[Federal Register Volume 77, Number 171 (Tuesday, September 4, 2012)]
[Notices]
[Pages 53870-53873]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-21612]


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COMMODITY FUTURES TRADING COMMISSION


Availability of a Legal Entity Identifier Meeting the 
Requirements of the Regulations of the Commodity Futures Trading 
Commission and Designation of Provider of Legal Entity Identifiers To 
Be Used in the Recordkeeping and Swap Data Reporting

AGENCY: Commodity Futures Trading Commission.

ACTION: Order.

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SUMMARY: On July 23, 2012, the Commodity Futures Trading Commission 
issued an order designating DTCC-SWIFT as the provider of the legal 
entity identifiers (LEIs) which will be used by registered entities and 
swap counterparties in complying with the CFTC's swap data reporting 
regulations. These identifiers will be known as CFTC Interim Compliant 
Identifiers (CICIs) until establishment of a global LEI system, and 
will transition into the global LEI system when it is established. The 
order included findings of fact by the Commission that the CICI 
provided by DTCC-SWIFT is the only available identifier that satisfies 
all requirements of the Commission's swap data reporting rules, and can 
be provided to market participants sufficiently in advance of the 
initial compliance date for swap data reporting to enable compliance 
with the rules. The designation is made for a limited term of two 
years, and is subject to four conditions specified in the order.

FOR FURTHER INFORMATION CONTACT: David Taylor, Associate Director, 
Division of Market Oversight, 202-418-5488, [email protected]; or Srini 
Bangarbale, Chief Data Officer, Office of Data and Technology, 202-418-
5315, [email protected]; Commodity Futures Trading Commission, Three 
Lafayette Centre, 1155 21st Street NW., Washington, DC 20851.

SUPPLEMENTARY INFORMATION: Section 21(b) of the Commodity Exchange Act, 
(``CEA''), added to the CEA by Section 728 of the Dodd-Frank Act, 
directs the Commission to prescribe standards that specify the data 
elements for each swap that shall be reported to, and collected and 
maintained by, swap data repositories. Pursuant to this authority, part 
45 of the Commission's regulations establishes recordkeeping and data 
reporting requirements for swaps subject to the jurisdiction of the 
Commission.\1\ Section 45.6, Legal entity identifiers, includes a legal 
entity identifier (``LEI'') for each swap counterparty among the data 
elements required to be reported for each swap. That section provides 
that:
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    \1\ 17 CFR part 45, Swap Data Recordkeeping and Reporting 
Requirements, 77 FR 2136 (Jan. 13, 2012), http://www.cftc.gov/ucm/groups/public/@lrfederalregister/documents/file/2011-33199a.pdf.

    Each counterparty to any swap subject to the jurisdiction of the 
Commission shall be identified in all recordkeeping and all swap 
data reporting pursuant to this part by means of a single legal 
entity identifier as specified in this section.\2\
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    \2\ Sec.  45.6.

As noted in part 45, and stated in the CPSS-IOSCO Report on OTC 
Derivatives Data Reporting and Aggregation Requirements, ``a standard 
system of LEIs is an essential tool for aggregation of OTC derivatives 
data.'' \3\
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    \3\ Committee on Payment and Settlement Systems and Technical 
Committee of the International Organization of Securities 
Commissions, Report on OTC Derivatives Data Reporting and 
Aggregation Requirements (Dec. 2011).
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    In order to enable compliance with this requirement by registered 
entities and swap counterparties subject to the Commission's 
jurisdiction, part 45 provides that:

    The Commission shall determine, as provided in paragraphs 
(e)(1)(i) through (iii) of this section, whether a legal entity 
identifier system that satisfies the requirements set forth in this 
section is

[[Page 53871]]

available to provide legal entity identifiers for registered 
entities and swap counterparties required to comply with this 
part.\4\

    \4\ Sec.  45.6(e)(1).

