FpML for these values in its Technical Specifications for 
its redefined ``Holiday Calendars'', but does not fully embrace the 
standard by aligning with the FpML data elements and scheme for all 
supported data fields.
    Rather than inventing its own methods, the Commission and global 
regulators should align with both the ISDA product definitions and 
FpML. There is simply no need or value to reinvent the terminology, 
definitions or representations of swap data. Instead, efforts to 
develop new standards will reduce rather than improve the quality of 
the data available to meet the regulatory mandates which require the 
collection of derivatives data. The CFTC and global regulators should 
use these existing standards to their benefit, allowing them to 
increase the clarity, accuracy and usefulness of the collected data.
Regulators Should Provide Appropriate Oversight and Commitment to 
        Market Participants So They Can Develop Industry-Based 
        Solutions
    ISDA continues its efforts to drive data standardization, including 
through its Symbology project \6\ to create an open source standard for 
derivatives product identification that works for pre-trade, trading 
and post-trade workflows. We encourage the participation of regulators 
in industry initiatives and feel strongly that an open and regular 
dialogue between regulators, industry associations like ISDA, and 
market participants will expedite the development and implementation of 
global data standards.
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    \[6]\ [http://www2.isda.org/functional-areas/symbology/.]
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Regulators Must Be Specific When Developing Data Standards
    Contrary to the approach of all other global regulators, both the 
CFTC and SEC include requirements in their trade reporting rules to 
provide data for which the Commissions have not explicitly specified 
the trade terms required to be reported. Since data cannot be reported 
electronically to a trade repository if the set of data fields are not 
supported, these catch-all buckets leave trade repositories and the 
industry to assess what data must be reported to comply with a 
requirement for, for instance, ``any other term(s) of the trade matched 
or affirmed by the counterparties in verifying the trade'' \7\ or ``any 
other data elements . . . that are necessary for a person to determine 
the market value of the transaction.'' \8\
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    \7\ Appendix 1 to CFTC Part 45 regulation.
    \8\  242.901(d)(5) of SEC's Regulation SBSR--Reporting and 
Dissemination of Security-Based Swap Information.
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    Some derivatives products are highly standardized and it may be 
possible to determine a uniform set of data fields that could apply in 
these cases, but some derivatives are customized and a finite list of 
potential data elements and values cannot be determined. Either way, 
any differences in interpretations between trade repositories and 
reporting entities regarding these unspecified requirements will reduce 
the quality of the data. ISDA has consistently urged the Commissions to 
explicitly define their data requirements as determined by the way in 
which they intend to assess the data, rather than allocate such 
decisions to trade repositories and market participants.
3. Domestic Regulators Should Align on Data Rules
    The reporting regulations of the CFTC and SEC are different, 
including the data this is reportable and the parameters to determine 
which trades are subject to reporting. Considering that the Commissions 
have issued these rules in response to their obligations under the same 
piece of legislation, the Dodd-Frank Act, the rationale for the 
divergence in their rules is difficult to comprehend.
    For instance, it is illogical that each Commission should have a 
different definition for who is a U.S. Person, and as a result, a 
divergent position as to which transactions pose risk to U.S. markets 
and, thus, are subject to reporting. Based on their divergent 
definitions, it is possible that a particular counterparty may only be 
required to report either its swaps or its security-based swaps. The 
Commissions should be expected to agree on a single definition for U.S. 
Person and a uniform approach to their requirements for reporting of 
cross-border swaps and security-based swaps, which carefully considers 
whether the derivatives transactions of parties that are not domiciled 
in the U.S. pose a genuine risk to the U.S. markets that cannot be 
mitigated by the oversight of the relevant foreign regulator(s).
    The artificial line between swaps and security-based swaps is 
unique to the U.S. and undermines the ability of the CFTC and SEC to 
aggregate their data and provide Congress with a holistic view of the 
risk in the U.S. derivatives market. Other regimes look at the 
derivatives market holistically and within the same jurisdiction have 
not issued different trade reporting regulations and different data 
fields for segments of the derivatives market (aside from those that 
are appropriate to a particular asset class). For example, in Canada, 
there are 13 securities regulators, each with its own securities 
legislation and independent oversight of the trading activity in its 
province or territory. Despite having separate trade reporting 
regulations, these authorities managed to agree to a defined, uniform 
list of data fields.
    In contrast, the SEC and CFTC recently issued concurrent but 
separate consultations on data standards for their respective reporting 
regulations. They took entirely different approaches to addressing the 
matter. In accordance with long-standing suggestions from ISDA and the 
industry, the SEC has proposed a rule requiring security-based swap 
data repositories to provide data to them using existing data standards 
such as FpML, which is the open source XML standard for electronic 
dealing and processing of OTC derivatives. Meanwhile, the CFTC has 
created its own trade terminology, definitions and allowable values 
which are not fully harmonized with either existing industry standards 
or the proposal of the SEC.
4. Reporting Requirements Should Be Rationalized and Streamlined
More Data Is Not Better Data
    There is a regulatory misconception that collecting more data will 
better inform an understanding of market risk. However, requiring 
dozens of data fields for a single transaction significantly 
complicates the ability to analyze trade data and meaningfully assess 
market risk by overloading databases with transaction terms that are 
not pertinent to a distinction of risk. For instance, whether payments 
are calculated taking into account New York business days vs. London 
business days or knowing which version of an ISDA Master Agreement was 
executed between the parties will not lead to any opportunities to 
mitigate risk. Rather, reporting of non-essential data fields, many of 
which are not agreed as part of the swap execution, makes it harder for 
regulators to focus on the key economics of the transactions that are 
relevant to price transparency or an understanding of the risk of the 
transaction. Instead of collecting vast amounts of data for which the 
value and application of each field toward systemic risk analysis is 
undetermined, the regulators should look at their desired end-state and 
work backward to ensure the right data is collected that meets a well-
considered approach to global risk analysis.
    In order to focus on meeting their primary objective to mitigate 
market risk, the Commissions should focus on obtaining a restrained, 
defined set of globally consistent core economic data fields that allow 
them to analyze the concentration of risk in certain products, against 
certain underliers or by certain market participants.
Placing Reporting Burden on End-Users
    The U.S. was the first to implement a single-sided reporting model 
under which one party is responsible for reporting the data to a swap, 
and rightfully placing the bulk of the cost, burden and liability for 
reporting on more sophisticated market participants. However, despite 
the obvious benefits, the U.S. is not a truly single-sided reporting 
regime. Rather, due to the requirement placed on SDRs by the Dodd-Frank 
Act to confirm the accuracy of reported data with both counterparties, 
SDRs are required to build functionality for non-reporting parties and 
to supplement or verify the reported data.
    This requirement in the Dodd-Frank Act replicates the bilateral 
confirmation process and places an indirect obligation on all parties 
to reportable derivatives transactions in the U.S. to onboard to all 
SDRs used by their counterparties and build the associated 
functionality required by each SDR. This is dual-sided reporting in 
disguise, placing an enormous and costly burden on end-users to build 
functionality that does not actually improve the quality of the data. 
Dual-sided reporting in the European Union has not resulted in better 
data quality and these variations of duplicative reporting obligations 
in the U.S. will not either. Instead, the reporting party should be 
solely accountable for the accuracy of the data it reports to an SDR.
Summary
    The goal of improved regulatory transparency in the derivatives 
market is an important one, and it is one that ISDA fully supports.
    In order to improve the quality of the data available to the 
regulators to meet their G20 commitments for transparency and risk 
mitigation, the industry needs global regulators to:

   Improve data quality by adopting a defined set of core 
        economic data fields that:

     are relevant to the primary objectives of trade 
            reporting;

     are domestically and globally harmonized in accordance 
            with the recommendations of CPMI-IOSCO;

     align with existing industry defined terminology 
            (i.e., product definitions published by ISDA); and

     leverage existing derivatives messaging standards, 
            like FpML.

   Allow a single reporting counterparty to be solely 
        responsible for the accuracy of the reported data.

    Rather than issuing their own proposals for changes and the 
expansion of their data reporting regulations, the Commissions should 
focus on improving data under their existing regulations by providing 
the clarity and improvements requested and suggested by the industry. 
Significant changes to the data fields should only be implemented in 
accordance with the recommendations of the CPMI-IOSCO Data 
Harmonisation Group. The recommendations of that forum are expected to 
be completed in 2017; U.S. regulators should contribute to the 
expedition of those efforts and not engage in further overlapping and 
potentially contradictory data proposals.

    The Chairman. Ms. Collazo?

          STATEMENT OF MARISOL COLLAZO, J.D., MANAGING
 DIRECTOR AND CHIEF EXECUTIVE OFFICER OF DTCC DATA REPOSITORY, 
                 DEPOSITORY TRUST AND CLEARING
                   CORPORATION, NEW YORK, NY

    Ms. Collazo. Thank you, Chairman Scott, Ranking Member 
Scott, and Members of the Subcommittee. I am Marisol Collazo, 
Managing Director at DTCC and Chief Executive Officer of the 
DTCC's Swap Data Repository. I appreciate the opportunity to 
share my perspective on the current status of swaps data 
reporting.
    In 2009, G20 leaders, committed to making the global OTC 
derivatives market safer and more transparent. This 
transparency will assist regulators globally to monitor 
systemic risk forming in the swaps market. Swap data 
repositories, or SDRs, emerged as a way to achieve this goal.
    Since then, progress has been made and trade reporting 
regimes are in place across all major jurisdictions. Today, 
authorities have access to more data than ever before. In the 
United States, we process 80 million messages a week or more 
than four billion messages a year.
    In order to assess the effectiveness of trade reporting, we 
must refer back to the two goals of the G20 mandate: First, to 
provide transparency into opaque markets; and second, for 
regulators to utilize such transparency to identify and 
anticipate potential systemic risk.
    There are aspects of the data being reported today that are 
useful to both the CFTC and the public at large. For example, 
public price transparency is now reported on a real-time basis. 
This provides a window into a market that was previously 
opaque. From this data, the CFTC can see volumes and the number 
of transactions executed daily. Further, the CFTC has an even 
deeper view of reported data that can be used for surveillance 
and other regulatory purposes.
    Now let's turn to the challenges that remain. Given that 
the swaps market is inherently cross-border, in order to fully 
maximize the usefulness of the data reported to SDRs, a 
globally consistent framework for standardization and 
governance are needed. Today, unfortunately, inconsistent 
reporting requirements amongst various jurisdictions are 
hindering this ability. Global data harmonization and 
regulatory access to data remain a challenge. DTCC applauds 
Congress for removing the Dodd-Frank's indemnification 
provision. However, more work remains. These challenges must be 
resolved before regulators can effectively aggregate data and 
determine the systemic risk profile of a global swap dealer.
    Based on DTCC's experience, supporting regulatory reporting 
across nine jurisdictions, we have seen divergent requirements 
even within the same data elements. This variance has 
negatively impacted data quality and increased complexity. 
Instead, we recommend that regulators agree to a standard 
approach for reporting the core terms of the swap across 
jurisdictions. Such global consistency will facilitate efforts 
by regulators to share and aggregate data, allowing for a more 
complete and harmonized view of the OTC derivatives market.
    The CFTC recently issued a request for comment on technical 
specifications for the reporting of certain data elements. DTCC 
strongly encourages the CFTC to recognize existing market 
convention in its effort to improve currently reported data. 
The CFTC should carefully consider if any proposed changes 
significantly add value or if they inject unintended complexity 
into the current reporting system.
    We also encourage the CFTC to align with policy-making 
efforts underway globally such as those spearheaded by CPMI-
IOSCO to establish consistent data standards. For example, much 
progress has been made on establishing a recommended standard 
for product and transaction identifiers. We look forward to the 
remaining work that CPMI-IOSCO will take on for other key data 
elements.
    Another important step is the establishment of a governance 
framework to facilitate management of this global data set and 
regulatory access to data. This framework will help ensure that 
standards are maintained and updated as markets evolve.
    In conclusion, the priorities I have outlined will assist 
in realizing the G20 goals of market transparency and systemic 
risk oversight. We believe that Congress must ensure regulators 
remain focused on implementing such framework as I have 
described. Thank you, Mr. Chairman, for the opportunity to 
present and participate in today's hearing, and I look forward 
to your questions.
    [The prepared statement of Ms. Collazo follows:]

