[Federal Register Volume 75, Number 240 (Wednesday, December 15, 2010)]
[Proposed Rules]
[Pages 78185-78197]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-31131]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 1, 21, and 39

RIN 3038-AC98


Information Management Requirements for Derivatives Clearing 
Organizations

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commodity Futures Trading Commission (Commission or CFTC) 
is proposing regulations to implement certain core principles for 
derivatives clearing organizations (DCOs) as amended by Title VII of 
the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-
Frank Act). The proposed regulations would establish standards for 
compliance with DCO Core Principles J (Reporting), K (Recordkeeping), L 
(Public Information), and M (Information Sharing). Additionally, the 
Commission is proposing technical amendments to parts 1 and 21 in 
connection with the proposed regulations. Finally, the Commission also 
is proposing to delegate to the Director of the Division of Clearing 
and Intermediary Oversight the Commission's authority to perform 
certain functions in connection with the proposed regulations.

DATES: Submit comments on or before February 14, 2011.

ADDRESSES: You may submit comments, identified by RIN number 3038-AC98, 
by any of the following methods:
     Agency Web site, via its Comments Online process: http://comments.cftc.gov. Follow the instructions for submitting comments 
through the Web site.
     Mail: David A. Stawick, Secretary of the Commission, 
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st 
Street, NW., Washington, DC 20581.
     Hand Delivery/Courier: Same as mail above.
     Federal eRulemaking Portal: http://www.Regulations.gov. 
Follow the instructions for submitting comments.
    All comments must be submitted in English, or if not, accompanied 
by an English translation. Comments will be posted as received to 
http://www.cftc.gov. You should submit only information that you wish 
to make available publicly. If you wish the Commission to consider 
information that you believe is exempt from disclosure under the 
Freedom of Information Act, a petition for confidential treatment of 
the exempt information may be submitted according to the procedures 
established in Sec.  145.9.\1\
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    \1\ Commission regulations referred to herein are found at 17 
CFR Ch. 1 (2010). They are accessible on the Commission's Web site 
at http://www.cftc.gov.
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    The Commission reserves the right, but shall have no obligation, to 
review, pre-screen, filter, redact, refuse or remove any or all of your 
submission from http://www.cftc.gov that it may deem to be 
inappropriate for publication, such as obscene language. All 
submissions that have been redacted or removed that contain comments on 
the merits of the rulemaking will be retained in the public comment 
file and will be considered as required under the Administrative 
Procedure Act and other applicable laws, and may be accessible under 
the Freedom of Information Act.

FOR FURTHER INFORMATION CONTACT: Phyllis P. Dietz, Associate Director, 
202-418-5449, [email protected], or Jacob Preiserowicz, Attorney-Advisor, 
202-418-5432, [email protected], Division of Clearing and 
Intermediary Oversight, Commodity Futures Trading Commission, Three 
Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
II. Proposed Regulations
    A. Reporting Requirements
    1. Information Required on a Daily Basis
    2. Information Required on a Quarterly Basis
    3. Information Required on an Annual Basis
    4. Event-Specific Reporting
    (a) Decrease in Financial Resources

[[Page 78186]]

    (b) Decrease in Ownership Equity
    (c) Six-Month Liquid Asset Requirement
    (d) Change in Working Capital
    (e) Intraday Initial Margin Call
    (f) Delay in Collection of Initial Margin
    (g) Management of Clearing Member Positions
    (h) Change in Ownership or Corporate or Organizational Structure
    (i) Change in Key Personnel
    (j) Credit Facility Funding Arrangement Change
    (k) Rule Enforcement
    (l) Financial Condition and Events
    5. Technical Amendments
    B. Recordkeeping Requirements
    C. Public Information
    1. Availability of Information
    2. Public Disclosure
    D. Information Sharing
III. Effective Date
IV. Related Matters
    A. Regulatory Flexibility Act
    B. Paperwork Reduction Act
    1. Information Provided by Reporting Entities/Persons
    2. Information Collection Comments
    C. Cost-Benefit Analysis

I. Background

    On July 21, 2010, President Obama signed the Dodd-Frank Act.\2\ 
Title VII of the Dodd-Frank Act \3\ amended the Commodity Exchange Act 
(CEA) \4\ to establish a comprehensive new regulatory framework to 
reduce risk, increase transparency, and promote market integrity within 
the financial system by, among other things: (1) Providing for the 
registration and comprehensive regulation of swap dealers and major 
swap participants; (2) imposing clearing and trade execution 
requirements on standardized derivative products; (3) creating rigorous 
recordkeeping and real-time reporting regimes; and (4) enhancing the 
Commission's rulemaking and enforcement authorities with respect to all 
registered entities and intermediaries subject to the Commission's 
oversight.
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    \2\ See Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Public Law 111-203, 124 Stat. 1376 (2010). The text of the 
Dodd-Frank Act may be accessed at http://www.cftc.gov./
LawRegulation/OTCDERIVATIVES/index.htm.
    \3\ Pursuant to Section 701 of the Dodd-Frank Act, Title VII may 
be cited as the ``Wall Street Transparency and Accountability Act of 
2010.''
    \4\ 7 U.S.C. 1 et seq.
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    Section 725(c) of the Dodd-Frank Act amended Section 5b(c)(2) of 
the CEA, which sets forth core principles with which a DCO must comply 
to be registered and to maintain registration as a DCO. The core 
principles were added to the CEA by the Commodity Futures Modernization 
Act of 2000 (CFMA).\5\ The Commission did not adopt implementing rules 
and regulations, but instead promulgated guidance for DCOs on 
compliance with the core principles.\6\ Under Section 5b(c)(2), as 
amended by the Dodd-Frank Act, Congress expressly confirmed that the 
Commission may adopt implementing rules and regulations pursuant to its 
rulemaking authority under Section 8a(5) of the CEA.\7\ This rulemaking 
is one of a series that will, in its entirety, propose regulations to 
implement all 18 DCO core principles.\8\
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    \5\ See Commodity Futures Modernization Act of 2000, Public Law 
106-554, 114 Stat. 2763 (2000).
    \6\ See 17 CFR part 39, app. A.
    \7\ See 7 U.S.C. 7a-1(c)(2). Section 8a(5) of the CEA authorizes 
the Commission to promulgate such Regulations ``as, in the judgment 
of the Commission, are reasonably necessary to effectuate any of the 
provisions or to accomplish any of the purposes of [the CEA].'' 7 
U.S.C. 12a(5).
    \8\ See 75 FR 63732 (Oct. 18, 2010) (proposing regulations to 
implement Core Principle P (Conflicts of Interest); and 75 FR 63113 
(Oct. 14, 2010) (proposing regulations to implement Core Principle B 
(Financial Resources)). Concurrent with issuing this notice, the 
Commission also is proposing regulations to implement Core 
Principles A (Compliance), H (Rule Enforcement), N (Antitrust 
Considerations), and R (Legal Risk). The Commission expects to issue 
two additional notices of proposed rulemaking to implement DCO core 
principles.
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    The Commission continues to believe that, where possible, each DCO 
should be afforded an appropriate level of discretion in determining 
how to operate its business within the statutory framework. At the same 
time, the Commission recognizes that specific bright-line regulations 
may be necessary in order to facilitate DCO compliance with a given 
core principle, and ultimately, to protect the integrity of the U.S. 
clearing system. Accordingly, in developing the proposed regulations, 
the Commission has endeavored to strike an appropriate balance between 
establishing general prudential standards and prescriptive 
requirements.
    Core Principle J, Reporting, as amended by the Dodd-Frank Act, 
requires a DCO to provide the Commission with all information that the 
Commission determines to be necessary to conduct oversight of the 
DCO.\9\ The Commission is proposing to adopt Sec.  39.19 to establish 
requirements that a DCO will have to meet in order to comply with Core 
Principle J.
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    \9\ See Section 5b(c)(2)(J) of the CEA; 7 U.S.C. 7a-1(c)(2)(J). 
Prior to amendment by the Dodd-Frank Act, Core Principle J provided 
that ``The [DCO] applicant shall provide to the Commission all 
information necessary for the Commission to conduct the oversight 
function of the applicant with respect to the activities of the 
[DCO].''
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    Core Principle K, Recordkeeping, as amended by the Dodd-Frank Act, 
requires a DCO to maintain records of all activities related to the 
business of the DCO as a DCO, in a form and manner that is acceptable 
to the Commission and for a period of not less than 5 years.\10\ The 
Commission is proposing to adopt Sec.  39.20 to establish requirements 
that a DCO will have to meet in order to comply with Core Principle K.
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    \10\ See Section 5b(c)(2)(K) of the CEA; 7 U.S.C. 7a-1(c)(2)(K). 
Prior to amendment by the Dodd-Frank Act, Core Principle K provided 
that ``The [DCO] applicant shall maintain records of all activities 
related to the business of the applicant as a [DCO] in a form and 
manner acceptable to the Commission for a period of 5 years.''
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    Core Principle L, Public Information, as amended by the Dodd-Frank 
Act, requires a DCO to provide market participants sufficient 
information to enable the market participants to identify and evaluate 
accurately the risks and costs associated with using the DCO's 
services.\11\ A DCO is, more specifically, required to make available 
to market participants information concerning the rules and operating 
and default procedures governing its clearing and settlement systems 
and also disclose publicly and to the Commission the terms and 
conditions of each contract, agreement, and transaction cleared and 
settled by the DCO, each clearing and other fee charged to members,\12\ 
the DCO's margin-setting methodology, daily settlement prices, and 
other matters relevant to participation in the DCO's clearing and 
settlement activities.\13\ The Commission is proposing to adopt Sec.  
39.21 to establish requirements that a DCO will have to meet in order 
to comply with Core Principle L.
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    \11\ See Section 5b(c)(2)(L) of the CEA; 7 U.S.C. 7a-1(c)(2)(L).
    \12\ The statutory language refers to fees charged to ``members 
and participants,'' and the Commission interprets this phrase to 
mean fees charged to ``clearing members,'' a term which it proposes 
to define as ``any person that has clearing privileges such that it 
can process, clear and settle trades through a derivatives clearing 
organization on behalf of itself or others. The derivatives clearing 
organization need not be organized as a membership organization.'' 
The Commission is proposing to amend the definition of ``clearing 
member'' in Sec.  1.3(c) of its regulations, as part of a separate 
proposed rulemaking.
    \13\ This core principle has been expanded greatly. Prior to 
amendment by the Dodd-Frank Act, Core Principle L provided that 
``The [DCO] applicant shall make information concerning the rules 
and operating procedures governing the clearing and settlement 
systems (including default procedures) available to market 
participants.''
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    Core Principle M, Information Sharing, as amended by the Dodd-Frank 
Act, requires a DCO to enter into and abide by terms of each 
appropriate and applicable domestic and international information-
sharing agreement and use relevant information obtained under such 
agreements in carrying out its risk management program.\14\ The