Section 45.6(e)(1)(i) specifies five factors that the Commission shall 
consider in making this determination.
    Section 45.6 emphasizes that making this determination and having 
LEIs available for identification of swap counterparties when swap data 
reporting commences as of the compliance dates set forth in part 45 is 
highly important to achieving the systemic risk mitigation, 
transparency, and market abuse prevention purposes of the Dodd-Frank 
Act. For this reason, Sec.  45.6(e)(1)(ii) provides that:

    In making this determination, the Commission shall consider all 
candidates meeting the criteria set forth in paragraph (e)(1)(i) of 
this section, but shall not consider any candidate that does not 
demonstrate that it in fact can provide LEIs for identification of 
swap counterparties in swap data reporting commencing as of the 
compliance dates set forth in this part.

In addition, Sec.  45.6(e)(1)(iii) provides that:

    The Commission shall make this determination at a time it 
believes is sufficiently prior to the compliance dates set forth in 
this part to enable issuance of LEIs far enough in advance of those 
compliance dates to enable compliance with this part.

    If the Commission determines that a provider whose LEI system 
provides LEIs meeting the requirements of part 45 is available, the 
rule calls for the Commission to inform registered entities and swap 
counterparties subject to the Commission's jurisdiction of where they 
can obtain the LEIs needed for compliance with part 45, by issuing an 
order designating the provider of the LEIs to be used for that purpose. 
Section 45.6(e)(2) provides that:

    If the Commission determines pursuant to paragraph (e)(1) of 
this section that such a legal entity identifier system is 
available, the Commission shall designate the legal entity 
identifier system as the provider of legal entity identifiers to be 
used in recordkeeping and swap data reporting pursuant to this part, 
by means of a Commission order that is published in the Federal 
Register and on the Web site of the Commission, as soon as 
practicable after such determination is made. The order shall 
include notice of this designation, the contact information of the 
LEI utility, and information concerning the procedure and 
requirements for obtaining legal entity identifiers.

    Once the Commission has determined that an LEI meeting the 
requirements of part 45 is available, and has designated its provider 
as set forth in Sec.  45.6(e)(2), registered entities and swap 
counterparties subject to the Commission's jurisdiction are required to 
use the LEIs furnished by that provider in recordkeeping and swap data 
reporting. Section 45.6(f)(1) provides that:

    When a legal entity identifier system has been designated by the 
Commission pursuant to paragraph (e) of this section, each 
registered entity and swap counterparty shall use the legal entity 
identifier provided by that system in all recordkeeping and swap 
data reporting pursuant to this part.

II. Determination and Designation Process

A. Request for Submissions

    Pursuant to these provisions of part 45, on March 9, 2012, the 
Commission issued a public request for submissions from industry 
participants that wished to be considered for designation by the 
Commission as the provider of LEIs to be used in complying with the 
rule.\5\
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    \5\ Commodity Futures Trading Commission Press Release, CFTC 
announces process to designate the provider of CFTC Interim 
Compliant Identifiers, March 9, 2012.
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    The Commission's request for submissions included provisions 
relating to international aspects of LEIs. It reiterated that part 45 
calls for issuance of the identifier used in recordkeeping and swap 
data reporting under CFTC jurisdiction, and for any utility formed to 
issue such identifiers, to be subject to international supervision by a 
governance structure that includes the Commission and other financial 
regulators in any jurisdiction requiring use of the legal entity 
identifier pursuant to applicable law. It noted the Commission's 
ongoing participation in an international process, coordinated by the 
Financial Stability Board (``FSB''), to establish governance principles 
and reference data requirements for a global legal entity identifier, 
to be contained in recommendations by an international regulatory LEI 
Expert Group (including the Commission) for consideration by the FSB in 
May 2012. In light of that process, and as requested by other 
international financial regulators, the request for submissions stated 
that the Commission would refer to the identifier to be used in 
reporting under part 45 as the CFTC Interim Compliant Identifier 
(``CICI'') until after the FSB Plenary meeting in May 2012, and would 
defer its designation of the provider of CICIs until after that 
meeting. The request also reiterated that, as provided in part 45, the 
Commission plans to adopt the governance principles and LEI reference 
data requirements endorsed by the FSB, making them applicable to 
identification of swap counterparties under CFTC jurisdiction. The 
request further stated that, once these steps are completed, the 
Commission anticipates that the identifier then called the CICI will 
transition into the global LEI, and be referred to as the LEI.
    In its request for submissions, the Commission stated that 
submitters must be prepared to demonstrate that they meet all of the 
requirements set forth in part 45. It further notified submitters that: 
(1) The Commission's determination and designation process would 
include an on-site, live demonstration for Commission staff of the 
process to be used for issuance of CICIs; (2) the Commission's 
designation will be for a limited term of two years, and be terminable 
on six months' notice if a different central utility for the global LEI 
is chosen later through the FSB process and becomes operational; and 
(3) subject to applicable confidentiality laws, the Commission's 
designation will require that the designated LEI utility must make 
public all CICI data, operations, identity validation processes and 
audit trail, and to pass to any successor LEI utility, free of charge, 
all CICI data and all CICI intellectual property rights.