  Prepared Statement of Marisol Collazo, J.D., Managing Director and 
 Chief Executive Officer of DTCC Data Repository, Depository Trust and
                   Clearing Corporation, New York, NY
    Chairman Scott, Ranking Member Scott, and Members of the 
Subcommittee, thank you for holding today's hearing to discuss the 
Group of 20 (``G20'') swap data reporting goals.
    I am Marisol Collazo, Managing Director at The Depository Trust & 
Clearing Corporation (``DTCC'') and Chief Executive Officer of the DTCC 
Data Repository (U.S.) LLC, (``DDR''). I appreciate the opportunity to 
share DTCC's perspective on the current status of data reporting of 
swaps around the globe, and equally appreciate the Committee's 
continued attention to the topic.
    At its core, DTCC develops and harnesses technology to provide a 
variety of risk management and data services to the financial services 
industry. More than 40 years ago the firm was born largely out of the 
need to leverage technology and automation in order to ensure 
securities transactions were more efficiently settled, thereby reducing 
risk of loss in the event of a counterparty default. In this respect, 
DTCC presently is among the more established financial technology or 
``fintech'' companies.
    Today, DTCC continues to deploy evolving and improving technology 
in service to its mission as the primary financial market 
infrastructure for the securities industry.\1\ DTCC simplifies the 
complexities of clearing, settlement, asset servicing, data management 
and information services across multiple asset classes. In 2014, DTCC's 
subsidiaries processed securities transactions valued at approximately 
U.S.$1.6 quadrillion.\2\
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    \1\ DTCC provides critical infrastructure to serve all participants 
in the financial industry, including investors, commercial end-users, 
broker-dealers, banks, insurance carriers, and mutual funds, and 
continually considers and examines new technologies to perform these 
services. See, for example, DTCC White Paper, ``Embracing Disruption--
Tapping the Potential of Distributed Ledgers to Improve the Post-Trade 
Landscape'' (January 2016), available at http://dtcc.com/news/2016/
january/25/blockchain-white-paper.
    \2\ DTCC's U.S. clearing and depository subsidiaries were 
designated as Systemically Important Financial Market Utilities 
(``SIFMUs'') in 2012 by the Financial Stability Oversight Council 
(``FSOC'') pursuant to Title VIII of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act (``Dodd-Frank'').
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DTCC's Global Trade Repository
    DTCC provides services for a significant portion of the global 
over-the-counter (``OTC'') derivatives market and has extensive 
experience operating repositories to support derivatives trade 
reporting and enhance market transparency.
    DTCC's Global Trade Repository (``GTR'') service supports reporting 
across all five major derivatives asset classes--credit, interest rate, 
equity, foreign exchange and commodity--and exchange traded derivatives 
in nine jurisdictions across 33 countries. Despite differences in local 
reporting requirements across regions, DTCC has built a robust and 
flexible infrastructure with three fully replicated data centers. This 
global reporting service was created in response to the G20 commitment 
regarding swap data reporting, explained in more detail later in this 
testimony.
    DDR received provisional registration from the Commodity Futures 
Trading Commission (``CFTC'') to operate a multi-asset class swap data 
repository for OTC credit, equity, interest rate, foreign exchange and 
commodity derivatives in the U.S. DDR is the only repository to offer 
reporting across all asset classes--a significant milestone in meeting 
regulatory calls for robust trade reporting and risk mitigation in the 
global OTC derivatives market. DTCC, through its Trade Information 
Warehouse (``TIW'') service, has provided public aggregate information 
for the credit default swap (``CDS'') market on a weekly basis since 
January 2009. This information is available, free of charge, on 
www.dtcc.com.
    While domestic authorities were developing mandatory reporting 
frameworks, in 2010, DTCC implemented a voluntary reporting framework 
under OTC Derivatives Regulators Forum (``ODRF'') data access 
guidelines. This framework leveraged TIW, which contains the vast 
majority of credit derivative trades transacted globally. A portal was 
established to provide detailed data on voluntarily-reported 
transactions to more than 40 supervisors globally. The portal allows 
for regulators to access data within their mandate and information 
provided is consistent with ODRF data-sharing guidelines. The portal 
assists regulators in their supervisory capacities in scenarios such as 
sovereign debt crises, corporate failures, credit downgrades and 
significant losses by financial institutions.
    The 2008 financial crisis highlighted the ability of TIW to provide 
an unprecedented degree of transparency into an opaque market. In the 
aftermath of the Lehman bankruptcy, rumors circulated that potential 
liabilities for CDS trades on outstanding Lehman obligations could top 
$400 billion based on estimates of the outstanding notionals (or value) 
of the trades. Regulators worked closely with DTCC to analyze data from 
TIW to obtain a better understanding of market exposures to the Lehman 
bankruptcy. This data revealed that the actual net liabilities would be 
approximately $6 billion, far less than the market anticipated, which 
helped calm the market.
Progress Made on Regulatory and Public Reporting of Swaps-Transaction 
        Data
    In 2009, G20 leaders committed to making the global OTC derivatives 
markets safer and more transparent, and to create tools for the 
supervision of global market participants.\3\ In particular, trade 
repositories--also known as swap data repositories (``SDRs'') under 
Dodd-Frank--emerged as a means to provide transparency into this 
previously opaque marketplace through the collection and maintenance of 
OTC derivatives data.
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    \3\ See G20 Leaders' Statement at the Pittsburgh Summit (Sept. 
2009), available at http://www.treasury.gov/resource-center/
international/g7-20/Documents/pittsburgh_summit_
leaders_statement_250909.pdf.
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    Since 2009, regulators and the industry have made significant 
strides in addressing the data gap that existed during the financial 
crisis. Trade reporting regimes are now in place across jurisdictions 
globally that host major derivative markets and authorities within 
those jurisdictions have access to more data than ever before, which is 
critical to market surveillance and the identification of counterparty 
risk.\4\ According to the Financial Stability Board's (``FSB'') Tenth 
Progress Report on Implementation of OTC Derivatives Market Reforms, 
there are currently 20 authorized trade repositories operating across 
12 jurisdictions, while government authorities or other trade 
repository-like entities are collecting OTC derivatives transaction 
reports in an additional six jurisdictions.
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    \4\ For example, CFTC Chairman Timothy Massad stated that swaps 
data is improving the Commission's ability to oversee the marketplace. 
See CFTC Chairman Timothy Massad, Keynote Remarks before the Futures 
Industry Association Futures and Options Expo (Nov. 4, 2015), available 
at http://www.cftc.gov/PressRoom/SpeechesTestimony/opamassad-33.
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    Notwithstanding the fact that trade repositories are now receiving 
and reporting data to authorities as well as the public, there remain 
two key questions: (1) how useful that information is; and (2) whether 
the regulatory reporting of that data by trade repositories is 
achieving the G20 mandate.
    Regarding the first question, there is a significant amount of 
post-trade data collected by trade repositories and reported to 
regulators and the public in real time. For example, DDR currently 
holds approximately ten million CFTC-reported open derivatives trades. 
DDR began publishing trade data to the CFTC on October 12, 2012, the 
first day that mandated trade reporting began under Dodd-Frank and on 
December 31, 2012, DDR began publishing real-time price information. 
Reports are publicly available through slice files, RSS feeds and 
Internet access to a ticker page, Excel and search functions on DDR's 
website, https://rtdata.dtcc.com/gtr/dashboard.do.
    Through information provided by DDR, the CFTC currently is able to 
see volume in the OTC derivatives marketplace and can identify the 
number of transactions executed every day.
    Additionally, all positions and activity are visible, which creates 
an end-of-day inventory of the market. For regulators, real time access 
to trade data provides a deeper view into derivatives pricing, and in 
raw form, allows for analysis that could be used for surveillance and 
other purposes. As transactions are being executed, regulators and the 
public can now see derivatives contracts pricing levels that previously 
had not been visible.
    From a U.S. point of view, the ability of a domestic supervisor to 
assess the systemic risk of a firm managing swap-book risk through the 
data reported by an SDR should be significant, for the foregoing 
reasons. Equally relevant is the fact that the vast majority of 
interest rate swaps and CDS are either cleared by a clearinghouse and/
or otherwise confirmed through an automated system. These processes 
provide for a substantial level of standardization of the terms of the 
swaps contracts, allowing for and facilitating more complete, valid and 
accurate regulatory reporting by an SDR. However, a large percentage of 
swaps outside these asset classes are not cleared or confirmed through 
automation.
    When a swap is neither cleared nor confirmed through automation, 
the completeness, validity and accuracy of reporting tends to erode due 
to the fact that the swap is likely bespoke in nature (thus containing 
a number of unique characteristics and attendant data fields for 
reporting).
    Bespoke swaps are less suitable to harmonization for purposes of 
data reporting, and as a result, data on those swaps is often more 
difficult to analyze efficiently. The nature of such bilateral swaps, 
which often are hedge instruments, means there will always be a 
percentage of trades that will not be cleared or confirmed.
Remaining Challenges to Realizing Vision of G20 and Dodd-Frank
    The answer to the second key question--whether the goals of the G20 
mandate are being realized--is less clear, as discussed below. True 
systemic-risk monitoring and analysis by a U.S. supervisor, through use 
of SDR-reported data, becomes more challenging when it requires 
reliance on data of a large institution's swap exposure outside the 
U.S.
    The marketplace for swaps is global and dealers (and others) who 
make markets in swaps for their customers usually have a global 
footprint through a variety of branches, affiliates and subsidiaries 
located around the world. Each global swap dealer is structured 
differently, but the swaps positions entered into by one branch, 
affiliate or subsidiary of a global financial institution oftentimes 
will be transferred or aggregated on the books of one, or perhaps 
several, legal entities within the corporate and legal structure of 
that global swap dealer.
    This context is important to understanding why global data 
harmonization is critical for purposes of monitoring the systemic risk 
profile of market participants by any one regulatory supervisor. To 
understand the risk profile of a systemically important institution, a 
regulator needs to see and understand the risk exposure of that 
institution based on swap positions it has entered into around the 
globe. If, for instance, the CFTC, which supervises a registered U.S. 
swap dealer, only sees the swap positions on the books of that legal 
entity but not the positions on the books of affiliated, non-U.S. 
entities outside the jurisdictional scope of the CFTC, it will not 
fully understand the level and breadth of risk that the swap dealer 
might be exposed to.
    Ideally, the CFTC or Securities and Exchange Commission (``SEC'') 
would be able to access not only U.S. SDR data but data from non-U.S. 
trade repositories as well in order to understand the risk that 
entities affiliated with a registered U.S. swap dealer are managing. 
This would afford a regulator the ability to aggregate and transform 
data from multiple trade repositories into meaningful analytical 
information.
Inconsistent Reporting Requirements and Data Quality
    In November 2015, the FSB published its Thematic Review on OTC 
Derivatives Trade Reporting, which noted that although the majority of 
FSB member jurisdictions have introduced trade reporting obligations, 
the usefulness of this data is being limited by data quality issues, 
including the formatting, completeness and accuracy of the data.
    Despite the G20's common commitment to trade reporting, the 
derivative reporting regimes that emerged following the financial 
crisis differed along national lines, creating inconsistent sets of 
reporting requirements globally. This makes it more challenging to 
standardize, access, share and aggregate data on a global scale.
    Even within the U.S. domestic market, there are disparities in the 
reporting regimes established by the CFTC and SEC. For example, SEC 
requirements for security-based SDRs include the reporting of new 
identifiers and collection of data from non-reporting sides, both of 
which are not required by the CFTC. Requiring information not relevant 
to understanding the key economic characteristics of the reported trade 
introduces complexities in data aggregation, creates additional 
opportunities for reporting errors and unnecessarily increases the 
costs of reporting by both reporting parties and trade repositories. In 
addition, requiring the same information, but in different formats, 
causes inefficiencies interpreting data due to the inherent need to 
reconcile data reported in differing ways.
Obstacles to Data Access
    The FSB also identified barriers to domestic and foreign 
authorities' access to data held in trade repositories as a key 
finding, specifically identifying the indemnification provisions of the 
Dodd-Frank Act.
    DTCC appreciates the efforts of Congress, the CFTC and the SEC to 
address and resolve issues concerning data reporting. DTCC has long 
been a vocal advocate of legislation to repeal the Dodd-Frank 
indemnification provisions and applauds Congress and the Administration 
for its passage of Public Law 114-94 (http://api.fdsys.gov/
link?collection=plaw&congress=114&lawtype=public& 
lawnum=94&link-type=html), the Surface Transportation 
Reauthorization and Reform Act of 2015, which, among other things, 
eliminated the indemnification requirement.
    Removal of these provisions is an important step to achieving the 
transparency goals established by the G20, but additional work is 
needed to further provide global and domestic regulators with 
appropriate access to high-quality standardized data critical to market 
surveillance and systemic risk oversight.
Necessary Next Steps to Achieving G20's Goals
    There are several continuing steps policymakers must take to fully 
realize the G20 goal of enhanced transparency into the OTC derivatives 
market:

  1.  Accelerate data standardization and aggregation;

  2.  Establish a global data access and governance framework; and

  3.  Drive global adoption and consistent implementation of the above 
            efforts.
1. Accelerating Data Harmonization To Improve Data Quality
    Data quality consists of three components: completeness, validity 
and accuracy. Completeness refers to the presence or absence of data in 
a field. Validity refers to a data element being submitted in 
accordance with the validation rules of an SDR, which have been 
developed according to relevant regulation in a jurisdiction. Accuracy 
refers to whether the SDR data accurately reflects the swap transaction 
terms.
    Data completeness is a precondition to determining whether the 
submitted data is valid and accurate. Data validation, which may be 
controlled by establishing a set of basic quality checks such as proper 
type of data, helps to facilitate meaningful reconciliation, which is 
the key mechanism to confirm the accuracy of the SDR data.
    Without harmonized regulatory reporting requirements--both 
domestically and internationally--each one of the components above is 
more likely to be impaired in the following ways.
    First, requiring more data elements than necessary to understand 
the key economic characteristics of a swap creates greater odds that 
the quality of the data will be reduced and potentially cause 
misinterpretation of the data. Based on DTCC's experience supporting 
regulatory reporting across nine jurisdictions, we have seen firsthand 
how regulators have implemented varying reporting regimes with 
different requirements, fields and definitions. For example, due to the 
current wide range of reporting fields required by regulators globally, 
DTCC supports reporting for a total of nearly 3,000 data elements 
globally. Global regulators should coalesce around a common core set of 
necessary data elements.
    Second, requiring different data elements among different 
jurisdictions increases the likelihood of error by reporting entities. 
Instead, global regulators should agree to and only require reporting 
of harmonized core terms of the swap, and require the data elements 
used to reflect those terms to be the same across jurisdictions.
    These actions would have the effect of facilitating efforts by 
regulators to share and aggregate data, thus providing the requisite 
jurisdictional as well as global view of the OTC derivatives market. 
Addressing the remaining legal barriers to data sharing--some of which 
predate derivatives reform such as blocking statutes, state secrecy 
laws and bank secrecy laws--requires international regulatory 
cooperation.
Domestic Efforts
    The CFTC has taken steps to improve data quality, including its 
recent request for comment on draft technical specifications for 
certain swap data elements. Rather than introduce new data elements as 
the CFTC proposes, DTCC encourages the CFTC to: (1) focus on improving 
the quality of existing key elements and adhere to current market 
conventions; (2) work towards global consistency by aligning its 
efforts with international policymaking efforts underway, such as those 
spearheaded by the Committee on Payments and Market Infrastructures 
(``CPMI'') and the International Organization of Securities Commissions 
(``IOSCO''); and (3) carefully consider whether the proposed changes 
inject operational and functional complexity into the current reporting 
system.
    Notwithstanding the steps taken by the CFTC and the SEC to improve 
swap data reporting, additional coordination is needed to address 
challenges that have emerged from divergent regulations. For example, 
the SEC proposed requiring the reporting of trade and desk identifiers 
whereas the CFTC does not require those elements to be reported. In 
addition, there is a lack of consistency among the CFTC and SEC as to 
the reporting of product identifiers.
Global Efforts
    The harmonization of OTC derivatives reporting must take place at 
the global level as well. Currently, significant disparities exist 
between reporting requirements in various jurisdictions. For example, 
in the European Union, the European Securities and Markets Authority 
(``ESMA'') mandates that a reporting field include a Unique Trade 
Identifier, or ``UTI.'' The CFTC, on the other hand, mandates the use 
of the Unique Swap Identifier, or ``USI,'' as a data standard for 
reporting by registered SDRs. These unique fields attempt to address 
the same issue of identifying a swap transaction, but essentially are 
using two different standards to do so.
    DTCC is encouraged by recent international efforts to establish 
consistent standards. CPMI-IOSCO has been charged with spearheading 
global data harmonization efforts, and recent efforts to standardize 
identifiers such as the unique product identifier (``UPI'') and UTI are 
significant steps.
    In June 2015, DTCC provided recommendations to the CPMI-IOSCO 
Harmonization Working Group, detailing a proposed path towards global 
data harmonization with credit derivatives identified as the first 
step.\5\ The approach involves harmonizing approximately 30 data fields 
across global trade repository providers, essentially creating a global 
data dictionary. These fields are viewed as critical to financial 
stability and systemic risk analysis. DTCC also provided comments in 
response to recent consultative reports regarding harmonization of key 
data elements, including the UTI and CPMI-IOSCO's consultation on 
harmonization of the UPI as well.
---------------------------------------------------------------------------
    \5\ See Press Release, DTCC Proposal to CPMI-IOSCO on Global Data 
Harmonization (June 18, 2015), available at http://www.dtcc.com/news/
2015/june/18/dtcc-proposal-to-harmonization-working-group.aspx.
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    While recent efforts are steps in the right direction, increased 
and consistent active dialogue is critical to resolve jurisdictional 
differences. This will require ongoing global coordination and 
collaboration in addition to a dedicated commitment by regulators and 
the industry.
Global Markets Entity Identifier Utility
    A key element in enhancing transparency is the global adoption of 
identifiers and consistent standards to provide for effective data 
aggregation. To this end, DTCC is actively engaged in the global effort 
regarding legal entity identifiers (``LEI''), which allow for the 
unique identification of legally distinct entities that are 
counterparties on financial transactions. As noted by U.S. and 
regulators globally, the FSB, and industry trade associations, global 
LEI adoption will enable improved systemic risk analysis.
    DTCC's Global Markets Entity Identifier (GMEI)--a utility operated 
in collaboration with SWIFT--has assigned LEIs to more than 200,000 
legal entities to date across more than 140 jurisdictions, representing 
approximately 50 percent of all global LEIs that have been assigned.\6\
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    \6\ Through a competitive process, DTCC was chosen to build and 
operate an LEI utility for the industry and was designated by the CFTC 
to provide LEIs to swap market participants as required by CFTC record-
keeping and reporting rules. This utility, which DTCC operates with 
SWIFT, is the GMEI utility and has been globally endorsed by the 
Regulatory Oversight Committee (ROC), which oversees the Global LEI 
System (GLEIS).
---------------------------------------------------------------------------
    Domestic and international regulators have considered the benefits 
of adopting a global system for legal entity identification and 
recognize the importance of such a system to various financial 
stability objectives. In fact, several regulatory authorities have 
promulgated record-keeping and reporting rules with respect to OTC 
derivatives transactions that require counterparties to be identified 
by LEIs.\7\ DTCC strongly supports industry and regulatory efforts to 
mandate the use of the LEI in relevant rulemakings.
---------------------------------------------------------------------------
    \7\ The CFTC, SEC, ESMA, the Monetary Authority of Singapore 
(``MAS''), the Hong Kong Monetary Authority (``HKMA''), the Australian 
Securities and Investment Commission (``ASIC''), and the Ontario 
Securities Commission (``OSC'') each mandate use of LEI. ESMA recently 
included an LEI requirement in their technical standards for compliance 
with MiFIR/MiFID II.
---------------------------------------------------------------------------
    While many jurisdictions accept LEIs, not all have mandated their 
use and some permit the masking of a financial institution's identity 
due to legal concerns regarding privacy laws. DTCC believes that the 
LEI standard should be extended across jurisdictions. Extension of LEIs 
to support branch location and the parentage information to enable 
aggregation by grouping all legal entities to one parent has begun and 
should continue under the auspices of the Global Legal Entity 
Foundation, a foundation created by global regulators to operate the 
LEI system.
2. Establishing a Global Data Access & Governance Framework
    A data access and governance framework is urgently needed to truly 
effectuate the goal of global data harmonization. This will help ensure 
that data standards are maintained and updated as markets and 
regulatory requirement evolve, while also providing a formal structure 
for the appropriate sharing of and access to data across jurisdictions 
for systemic risk oversight.
    Financial data standards are not static. As such, guidance is 
needed to restrict how and when the global data set and its associated 
data dictionary can be changed. A consistent and predictable approach 
to changing the composition of the data elements in the global data set 
and the timing of such changes must also be adopted. In doing so, 
certainty will be provided to the industry, trade repositories and 
regulators that there is consistency across regulatory regimes from 
ingestion of the data to its reporting to regulators.
    For example, currently there is no predictable cycle to the review 
and revision of regulatory reporting requirements which makes planning 
for changes by both reporting parties and trade repositories virtually 
impossible. Likewise, the need for a sufficient amount of lead time 
prior to implementation of any changes to reporting must be recognized; 
at present the lead time to implementation varies from jurisdiction to 
jurisdiction.
    Implementation efforts are rarely synchronized, causing redundant 
development on one side when there are serial changes and resource 
conflicts on the other when implementations overlap. A coordinated 
approach to implementation would alleviate those problems, improving 
regulatory and legal certainty, boosting market efficiency and 
lessening the cost of compliance for market participants and 
infrastructure service providers.
    Further, the governance framework must concurrently provide the 
formal structure and conditions upon which regulators could access each 
other's data, particularly now that legislative hurdles such as Dodd-
Frank's indemnification provisions have been removed. Consistent with 
this approach, in its 2015 Thematic Review, the FSB issued a 
recommendation that by ``June 2018 at the latest all jurisdictions 
should have a legal framework in place to permit access to data held in 
a domestic [Trade Repository] by domestic authorities and by foreign 
authorities, on the basis of these authorities' mandates and in 
accordance with domestic regulatory regime.'' \8\
---------------------------------------------------------------------------
    \8\ FSB Thematic Review on OTC Derivatives Trade Reporting: Peer 
Review Report, 4 November 2015.
---------------------------------------------------------------------------
    DTCC applauds the SEC for quickly recommending a revision of its 
Proposed Rules on Access to Data Obtained by Security-Based Swap Data 
Repositories and Exemption from Indemnification Requirement to take 
into account the legislative repeal of the indemnification provisions. 
We encourage the SEC and the CFTC to consider CPMI-IOSCO's Guidance on 
Authorities access to trade repository in the development of their 
respective data access rules.
    Important precedents exist at a multi-lateral level which show that 
regulatory cooperation can make cross-border data sharing possible. 
DTCC's TIW provided authorities access to data on CDS transactions 
pursuant to guidance issued by the ODRF, which defined the parameters 
of information that could be disclosed based on parties to the 
transaction and the underlying reference entity on whom credit 
protection was being bought or sold. The credit derivatives data 
provided was standardized, aggregated and shared across jurisdictions.
    The ODRF example demonstrates that existing infrastructures can be 
leveraged to perform the aggregation of OTC derivatives data, provided 
the relevant supervisory authorities agree on a governance layer. For 
aggregation to work, as demonstrated in the credit derivatives markets, 
consistent data with very clear access rules is essential.
    DTCC believes that the FSB, in conjunction with CPMI-IOSCO, is best 
positioned to identify and commission a neutral college of regulators 
to establish a global governance framework. This group would support 
maintenance of global data standards and appropriate data sharing. A 
governance framework would also establish the foundation and necessary 
structure to enable global supervisors such as the FSB and CPMI-IOSCO 
to develop their guidance for data standards and harmonization.
3. Ensuring Global Adoption and Implementation
    Once guidance on data standards is agreed upon and a governance 
framework is established, a challenging but critical final step is for 
policymakers to ensure that these efforts are adhered to and 
implemented globally.
    Ideally, a single standard setting authority should be responsible 
for monitoring the adoption of standards in domestic rulemaking and 
compliance with those rules as well as outcomes. This is a proven three 
level process which has been successfully adopted by the Basel 
Committee and CPMI on monitoring the implementation of the Principles 
for Financial Market Infrastructures, and could be extended in scope to 
create the necessary conditions for the consistent adoption of global 
data standards and the corresponding governance framework.
    Without consistent adoption at the domestic rulemaking level, many 
of the obstacles complicating efforts to achieve cross-border data 
harmonization for market transparency purposes will remain unaddressed. 
G20 leaders can support these efforts by continuing to address legal 
barriers to data access and mandating that jurisdictions adopt and 
adhere to these principles within a specific timeframe. DTCC 
appreciates the FSB's recent recommendation referred to above that all 
jurisdictions should have a legal framework in place by 2018 to address 
access to data by domestic and foreign authorities, on the basis of 
these authorities' mandates and in accordance with the domestic 
regulatory regime.\9\
---------------------------------------------------------------------------
    \9\ FSB Thematic Review on OTC Derivatives Trade Reporting: Peer 
Review Report, 4 November 2015.
---------------------------------------------------------------------------
    Given the global nature of OTC derivatives markets, global 
coordination is essential. Congress can play a pivotal role in these 
efforts by strongly encouraging regulators to address key issues 
surrounding data harmonization and data sharing globally. DTCC stands 
ready to assist and looks forward to continuing work with U.S. 
policymakers, regulatory bodies globally and industry participants to 
strengthen the global derivatives marketplace.
Conclusion
    Mr. Chairman, Ranking Member, thank you for inviting me to speak 
today on this important topic. As you know, access to high quality, 
aggregated data is necessary to assist in safeguarding the markets and 
in protecting our economy. I will be happy to answer any questions and 
look forward to a continued dialogue with you and your staffs.