[[Page 78187]]

Commission is proposing to adopt Sec.  39.22 to codify the statutory 
requirement.
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    \14\ See Section 5b(c)(2)(M) of the CEA, 7 U.S.C. 7a-1(c)(2)(M). 
The Dodd-Frank Act made minor changes in the language of Core 
Principle M, but did not make any substantive changes.
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    Section 805(a) of the Dodd-Frank Act allows the Commission to 
prescribe regulations for those DCOs that the Financial Stability 
Oversight Council has determined are systemically important financial 
market utilities.\15\ The Commission is not proposing to adopt 
additional or enhanced requirements for systemically important DCOs 
(SIDCOs) in connection with the proposed rules to implement Core 
Principles J, K, L and M. This is based on the Commission's view that 
rigorous information management requirements should apply equally to 
all DCOs, regardless of their size or systemic importance.
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    \15\ Section 804 of the Dodd-Frank Act authorizes the Financial 
Stability Oversight Council to designate financial market utilities 
involved in clearing and settlement as ``systemically important.''
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    The Commission requests comment on all aspects of the proposed 
rules, as well as comment on the specific provisions and issues 
highlighted in the discussion below.

II. Proposed Regulations

A. Reporting Requirements

    Proposed Sec.  39.19 would require certain reports to be made by 
the DCO to the Commission: (1) On a periodic basis (daily, quarterly or 
annually), (2) where the reporting requirement is triggered by the 
occurrence of a significant event; and (3) upon request by the 
Commission.\16\ Unless otherwise specified by the Commission or its 
designee, each DCO would have to submit the information required by 
this section to the Commission electronically and in a form and manner 
prescribed by the Commission.
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    \16\ Requirements that certain information be submitted upon 
request of the Commission are currently found in the Commission's 
regulations as paragraphs (a) and (b) of Sec.  39.5. 17 CFR 39.5. 
See infra discussion of technical amendments regarding Sec. Sec.  
39.5(a) and 39.5(b) at Section II.A.5. of this notice.
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    The Commission has determined that the information required by 
proposed Sec.  39.19 would enable it to conduct more effective and more 
streamlined financial oversight of a DCO. In this regard, obtaining the 
required data would enhance the Commission's ability to conduct a more 
in-depth and timely analysis of a DCO's activities, thereby enabling 
the Commission to identify insipient problems and address them at an 
earlier stage. This is particularly important in connection with a DCO 
that clears swaps, in light of the increased risk that swaps may pose 
to DCOs.\17\
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    \17\ The Commission notes that DCOs may be subject to additional 
reporting requirements that are not covered by Core Principle J and 
therefore are not addressed in proposed Sec.  39.19, e.g., 
requirements for reporting to a swap data repository under proposed 
part 45 of the Commission's regulations.
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    Unless otherwise specified by the Commission or its designee, any 
stated time in these proposed regulations would be Central time for 
information concerning DCOs located in that time zone, and Eastern time 
for information concerning all other DCOs (including clearing 
organizations registered as DCOs but located outside the United 
States).\18\
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    \18\ See proposed Sec.  39.19(b)(2).
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1. Information Required on a Daily Basis
    Currently, the Commission receives initial margin data from 
several, but not all DCOs and not necessarily on a daily basis. The 
Commission receives variation margin data through the Shared Market 
Information System (SHAMIS), which is maintained by The Clearing 
Corporation, a subsidiary of IntercontinentalExchange, Inc. However, 
the Commission has found it difficult to obtain a complete data set 
from SHAMIS on a regular basis and in the necessary format. Moreover, 
not all DCOs participate in SHAMIS. The Commission is therefore 
proposing regulations that would require reporting by all DCOs on a 
daily basis. By requiring both sets of data as well as intraday initial 
margin calls \19\ to be reported directly to the Commission, the 
Commission would be better positioned to conduct risk surveillance 
activities efficiently, to monitor the financial health of the DCO, and 
to detect any unusual activity in a timely manner.
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    \19\ See infra discussion of proposed Regulation 39.19(c)(4)(v) 
which would require intraday reporting of initial margin calls at 
Section II.A.4.(e) of this notice.
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    Proposed Sec.  39.19(c)(1)(i) would require a DCO to report both 
the initial margin requirement for each clearing member, by customer 
origin and house origin,\20\ and the initial margin on deposit for each 
clearing member, by origin. Proposed Sec.  39.19(c)(1)(ii) would 
require a DCO to report the daily variation margin collected and paid 
by the DCO. The report would separately list the mark-to-market amount 
collected from or paid to each clearing member, by origin.\21\
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    \20\ In a separate rulemaking, the Commission is proposing to 
define the terms ``customer account or customer origin'' and ``house 
account or house origin'' in proposed Sec.  39.1(b). ``Customer 
account or customer origin'' would be defined as a clearing member's 
account held on behalf of customers, as defined in Sec.  1.3(k) of 
the Commission's regulations, and would clarify that a customer 
account is also a futures account, as that term is defined by Sec.  
1.3(vv). ``House account or house origin'' would be defined as a 
clearing member's combined proprietary accounts, as defined in Sec.  
1.3(y).
    \21\ This requirement would apply to options transactions only 
to the extent a DCO uses futures-style margining for options.
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    Proposed Sec.  39.19(c)(1)(iii) would require the DCO to report all 
other cash flows relating to clearing and settlement including, but not 
limited to, option premiums and payments related to swaps such as 
coupon amounts, collected from or paid to each clearing member, by 
origin. This data, supplementing the initial margin and variation 
margin data, would provide the Commission with a more complete picture 
of the financial risk profile of the DCO and its clearing members.
    Proposed Sec.  39.19(c)(1)(iv) would require a DCO to report the 
end-of-day positions for each clearing member, by origin. Although the 
Commission currently receives large trader reports that are essential 
to an understanding of significant financial risk exposures, receipt of 
the proposed reports directly from the DCO would facilitate the ability 
of the Commission to evaluate the risk of each DCO as well as the 
aggregate financial risk across all DCOs.
    Proposed Sec.  39.19(c)(1) would require the report to be compiled 
as of the end of each trading day and to be submitted to the Commission 
by 10 a.m. the following business day. Although the proposed daily 
reporting requirements would be new, the Commission notes that in the 
ordinary course of a DCO conducting its clearing and settlement 
business, the information required to be reported is already known or 
is readily ascertainable by a DCO.
2. Information Required on a Quarterly Basis
    The Commission recently proposed a new Sec.  39.11(f)(1) under 
which, at the end of each fiscal quarter, or at any time upon 
Commission request, a DCO would be required to report to the 
Commission: (i) The amount of financial resources necessary to meet the 
requirements set forth in the regulation; and (ii) the value of each 
financial resource available to meet those requirements.\22\ The DCO 
would have to include with the report its financial statements, 
including the balance sheet, income statement, and statement of cash 
flows of the DCO or its parent company. If one of the financial 
resources a DCO is using to meet the regulation's requirements is a 
guaranty fund, the DCO would also have to report the value

[[Page 78188]]