B. Requirements for Designation as the LEI Utility

    Four parties expressed an interest in becoming the LEI provider. To 
assess their suitability, the Commission required the submitters to 
provide both (1) a written demonstration of their ability to meet the 
Commission's part 45 requirements, and (2) an on-site, live 
demonstration of their process for issuing CICIs.
1. Written Demonstration of Ability To Meet Commission Requirements
    Detailed requirements for the written demonstration were provided 
to each submitter. The requirements document stated that, as provided 
in Sec.  45.6(e)(1)(i) of the Commission's regulations, in determining 
whether a CICI meeting the requirements of part 45 is available, and if 
so designating its provider as the utility that will provide the CICI, 
the Commission would consider, without limitation, the following five 
factors:
     Whether the CICI provided by the utility is issued under, 
and conforms to, ISO Standard 17442, Legal Entity Identifier (LEI).
     Whether the CICI provided by the utility complies with all 
of the technical principles set forth in part 45.

[[Page 53872]]

     Whether the CICI utility complies with all of the 
governance principles set forth in part 45.
     Whether the CICI utility has demonstrated that it in fact 
can provide CICIs for identification of swap counterparties in swap 
data reporting commencing as of the compliance dates set forth in part 
45.
     The acceptability of the CICI utility to industry 
participants required to use the LEI in complying with part 45.
    The requirements document also described the functions to be 
performed by the CICI system, including, but not limited to, the 
following:
     Utility Administration (e.g., accounting; audit; CICI fee 
collection; billing and payment; communications, human resources; and 
legal department).
     Data Management (e.g., receive registrant data; establish 
and maintain registrant data record; apply validation and data quality 
assurance processes to registrant data; issue unique CICI; transmit 
CICI to registrant; maintain and update data record history; maintain 
and update required metadata; maintain complete audit trail of all 
records, data, and messages; and maintain appropriate system 
safeguards).
     Verification of Entity Identification (e.g., cleanse and 
validate identification data submitted through both self-registration 
and third-party registration; connect to and communicate with national 
business registers in jurisdictions world-wide; provide identification 
data challenge services; verify uniqueness of submitted identification 
information; provide local verification in countries world-wide; visit 
provided addresses to verify entity presence; process entity messages 
regarding identification data, for example concerning corporate 
actions; perform periodic re-verification; and identify the 
verification level at which each record has been verified).
     Public Database (e.g., establish and maintain free public 
database of all CICIs; provide 24/7 internet query facility; provide 
near-real time response to queries; provide complete, current CICI 
directory; and provide help desk and assistance services for the 
public).
     CICI Registration Services (e.g., provide local language 
services world-wide; respond to market participant queries; receive and 
process both electronic and paper registration requests; and provide 
timely processing of CICI requests and timely assignment of CICIs).
     Compliance (e.g., monitor and ensure adherence to 
technical and governance principles, to operational and technical 
standards and protocols, to regulatory policies concerning access to 
hierarchical data; and to applicable laws; regulatory oversight 
reporting; compliance with directives of international Regulatory 
Oversight Committee, when established; and maintain capability to 
transfer all CICI data to international central utility when 
established).
    In addition, the requirements document provided that each submitter 
was required to provide detailed information concerning its relevant 
background and experience. This information was required to include 
details of the submitter's corporate and organization background and 
ownership and legal structure; its financial status; and its plan for 
financing establishment and operation of the CICI utility on a non-
profit, cost-recovery basis, without charging market participants any 
fees that could reasonably be construed to constitute a barrier to 
participation in financial markets. Each submitter was also required to 
include a detailed description of its experience in assigning, 
maintaining, and managing validated corporate or legal entity 
identifiers, and its experience with gathering, cleansing, maintaining, 
and using reference data associated with identifying corporate or legal 
entities.
    Each submitter provided a document to the Commission in response to 
the requirement for a written demonstration, as set forth above.
2. On-site, Live Demonstration of Complete CICI Issuance Process
    Each submitter was also required to provide an on-site, live 
demonstration of its systems, operations, and processes for obtaining, 
cleansing, and using reference data to validate the identity of a legal 
entity and for issuing a CICI to such an entity. Submitters were asked 
to provide examples of preliminary identifiers and test files or test 
identifiers already prepared for or provided to swap counterparties for 
use in automated system preparation and testing in preparation for swap 
data reporting beginning on the applicable compliance date established 
in part 45. The demonstration was required to include live presentation 
of the submitter's web portal, file transmission facilities, and test 
processes that would be available to registered entities and swap 
counterparties for use in the CICI issuance process. The demonstration 
was also required to include live presentation of the submitter's 
procedures and staffing for obtaining entity reference data, entity 
challenge with respect to reference data, de-duplication of preliminary 
identifiers, and assignment of unique identifiers to all swap 
counterparties subject to the Commission's jurisdiction.
    All four submitters provided some form of on-site, live 
demonstration to Commission staff.