    The Chairman. Thank you, ma'am. Mr. Gil?

         STATEMENT OF ANDRES GIL, DIRECTOR, CENTER FOR
CAPITAL MARKETS COMPETITIVENESS; REPRESENTATIVE, COALITION FOR 
            DERIVATIVES END-USERS, WASHINGTON, D.C.

    Mr. Gil. Thank you. Mr. Chairman, Ranking Member Scott, 
other Members of the Subcommittee for the opportunity to 
testify at this hearing to review the G20 swap data reporting 
goals.
    My name is Andres Gil, and I am testifying on behalf of the 
U.S. Chamber of Commerce and the Coalition for Derivatives End-
Users. The Chamber is the world's largest business federation, 
representing the interests of more than three million 
businesses of all sizes, sectors, and regions. The Coalition 
includes more than 300 end-user companies and trade 
associations. Collectively, the Chamber and the Coalition 
represent a wide and diverse population of domestic and 
international commercial businesses and trade associations.
    At the outset, let me thank the Members of this 
Subcommittee for their focus on balancing regulations, to 
promote financial stability, and for Main Street businesses to 
have the tools necessary to operate and grow as well as the 
CFTC for listening to the concerns of end-users and for 
creating a data-reporting regime that is both robust and 
sensible.
    The Chamber believes in America's global leadership in 
capital formation and supports capital markets that are the 
most fair, transparent, efficient, and innovative in the world. 
As part of that mission, we recognize the acute need for 
commercial end-users to effectively manage risks. This should 
be consistent with financial regulatory measures that promote 
economic stability and transparency without imposing undue 
burdens on derivatives end-users.
    With that background in mind, we support and believe in the 
G20 swap data reporting goals including improving transparency 
in derivatives markets, mitigating systemic risk, and 
preventing market abuse. But there are real economic 
consequences of getting derivatives regulation wrong. Main 
Street businesses use derivatives to obtain access to raw 
materials, lock in prices for commodities, and mitigate risk. 
Many U.S. companies are able to maintain more stable and 
successful operations through the use of a variety of risk 
management tools, including derivatives. Smart regulation 
should encourage, not discourage, such practices.
    However, implementation of the G20 goals has begun to hurt 
end-users. For example, the European Union appears to be 
proceeding without due regard for the economic and regulatory 
burdens imposed on end-users by certain swap data reporting 
obligations. These include dual-sided reporting and 
interaffiliate obligations which require end-users to adopt 
costly new reporting systems to comply with EU law. Both 
requirements impose significant initial and ongoing 
operational, legal, and cost burdens for end-user companies.
    We suggest that there must be a better way for regulators 
and the market to get the data they need without imposing 
duplicative and burdensome regulations on real economy 
companies, especially because they do nothing to promote the 
goals of the G20 framework.
    Ultimately, the Chamber and the Coalition believe that this 
has resulted in a fragmented market where U.S. end-users 
operating abroad now face compliance with multiple reporting 
regimes and required data sets for their transactions.
    The larger point, however, is that the cumulative effect of 
new derivatives regulation threatens to impose undue burdens on 
end-user hedging. Both the direct regulation of end-users, the 
reporting requirements on which this hearing is focused, and 
indirect regulation, such as capital and liquidity requirements 
imposed on our counterparties serves to discourage end-user 
risk management through hedging.
    We need a regulatory system that allows Main Street to 
effectively use derivatives to hedge commercial risk resulting 
in key economic benefits, one that allows businesses to improve 
their planning and forecasting, manage unforeseen and 
uncontrollable events, offer more stable prices to consumers, 
and contribute to economic growth. We should always aim to 
avoid the imposition of unnecessary burdens on end-users that 
restricts job growth, decreases investment, and undermines our 
competitiveness abroad.
    As the Subcommittee considers the implementation of G20 
reporting obligations, it is our hope that these issues will be 
at the forefront of your efforts. Continued support for global 
standards, rather than proceeding on divergent paths, is 
important for data reporting consistency. Congress has the 
ability to influence that process by promoting harmonization 
and sensitivity to the impacts on end-user companies. Together, 
we can strengthen our financial systems by supporting Main 
Street business.
    Thank you, and I am happy to address any questions that you 
may have.
    [The prepared statement of Mr. Gil follows:]

Prepared Statement of Andres Gil, Director, Center for Capital Markets 
 Competitiveness; Representative, Coalition for Derivatives End-Users, 
                            Washington, D.C.
          The U.S. Chamber of Commerce is the world's largest business 
        federation representing the interests of more than three 
        million businesses of all sizes, sectors, and regions, as well 
        as state and local chambers and industry associations. The 
        Chamber is dedicated to promoting, protecting, and defending 
        America's free enterprise system.
          More than 96% of Chamber member companies have fewer than 100 
        employees, and many of the nation's largest companies are also 
        active members. We are therefore cognizant not only of the 
        challenges facing smaller businesses, but also those facing the 
        business community at large.
          Besides representing a cross section of the American business 
        community with respect to the number of employees, major 
        classifications of American business--e.g., manufacturing, 
        retailing, services, construction, wholesalers, and finance--
        are represented. The Chamber has membership in all 50 states.
          The Chamber's international reach is substantial as well. We 
        believe that global interdependence provides opportunities, not 
        threats. In addition to the American Chambers of Commerce 
        abroad, an increasing number of our members engage in the 
        export and import of both goods and services and have ongoing 
        investment activities. The Chamber favors strengthened 
        international competitiveness and opposes artificial U.S. and 
        foreign barriers to international business.