of each individual clearing member's guaranty fund deposit. Proposed 
Sec.  39.11(f)(3) would require a DCO to provide the Commission with 
sufficient documentation that explains both the methodology it used to 
calculate its financial requirements and the basis for its 
determinations regarding valuation and liquidity. The DCO also would 
have to provide copies of any agreements establishing or amending a 
credit facility, insurance coverage, or other arrangement that 
evidences or otherwise supports its conclusions.
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    \22\ See 75 FR 63113 (Oct. 14, 2010) (proposing DCO financial 
resources requirements pursuant to Core Principle B).
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    By this notice, the Commission is proposing a new Sec.  39.19(c)(2) 
under which a DCO would be required to report its financial resources 
in accordance with proposed Sec.  39.11(f). The Commission notes that 
certain significant changes in financial resources would trigger 
additional reporting requirements under proposed Sec.  
39.19(c)(4)(i).\23\
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    \23\ See infra discussion of proposed Sec.  39.19(c)(4)(i) at 
Section II.A.4.(a) of this notice.
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3. Information Required on an Annual Basis
    Proposed Sec.  39.19(c)(3)(i) would require a DCO's chief 
compliance officer to submit the annual compliance report required by 
Section 725(b) of the Dodd-Frank Act \24\ and proposed Sec.  39.10.\25\ 
The form and content of the annual compliance report would be codified 
in proposed Sec.  39.10.
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    \24\ Section 5b(i) of the CEA, 7 U.S.C. 7a-1(i).
    \25\ Section 39.10 is being proposed in a separate notice of 
proposed rulemaking.
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    Proposed Sec.  39.19(c)(3)(ii) would require a DCO to provide the 
Commission with audited year-end financial statements of the DCO, or if 
there are no financial statements available for the DCO itself, the 
consolidated audited year-end financial statements of the DCO's parent 
company.
    Proposed Sec.  39.19(c)(3)(iii) would require a DCO to submit to 
the Commission concurrently, the annual compliance report and audited 
financial statements required by (c)(3)(i) and (ii), respectively, not 
later than 90 days after the end of the DCO's fiscal year. The DCO 
would be able to request from the Commission an extension of time to 
submit either report, provided the DCO's failure to submit the report 
in a timely manner could not be avoided without unreasonable effort or 
expense. Extensions of the deadline would be granted at the discretion 
of the Commission.
4. Event-Specific Reporting
(a) Decrease in Financial Resources
    Proposed Sec.  39.19(c)(4)(i) would alert the Commission in a 
timely manner of a significant decrease in the value of a DCO's 
financial resources and the reason for the decrease, e.g., whether such 
a decrease is an indicator of inadequate financial resources or if it 
is merely the result of a corresponding decrease in the margin 
requirements of the DCO. A DCO would be required to report certain 
decreases of the financial resources required to be maintained by 
proposed Sec.  39.11(a) or, as applicable if the DCO is a SIDCO, 
proposed Sec.  39.29(a): \26\ (1) A 10 percent decrease from the total 
value of the financial resources reported on the last quarterly report 
submitted under proposed Sec.  39.11(f); or (2) a 10 percent decrease 
from the total value of the financial resources as of the close of the 
previous business day. Reporting a decrease from the last quarterly 
report is intended to capture a situation where a DCO has a gradual 
decrease of financial resources. Reporting a decrease from the previous 
business day is intended to capture a situation where the DCO would 
experience a sudden decrease in financial resources over a short period 
of time. Although in such a situation the DCO may still have financial 
resources on hand that are greater in value than what was reported on 
the most recent quarterly report, the Commission believes that such a 
rapid drop in the value of a DCO's financial resources is a situation 
that warrants notice to the Commission. The Commission invites comment 
on possible alternatives regarding what would be considered a 
significant drop in the value of financial resources and whether there 
should be alternative reporting requirements.
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    \26\ Proposed Sec.  39.11(a) would require a DCO to maintain 
sufficient financial resources to: (1) Meet its financial 
obligations to its clearing members notwithstanding a default by the 
clearing member creating the largest financial exposure for the DCO 
in extreme but plausible market conditions, and (2) cover its 
operating costs for at least one year, calculated on a rolling 
basis. Proposed Sec.  39.29(a) would establish a different default 
resources standard for SIDCOs, requiring a SIDCO to maintain 
sufficient financial resources to meet its financial obligations to 
its clearing members notwithstanding a default by the two clearing 
members creating the largest combined financial exposure for the 
SIDCO in extreme but plausible market conditions. See 75 FR at 
63118-19.
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    The DCO would be required to report each such decrease to the 
Commission no later than one business day following the day the 10 
percent threshold was reached. The report would have to include the 
total value of the financial resources: (1) As of the close of business 
the day the 10 percent threshold was reached; and (2) if reporting a 10 
percent decrease from the previous business day, the total value of the 
financial resources immediately prior to the 10 percent drop. This 
would include a breakdown of the value of each financial resource 
available as reported in each (1) and (2) above, calculated in 
accordance with the requirements of proposed Sec.  39.11(d) or, as 
applicable if the DCO is a SIDCO, Sec.  39.29(b),\27\ including the 
value of each individual clearing member's guaranty fund deposit, if 
the DCO reports guaranty fund deposits as a financial resource. The 
report would also include a detailed explanation for the decrease.
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    \27\ Proposed Sec.  39.11(d)(2) and Sec.  39.29(b) address 
valuation of clearing member assessments for purposes of calculating 
default resources. See 75 FR at 63119-20.
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(b) Decrease in Ownership Equity
    Proposed Sec.  39.19(c)(4)(ii) would require a DCO to notify the 
Commission of an event which the DCO knows or should reasonably know 
will cause a decrease of 20 percent in ownership equity from the last 
reported ownership equity balance. This notice would be required to be 
provided no later than two business days prior to the event. The last 
reported ownership equity balance would generally be on the quarterly 
or audited financial statements that would be required to be submitted 
by proposed Sec.  39.19(c)(2) \28\ or proposed Sec.  
39.19(c)(3)(ii),\29\ respectively. For events which the DCO did not 
know, and reasonably could not know, would cause a decrease of 20 
percent prior to the event occurring, the DCO would be able to report 
the triggering event no later than two business days after the decrease 
in ownership equity. Reports submitted prior to an event would have to 
include pro forma financial statements, reflecting the DCO's estimated 
future financial condition following the anticipated decrease and 
details describing the reason for the anticipated decrease. Reports 
submitted after the event would have to include current financial 
statements and details describing the reason for the decrease.
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    \28\ See supra discussion of proposed Sec.  39.19(c)(2) at 
Section II.A.2. of this notice.
    \29\ See supra discussion of proposed Sec.  39.19(c)(3)(ii) at 
Section II.A.3. of this notice.
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    Proposed Sec.  39.19(c)(4)(ii) is intended to alert the Commission 
of major planned events that would significantly affect ownership 
equity, most of which are events the DCO would have advance knowledge 
of, such as a reinvestment of capital, dividend payment, or major 
acquisition. The report would notify the Commission of such an event 
and would allow the Commission to

[[Page 78189]]

evaluate its effect on the financial health of the DCO. The Commission 
invites commenters to propose alternative reporting requirements which 
would also provide the Commission with this type of information.
(c) Six-Month Liquid Asset Requirement
    The Commission recently proposed a new Sec.  39.11(e)(2) which 
would establish a six-month liquid asset requirement. It would require 
DCOs to maintain unencumbered liquid financial assets in the form of 
cash or highly liquid securities equal to six months operating 
costs.\30\ In this notice, the Commission is proposing a new Sec.  
39.19(c)(4)(iii) that would require immediate notice to the Commission 
when a DCO knows or reasonably should know of a deficit in the six-
month liquid asset requirement of proposed Sec.  39.11(e)(2). The 
Commission believes that immediate notification of a DCO's deficit in 
the six-month liquid asset requirement is critical because of its 
potential impact on the ability of the DCO to continue to operate as a 
going concern.
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    \30\ See 75 FR at 63116.
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(d) Change in Working Capital
    Proposed Sec.  39.19(c)(4)(iv) would require notice to the 
Commission no later than two business days after a DCO's working 
capital becomes negative. Working capital is defined as current assets 
minus current liabilities. The notice would include a balance sheet 
that reflects the DCO's working capital and an explanation as to the 
reason for the negative balance. The Commission believes that it is 
essential that it be made aware, in a timely manner, when a DCO has 
negative working capital, as this development can be an indicator of 
the declining financial health of a DCO.
    The Commission invites comment as to whether this is a meaningful 
indicator of a DCO's financial condition, if there are alternative or 
additional measures that might be applied, and if the timing for 
notification is appropriate given the information to be provided.
(e) Intraday Initial Margin Calls to Clearing Members
    Proposed Sec.  39.19(c)(4)(v) would require a DCO to report any 
intraday initial margin calls to clearing members. While proposed Sec.  
39.19(c)(1), discussed above, would provide the Commission with initial 
margin and daily variation margin data, the Commission would not 
receive that data until the following business day. Learning of an 
intraday initial margin call soon after the call would assist the 
Commission in determining whether certain clearing member positions 
could affect the ability of a DCO to meet its end-of-day financial 
obligations in a timely manner. This data would alert the Commission to 
positions that could pose greater risk. This is especially important 
given that intraday initial margin calls are unusual and are often due 
to increasing position size. The Commission invites commenters to 
recommend other possible reporting solutions that could serve to inform 
the Commission of a clearing member that is potentially building up 
position size during the current trading day.
    The report would have to be submitted no later than 1 hour 
following the margin call and would have to separately list each 
request and include the name of the clearing member, the amount 
requested and the account origin.
    The Commission notes that while this may impose an occasional 
reporting requirement on DCOs, many DCOs already have such reports 
generated for submission to a clearing member's depository as a request 
for intraday funds. The primary burden would be arranging a mechanism 
that would allow submission of these reports to the Commission in a 
timely manner. Thus, the Commission believes that it would be a de 
minimis burden.
(f) Delay in Collection of Initial Margin
    Proposed Sec.  39.19(c)(4)(vi) would require the DCO to immediately 
notify the Commission when it has not received additional initial 
margin that it requested from a clearing member, in a timely manner. 
The proposed reporting requirement is intended to alert the Commission 
of a development that could be an indicator of a potential clearing 
member default. Payment of additional initial margin would be 
considered late if the DCO has not received payment within the time 
frame allowed by the DCO's rules and procedures.\31\ The Commission 
invites comment on this reporting requirement and the time frame used 
in determining when a payment is not considered timely.
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    \31\ The DCO's rules and procedures are required to be submitted 
to the Commission under Section 5c(c) of the CEA, 7 U.S.C. 7a-2(c), 
and Sec.  40.6. Such information is required to be made available to 
clearing members and the public under Core Principle L and proposed 
Sec.  39.21. See infra Section II.C. of this notice.
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(g) Management of Clearing Member Positions
    Proposed Sec. Sec.  39.19(c)(4)(vii)-(ix) would require a DCO to 
apprise the Commission of different levels of financial distress of a 
clearing member, and the status of the DCO's actions to manage the 
risks associated with the clearing member's financial situation. The 
DCO would be required to report situations where a clearing member's 
position(s) must be reduced, transferred or liquidated, or where the 
clearing member defaults.
    Proposed Sec.  39.19(c)(4)(vii) would require a DCO to immediately 
notify the Commission of the DCO's request to a clearing member to 
reduce its positions because the DCO has determined that the clearing 
member has exceeded its exposure limit, that the clearing member has 
failed to meet an initial or variation margin call, or that it has 
failed to fulfill any other financial obligation to the DCO. The notice 
would have to include: (A) The name of the clearing member; (B) the 
time the clearing member was contacted; (C) the number of positions by 
which the DCO requested the clearing member to reduce its position 
size; (D) the contracts that are the subject of the request; and (E) 
the reason for the request.
    Proposed Sec.  39.19(c)(4)(viii) would require a DCO to immediately 
notify the Commission of the DCO's determination that any position the 
DCO carries for one of its clearing members must be liquidated 
immediately or transferred immediately, or that the trading of any 
account of a clearing member can be only for the purposes of 
liquidation because that clearing member has failed to meet an initial 
or variation margin call or failed to fulfill any other financial 
obligation to the DCO. The notice would have to include: (A) The name 
of the clearing member; (B) the time the clearing member was contacted; 
(C) the contracts that are subject to the determination; (D) the number 
of positions that are subject to the determination; and (E) the reason 
for the determination.
    The provisions of proposed Sec.  39.19(c)(4)(viii) are 
substantially similar to the requirements of Sec.  1.12(f)(1) of the 
Commission's regulations. Accordingly, the Commission is proposing to 
remove Sec.  1.12(f)(1) and redesignate it as proposed Sec.  
39.19(c)(4)(viii) in substantially the same form. The difference would 
be that while Sec.  1.12(f)(1) applies only to a DCO's determination 
concerning a clearing member that is a registered futures commission 
merchant (FCM) or registered leverage transaction merchant, proposed 
Sec.  39.19(c)(4)(viii) would apply to all DCO clearing members, even 
those that are not registrants.