D. Evaluation Criteria

    The requirements document set forth criteria the Commission would 
use in evaluating the submitters and the CICIs they provide, for the 
purpose of determining whether a CICI meeting the requirements of part 
45 is available, and if so, designating its provider as the source of 
CICIs to be used in compliance with part 45. Among other things, the 
four submissions were evaluated based on the following criteria:
    1. Evidence that the submitter can in fact provide all CICIs 
required by market participants for the purpose of complying with part 
45 of the Commission's regulations, and can do so sufficiently in 
advance of July 16, 2012, to enable market participants to be ready to 
comply as of that date. As provided in Sec.  45.6 of the Commission's 
regulations, submitters that do not demonstrate this will not be 
considered further.
    2. Whether the written demonstration completely and satisfactorily 
addresses all of the Commission's requirements addressed in the 
requirements document. Incomplete submissions will not be considered 
further.
    3. Evidence of the submitter's satisfactory understanding of the 
Commission's requirements with respect to the CICI utility, as set 
forth in the requirements document.
    4. Evidence satisfying the Commission that the submitter has 
commenced setting up, will fully set up before June 1, 2012, and can 
satisfactorily manage and maintain, a CICI utility meeting all of the 
Commission's requirements, as set forth in the requirements document 
and in part 45 of the Commission's regulations. Submissions not 
providing such evidence will not be considered further.
    5. A successful, onsite, live, complete demonstration for 
Commission staff of the submitter's systems, operations, and processes 
for obtaining, cleansing, and using level one reference data to 
validate the identity of a legal entity and issuing a CICI to such an 
entity. Submitters who do not provide such a successful demonstration 
will not be considered further.
    6. The submitter's relevant experience, as described in the 
requirements document, in assigning, maintaining, and managing 
validated corporate or legal entity identifiers, and the submitter's 
experience with gathering, cleansing, maintaining, and

[[Page 53873]]

using reference data associated with identifying corporate or legal 
entities.
    7. A workable plan for financing the non-profit, cost-recovery-
based establishment and operation of the CICI utility, without charging 
market participants any fee reasonably deemed to constitute a barrier 
to market participation.