    Mr. Chairman, Ranking Member Scott, other Members of the 
Subcommittee, I want to thank you for inviting me to testify at this 
important hearing, which focuses on matters of significant concern to 
the end-user community. I am testifying today on behalf of both the 
U.S. Chamber of Commerce (``Chamber'') and the Coalition for 
Derivatives End-Users (``Coalition''). The Chamber is the world's 
largest business federation, representing the interests of more than 
three million businesses of all sizes, sectors, and regions. The 
Coalition includes more than 300 end-user companies and trade 
associations. Collectively, the Chamber and the Coalition represent a 
wide and diverse population of domestic and international commercial 
businesses and trade associations.
    The Chamber's mission is to ensure America's global leadership in 
capital formation by supporting robust capital markets that are the 
most fair, transparent, efficient, and innovative in the world. As part 
of that mission, the Chamber recognizes the acute need for commercial 
end-users to effectively manage risk. Similarly, the Coalition, 
representing the engines of our domestic and global economy, has 
consistently supported financial regulatory measures that promote 
economic stability and transparency without imposing undue burdens on 
derivatives end-users; a sentiment with which I believe a consensus of 
those in this room agree.
    At the outset, let me thank the Members of this Subcommittee for 
their focus on balancing regulations to promote financial stability and 
for Main Street businesses to have the tools necessary to operate and 
grow.
    Main Street businesses use derivatives for their intended purpose--
obtaining access to raw materials, locking in prices for commodities 
and mitigating risk--not for financial speculation. This allows 
businesses to produce goods with stable prices for consumers. 
Therefore, there are real economic consequences of getting derivatives 
regulation wrong for Main Street businesses and the American consumer. 
Many U.S. companies are able to maintain more stable and successful 
operations through the use of a variety of risk management tools, 
including derivatives. Smart regulation should encourage, not 
discourage, such practices.
    The Chamber and the Coalition have worked diligently to address the 
regulatory burdens faced by commercial end-users, and that is why, 
before I dive into the subject matter of this hearing, I would like to 
thank the CFTC for listening to the concerns of end-users and for 
creating a data reporting regime that is both robust and sensible. 
Unfortunately, we cannot say the same for the G20 framework.
    We are broadly supportive of the G20's swap data reporting goals, 
including improving transparency in derivatives markets, mitigating 
systemic risk, and preventing market abuse. However, as this 
Subcommittee is aware, implementation of those G20 rules domestically 
has begun to vary considerably. For example, the European Union 
(``EU'') appears to be proceeding without due regard for the economic 
and regulatory burdens imposed on end-users by certain swap data 
reporting obligations. It is important to remember that these 
obligations are being imposed on entities that do not pose systemic 
risk and did not cause the financial crisis. Swap data reporting, at 
its core, is largely driven by the need for transparency within the 
derivatives markets. The theory is that, with transactional details, 
regulators will be better equipped to assess market shortcomings and 
better ensure financial stability. While that may be so, the real 
question is what level of transaction detail is necessary, or even 
helpful?
    The EU, unlike the U.S., has implemented dual-sided and inter-
affiliate reporting requirements on end-users. Unfortunately, in many 
circumstances these regulations are duplicative, costly and otherwise 
detract from the risk mitigating nature of end-user derivatives. 
Disparate treatment has resulted in a fragmented market where U.S. end-
users operating abroad now face compliance with multiple reporting 
regimes and required data sets for their derivatives transactions. 
Beyond the costly issues of compliance, the lack of consistency across 
jurisdictions in a global market does not serve the G20 goals of 
greater transparency, international harmonization, and systemic risk 
reduction in the derivatives markets.
    We understand that European policymakers believe that a dual-sided 
reporting regime for derivatives transactions is appropriate in order 
to reconcile certain circumstances in reporting errors and confirm the 
integrity of reported data. However, we believe that adopting a dual-
sided reporting regime presents legitimate and significant costs on 
end-users and should not be adopted without a thorough analysis of 
whether dual-sided reporting presents any significant benefits to such 
error reconciliation. This is especially true given that, in the United 
States, regulators have access to accurate derivatives transaction data 
through single-sided reporting, coupled with straight-through-
processing and the existing confirmation and reconciliation processes 
employed by end-users and other market participants.
    The CFTC and lawmakers have correctly recognized that the intrusive 
nature of intragroup reporting--swap data reporting of transactions 
among entities within a single end-user corporate structure--does not 
serve to promote the goals of the G20 framework. Nor does it increase 
systemic risk, either by creating counterparty credit risk or 
increasing interconnectedness between financial institutions. The EU's 
approach fails to substantively justify the need for information 
related to the intra-corporate management of commercial risk--such 
information has little or no value to regulators when compared to the 
costs and operational burdens that end-users face in reporting such 
transactions. Forcing end-users to comply with the same reporting 
requirements for intragroup transactions as those required for external 
derivatives transactions would simply burden end-users without any 
corresponding benefit.
    Finally, it is also worth noting that the EU has also included 
futures markets in their reporting legislation. That inclusion is 
outside of the G20 commitment and has proven to be highly burdensome 
and costly for end-users. This is a particularly large issue given that 
tools on collecting data from futures markets are already available to 
European regulators.
    The larger point, which I know this Subcommittee appreciates, is 
that the cumulative effect of new derivatives regulation threatens to 
impose undue burdens on end-user hedging. Both the direct regulation of 
end-users through reporting requirements, on which this hearing is 
focused, and indirect regulation, such as capital and liquidity 
requirements imposed on our counterparties, serves to discourage end-
user risk management through hedging. We need a regulatory system that 
allows Main Street to effectively use derivatives to hedge commercial 
risk, resulting in key economic benefits; one that allows businesses--
from manufacturing to healthcare to agriculture to energy to 
technology--to improve their planning and forecasting, manage 
unforeseen and uncontrollable events, offer more stable prices to 
consumers and contribute to economic growth. The imposition of 
unnecessary burdens on end-users businesses restricts job growth, 
decreases investment and undermines our competitiveness in Europe--
leading to material cumulative impacts on corporate end-users and our 
economy.
    While we support reforms to enhance derivatives market transparency 
and reduce systemic risk, we remain concerned that a regression to 
dual-sided and intragroup reporting would place disproportionate, 
costly and unnecessary burdens on end-users and would not provide 
regulators or markets with any discernible benefit.
    Throughout the development of the G20 framework, the passage and 
implementation of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, the Chamber and the Coalition have advocated for a more 
transparent derivatives market through the imposition of thoughtful, 
new regulatory standards that enhance financial stability while 
avoiding needless costs on end-users. The importance of prudent 
regulation and international harmonization of regulatory standards that 
promote Main Street business has been echoed by Members of Congress, 
including by Chairman Conaway, who has noted that bipartisan efforts 
must ``protect end-users from being roped into reporting, registration, 
or regulatory requirements that are inappropriate for the level of risk 
they can impose on financial markets. It is clear that end-users did 
not cause the financial crisis, they do not pose a systemic risk to the 
U.S. financial markets, and they should not be treated like financial 
entities.'' \1\ These efforts are clearly reflected in the Commodity 
End-User Relief Act, which includes several provisions to provide end-
user relief, including ensuring that there is adequate time between 
completing and reporting a transaction to protect an end-user's hedging 
in thinly-traded markets.
---------------------------------------------------------------------------
    \1\ Press Release, Congressman Conaway Praises Approval of the 
Customer Protection and End-User Relief Act, U.S. Representative Mike 
Conaway (Apr. 9, 2014), available at http://agriculture.house.gov/news/
documentsingle.aspx?DocumentID=1110.
---------------------------------------------------------------------------
    As the Subcommittee considers the U.S.'s implementation of G20 
reporting obligations, it is our hope that the effects of such 
requirements on commercial end-users are at the forefront of that 
consideration. Continued support for global standards, rather than 
proceeding on divergent paths, is important for data reporting 
consistency. It also has the potential minimize reporting burdens for 
end-users through the development of high quality data that can be 
easily understood and used by regulators throughout the world. While we 
realize that Congress does not have a direct hand in the implementation 
of the G20 framework, Congress does have ability to influence that 
process by promoting harmonization and a sensitivity to the impacts on 
end-user companies. Together we can strengthen our financial systems by 
supporting Main Street business.
    Thank you and I am happy to address any questions that you may 
have.