[[Page 78190]]

    Proposed Sec.  39.19(c)(4)(ix) would require a DCO to immediately 
notify the Commission of the default of a clearing member. An event of 
default would be determined in accordance with the rules of the DCO. 
The notice of default would have to include: (A) The name of the 
clearing member; (B) the contracts the clearing member defaulted upon; 
(C) the number of positions the clearing member defaulted upon; and (D) 
the amount of the unmet financial obligation.
(h) Change in Ownership or Corporate or Organizational Structure
    Proposed Sec.  39.19(c)(4)(x) is intended to provide advance notice 
to the Commission of major ownership, corporate, or organizational 
changes of a DCO. The DCO would be required to report any anticipated 
ownership, corporate, or organizational changes of the DCO or its 
parent company that would: (i) Result in at least a 10 percent change 
of ownership of the DCO; (ii) create a new subsidiary of the DCO or the 
parent company; (iii) eliminate a current subsidiary of the DCO or its 
parent company; or (iv) result in a transfer of all or substantially 
all of its assets, including its registration as a DCO, to another 
legal entity (e.g., as a result of a reincorporation, or corporate 
merger). Such changes could include, but would not be limited to, the 
DCO's change of corporate structure from a partnership to a 
corporation, or from a member owned company to a publicly held company, 
or a change in corporate domicile. The report would include: (1) A 
chart outlining the new ownership or corporate or organizational 
structure, (2) a brief description of the purpose and impact of the 
change; and (3) any relevant agreements effecting the change and 
corporate documents such as new articles of incorporation and bylaws. 
With respect to a corporate change that results in a transfer of all or 
substantially all of a DCO's assets, the informational requirements of 
proposed Sec.  39.19(c)(4)(x)(B) would be satisfied by the DCO's 
compliance with proposed Sec.  39.3(h)(3).\32\
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    \32\ In a separate proposed rulemaking, the Commission is 
proposing procedures for the transfer of a DCO's registration and 
open interest under proposed Sec.  39.3(h).
---------------------------------------------------------------------------

    Because a DCO is likely to be aware of such changes well in advance 
of their effective date, the proposed regulation would require the 
report to be submitted to the Commission no later than three months 
prior to the anticipated change. The Commission is allowing an 
exception to the three-month prior notice requirement if the DCO does 
not know and reasonably could not have known of the anticipated change 
three months prior to that change. In such event, the DCO would be 
required to immediately report such change to the Commission as soon as 
it knows of the change. The Commission requests comment on whether the 
three-month notice period is appropriate or whether a different notice 
period should be required.
    Proposed Sec.  39.19(c)(4)(x)(D) would require a second report to 
the Commission of the consummation of the corporate or organizational 
change no later than 2 business days following the effective date of 
the change.
    The Commission notes that there may be differences in the proposed 
notification requirements for changes in the ownership or corporate or 
organizational structure of DCOs, designated contract markets, swap 
execution facilities, and swap data repositories.\33\ The Commission 
requests comment on the proposed reporting requirements under Sec.  
39.19(c)(4)(x), generally, and, more specifically, the extent to which 
there should be uniformity or differentiation in notification 
procedures applied to different types of registrants.
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    \33\ Such requirements would be proposed in separate 
rulemakings, each for a specific registrant.
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(i) Change in Key Personnel
    Proposed Sec.  39.19(c)(4)(xi) would require a DCO to report to the 
Commission the departure or addition of persons who are key personnel, 
as defined in proposed Sec.  39.1(b), no later than two business days 
following any such change. As applicable when a position is vacated, 
the report would include the name of the person who will assume the 
duties of the position on a temporary basis until a permanent 
replacement fills the position.
    Key personnel would be defined by proposed Sec.  39.1(b) as 
personnel who play a significant role in the operation of the DCO, 
provision of clearing and settlement services, risk management, or 
oversight of compliance with the CEA and Commission regulations. Key 
personnel would include, but would not be limited to, those persons who 
are or perform the functions of any of the following: The chief 
executive officer; president; chief compliance officer; chief operating 
officer; chief risk officer; chief financial officer; chief technology 
officer; and emergency contacts or persons who are responsible for 
business continuity and disaster recovery.\34\ The term ``emergency'' 
would have the same meaning as defined in Sec.  40.1(g), which the 
Commission has proposed to revise and redesignate as Sec.  40.1(h).\35\ 
The Commission intends to require listing key personnel on a DCO's 
initial application in furtherance of the applicant's representation 
that it can satisfy the requirements of Core Principle B, i.e., that it 
will have adequate managerial resources.\36\ From a practical 
standpoint, notification of any changes of key personnel, particularly 
those responsible for handling emergency situations, is important for 
purposes of the Commission's general oversight of each DCO, as well as 
its ability to establish contact with key personnel in a timely manner, 
as circumstances may warrant.
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    \34\ In a separate rulemaking, the Commission is proposing to 
adopt this definition for ``key personnel'' in a new Sec.  39.1(b).
    \35\ See 75 FR 67282, 67292 (Nov. 2, 2010) (provisions common to 
registered entities; proposing to revise and redesignate Sec.  
40.1(g) as Sec.  40.1(h)). The term ``emergency'' is currently 
defined as:
    Any occurrence or circumstance that, in the opinion of the 
governing board of a registered entity, or a person or persons duly 
authorized to issue such an opinion on behalf of the governing board 
of a registered entity under circumstances and pursuant to 
procedures that are specified by rule, requires immediate action and 
threatens or may threaten such things as the fair and orderly 
trading in, or the liquidation of or delivery pursuant to, any 
agreements, contracts or transactions, including: (1) Any 
manipulative or attempted manipulative activity; (2) Any actual, 
attempted, or threatened corner, squeeze, congestion, or undue 
concentration of positions; (3) Any circumstances which may 
materially affect the performance of agreements, contracts or 
transactions, including failure of the payment system or the 
bankruptcy or insolvency of any participant; (4) Any action taken by 
any governmental body, or any other registered entity, board of 
trade, market or facility which may have a direct impact on trading; 
and (5) Any other circumstance which may have a severe, adverse 
effect upon the functioning of a registered entity.
    17 CFR 40.1(g).
    \36\ See Section 5b(c)(2)(B)(i) of the CEA; 17 USC 7a-
1(c)(2)(B)(i) (requiring each DCO to have ``adequate financial, 
operational, and managerial resources, as determined by the 
Commission, to discharge each responsibility of the derivatives 
clearing organization''). The Commission expects to include in a 
future rulemaking revised instructions for DCO applications which 
will include a requirement that applicants list key personnel and 
emergency contacts.
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(j) Credit Facility Funding Arrangement Change
    Under proposed Sec.  39.19(c)(4)(xii), a DCO would be required to 
notify the Commission of material changes in a credit facility funding 
arrangement, if the DCO has one in place. A credit facility funding 
arrangement is generally used as a stop-gap measure in an emergency 
situation such as to provide liquidity during a clearing member default 
or to temporarily provide the DCO with adequate operating funds.\37\

[[Page 78191]]

Thus, it is essential for the Commission to be promptly notified of 
changes that would affect the DCO's immediate access to cash. Under the 
proposed regulation, a DCO would have to notify the Commission no later 
than one business day after a DCO changes a credit facility funding 
arrangement, is notified that such an arrangement has changed, or knows 
or reasonably should know that the arrangement will change, including 
but not limited to a change in lender, change in the size of the 
facility, change in expiration date, or any other material changes or 
conditions.
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    \37\ See 75 FR at 63116 (proposing that a DCO may use a 
committed line of credit or similar facility to meet the liquidity 
requirements set forth in proposed Sec.  39.11(e)(1) and 
39.11(e)(2)).
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(k) Rule Enforcement
    As mandated by Core Principle H, proposed Sec.  39.19(c)(4)(xiii) 
would require a DCO to report to the Commission regarding rule 
enforcement activities and sanctions imposed against clearing members. 
More specifically, it would require a DCO to notify the Commission no 
later than two business days after the DCO (A) initiates a rule 
enforcement action against a clearing member, or (B) imposes sanctions 
against a clearing member. The Commission notes that while an exchange 
has 30 days within which to notify the Commission of a decision 
pursuant to which a disciplinary action has become final,\38\ a DCO 
taking disciplinary action against a clearing member is a less common 
occurrence, and the clearing member's offense could potentially impact 
the financial integrity of the DCO. Thus, the Commission believes that 
it should be notified of such actions, sooner. Nonetheless, the 
Commission requests comment on whether a 30-day reporting period would 
be more appropriate under proposed Sec.  39.19(c)(4)(xiii).
---------------------------------------------------------------------------

    \38\ See 17 CFR 9.11(a).
---------------------------------------------------------------------------