III. Findings and Order

    Now, therefore, based on the statutory provisions and Commission 
regulations cited above, and on the written submissions and on-site, 
live demonstrations provided by the submitters, the Commission makes 
the following findings and rulings:
    The Commission FINDS that:
    1. An LEI is available that: satisfies the requirements set forth 
in Sec.  45.6 of the Commission's regulations; is provided by a utility 
fully set up by June 1, 2012; and can be provided to market 
participants sufficiently in advance of the initial compliance date for 
swap data reporting to enable compliance with the Commission's 
regulations. That LEI is the LEI provided by DTCC-SWIFT. DTCC-SWIFT met 
all of the Commission's requirements and evaluation criteria set forth 
in part 45 of the Commission's regulations and the requirements 
document.
    2. The LEI provided by DTCC-SWIFT is the only available LEI that: 
satisfies the requirements set forth in Sec.  45.6 of the Commission's 
regulations; is provided by a utility fully set up by June 1, 2012; and 
can be provided to market participants sufficiently in advance of the 
initial compliance date for swap data reporting to enable compliance 
with the Commission's regulations.
    Therefore:
    It is hereby ordered that:
    1. DTCC-SWIFT is designated as the provider of legal entity 
identifiers (``LEIs''), to be known as CFTC Compliant Interim 
Identifiers (``CICIs'') until establishment of the global LEI system or 
further action by the Commission, to be used in recordkeeping and swap 
data reporting pursuant to parts 45 and 46 of the Commission's 
regulations.
    a. This designation is conditioned on modification of the DTCC-
SWIFT Web site and other facilities and documents used to provide 
identifiers for use in complying with parts 45 and 46, to refer to the 
CICI and not to refer to the LEI, the preliminary LEI, or other similar 
terms including the term LEI. This shall include, without limitation, 
references to the CICI rather than the LEI on the utility logo, 
documentation, instructions and field labels used by DTCC-SWIFT.
    b. This designation is conditioned on DTCC-SWIFT's continuing 
compliance, for as long as it is authorized to provide LEIs (to be 
known as CICIs until establishment of the global LEI system), by this 
order or any future order of the Commission, with all of the legal 
entity identifier requirements of Part 45 of the Commission's 
regulations, and any related requirements as set forth in this order or 
in the requirements document provided to DTCC-SWIFT during the 
determination and designation process; including, without limitation, 
the requirement to be subject to supervision by a governance structure 
that includes the Commission and other financial regulators in any 
jurisdiction requiring use of legal entity identifiers pursuant to 
applicable law, for the purpose of ensuring that issuance and 
maintenance of CICIs and of associated reference data adheres on an 
ongoing basis to the Commission's requirements set forth in part 45.
    c. This designation is further conditioned on the requirement that, 
subject to applicable confidentiality laws and other applicable law, 
(1) DTCC-SWIFT shall make public all CICI identifiers and associated 
reference data, utility operations, and identity validation processes, 
and (2) following establishment of the global LEI system by means of a 
charter acceded to by the Commission, or following designation by the 
Commission of a successor CICI utility, DTCC-SWIFT shall pass to any 
successor CICI utility, or to the global LEI system, free of charge, 
all CICI identifiers and associated reference data and all CICI 
intellectual property rights.
    d. This designation is made for a limited term of two years from 
the date of this Order, and may be terminated by the Commission on six 
months' notice in connection with the establishment of a global LEI 
system. At the conclusion of the term of this designation, if the 
global LEI system is not yet operational, the Commission may consider 
the feasibility of having multiple CICI providers and the feasibility 
of coordination among them to avoid duplicative LEIs, and if it 
believes this is feasible, may consider submissions from DTCC-SWIFT as 
well as from other parties that seek to become CICI providers.
    2. Registered entities and swap counterparties subject to the 
Commission's jurisdiction shall use CICIs provided by DTCC-SWIFT to 
comply with the legal entity identifier requirements of parts 45 and 46 
of the Commission's regulations. For this purpose, registered entities 
and swap counterparties may contact DTCC-SWIFT at: The Depository Trust 
& Clearing Corporation, 55 Water Street, New York, NY 10041, 212-855-
1000.

    Issued in Washington, DC, this 23rd day of July, 2012.
    By the Commission.
 Sauntia S. Warfield,
 Assistant Secretary of the Commission.
[FR Doc. 2012-21612 Filed 8-31-12; 8:45 am]
BILLING CODE 6351-01-P