    The Chairman. Thank you. I have several questions as I know 
the other Members do as well. This will be for Ms. Kruse or Ms. 
Collazo, predominantly.
    In its 2010 report entitled Implementing OTC Derivatives 
Market Reforms, the Financial Stability Board stated 
authorities must have a global view of the OTC derivatives 
markets through full and timely access to the data needed to 
carry out their respective mandates. The recommendations help 
achieve this objective, including that trade repository data 
must be comprehensive, uniform, and reliable, and if from more 
than one source, provided in a form that facilitates 
aggregation on a global scale.
    Ms. Kruse, Ms. Collazo, why has the Financial Stability 
Board been so concerned about regulators having a global view 
of the swaps market? And how do their recommendations help 
achieve that objective?
    Ms. Kruse. Thank you, Mr. Chairman. I can start. I think it 
is, back to the statement that was made earlier, these are 
global markets, and you may have market participants in your 
jurisdiction that trade transactions that may seem explicit to 
the U.S. markets. But in fact, a lot of their trading activity 
and many of their affiliates may cross over into other regions. 
And so to understand really the risk that that particular 
entity and its affiliates hold, you need to have a broader view 
of trading activity.
    Ms. Collazo. Thank you, Mr. Chairman, for that question. It 
is an excellent one because it is one that is often discussed. 
Adding to what Tara just described, it is one about 
understanding all the activity, these financial companies have 
many entities, and making sure that the regulator can see the 
activity of the entity at the parent level, across all of the 
subsidiaries and branches that they may have.
    But there is another important point here as well, 
particularly as it relates to credit default swaps, and the 
Lehman crisis was a classic example of that. Lehman Brothers 
was an entity as well that, for credit default swaps, that was 
the underlying security. And that transaction could occur 
between two non-U.S. entities. And during that crisis, there 
were rumors that the outstanding debt that firms would have to 
pay with Lehman going bankrupt was over $400 billion. Well, we 
were actually able to look at the contract because we offered a 
post-trade processing service that had all the global data. And 
we saw that through aggregating that, it wasn't $400 billion, 
it was $6 billion. But the important point here is that these 
are contracts that neither side was a U.S. party, yet had a 
significant systemic impact. And that to me is a sort of 
classic example for why regulators need to be working together 
globally because these are inherently cross-border trades, and 
there are going to be trades outside our jurisdiction that is 
going to be relevant, particularly in a time of crisis for our 
authorities to be able to see that information. Thank you.
    The Chairman. Were you able to see that difference 
immediately, the difference in the $400 billion and the $6 
billion?
    Ms. Collazo. So it was speculation of the $400 billion 
notional. There were rumors essentially that the payout on 
Lehman bankruptcy for credit default swaps by those who held 
these transactions and had sold protection, they would have to 
pay at time of auction, north of $400 billion.
    DTCC was uniquely positioned at that time because we were 
providing post-trade. We were essentially performing the 
management of the operations of the credit default swaps. And 
so we took that data and we looked at the payments if the 
auction occurred. And the number was not $400 billion. We 
identified that if the auction was zero recovery rate, the 
amount would be $6 billion. In fact, when the auction for 
Lehman occurred, the exchange of payments was $5.2 billion.
    The Chairman. If I can, did that take a day? Did it take a 
week? Did it take a month? How long did it take you to 
determine that it was going to be $6 billion, not $400 billion?
    Ms. Collazo. A very long, painful day.
    The Chairman. A day? Thank you. I will recognize Mr. Scott 
from Georgia for any questions that he may have.
    Mr. David Scott of Georgia. Yes, thank you, Mr. Chairman. 
Ms. Collazo, did I say that right?
    Ms. Collazo. Yes, you did, Ranking Member.
    Mr. David Scott of Georgia. Wonderful. I was very intrigued 
by your testimony, but I have to agree with you. The cross-
border harmonization issue is very critical. Share with us a 
moment because you talked about the nine jurisdictions that you 
have. Tell us what those jurisdictions are. And then you 
mentioned the workload capacity of did you say 80 million 
messages? I didn't get it. Was that 80 million per year or was 
it per day? And then what is that other figure?
    In other words, what I am trying to get at is the enormity 
of this problem and why the issue of transparency is so 
critical to identifying systemic risk? But a good starting 
point is that you are right. They are sort of in the 
wheelhouse, and that was a profound amount of work that you 
issued before us. Could you elaborate on those points?
    Ms. Collazo. I would be happy to. Thank you for that 
question. It is certainly at the heart of what I was trying to 
communicate regarding the enormity and the global impact. So I 
appreciate it.
    So in answer to your first question, as it relates to nine 
jurisdictions, these represent the United States under the 
CFTC. We also cover reporting in Europe under the ESMA 
regulations. We are also in Australia, Singapore, and Japan. 
And we support reporting for three Canadian provinces.
    And so we have been uniquely positioned really to look 
across that data set and identify where those divergences 
exist. When I speak about the enormity of the data that is 
coming in, the 80 million messages a week that I described, as 
it relates to U.S. volume coming through, really is to sort of 
set the context of how much activity, messages, are just coming 
through, and that this is something in terms of data standards 
that become so important when you see this size of information.
    In terms of globally what we support for these nine 
jurisdictions, we see approximately 300 million a week. So this 
is big. And when we sort of think about how we arrive at 
reliability, usability of the information, it is not a one-
size-fits-all. It has to be a means where we can, and my 
colleague, Tara Kruse, mentioned this, where we can leverage 
existing market conventions.
    In that example of the $400 billion and the $6 billion, why 
were we able to aggregate that information in a day? Because we 
have the data held in a highly standard way for credit default 
swaps.
    Mr. David Scott of Georgia. I want to get to my other 
point. I have about a minute left. I want to ask how difficult 
or expensive is it, given all of what you are talking about 
there, for smaller players in these markets like our end-users? 
And Mr. Gil, you may chip in here, too, because that is where 
the rubber meets the pavement for us is the complexity of what 
this makes for our end-users to interface with the SDRs and 
accurately report swaps data.
    Ms. Collazo. Yes. So I will say a few brief words and then 
I will let Mr. Gil respond to that as well. The work that we 
are proposing here will actually drive efficiency, remove 
complexity, and ultimately that will benefit the end-users and 
in fact, I would even add would enable them to have a level of 
transparency into this data being reported that would support 
the efforts both from the G20 goal as well as end-users 
actually having some benefit here.
    Mr. Gil. I would definitely associate myself with those 
comments. I would also underscore there is also the mistaken 
kind of assumption that reporting simply means sending an e-
mail by an end-user. That is completely wrong. What actually 
occurs for an end-user is the creation of a system, a computer 
system, usually from scratch, very costly, and usually not in 
the best position for someone to actually report. So I would 
say that the costs are tremendously high.
    Mr. David Scott of Georgia. Yes. So you don't see, for 
example, end-users having an exemption from this?
    Mr. Gil. Under the current rules, end-users, under single-
sided reporting would rely on their financial counterparties to 
do the reporting. Obviously under the dual-sided reporting in 
other jurisdictions we have a lot of concerns.
    Mr. David Scott of Georgia. Okay. Thank you, sir. I 
appreciate it.
    The Chairman. Mr. Neugebauer?
    Mr. Neugebauer. Thank you, Mr. Chairman. One of the things, 
as I sit on this Committee and the Financial Services 
Committee, and we have been dealing with a plethora of 
regulations that came out of Dodd-Frank, is that changing the 
business model into market behavior. And one of the things I 
have been particularly concerned about is liquidity in some of 
these markets. And markets do not perform well if they don't 
have the right amount of liquidity. And what we have seen is 
that some of these regulations have changed market players' 
behavior. We have seen some players get out of the marketplace.
    And so one of the things that I am a little concerned about 
is this recently drafted technical specifications creates a 
pretty detailed and highly prescriptive set of standards on how 
to report each and every trade. And I am afraid that might not 
be all that easy for some of the non-standard hedging products.
    So I guess, Ms. Kruse, do I have a valid concern that with 
all of these changes that we are making, that we are changing 
market behavior a little bit and potentially have a liquidity 
issue?
    Ms. Kruse. Congressman, yes. I would absolutely agree with 
that. I think sometimes we go in the wrong direction. There is 
a misconception that more data is better data. But it is better 
to stick with a core set of data fields that allow you to 
understand the market risk of the transactions and focus on 
improving those before looking to expand the requirements.
    Mr. Neugebauer. Mr. Gil, I am also concerned about these 
increased reporting requirements, and we were talking about 
end-users. Mr. Scott brought up on the swap market. I think 
about adding 120 additional data fields and having to compile 
the data and report the data on each and every trade, is 
particularly for smaller end-users, that is, to me that is 
problematic. Am I missing something here?
    Mr. Gil. Congressman, we share your concerns completely. 
The CFTC's proposal, while well-intentioned, does ask for a 
number of additional data fields that will impose additional 
costs. Those costs obviously flow down to end-users. To the 
extent that that financial reporting party has to start 
collecting that information, it does go to the end-user. The 
number one thing that we want to avoid is pricing the end-user 
out of the market because of increased costs.
    Mr. Neugebauer. Yes, one of the things that I wonder is if 
the requirements are maybe well-suited for reporting--could 
perhaps be more suited for the dealers, swap dealers, 
themselves rather than putting that responsibility on the end-
user. Is that a reasonable thought?
    Mr. Gil. Congressman, that is a great question. Honestly, 
the costs do end up flowing to the end-user regardless of who 
is the reporting party. We have seen that in a number of 
different regulations, whether it is capital or margin, and it 
applies for reporting, too. I think that the important thing to 
do honestly in addition to making sure that the right person 
and the right party is actually reporting this information, is 
making that information as targeted as possible, eliminating 
issues with current reporting issues, and then only asking for 
data sets that are truly needed, going forward.
    Mr. Neugebauer. Yes. I think one of the things, because I 
heard you say a while ago it is pretty expensive, the start-up. 
So I am thinking that the infrastructure that the swap dealers 
already have in place may be a more cost-effective place to do 
that, rather than asking the end-users to have to develop that 
infrastructure.
    Mr. Gil. Congressman, I would agree with that.
    Mr. Neugebauer. Yes. So the final point that I wanted to 
make is that I am extremely concerned about, as we have gotten 
this new regulation, we have also, with Dodd-Frank, we created 
new entities. We have OFR and it is collecting a huge amount of 
data. The CFPB is collecting a huge amount of data now, 
millions and millions of records on credit card holders across 
the country. I am concerned with two things. One is do the 
regulators need all that data? But more importantly, now I am 
worried about the sensitivity in collecting that data and the 
safety of that data because much of that data is very 
proprietary. Again, one of the things that we would hope that 
the CFTC and other regulators would do is, look. This is the 
data we need to make a safety and soundness issue. We don't 
need to know that much more about that transaction than a 
certain subset. And I am having a hard time believing that we 
have 100 fields that will determine whether we have the right 
amount of data on that, particularly for non-standard trades as 
well.
    So Mr. Chairman, thanks for having this hearing today.
    The Chairman. Mr. Aguilar?
    Mr. Aguilar. Thank you, Mr. Chairman. I have a couple 
questions for Mr. Rogers. In your testimony you comment that in 
a post-Dodd-Frank world, the Commission has adopted rules for 
data reporting that have changed how we view the markets. 
Specifically, can you talk a little bit about the transparency 
to market participants? Give me an example of that and what do 
you believe are some of the most significant gains in these 
efforts. And with respect to SDR data quality, do we plan to 
continue building upon this progress and how will we do that?
    Mr. Rogers. Thank you for the question, Congressman. I 
would say that from a significant advancement perspective that 
at the Commission we have a view into the data that we did not 
have at the time of the financial crisis. And we are actually 
able to make use of the data that we get through the SDRs every 
day. Those purposes are to assess exposures for particular 
market participants overall but then also assess risk, 
financial risk, to firms and whatnot. So we actually analyzed 
the same data that is coming into the SDRs for those purposes.
    Other purposes would be for the de minimis study, for 
example, that is currently ongoing. Or Made Available for 
Trading.
    So, we have a variety of divisions performing market 
oversight functions or monitoring swap dealers or assessing 
financial risk that are all looking at data that we didn't have 
a view into before and are able to then do analysis, reach out 
to industry participants if there are questions that we have 
about the data and be more informed about what is happening in 
the marketplace. I think that is the most significant 
advancement that has been made. I would add that certainly 
there is lots of work that needs to be done, moving forward, in 
terms of improving the quality of data, but we actually are 
using the data on a daily basis.
    One other thing that I would add is that we are trying to 
create clarity in terms of what data we would expect to see and 
how we would expect to see it. That was the purpose of the 
technical specifications document that was issued with the 120 
fields. We believe with that clarity that the quality of data 
will improve, the quality of the data going into the SDRs will 
improve because people will know what to submit and when. That 
is the objectives of those efforts.
    Mr. Aguilar. I appreciate it. One more for you. The 
regulators, the global regulators working on this through the 
data harmonization working group to propose guidelines for 
harmonizing the derivatives data across the jurisdictions, work 
streams are taking place on data elements such as unique trade 
identification, unique product identification, and other data 
elements. Once the working group puts out its recommendations 
expected later this year, how will CFTC respond? Will it use 
these recommendations? What do you think are some of the next 
steps, and do you envision that there will be changes that are 
needed based on that work?
    Mr. Rogers. Thank you for the question, Congressman. The 
guidance that is being issued through the CPMI-IOSCO initiative 
is truly guidance to the regulators on the standard ways to 
represent this information with the notion that the regulators 
that are participating in this activity will adopt that 
guidance and implement it in their jurisdictions. From a CFTC 
perspective, we would certainly expect to be implementing the 
guidance of this initiative.
    Even at this point, we are looking at how that would be 
done. So there may be some aspects to the guidance that comes 