(l) Financial Condition and Events
    Proposed Sec.  39.19(c)(4)(xiv) is intended to alert the Commission 
of certain events and situations that may affect the financial 
integrity of a DCO. Under the proposed regulation, a DCO would be 
required to immediately notify the Commission after the DCO knows or 
reasonably should know of: (A) The institution of any legal proceedings 
which may have a material adverse financial impact on the DCO; (B) any 
event, circumstance or situation that would not otherwise be required 
to be reported under Sec.  39.19 and that would materially impede the 
DCO's ability to comply with part 39 of the Commission's regulations; 
and (C) any material adverse change in the financial condition of any 
clearing member that would not otherwise be required to be reported 
under Sec.  39.19. These requirements would place an affirmative duty 
on the DCO to be aware of and monitor such events, and would permit the 
DCO to exercise its discretion in determining which events rise to the 
level of requiring notification to the Commission.
    Proposed Sec.  39.19(c)(4)(xv) would require a DCO, when it 
discovers or is notified by an independent public accountant of the 
existence of any material inadequacy, to give notice of such material 
inadequacy within 24 hours, and within 48 hours after giving such 
notice to file a written report stating what steps have been and are 
being taken to correct the material inadequacy. Proposed Sec.  
39.19(c)(4)(xv) is consistent with Sec.  1.12(d), a similar requirement 
for FCMs and introducing brokers.
5. Technical Amendments
    Sections 39.5(a) and (b) require certain reports from a DCO upon 
request by the Commission. The Commission is proposing redesignating 
Sec.  39.5(a) and (b) as proposed Sec.  39.19(c)(5)(i) and (ii), 
respectively, in substantially the same form. The Commission believes 
that the addition of proposed Sec.  39.19 as the DCO reporting 
regulation would make that section the appropriate placement for the 
provisions of Sec.  39.5(a) and (b). Section 39.5(a), which is proposed 
as new Sec.  39.19(c)(5)(i), requires that, upon request by the 
Commission, a DCO file with the Commission such information related to 
its business as a clearing organization, including information relating 
to trade and clearing details, in the form and manner and within the 
time as specified by the Commission in the request. Section 39.5(b), 
which is proposed as new Sec.  39.19(c)(5)(ii), requires that, upon 
request by the Commission, a DCO file with the Commission a written 
demonstration, containing such supporting data, information and 
documents, in the form and manner and within such time as the 
Commission may specify, that the DCO is in compliance with one or more 
core principles and the relevant provisions of part 39, as specified in 
the request.
    Section 39.5(c) currently requires a DCO to submit large trader 
reports in circumstances where they are not required to be filed by 
FCMs, clearing members or others.\39\ The Commission is proposing to 
remove Sec.  39.5(c) because the data from such large trader reports 
would be available pursuant to a combination of other large trader 
reporting requirements and the requirements of proposed Sec.  
39.19(c)(1).\40\
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    \39\ Section 39.5(c) states:
    Information regarding transactions by large traders cleared by a 
derivatives clearing organization shall be filed with the 
Commission, in a form and manner acceptable to the Commission, by 
futures commission merchants, clearing members, foreign brokers or 
registered entities other than a derivatives clearing organization, 
as applicable. Provided, however, that if no such person or entity 
is required to file large trader information with the Commission, 
such information must be filed with the Commission by a derivatives 
clearing organization.
    17 CFR 39.5(c).
    \40\ See supra discussion of proposed daily reporting 
requirements at Section II.A.1. of this notice.
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    Section 39.5(d) currently requires, upon special call, reports by 
certain persons for positions cleared on a DCO.\41\ The Commission is 
proposing to redesignate Sec.  39.5(d) as Sec.  21.04 because part 21 
(Special Calls) is the appropriate placement for this provision.\42\ As 
such, the Commission also proposes to redesignate current Sec.  21.04 
as Sec.  21.05 and add Sec.  21.06 which would delegate its authority 
under proposed Sec.  21.04 to the Director of the Division of Clearing 
and Intermediary Oversight.\43\
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    \41\ Section 39.5(d) states:
    Upon special call by the Commission, each futures commission 
merchant, clearing member or foreign broker shall provide 
information to the Commission concerning customer accounts or 
related positions cleared on a derivatives clearing organization or 
other multilateral clearing organization in the form and manner and 
within the time specified by the Commission in the special call.
    17 CFR 39.5(d).
    \42\ In a recent proposed rulemaking, the Commission proposed to 
renumber Sec.  39.5 as Sec.  39.6. See 75 FR 67277, 67281 (Nov. 2, 
2010) (process for review of swaps for mandatory clearing). 
Renumbering would no longer be necessary if the requirements of 
Sec.  39.5 are redesignated as proposed in this notice. (As 
discussed in this section, the Commission is proposing to: (1) 
Redesignate Sec.  39.5(a) as Sec.  39.19(c)(5)(i); (2) redesignate 
Sec.  39.5(b) as Sec.  39.19(c)(5)(ii); (3) remove Sec.  39.5(c); 
(4) redesignate Sec.  21.04 as Sec.  21.05; (5) redesignate Sec.  
39.5(d) as Sec.  21.04; and (6) add Sec.  21.06). Additionally, the 
earlier proposal to redesignate Sec. Sec.  39.6 and 39.7 as 
Sec. Sec.  39.7 and 39.8, respectively, would no longer be 
necessary. See 75 FR at 67281. The Commission notes that it intends 
to propose a revised and renumbered part 39 in conjunction with an 
upcoming notice of proposed rulemaking.
    \43\ This delegation provision is the same as the delegation 
provision for the Director of the Division of Market Oversight in 
current Sec.  21.04.
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B. Recordkeeping Requirements

    To implement Core Principle K, the Commission proposes to codify 
the requirements of the core principle such that each DCO will have to 
maintain records of all activities related to its business as a DCO in 
the form and manner acceptable to the Commission for a period of not 
less than five years. To clarify this general standard by way of 
example, and to supplement pre-existing recordkeeping requirements

[[Page 78192]]

imposed by various Commission regulations,\44\ the Commission is 
proposing to list examples of information subject to the recordkeeping 
requirement.
---------------------------------------------------------------------------

    \44\ For example, Sec. Sec.  1.26 and 1.27 impose recordkeeping 
requirements for DCOs and FCMs related to the investment of customer 
funds.
---------------------------------------------------------------------------

    Proposed Sec.  39.20(a)(1) would require a DCO to maintain records 
of all cleared transactions, including swaps. This is information that 
a DCO already maintains in the ordinary course of its business as a 
clearing house.
    More specifically, proposed Sec.  39.20(a)(2) would require a DCO 
to retain all information necessary to record allocation of bunched 
orders for cleared swaps. This provision would highlight an important 
recordkeeping component of swaps clearing.
    Proposed Sec.  39.20(a)(3) would require a DCO to maintain records 
of all information required to be generated, created, or reported under 
part 39. This would include, but would not be limited to, the results 
of and the methodology used for all tests, reviews, and calculations in 
connection with setting and evaluating margin levels, determining the 
value and adequacy of financial resources, and establishing settlement 
prices.
    Proposed Sec.  39.20(a)(4) would require a DCO to maintain records 
of all rules and procedures of the DCO. Specifically, the DCO would be 
required to maintain records of all rules and procedures required to be 
submitted pursuant to part 39 and part 40 of the Commission's 
regulations, including all proposed changes in rules, procedures or 
operations of SIDCOs, subject to proposed Sec.  40.10.\45\
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    \45\ See 75 FR 67282 (Nov. 2, 2010) (proposing amendments to 
part 40 of the Commission's regulations).
---------------------------------------------------------------------------

    Proposed Sec.  39.20(a)(5) would require a DCO to maintain any data 
or documentation required by the Commission or the DCO to be submitted 
to the DCO by its clearing members, or by any other person in 
connection with the DCO's clearing and settlement activities.
    Proposed Sec.  39.20(b)(1) would require a DCO to maintain records 
required by the Commission's regulations in accordance with the 
provisions of Sec.  1.31 (books and records; keeping and inspection), 
for a period of not less than five years. However, there is an 
exception in proposed Sec.  39.20(b)(2) that would require each DCO 
that clears swaps to maintain swap data in accordance with the 
requirements of part 45 (swap data repositories) of the Commission's 
regulations.

C. Public Information

    To implement Core Principle L, the Commission proposes to codify 
the requirements of the core principle, requiring DCOs to provide or 
make available certain information to the public and to market 
participants.
1. Availability of Information
    Proposed Sec.  39.21(a) would require each DCO to provide to market 
participants sufficient information to enable the market participants 
to identify and evaluate accurately the risks and costs associated with 
using the services of the DCO.\46\ In furtherance of this objective, 
each DCO would be required to have clear and comprehensive rules and 
procedures. Proposed Sec.  39.21(b) would require each DCO to make 
information concerning the rules and the operating and default 
procedures governing the clearing and settlement systems of the DCO 
available to market participants.\47\
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    \46\ See Section 5b(c)(2)(L)(i) of the CEA; 7 U.S.C. 7a-
1(c)(2)(L)(i).
    \47\ See Section 5b(c)(2)(L)(ii) of the CEA; 7 U.S.C. 7a-
1(c)(2)(L)(ii).
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2. Public Disclosure
    Proposed Sec.  39.21(c) would require each DCO to disclose publicly 
and to the Commission information concerning: (1) The terms and 
conditions of each contract, agreement, and transaction cleared and 
settled by the DCO; (2) each clearing and other fee that the DCO 
charges its clearing members; (3) the DCO's margin methodology; (4) the 
size and composition of the financial resource package available in the 
event of a clearing member default; (5) daily settlement prices, 
volume, and open interest for each contract, agreement or transaction 
cleared or settled by the DCO; (6) the DCO's rules and procedures for 
defaults pursuant to proposed Sec.  39.16; \48\ and (7) any other 
matter that is relevant to participation in the clearing and settlement 
activities of the DCO.\49\
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    \48\ In a future proposed rulemaking, the Commission intends to 
propose a new Sec.  39.16 to implement DCO Core Principle G, 
regarding default rules and procedures. See Section 5b(c)(2)(G) of 
the CEA; 7 U.S.C. 7a-1(c)(2)(G).
    \49\ See Section 5b(c)(2)(L)(iii) of the CEA, 7 U.S.C. 7a-
1(c)(2)(L)(iii).
---------------------------------------------------------------------------

    Under proposed Sec.  39.21(d) the DCO would be required to make its 
rulebook, a list of all current clearing members, and the information 
listed in proposed Sec.  39.21(c) readily available to the general 
public, in a timely manner, by posting such information on the DCO's 
website, unless otherwise permitted by the Commission. The information 
that would be required by proposed Sec.  39.21(c)(5) would have to be 
made available to the public no later than the business day following 
the day to which the information pertains.

