[Federal Register Volume 77, Number 207 (Thursday, October 25, 2012)]
[Notices]
[Pages 65177-65182]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-26298]


=======================================================================
-----------------------------------------------------------------------

COMMODITY FUTURES TRADING COMMISSION


Swap Data Repositories: Interpretative Statement Regarding the 
Confidentiality and Indemnification Provisions of the Commodity 
Exchange Act

AGENCY: Commodity Futures Trading Commission.

ACTION: Interpretative statement.

-----------------------------------------------------------------------

SUMMARY: The Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') is issuing this interpretative statement (``Statement'') to 
provide guidance regarding the applicability of the confidentiality and 
indemnification provisions set forth in new section 21(d) of the 
Commodity Exchange Act (``CEA'') added by section 728 of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act''). 
This Statement clarifies that the provisions of CEA section 21(d) 
should not operate to inhibit or prevent foreign regulatory authorities 
from accessing data in which they have an independent and sufficient 
regulatory interest, even if that data also has been reported pursuant 
to the CEA and Commission regulations.

DATES: Effective date: October 25, 2012

FOR FURTHER INFORMATION CONTACT: Adedayo Banwo, Counsel, Office of the 
General Counsel, at (202) 418.6249, [email protected]; With respect to 
questions relating to international consultation and coordination: 
Jacqueline Mesa, Director, at (202) 418.5386, [email protected], or 
Mauricio Melara, Attorney-Advisor, at (202) 418.5719, [email protected], 
Office of International Affairs, Commodity Futures Trading Commission, 
Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background: Statutory and Regulatory Authorities

    On July 21, 2010, President Obama signed into law the Dodd-Frank 
Act.\1\ Title VII amended the CEA to establish a comprehensive new 
regulatory framework for swaps and security-based swaps.\2\ The 
legislation was enacted to reduce risk, increase transparency and 
promote market integrity within the financial system by, among other 
things: (i) Providing for the registration and comprehensive regulation 
of swap dealers and major swap participants; (ii) imposing clearing and 
trade execution requirements on standardized derivative products; (iii) 
creating robust recordkeeping and real-time reporting regimes; and (iv) 
enhancing the Commission's rulemaking and enforcement authorities with 
respect to, among others, all registered entities and intermediaries 
subject to the Commission's oversight.
---------------------------------------------------------------------------

    \1\ See Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Public Law 111-203, 124 Stat. 1376 (2010), available at http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm.
    \2\ Pursuant to section 701 of the Dodd-Frank Act, Title VII may 
be cited as the ``Wall Street Transparency and Accountability Act of 
2010;'' 7 U.S.C. 1 et seq.
---------------------------------------------------------------------------

    To enhance transparency, promote standardization and reduce 
systemic risk, section 727 of the Dodd-Frank Act

[[Page 65178]]

added to the CEA new section 2(a)(13)(G),\3\ which requires all swaps--
whether cleared or uncleared--to be reported to swap data repositories 
(``SDRs''). SDRs are new registered entities created by section 728 of 
the Dodd-Frank Act.\4\ SDRs are required to perform specified functions 
related to the collection and maintenance of swap transaction data and 
information.\5\
---------------------------------------------------------------------------

    \3\ 7 U.S.C. 2(a)(13)(G).
    \4\ Section 721 of the Dodd-Frank Act amends section 1a of the 
CEA to add a definition of the term ``swap data repository.'' 
Pursuant to CEA section 1a(48), the term ``swap data repository 
means any person that collects and maintains information or records 
with respect to transactions or positions in, or the terms and 
conditions of, swaps entered into by third parties for the purpose 
of providing a centralized recordkeeping facility for swaps.'' 7 
U.S.C. 1a(48).
    \5\ See 7 U.S.C. 24a(c). See also Commission, Final Rulemaking: 
Swap Data Recordkeeping and Reporting Requirements, 77 FR 2136, Jan. 
13, 2012 (``Data Final Rules''). The Data Final Rules, among other 
things, set forth regulations governing SDR data collection and 
reporting responsibilities under part 45 of the Commission's 
regulations.
---------------------------------------------------------------------------