out that would not require a change to rules but probably would 
require some guidance from the Commission, and there may be 
some that would in fact require changes to rules.
    So that is something that we would be looking at, and we 
would expect that other regulators that are a part of the 
process would be doing as well. That is actually something that 
we talk about when this committee gets together to discuss the 
implementation, and that is where a lot of coordination 
happens, both domestically and internationally in the work that 
we are doing, moving forward, to create that global harmonized 
standard.
    Mr. Aguilar. Thank you. Thank you, Mr. Chairman.
    The Chairman. Mr. Lucas is not here, Mr. LaMalfa?
    Mr. LaMalfa. Thank you, Mr. Chairman. Mr. Gil, of course, I 
am glad we are having this hearing. It is important to hear 
from the end-users on how this process works or the 
difficulties of it. You didn't have a whole lot of time 
earlier. Could you elaborate a little more on the burdens that 
are imposed on the end-users by this amount of data that is 
required? Would you care to elaborate a little bit more on what 
that really looks like and what kind of a barrier that might 
actually be towards trading?
    Mr. Gil. Absolutely. That is a great question. Thank you 
for that. I think that one way of kind of thinking about it, 
again, I use the analogy of someone thinking that an e-mail is 
sufficient. Sometimes people don't realize that an end-user 
also has a continuous obligation to update that information 
that is posted. So you have to create a system from scratch. 
You have to create the code in order to actually implement the 
system. Then you have that reporting obligation, going forward, 
in terms of updating that continuous information.
    Let me take the example of Europe where that is even 
tougher. So for example, you have a dual-sided reporting 
obligation, and usually you would actually rely on the 
financial counterparty to supply that information and send it 
to an SDR. In that situation, you actually have to do it 
yourself. So the end-user has to adopt this to begin with.
    So for an international company that is doing both business 
in the United States and Europe, sometimes they are faced with 
a situation where they may not have to post that information or 
report it in the United States but they do in Europe. And that 
creates complexity and burden.
    Mr. LaMalfa. And how much do you think that has created a 
barrier with international transactions?
    Mr. Gil. I think it has been significant, Congressman. I 
don't have any numbers on me.
    Mr. LaMalfa. This isn't the first time it has come up. Ever 
since I have been on this Committee, it has been a topic that 
has been a source of frustration with trying to--more 
harmonization is needed between the U.S. and European concerns. 
Please.
    Mr. Gil. Right. To answer that question, it is important to 
look at how this system has kind of developed over time. The 
Europeans have decided to actually develop the system that is 
very different from the CFTC and what we have in the United 
States. A few years ago the CFTC granted no-action relief and 
has helped with a lot of these different reporting obligations, 
which we really appreciate.
    So for example, inter-affiliate reporting which would have 
been very burdensome for end-users, is something that the CFTC 
has granted relief from. Europe is different, and because of 
that, we face different reporting obligations.
    Mr. LaMalfa. The level of detail Mr. Neugebauer was talking 
about as well, the amount of data, the number of fields 
expanding, how do you find that as being really helpful or what 
do you think the theory is, or how that would even actually be 
helpful? We have a lot of data. We have a lot of data to keep 
track of. Is it secure enough? At the end of the day, is it 
useful to anybody on the regulatory end?
    Mr. Gil. I think you have a great point there, Congressman. 
The fact is, more information is not necessarily helpful or 
useful, and we need to actually look at that.
    So for example, I have used the example of the EU because 
it is very helpful here. In the dual-sided reporting regime, 
you have about 50 percent matching, so in other words, 50 
percent actually working in that system. You have more 
information in that system, though, because it is coming from 
two different sources. Taking that analogy and using it here, 
now you have 120 new data fields. You might have potential 
mismatches. You are going to have a lot of false positives. 
More information is not necessarily helpful in that respect.
    Mr. LaMalfa. It seems like one could get lost in all that, 
and I don't know if it is even looked at on the regulatory end 
anyhow. Ms. Collazo alluded to that as well.
    Mr. Rogers, again, we are hearing multiple times whether 
here in this room, I had others in my office complaining about 
the overload of information as it affects credit unions in the 
Dodd-Frank situation and just a lot of frustration with what 
many people feel are unneeded levels of information. The 
harmonization problem across the border is huge since I have 
been here hearing these testimonies over time.
    What do you see are really the biggest differences between 
the United States and G20 members on these reporting 
requirements and what is CFTC going to do to have a much better 
harmonization so we are not creating a barrier or even Europe 
looks at this as hostile towards trade? I am short of time, 
too, so you have to hurry a bit, please. Thank you.
    Mr. Rogers. Yes. Thank you for the question, Congressman. I 
believe the work that we are doing internally with CPMI-IOSCO 
is geared towards in particular a set of fields that are 
necessary for aggregation and standardizing on that front. The 
work that we are doing at CFTC is fitting into that, but when 
we look at the data that we are asking for, we look at it from 
the perspective of the use cases that we have at the 
Commission. And it is based on the specifications that are 
intended to provide greater clarity for fields that are already 
being asked for but then there are also situations where there 
were new asks of data as it relates to that particular 
technical specifications document.
    Mr. LaMalfa. Right. I better cut you off there.
    Mr. Rogers. Sure.
    Mr. LaMalfa. But every time I hear about more clarity, it 
seems to be a greater burden on the people, whether it is this 
or whether it is clarity as set down by the Army Corps of 
Engineers on their policy. I will yield back, Mr. Chairman. 
Thank you.
    The Chairman. Thank you. I am going to go to a second round 
of questions pretty quick and try to move fairly fast through 
these. Mr. Rogers, I have a couple for you real quick. Does the 
CFTC have full and timely access to all of the data needed to 
carry out the mandates of the Dodd-Frank Act to enhance 
transparency, promote standardization, and reduce systemic 
risk?
    Mr. Rogers. I believe we do have access to the data that we 
need, but I do believe that there are refinements that need to 
be made in that data in terms of the quality of it, whether it 
is complete or whether it is accurate. And we are taking steps 
in that regard. There are circumstances where data has been 
identified, new data that would be required. But for the most 
part, I would say that we do have access to the data to perform 
quite a lot of the functions that we are required to perform.
    The Chairman. Do you or does any other authority have a 
global view of the swap markets?
    Mr. Rogers. Thank you for the question. I would say that at 
this point in time, no. We have a view into the data that we 
have jurisdiction over, and that gives us insight. And we would 
have to reach out then and get data that we would need in a 
broader context. It is an issue that is being worked on through 
the Financial Stability Board and CPMI-IOSCO. But at this time 
the mechanism that would be envisioned to have a single place 
where every jurisdiction could go to do that assessment is not 
in place at this time.
    The Chairman. Why not?
    Mr. Rogers. I believe it is a complicated matter that 
requires examination from a variety of different fronts. One of 
them would be the legal barriers, and in the United States we 
have just had the repeal of the indemnification provision. But 
in other jurisdictions, there are similar barriers to having 
that information being shared. Other laws, like privacy laws 
and things like that, there are governance and data protection 
things that would need to be worked out to make sure that the 
data that would be available is available in appropriate ways 
and protected properly and used properly. So those are just a 
couple of issues that would need to be addressed to stand up a 
regime like that.
    The Chairman. As you work through that, it would be helpful 
for this Committee to have those recommendations, especially on 
how we protect people's privacy while at the same time making 
the data useful.
    One more question: Within the confines of your recent 
appropriations, what work are you doing to improve the 
technological capabilities of the Commission to accept, 
process, and analyze swaps data from the SDRs?
    Mr. Rogers. Thank you for the question, Congressman. We are 
working on a variety of fronts, starting from the technological 
layer. There are cycles to technologically refresh our 
environment. So as an example, our storage capacity is 
something that we are addressing this year. From a more data-
oriented perspective, we are working very hard to provide 
specifications that will hopefully improve the quality of 
information but also working on the systems that are necessary 
to combine data from multiple swap data repositories in such a 
way that our staff, regardless of the divisions that are 
represented, can go to one place and do the analysis that they 
need to do to carry out the mission of the Commission. So quite 
a lot from both the technological front and from the data 
perspective.
    The Chairman. I have one more question if I may, Mr. Scott, 
before I go to you. Ms. Kruse, it was mentioned the importance 
of using existing market conventions. What are those market 
conventions and what are we using instead of those conventions?
    Ms. Kruse. Sure, thank you, Mr. Chairman. It is a very good 
question. The conventions, the key ones, are the following: 
There are the product definitions that have been published and 
developed over time that are used by market participants to 
agree to the terms of their transactions and confirm the terms 
of the transactions. They establish terminology and definitions 
for terminology that frankly just are the market standard for 
how derivatives are agreed and confirmed. Yet those terms and 
the definitions that underlie them aren't being consistently 
used in leverage. Instead, you have regulators creating new 
terms to represent the same information or defining it 
differently which isn't really economically what was agreed 
between the parties.
    Also from an electronic representation, there are standard 
ways to represent some of this data. A lot of that is in the 
Financial products Markup Language. This is an open-source 
electronic messaging scheme that is used by market 
participants, even before there were reporting requirements to 
electronically confirm the trades. So there already is a 
mechanism to represent consistently for instance things like 
business day conventions established in these, or certain dates 
and payment types, et cetera. And those values are not 
necessarily being leveraged and reflected in the regulatory 
requirements. Instead, regulators start fresh and kind of 
reinvent the wheel to come up with their own values. If you go 
back to these standards and regulators align to them, it not 
only increases the efficiency of reporting but increases the 
consistency between the regulatory requirements.
    The Chairman. Thank you. Mr. Scott?
    Mr. David Scott of Georgia. Yes, thank you, Mr. Chairman. 
So this morning we have heard from the panel, Ms. Kruse, 
Collazo, and you, Mr. Gil, that we have global regulators that 
are working together with the CPMI-IOSCO Data Harmonization 
Working Group, and they will propose guidelines for harmonizing 
derivatives data across all of the nine jurisdictions, 
according to Ms. Collazo, and that work streams are taking 
place on data elements such as the unique trade identification, 
unique product identification, and other data elements.
    So then I have to turn to you, Mr. Rogers, and ask you, 
once this working group, as your three fellow panelists have 
laid out, puts out its recommendations, which I understand is 
expected later this year, will you, the CFTC, heed those 
recommendations?
    Mr. Rogers. Thank you for the question, Congressman. Let me 
provide a little context behind the recommendations that are 
coming out from the CPMI-IOSCO group. They are focusing, 
besides the UTI and the UPI, on 80 fields that are necessary 
for de-aggregation of data. Within those 80 fields, yes, the 
CFTC does plan to adopt the recommendations of the group. The 
needs though in terms of what the CFTC does with data actually 
is broader than the mandate of those 80 fields. And that is why 
we have in our technical specification that has come out 120 
fields as an example actually covering three asset classes: 
credit, interest rates, and foreign exchange.
    Mr. David Scott of Georgia. Right. So your answer is that 
you will heed the recommendations? Now let me give you this 
entrance ramp by asking you that if you do, do you envision 
that there will be changes needed to current rules and 
reporting requirements based on this work?
    Mr. Rogers. Thank you for the question. I believe that 
there is certainly the possibility that that would exist. I 
don't know that I can say categorically, but I believe that 
that is in all likelihood a possibility. I think that for 
example in our Part 45 rules, there are very specific 
appendices in the back of that, and there might be adjustments 
that are needed to that. But there could be adjustments in 
other areas.
    One of the things that we are looking at from a Commission 
standpoint is the potential for changes to our rules based on 
information that we know now. But also, I could envision that 
changes would be required as it relates to that work that is 
being done by CPMI and IOSCO.
    Mr. David Scott of Georgia. Okay. Let me ask each of you to 
comment, if you could. The data quality in ISDA swaps data 
repository is high, very high. There is a high bar for data to 
make it into the swap data repository and many validations are 
in place to ensure data quality. All of the SDRs have been 
working together to present data in the most efficient manner. 
And the suggested path forward is to allow the SDRs to work 
with the CFTC. And I have been assured that this is a very 
achievable goal. Yet, there is still talk about improving the 
quality of the data. So my question is, what is the best path 
forward to improve that data quality? Mr. Rogers?
    Mr. Rogers. Thank you for the question. I think that from 
the CFTC's perspective, as I mentioned in my opening remarks, I 
believe that in some cases the swaps data repositories don't 
feel that they are empowered to reject data. If we provide 
greater clarity on: first, that they can; and second, just what 
the criteria would be for validation, whether it is making sure 
that data that is not supplied is now supplied or more 
complicated things around data quality, that will substantially 
improve the quality of the data coming to the Commission. And 
so that is a priority focus of ours.
    Mr. David Scott of Georgia. Thank you, Mr. Chairman.
    The Chairman. Mr. LaMalfa?
    Mr. LaMalfa. Thank you again, Mr. Chairman. Mr. Gil, 
listening to the complexity of this day and over time, there is 
certainly a case to be made, can exceptions be made from 
somebody's reporting requirements at a certain level or a 
certain timeline? Would you have any recommendations on that? 
Would you be supportive of that? And if you would, how would 
you put that into place? How would you implement that sort of 
thing?
    Mr. Gil. Thank you very much, Congressman, for that 
question. I think it is completely appropriate to be looking at 
this, looking at the burden that is imposed on end-user 
companies and finding out if there are exemptions or abilities 
to tailor that type of reporting in a way that will be 
appropriate for end-users.
    In terms of specific recommendations? It is difficult to 
say considering that this is a technical staff document, alpha 
proposal. I think the main point, though and the main point 
that I underscore that the other panelists have also mentioned 
is that it is incredibly important to make sure that it is 
consistent with the work being done by CPMI-IOSCO. It needs to 