D. Information Sharing

    Proposed Sec.  39.22 would require each DCO to enter into, and 
abide by the terms of, each appropriate and applicable domestic and 
international information-sharing agreement and to use relevant 
information obtained from each such agreement in carrying out the risk 
management program of the DCO. Proposed Sec.  39.22 would codify the 
statutory provisions of Core Principle M. The Commission believes that 
the language affords each DCO the appropriate level of discretion 
regarding the appropriate information-sharing agreements to enter into 
and the rules to abide by, and it does not perceive a need to 
articulate more specific requirements. The Commission requests comment 
on this approach.

III. Effective Date

    The Commission is proposing that the requirements proposed in this 
notice become effective 180 days from the date the final rules are 
published in the Federal Register. The Commission believes that this 
would give DCOs adequate time to implement the technology and the 
procedures necessary to fulfill the proposed reporting requirements. 
This period of time also would be sufficient to allow for compliance 
with the recordkeeping, public information and information sharing 
requirements. The Commission requests comment on whether 180 days is an 
appropriate time frame for compliance with the proposed rules. The 
Commission further requests comment on possible alternative effective 
dates and the basis for any such alternative date.

IV. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires that agencies 
consider whether the rules they propose will have a significant 
economic impact on a substantial number of small entities and, if so, 
provide a regulatory flexibility analysis respecting the impact.\50\ 
The rules proposed by the Commission will affect only DCOs (some of 
which will be designated as SIDCOs). The Commission has previously 
established certain definitions of ``small entities'' to be used by the 
Commission in evaluating the impact of its regulations on small

[[Page 78193]]

entities in accordance with the RFA.\51\ The Commission has previously 
determined that DCOs are not small entities for the purpose of the 
RFA.\52\ Accordingly, the Chairman, on behalf of the Commission, hereby 
certifies pursuant to 5 U.S.C. 605(b) that the proposed rules will not 
have a significant economic impact on a substantial number of small 
entities.
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    \50\ 5 U.S.C. 601 et seq.
    \51\ 47 FR 18618 (Apr. 30, 1982).
    \52\ See 66 FR 45604, 45609 (Aug. 29, 2001).
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B. Paperwork Reduction Act

    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a 
currently valid control number. OMB has not yet assigned a control 
number to the new collection. The Paperwork Reduction Act of 1995 (PRA) 
\53\ imposes certain requirements on Federal agencies (including the 
Commission) in connection with their conducting or sponsoring any 
collection of information as defined by the PRA. This proposed 
rulemaking would result in new collection of information requirements 
within the meaning of the PRA. The Commission therefore is submitting 
this proposal to the Office of Management and Budget (OMB) for review. 
If adopted, responses to this collection of information would be 
mandatory. The Commission will protect proprietary information 
according to the Freedom of Information Act and 17 CFR Part 145, 
``Commission Records and Information.'' In addition, section 8(a)(1) of 
the CEA strictly prohibits the Commission, unless specifically 
authorized by the CEA, from making public ``data and information that 
would separately disclose the business transactions or market positions 
of any person and trade secrets or names of customers.'' The Commission 
is also required to protect certain information contained in a 
government system of records according to the Privacy Act of 1974, 5 
U.S.C. 552a.
---------------------------------------------------------------------------

    \53\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

1. Information Provided by Reporting Entities/Persons
    The proposed regulations require each respondent to file 
information with the Commission (1) periodically, on a daily, 
quarterly, and annual basis,\54\ (2) as specified events occur, and (3) 
upon Commission request.\55\
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    \54\ Quarterly financial resources reports and annual compliance 
reports are the subjects of separate Paperwork Reduction Act 
submissions in connection with other proposed rulemakings.
    \55\ Reports submitted upon Commission request are current 
requirements.
---------------------------------------------------------------------------

    For daily reports, these would result in an estimated total of 12 
initial responses and 250 responses per respondent on an annual basis. 
Commission staff estimates that respondents could expend up to $690 
initially and $1,400 annually, based on an hourly rate ranging from $46 
to $56, to comply with the proposed regulations. This would result in 
an aggregated cost of $8,280 initially (12 respondents x $690) and 
$16,800 per annum (12 respondents x $1,400).
    For annual reports, these would result in an estimated total of 1 
response per respondent on an annual basis. Commission staff estimates 
that respondents could expend up to $482,110 annually, based on an 
hourly rate of $185, to comply with the proposed regulations. This 
would result in an aggregated cost of $5,785,320 per annum (12 
respondents x $482,110).\56\
---------------------------------------------------------------------------

    \56\ This amount reflects the estimated cost of preparing 
audited annual financial statements, an activity which many, if not 
all, respondents already perform on an annual basis.
---------------------------------------------------------------------------

    For event-specific reports, these would result in an estimated 
total of 4 responses per respondent on an annual basis. Commission 
staff estimates that respondents could expend up to $1,680 annually, 
based on an hourly rate of $75, to comply with the proposed 
regulations. This would result in an aggregated cost of $20,160 per 
annum (12 respondents x $1,680).\57\
---------------------------------------------------------------------------

    \57\ This amount reflects the estimated cost of putting systems 
in place which would alert a respondent of certain event-specific-
reporting requirements. It is expected, however, that most 
respondents already have most, if not all, of these systems in 
place. Additionally, this amount takes into account the preparation 
of reports such as the pro forma financial statement for a decrease 
in ownership equity, a document which a respondent would most likely 
already have produced in connection with whatever specific event the 
respondent anticipated would cause a decrease in ownership equity.
---------------------------------------------------------------------------

    For recordkeeping requirements, these would result in an estimated 
total of 1 response per respondent on an annual basis. Commission staff 
estimates that respondents could expend up to $1,000 annually, based on 
an hourly rate of $10, to comply with the proposed regulations. This 
would result in an aggregated cost of $12,000 per annum (12 respondents 
x $1,000).
2. Information Collection Comments
    The Commission invites the public and other federal agencies to 
comment on any aspect of the reporting and recordkeeping burdens 
discussed above. Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission 
solicits comment in order to: (i) Evaluate whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the Commission, including whether the information will 
have practical utility; (ii) evaluate the accuracy of the Commission's 
estimate of the burden of the proposed collection of information; (iii) 
determine whether there are ways to enhance the quality, utility, and 
clarity of the information to be collected; and (iv) minimize the 
burden of the collection of information on those who are to respond, 
including through the use of automated collection techniques or other 
forms of information technology.
    Comments may be submitted directly to the Office of Information and 
Regulatory Affairs, by fax at (202) 395-6566 or by e-mail at 
[email protected]. Please provide the Commission with a copy 
of submitted comments so that all comments can be summarized and 
addressed in the final rule preamble. Refer to the Addresses section of 
this notice of proposed rulemaking for comment submission instructions 
to the Commission. A copy of the supporting statements for the 
collections of information discussed above may be obtained by visiting 
RegInfo.gov. OMB is required to make a decision concerning the 
collection of information between 30 and 60 days after publication of 
this document in the Federal Register. Therefore, a comment is best 
assured of having its full effect if OMB receives it within 30 days of 
publication.

C. Cost-Benefit Analysis

    Section 15(a) of the CEA requires the Commission to consider the 
costs and benefits of its actions before issuing a rulemaking under the 
CEA. By its terms, Section 15(a) does not require the Commission to 
quantify the costs and benefits of a rule or to determine whether the 
benefits of the rulemaking outweigh its costs; rather, it requires that 
the Commission to ``consider'' the costs and benefits of its actions. 
Section 15(a) further specifies that the costs and benefits shall be 
evaluated in light of five broad areas of market and public concern: 
(1) Protection of market participants and the public; (2) efficiency, 
competitiveness, and financial integrity of futures markets; (3) price 
discovery; (4) sound risk management practices; and (5) other public 
interest considerations. The Commission may in its discretion give 
greater weight to any one of the five enumerated areas and could in its 
discretion determine that, notwithstanding its costs, a particular rule 
is necessary or appropriate to protect the public interest or to 
effectuate any of the provisions or to

[[Page 78194]]

accomplish any of the purposes of the CEA.
    Summary of proposed requirements. The proposed regulations would 
implement the reporting, recordkeeping, public information, and 
information-sharing requirements for DCOs under the CEA, as amended by 
the Dodd-Frank Act.
    Costs. With respect to costs, the Commission has determined that 
the costs of the new reporting requirements are not expected to be 
significant given that the information required to be reported is 
readily available to the DCO and, in certain instances, is already 
being reported to the Commission. The incremental increases in 
operating costs will have a negligible effect on the markets' 
efficiency, effectiveness and financial competitiveness.
    Benefits. With respect to benefits, the Commission has determined 
that receiving such data required by the daily, annual and event-
specific reporting requirements in a timely manner and in one format 
would further the Commission's goal of monitoring the financial health 
and financial integrity of DCOs and whether a DCO's financial and risk 
management practices are effective. It would also assist the Commission 
in taking prompt action as necessary to identify insipient problems and 
address them at an earlier stage. This would further the goal of 
avoiding systemic risk due to the default of a clearing member and 
thereby protect market participants and the public and serve the public 
interest by promoting sound risk management practices. Similarly, the 
recordkeeping requirements allow for making certain records available 
for Commission inspection, which helps further the goals of the 
reporting requirements and is necessary for the Commission to 
effectively monitor a DCO's financial integrity and compliance with the 
CEA and Commission regulations. The public information requirements 
serve the public interest by facilitating the dissemination of 
important information about the DCO, including its clearing and 
settlement activities and default procedures. Information-sharing 
requirements promote cooperation among industry participants, 
facilitating more effective risk management.
    Public Comment. The Commission invites public comment on its cost-
benefit considerations. Commentators are also invited to submit any 
data or other information that they may have quantifying or qualifying 
costs and benefits of the Proposal with their comment letters.

List of Subjects

17 CFR Part 1

    Brokers, Commodity futures, Consumer protection.

17 CFR Part 21

    Brokers, Commodity futures, Reporting and recordkeeping 
requirements

17 CFR Part 39

    Definitions, commodity futures, reporting and recordkeeping 
requirements, swaps.

    For the reasons stated in the preamble, the Commission proposes to 
amend 17 CFR parts 1, 21 and 39 as follows:

PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT

Authority and Issuance

    1. The authority citation for part 1 is revised to read as follows:

    Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g, 6h, 
6i, 6k, 6m, 6n, 6o, 6p, 7, 7a, 7b, 8, 9, 12, 12a, 12c, 13a, 13a-1, 
16, 16a, 19, 21, 23, and 24, as amended by the Dodd-Frank Wall 
Street Reform and Consumer Protection Act, Pub. L. 111-203, 124 
Stat. 1376 (2010).

    2. In Sec.  1.12, remove and reserve paragraph (f)(1).

PART 21--SPECIAL CALLS

Authority and Issuance

    3. The authority for part 21 continues to read as follows:

    Authority:  7 U.S.C. 1a, 2, 2a, 4, 6a, 6c, 6f, 6g, 6i, 6k, 6m, 
6n, 7, 7a, 12a, 19 and 21, as amended by the Dodd-Frank Wall Street 
Reform and Consumer Protection Act, Pub. L. 111-203, 124 Stat. 1376 
(2010); 5 U.S.C. 552 and 552(b), unless otherwise noted.
    4. Redesignate Sec.  21.04 as Sec.  21.05.
    5. Add Sec.  21.06 to read as follows:


Sec.  21.06  Delegation of authority to the Director of the Division of 
Clearing and Intermediary Oversight.

    The Commission hereby delegates, until the Commission orders 
otherwise, the special call authority set forth in Sec.  21.04 to the 
Director of the Division of Clearing and Intermediary Oversight to be 
exercised by such Director or by such other employee or employees of 
such Director as designated from time to time by the Director. The 
Director of the Division of Clearing and Intermediary Oversight may 
submit to the Commission for its consideration any matter which has 
been delegated in this paragraph. Nothing in this section shall be 
deemed to prohibit the Commission, at its election, from exercising the 
authority delegated in this section to the Director.

PART 39--DERIVATIVES CLEARING ORGANIZATIONS

Authority and Issuance

    6. The authority for part 39 is proposed to read as follows:

    Authority:  7 U.S.C. 2, 5, 6, 6d, 7a-1,7a-2, and 7b as amended 
by the Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Pub. L. 111-203, 124 Stat. 1376 (2010).

    7. Add Sec.  39.19 to read as follows:


Sec.  39.19  Reporting.

    (a) In general. Each derivatives clearing organization shall 
provide to the Commission the information specified in this section and 
any other information that the Commission deems necessary to conduct 
its oversight of a derivatives clearing organization.
    (b) Submission of reports. (1) Unless otherwise specified by the 
Commission or its designee, each derivatives clearing organization 
shall submit the information required by this section to the Commission 
electronically and in a form and manner prescribed by the Commission.
    (2) Time zones. Unless otherwise specified by the Commission or its 
designee, any stated time in this section is Central time for 
information concerning derivatives clearing organizations located in 
that time zone, and Eastern time for information concerning all other 
derivatives clearing organizations.
    (c) Reporting requirements. Each registered derivatives clearing 
organization shall provide to the Commission or other person as may be 
required or permitted by this paragraph the information specified 
below:
    (1) Daily reporting. A report containing the information specified 
by this paragraph (c)(1), which shall be compiled as of the end of each 
trading day and shall be submitted to the Commission by 10 a.m. on the 
following business day:
    (i) Initial margin requirements and initial margin on deposit for 
each clearing member, by customer origin and house origin;
    (ii) Daily variation margin, separately listing the mark-to-market 
amount collected from or paid to each clearing member, by customer 
origin and house origin;
    (iii) All other daily cash flows relating to clearing and 
settlement including, but not limited to, option premiums and payments 
related to swaps such as coupon amounts, collected from or paid to each 
clearing member, by customer origin and house origin; and

[[Page 78195]]

    (iv) End-of-day positions for each clearing member, by customer 
origin and house origin.
    (2) Quarterly reporting. A report of the derivatives clearing 
organization's financial resources as required by Sec.  39.11(f); 
provided that, additional reports may be required by paragraph 
(c)(4)(i) of this section or Sec.  39.11(f).
    (3) Annual reporting. (i) Annual report of chief compliance 
officer. The annual report of the chief compliance officer required by 
Sec.  39.10.
    (ii) Audited financial statements. Audited year-end financial 
statements of the derivatives clearing organization or, if there are no 
financial statements available for the derivatives clearing 
organization itself, the consolidated audited year-end financial 
statements of the derivatives clearing organization's parent company.
    (iii) Time of report. The reports required by this paragraph (c)(3) 
shall be submitted concurrently to the Commission not more than 90 days 
after the end of the derivatives clearing organization's fiscal year; 
provided that, a derivatives clearing organization may request from the 
Commission an extension of time to submit either report, provided the 
derivatives clearing organization's failure to submit the report in a 
timely manner could not be avoided without unreasonable effort or 
expense. Extensions of the deadline will be granted at the discretion 
of the Commission.
    (4) Event-specific reporting. (i) Decrease in financial resources. 
If there is a decrease of 10 percent in the total value of the 
financial resources required to be maintained by the derivatives 
clearing organization under Sec.  39.11(a) or, as applicable, Sec.  
39.29(a), either from the last quarterly report submitted under Sec.  
39.11(f) or from the value as of the close of the previous business 
day, the derivatives clearing organization shall report such decrease 
to the Commission no later than one business day following the day the 
10 percent threshold was reached. The report shall include:
    (A) The total value of the financial resources:
    (1) as of the close of business the day the 10 percent threshold 
was reached, and
    (2) if reporting a decrease in value from the previous business 
day, the total value of the financial resources immediately prior to 
the 10 percent decline;
    (B) A breakdown of the value of each financial resource reported in 
each of paragraph (4)(i)(A)(1) and (2), calculated in accordance with 
the requirements of Sec.  39.11(d) or, as applicable, Sec.  39.29(b), 
including the value of each individual clearing member's guaranty fund 
deposit if the derivatives clearing organization reports guaranty fund 
deposits as a financial resource; and
    (C) A detailed explanation for the decrease.
    (ii) Decrease in ownership equity. No later than two business days 
prior to an event which the derivatives clearing organization knows or 
should reasonably know will cause a decrease of 20 percent or more in 
ownership equity from the last reported ownership equity balance as 
reported on a quarterly or audited financial statements required to be 
submitted by paragraph (c)(2) or (c)(3)(ii), respectively, of this 
section, but in any event no later than two business days after such 
decrease in ownership equity for events that caused the decrease for 
which the derivatives clearing organization does not know and 
reasonably should not have known about prior to the event. The report 
shall include:
    (A) Pro forma financial statements reflecting the DCO's estimated 
future financial condition following the anticipated decrease for 
reports submitted prior to the anticipated decrease and current 
financial statements for reports submitted after such a decrease; and
    (B) Details describing the reason for the decrease or anticipated 
decrease in the balance.
    (iii) Six-month liquid asset requirement. Immediate notice when a 
derivatives clearing organization knows or reasonably should know of a 
deficit in the six-month liquid asset requirement of Sec.  39.11(e)(2).
    (iv) Change in working capital. No later than two business days 
after working capital becomes negative; the notice shall include a 
balance sheet that reflects the derivatives clearing organization's 
working capital and an explanation as to the reason for the negative 
balance.
    (v) Intraday initial margin calls. (A) Reporting requirement. Any 
intraday initial margin call to a clearing member.
    (B) Required information. The report shall separately list each 
request and include the name of the clearing member, the amount 
requested and the account origin.
    (C) Time of report. The report shall be submitted to the Commission 
no later than 1 hour following the margin call.
    (vi) Delay in collection of initial margin. Immediate notice when a 
derivatives clearing organization has not received additional initial 
margin that it requested from a clearing member within the time frame 
allowed by the derivatives clearing organization's rules and 
procedures.
    (vii) Request to clearing member to reduce its positions. Immediate 
notice, of a derivatives clearing organization's request to a clearing 
member to reduce its positions because the derivatives clearing 
organization has determined that the clearing member has exceeded its 
exposure limit, has failed to meet an initial or variation margin call, 
or has failed to fulfill any other financial obligation to the 
derivatives clearing organization. The notice shall include:
    (A) The name of the clearing member;
    (B) The time the clearing member was contacted;
    (C) The number of positions by which the derivatives clearing 
organization requested the clearing member to reduce its position size;
    (D) All contracts that are the subject of the request; and
    (E) The reason for the request.
    (viii) Determination to transfer or liquidate positions. Immediate 
notice, of a determination that any position a derivatives clearing 
organization carries for one of its clearing members must be liquidated 
immediately or transferred immediately, or that the trading of any 
account of a clearing member shall be only for the purposes of 
liquidation because that clearing member has failed to meet an initial 
or variation margin call or has failed to fulfill any other financial 
obligation to the derivatives clearing organization. The notice shall 
include:
    (A) The name of the clearing member;
    (B) The time the clearing member was contacted;
    (C) The contracts that are subject to the determination;
    (D) The number of positions that are subject to the determination; 
and
    (E) The reason for the determination.
    (ix) Default of a clearing member. Immediate notice, upon the 
default of a clearing member. An event of default shall be determined 
in accordance with the rules of the derivatives clearing organization. 
The notice of default shall include:
    (A) The name of the clearing member;
    (B) The contracts the clearing member defaulted upon;
    (C) The number of positions the clearing member defaulted upon; and
    (D) The amount of the financial obligation.
    (x) Change in ownership or corporate or organizational structure. 
(A) Reporting requirement. Any anticipated change in the ownership or 
corporate or organizational structure of the derivatives clearing 
organization or its parent company that would:

[[Page 78196]]

    (1) Result in at least a 10 percent change of ownership of the 
derivatives clearing organization,
    (2) create a new subsidiary or eliminate a current subsidiary of 
the derivatives clearing organization or its parent company, or
    (3) result in the transfer of all or substantially all of its 
assets, including its registration as a derivatives clearing 
organization to another legal entity.
    (B) Required information. The report shall include: A chart 
outlining the new ownership or corporate or organizational structure; a 
brief description of the purpose and impact of the change; and any 
relevant agreements effecting the change and corporate documents such 
as articles of incorporation and bylaws. With respect to a corporate 
change for which a derivatives clearing organization submits a request 
for approval to transfer its derivatives clearing organization 
registration and open interest under Sec.  39.3(h) of this part, the 
informational requirements of this paragraph (c)(4)(x)(B) shall be 
satisfied by the derivatives clearing organization's compliance with 
Sec.  39.3(h)(3).
    (C) Time of report. The report shall be submitted to the Commission 
no later than three months prior to the anticipated change; provided 
that the derivatives clearing organization may report the anticipated 
change to the Commission later than three months prior to the 
anticipated change if the derivatives clearing organization does not 
know and reasonably could not have known of the anticipated change 
three months prior to the anticipated change. In such event, the 
derivatives clearing organization shall immediately report such change 
to the Commission as soon as it knows of such change.
    (D) Confirmation of change report. The derivatives clearing 
organization shall report to the Commission the consummation of the 
change no later than 2 business days following the effective date of 
the change.
    (xi) Change in key personnel. No later than two business days 
following the departure, or addition of persons who are key personnel 
as defined in Sec.  39.1(b), a report that includes, as applicable, the 
name of the person who will assume the duties of the position on a 
temporary basis until a permanent replacement fills the position.
    (xii) Credit facility funding arrangement change. No later than one 
business day after a derivatives clearing organization changes a credit 
facility funding arrangement it may have in place, is notified that 
such arrangement has changed, or knows or reasonably should have known 
that the arrangement will change, including but not limited to a change 
in lender, change in the size of the facility, change in expiration 
date, or any other material changes or conditions.
    (xiii) Rule enforcement. Notice of action taken, no later than two 
business days after the derivatives clearing organization:
    (A) Initiates a rule enforcement action against a clearing member; 
or
    (B) Imposes sanctions against a clearing member.
    (xiv) Financial condition and events. Immediate notice after the 
derivatives clearing organization knows or reasonably should have known 
of:
    (A) The institution of any legal proceedings which may have a 
material adverse financial impact on the derivatives clearing 
organization;
    (B) Any event, circumstance or situation that materially impedes 
the derivatives clearing organization's ability to comply with this 
part and is not otherwise required to be reported under this section; 
or
    (C) A material adverse change in the financial condition of any 
clearing member that is not otherwise required to be reported under 
this section.
    (xv) Financial statements material inadequacies. If a derivatives 
clearing organization discovers or is notified by an independent public 
accountant of the existence of any material inadequacy, such 
derivatives clearing organization must give notice of such material 
inadequacy within 24 hours, and within 48 hours after giving such 
notice file a written report stating what steps have been and are being 
taken to correct the material inadequacy.


Sec.  39.5(a)  [Redesignated as Sec.  39.19(c)(5)(i)]

    8. Redesignate Sec.  39.5(a) as Sec.  39.19(c)(5)(i).
    9. Redesignate Sec.  39.5(b) as Sec.  39.19(c)(5)(ii) and revise to 
read as follows:


Sec.  39.19  Reporting.

* * * * *
    (c) * * *
    (5) * * *
    (ii) Upon request by the Commission, a derivatives clearing 
organization shall file with the Commission a written demonstration, 
containing such supporting data, information and documents, in the form 
and manner and within such time as the Commission may specify, that the 
derivatives clearing organization is in compliance with one or more 
core principles and relevant provisions of this part, as specified in 
the request.


Sec.  39.5(d)  [Redesignated as Sec.  21.04]

    10. Redesignate Sec.  39.5(d) as Sec.  21.04.


Sec.  39.5  [Amended]

    11. Remove Sec.  39.5(c) and reserve the section.
    12. Add Sec.  39.20 to read as follows:


Sec.  39.20  Recordkeeping.

    (a) Requirement to maintain information. Each derivatives clearing 
organization shall maintain records of all activities related to its 
business as a derivatives clearing organization. Such records shall 
include, but are not limited to, records of:
    (1) All cleared transactions, including swaps.
    (2) All information necessary to record allocation of bunched 
orders for cleared swaps;
    (3) All information required to be created, generated, or reported 
under this part 39, including but not limited to the results of and 
methodology used for all tests, reviews, and calculations in connection 
with setting and evaluating margin levels, determining the value and 
adequacy of financial resources, and establishing settlement prices;
    (4) All rules and procedures required to be submitted pursuant to 
this part 39 and part 40 of this chapter, including all proposed 
changes in rules, procedures or operations subject to Sec.  40.10 of 
this chapter; and
    (5) Any data or documentation required by the Commission or by the 
derivatives clearing organization to be submitted to the derivatives 
clearing organization by its clearing members, or by any other person 
in connection with the derivatives clearing organization's clearing and 
settlement activities.
    (b) Form and manner of maintaining information. (1) In general. The 
records required to be maintained by this chapter shall be maintained 
in accordance with the provisions of Sec.  1.31 of this chapter, for a 
period of not less than 5 years, except as provided in paragraph (b)(2) 
of this section.
    (2) Exception for swap data. Each derivatives clearing organization 
that clears swaps must maintain swap data in accordance with the 
requirements of part 45 of this chapter.
    15. Add Sec.  39.21 to read as follows:


Sec.  39.21  Public information.

    (a) In general. Each derivatives clearing organization shall 
provide to market participants sufficient information to enable the 
market participants to identify and evaluate accurately the risks and 
costs associated with using the services of the derivatives clearing 
organization. In furtherance of this objective, each

[[Page 78197]]

derivatives clearing organization shall have clear and comprehensive 
rules and procedures.
    (b) Availability of information. Each derivatives clearing 
organization shall make information concerning the rules and the 
operating and default procedures governing the clearing and settlement 
systems of the derivatives clearing organization available to market 
participants.
    (c) Public disclosure. Each derivatives clearing organization shall 
disclose publicly and to the Commission information concerning:
    (1) The terms and conditions of each contract, agreement, and 
transaction cleared and settled by the derivatives clearing 
organization;
    (2) Each clearing and other fee that the derivatives clearing 
organization charges its clearing members;
    (3) The margin-setting methodology;
    (4) The size and composition of the financial resource package 
available in the event of a clearing member default;
    (5) Daily settlement prices, volume, and open interest for each 
contract, agreement, or transaction cleared or settled by the 
derivatives clearing organization;
    (6) The derivatives clearing organization's rules and procedures 
for defaults in accordance with Sec.  39.16 of this part; and
    (7) Any other matter that is relevant to participation in the 
clearing and settlement activities of the derivatives clearing 
organization.
    (d) Publication of information. The derivatives clearing 
organization shall make its rulebook, a list of all current clearing 
members and the information listed in paragraph (c) of this section 
readily available to the general public, in a timely manner, by posting 
such information on the derivatives clearing organization's website, 
unless otherwise permitted by the Commission. The information required 
in paragraph (c)(5) of this section shall be made available to the 
public no later than the business day following the day to which the 
information pertains.
    16. Add Sec.  39.22 to read as follows:


Sec.  39.22  Information sharing.

    Each derivatives clearing organization shall enter into, and abide 
by the terms of, each appropriate and applicable domestic and 
international information-sharing agreement, and shall use relevant 
information obtained from each such agreement in carrying out the risk 
management program of the derivatives clearing organization.

    Issued in Washington, DC, on December 1, 2010, by the 
Commission.
David A. Stawick,
Secretary of the Commission.

Appendices to Information Management Requirements for Derivatives 
Clearing Organizations--Commission Voting Summary and Statements of 
Commissioners

    Note:  The following appendices will not appear in the Code of 
Federal Regulations

Appendix 1--Commission Voting Summary

    On this matter, Chairman Gensler and Commissioners Dunn, 
Sommers, Chilton and O'Malia voted in the affirmative. No 
Commissioner voted in the negative.

Appendix 2--Statement of Chairman Gary Gensler

    I support the proposed rulemaking concerning information 
management, recordkeeping and reporting requirements for derivatives 
clearing organizations. The requirements would enable the Commission 
to conduct financial risk surveillance more efficiently and 
effectively. Further, they would promote transparency to the 
regulators, enhancing the Commission's ability to detect and resolve 
potential concerns before they escalate into major problems. The 
rule also fulfills Congress's direction that clearinghouses be 
required to make settlement prices and open interest public in all 
their contracts on a daily basis.
    The proposed reporting rules apply uniform standards to all 
DCOs, thereby helping to avoid inconsistency in DCO reporting. The 
recordkeeping requirements are rooted in sound business practices, 
and the public information requirements serve the public interest by 
promoting transparency and disclosure. By codifying the information-
sharing core principle into the Commission's regulations, the 
Commission would reaffirm its commitment to promoting cooperation 
among industry participants in carrying out risk management 
functions.

[FR Doc. 2010-31131 Filed 12-14-10; 8:45 am]
BILLING CODE 6351-01-P