be consistent with end-users, especially the businesses across 
different jurisdictions need to have the same reporting 
obligations throughout.
    Mr. LaMalfa. Thank you. Let me shift to Ms. Kruse, too, I 
picked up that you talked about the reinvention of the wheel, 
whether it had been a way of doing things that was working and 
now you have to almost scrap that in order to have these two 
different languages talk to each other in really plain terms 
here. What would you see is the concern about the previous way 
of doing things as being deficient? Where is that concern 
coming from and what are these--elaborate more on the pitfalls 
of having two different methods of doing that with this 
reinvention of the wheel as you mentioned?
    Ms. Kruse. Thank you, Congressman. I mean, the real pitfall 
is that it is very inefficient trade. It also creates a lack of 
clarity. It allows participants to interpret the data in a 
different way, potentially report it in a different way, in a 
different way than they might have agreed to trade or the way 
they might have confirmed it bilaterally between themselves.
    Ideally, if you want good quality data, you want the data 
to be provided to the regulators and viewed by the regulators 
in the same terminology and in the same form and as close to 
the same form as the parties agreed to it between themselves to 
begin with.
    Mr. LaMalfa. So the industry standard amongst the people 
talking to each other, doing it, should be adapted to by the 
regulatory agency so that you are going to get better quality 
instead of trying to translate it into something completely 
different that they don't work with basically?
    Ms. Kruse. Yes. That is correct. I mean, a lot of the 
issues you see with data quality are not attributed to the fact 
that the parties don't agree on the terms of the trade. They 
have confirmed the trade. They have legal certainty. It is the 
way the data is transformed differently by parties sometimes 
due to technological differences in their systems, sometimes 
due to different interpretations of what is required or asked 
for by the regulator that ends up showing it is very----
    Mr. LaMalfa. What is the quality of the technology that the 
regulator brings to the table compared to what you have within 
your system?
    Ms. Kruse. I think it is more so about the regulators 
adopting what is already available from an industry perspective 
because parties use those standards to provide the information 
to the regulator, and then the regulator can leverage and 
benefit from those existing standards. It ought to save them a 
lot of work, and it ought to provide a mechanism for more 
consistent data.
    Mr. LaMalfa. Thank you. Sounds sensible to me. Ms. Collazo, 
you talked about having an international governing framework 
here where you would have, in order to cover this international 
misunderstanding here, you would have an outside group made up 
of multi-national entities to speak to each other about that, 
come to agree. Could you elaborate on how that would come 
about? How do you envision that and how would that be formed 
and what would it be accountable to?
    Ms. Collazo. Thank you for the question, Congressman. In 
terms of the governance model, it is really a jumping off point 
from what Tara Kruse just discussed which is their existing 
market standards. And our hope and expectation is that those 
standards are recognized at a global level.
    But we also know that standards evolve over time. And we 
don't want it to be----
    Mr. LaMalfa. I'm sorry, running out of time. But how would 
you formulate this international entity or governance group 
that would be trying to assemble this? How would that come 
about?
    Ms. Collazo.--governance. Right.
    Mr. LaMalfa. If you could please?
    Ms. Collazo. So essentially what we would like to see is 
that the governance model is such that it has representatives 
from each of the jurisdictions, major jurisdictions that have 
derivatives data and that they are constantly--that they can 
take inquiries. It can be a governance model that is owned by 
the industry, such as ISDA has particular governance oversight 
of certain data elements. Regulators representing multiple 
jurisdictions can be part of that governance framework. And 
then there can be a process for as the standards evolve for 
this governance framework, to review it, to comment on it, and 
to make sure that it is aligned with how entities would report 
and the changes they would have to make to this.
    Mr. LaMalfa. Okay. To sum up then, would they have any kind 
of a regulatory authority or is it more of a recommendation 
that has credibility amongst all the separate groups that 
should be paid attention to? Are you going to empower them with 
some kind of enforcement or some kind of regulatory--
    Ms. Kruse. I would say--it is a great question. I would say 
that it is more about enabling the standard to evolve and that 
the regulation recognizes that governance framework so that as 
changes occur in the market, the data is consistently being 
updated on a global basis.
    Mr. LaMalfa. Thank you. So they could be listened to and 
with credibility. Mr. Chairman, I thank you for your 
indulgence. I yield back.
    The Chairman. Thank you, Mr. LaMalfa. We will take that 
minute-and-a-half out of the next meeting. Mr. Davis?
    Mr. Davis. Thank you, Mr. Chairman, and thanks to all the 
witnesses for being here today. I would like to start with Mr. 
Rogers. As the CFTC pushes to develop these standards to report 
each and every swap trade, are precautions being taken to 
ensure that such rules don't end up hurting liquidity? Because 
reporting actually imposes real costs on the market 
participants.
    Mr. Rogers. Thank you for the question, Congressman. Yes, I 
would say that the data that is being asked for is being looked 
at in terms of the implications for the use by the Commission 
and on the marketplace in general. We have focused on in fact 
in our technical specifications existing standards, existing 
practices and look forward to feedback on exactly what we are 
asking for and how that fits into the framework that already 
exists with the notion of trying to ensure that we are able to 
accomplish our regulatory mission but also trying to not be 
overly burdensome to industry.
    Mr. Davis. Okay. Ms. Kruse, does industry feel the 
regulators are only demanding the information they need or 
expanding into new fields?
    Ms. Kruse. Thank you, Congressman. I mean, we definitely 
feel that they are expanding. That is right. I would really 
question the idea that the 120 fields in the technical 
specification are all priority fields. Many of these are new 
fields. There are probably a couple dozen of them that are 
brand new fields which is an expansion of reporting 
requirements. At this point in time people feel it is more 
important to focus on improving the data fields that are 
already required by the Commission and making those more useful 
rather than looking to expand the scope of the requirements.
    Mr. Davis. Okay. Now we know every SDR is going to need to 
make some changes to comply with this uniform reporting 
standard. Are you concerned that the regulators won't give 
industry enough time to implement some of these changes with 
the fields that you have mentioned? Ms. Kruse, go ahead.
    Ms. Kruse. That is for me, Congressman. Thank you for the 
question. Yes, it could take significant time. I mean, one of 
the concerns that we really have is that we don't want 
jurisdiction-specific implementations. We want the global 
initiative at CPMI-IOSCO to play out, and to the extent that 
there are changes that are necessary to promote consistency, 
which there probably will be, then the industry is very willing 
to do that. But they want to do it in a globally coordinated 
fashion. It is very expensive and inefficient to have interim 
jurisdiction-specific changes to regulations, especially if 
those might then be superseded by the global mandates.
    Mr. Davis. Okay. Well, I guess for the other two witnesses, 
do you have any comments on any of the questions I have asked?
    Ms. Collazo. I would add one other comment in terms of the 
data and having a much more narrow focus on improving the 
quality there. Really, it is about the ability, when we think 
about usability, it is about transforming this data into 
information. And the only way to do that is to have a 
consistent standard. So we would absolutely agree that 
narrowing the focus on what are the key economic terms, what 
are the key data elements, for example, the parties to the 
trade that are needed to be able to aggregate and have useful 
information. Data in and of itself is not information.
    And so when looking at that, we think that there is a much 
more narrow set of data elements. In fact we did suggest to 
CPMI-IOSCO that that data set is somewhere in the vicinity of 
30 to 50 fields. And we made that specific recommendation on 
those fields for credit derivatives. So we would really urge 
that there be a much more narrow lens around these data 
standards, that the focus is around how would that information 
be used? What aggregation, what output of the data would be 
utilized by the regulators? And that is the objective we should 
be turning our attention to.
    Mr. Davis. Okay. Thank you. Mr. Gil?
    Mr. Gil. I would associate myself with the comments of Ms. 
Kruse and Ms. Collazo. I would also add----
    Mr. Davis. And not Mr. Rogers?
    Mr. Gil. Not Mr. Rogers.
    Mr. Davis. Okay.
    Mr. Gil. What I would say, though, in addition to the 
points that they raised, we have to look at what tools are also 
available currently to talk about swap data quality and, for 
example, portfolio reconciliation and confirmation of trades. 
Those basically ensure that the economics of the bargain that 
are actually entered into between parties is confirmed. So when 
we are talking about data quality issues, we are talking more 
about month, date, year versus date, month, year kind of 
issues, not the economics of the actual transaction.
    Mr. Davis. Right. Well, thank you all very, very much. Mr. 
Rogers?
    Mr. Rogers. May I add something? Yes?
    Mr. Davis. If the Chairman allows me extra time, you can.
    The Chairman. Absolutely.
    Mr. Davis. Thank you.
    Mr. Rogers. Thank you both. So I wouldn't say that without 
question we are looking at how the global standards align with 
the things that we are asking for. And a real good example of 
that is the UPI data element. We have been having conversations 
with industry for a long time about the unique product 
identification and how to represent that, and we are 
specifically asked, ``Please don't create something at the 
Commission that would then be overtaken by an international 
standard.'' And it is for that reason that that is an element 
that hasn't been brought into the conversation.
    We work very hard to align what we are doing domestically 
with what is being done internationally and do try to leverage 
international standards. Having said that, we have gotten 
feedback at our TAC meeting this week that some of the things 
that we were asking for in our technical specification did 
represent more things than we were asking for and heard very 
clearly that the recommendation was focus on making the 
elements that we already have better before asking for new 
elements. And that is something that we will absolutely take 
into consideration as we contemplate the comments that we have 
gotten or will be getting as a result of this----
    Mr. Davis. I think from some of the questions we have 
asked, I respect the fact that the CFTC is willing to take 
those ideas into consideration. We would urge that to happen, 
and we appreciate your willingness to work with us. And thank 
you all for being here, and I don't have any time to yield 
back.
    The Chairman. Mr. Kelly?
    Mr. Kelly. Ms. Kruse, the CFTC swap data reporting 
requirements are not fully aligned with the SEC's requirement 
for securities-based swap data. Differences exist as to who is 
obligated to report, reporting timelines, and what data is 
reportable. What is the impact of these discrepancies between 
the SEC and CFTC's swap data reporting standards?
    Ms. Kruse. Thank you for the question, Congressman. It is 
an excellent one and one that I have been quite concerned 
about. We have been working with the SEC in providing comment 
to them as they have worked to finalize their rules. And one of 
the major comments that our members have continued to put 
forward is that the SEC should be working to try and align with 
the CFTC to the greatest extent possible.
    What it means for our participants is a great deal of 
additional cost and inefficiency because they have to build out 
different reporting pipelines, different reporting logic, 
different reporting data fields for their securities-based 
swaps as they are currently reporting for their swaps. It also 
creates a great deal of expense for trade repositories that are 
looking to support it. That cost gets passed back to the market 
participants.
    The SEC also has a requirement that goes to the end-users, 
very specifically they are looking for the party who is not 
responsible primarily for reporting to supplement the data with 
unique identification codes like trader IDs and trading desk 
IDs which amounts to requiring these parties to be onboard to 
all of the trade repositories and building out their own 
pipelines to report additional data.
    Mr. Kelly. And if I mispronounce your name, I apologize. 
Ms. Collazo? If you or Mr. Gil, I noticed you were nodding 
during some of that. If you have comments that you would like 
to add, I'd just appreciate it.
    Ms. Collazo. Thank you, Congressman, for the question. I 
would absolutely agree with the comments that Ms. Kruse made, 
and this is a real concern because we have talked about 
globally but even domestically we have these challenges. We are 
very concerned about the impact that it will have in terms of 
the quality of the data that we will receive. These types of 
fields, additional fields that are being recommended by the SEC 
is not information that is otherwise held in a systemic way. 
There are challenges in adhering to it in terms of the end-user 
impact. How are the swap dealers to gather this kind of 
information? As a swap data repository, how can I know that 
that information is actually accurate? And it is also morphing 
into concerns such as personal information. There are 
additional obligations that the SEC regulation has about a swap 
data repository being an issuer of these identifiers. And we do 
not believe that that is a role that a repository should play, 
and we question the value of that measured against the 
information that would be derived.
    Mr. Kelly. And I apologize, Mr. Gil. I wanted to give Mr. 
Rogers just a chance to respond, and I will come back to you if 
I have any time. What is the CFTC doing to harmonize the data 
reporting standards with the SEC, Mr. Rogers?
    Mr. Rogers. Thank you for the question, Congressman. I know 
that SEC and CFTC from a mission policy setting direction do 
coordinate their activities that they have going on within 
their particular purviews. I can also say that the SEC does 
participate in the CPMI-IOSCO initiative, and that is a means 
of collaboration between our organizations at the very specific 
data level. Of course, it is up to the particular jurisdictions 
to adopt the recommendations that are coming out of this 
initiative. But we would expect that everyone would be adopting 
it. So there is coordination at the very specific data level, 
but there is also coordination at the policy level.
    Mr. Kelly. And Mr. Gil, you have my remaining 30 seconds.
    Mr. Gil. Thank you. I would only add in addition to the 
differences that have kind of been noted here is inter-
affiliate reporting. And so the CFTC in its no-action relief 
granted relief from that in its reporting rules. The SEC seems 
to be going down a different route and will require it despite 
the fact that it is internal risk management. So end-users find 
that to be a significant concern. We will be inputting comments 
on that.
    Mr. Kelly. Thank you, and Mr. Chairman, I yield back.
    The Chairman. That is right on time. Ladies and gentlemen, 
Ranking Member Scott and myself, we would like to thank you for 
coming and testifying before the Committee today. Under the 
rules of the Committee, the record of today's hearing will 
remain open for 10 calendar days to receive additional 
materials and supplementary written responses from the 
witnesses to any questions posed by a Member. This Subcommittee 
on Commodity Exchanges, Energy, and Credit hearing is now 
adjourned. Thank you.
    [Whereupon, at 11:28 a.m., the Subcommittee was adjourned.]

                                  [all]