    CEA section 21(c)(7) requires that SDRs make data available to 
certain domestic and foreign regulators \6\ under specified 
circumstances.\7\ Separately, CEA section 21(d) mandates that prior to 
receipt of any requested data or information from an SDR, a regulatory 
authority described in section 21(c)(7) shall agree in writing to abide 
by the confidentiality requirements described in section 8 of the 
CEA,\8\ and to indemnify the SDR and the Commission for any expenses 
arising from litigation relating to the information provided under 
section 8 of the CEA.\9\
---------------------------------------------------------------------------

    \6\ The Commission's regulations designate such regulators as 
either an ``Appropriate Domestic Regulator'' or an ``Appropriate 
Foreign Regulator'' in Sec.  49.17(b). See Swap Data Repositories: 
Registration Standards, Duties and Core Principles, 76 FR 54538, 
54554 (Sep. 1, 2011) (``SDR Final Rules'').
    \7\ 7 U.S.C. 24a(c)(7).
    \8\ 7 U.S.C. 12.
    \9\ 7 U.S.C. 24a(d).
---------------------------------------------------------------------------

    Section 752 of the Dodd-Frank Act seeks to ``promote effective and 
consistent global regulation of swaps,'' and provides that the CFTC and 
foreign regulatory authorities ``may agree to such information-sharing 
arrangements as may be deemed to be necessary or appropriate in the 
public interest. * * *.'' \10\ In light of this statutory directive, 
and consistent with section 21 of the CEA, the Commission has been 
working to provide sufficient access to SDR data to domestic and 
foreign regulators.
---------------------------------------------------------------------------

    \10\ See section 752(a) of the Dodd-Frank Act.
---------------------------------------------------------------------------

    In that regard, the Chairman of the CFTC and the Chairman of the 
Securities and Exchange Commission (``Chairmen'') jointly submitted a 
letter to Michel Barnier, European Commissioner for Internal Markets 
and Services,\11\ highlighting their desire for international 
cooperation. In the letter, the Chairmen expressed their belief that 
indemnification and notice requirements need not apply when a 
registered SDR is also registered in a foreign jurisdiction and the 
foreign regulatory authority, acting within the scope of its 
jurisdiction, seeks information directly from the SDR.
---------------------------------------------------------------------------

    \11\ See letter from Gary Gensler, Chairman of the Commission, 
and Mary Schapiro, Chairman of the SEC, to Michel Barnier, European 
Commissioner for Internal Markets and Services, European Commission, 
dated June 8, 2011.
---------------------------------------------------------------------------

    On September 1, 2011, the Commission adopted regulations 
implementing CEA section 21's registration standards, duties, and core 
principles for SDRs.\12\ To implement the provisions of sections 
21(c)(7) and (d), the Commission adopted definitions and standards for 
determining access by domestic and foreign regulators to data 
maintained by SDRs.
---------------------------------------------------------------------------

    \12\ See, generally, SDR Final Rules.
---------------------------------------------------------------------------

    The Commission acknowledged in the SDR Final Rules that the CEA's 
indemnification requirement could have the unintended effect of 
inhibiting direct access by other regulators to data maintained by SDRs 
due to various home country laws and regulations.\13\ The SDR Final 
Rules provided that under specified circumstances, certain 
``Appropriate Domestic Regulators'' \14\ may gain access to the swap 
data reported and maintained by SDRs without being subject to the 
notice and indemnification requirements of CEA sections 21(c)(7) and 
(d).\15\ In connection with foreign regulatory authorities, the 
Commission determined in the SDR Final Rules that confidential swap 
data reported to and maintained by an SDR may be accessed by an 
Appropriate Foreign Regulator \16\ without the execution of a 
confidentiality and indemnification agreement when the Appropriate 
Foreign Regulator has supervisory authority over an SDR registered with 
it pursuant to foreign law and/or regulation that is also registered 
with the Commission.
---------------------------------------------------------------------------

    \13\ See SDR Final Rules at 54554.
    \14\ The term ``Appropriate Domestic Regulator'' is defined in 
17 CFR 49.17(b)(1) as the Securities and Exchange Commission; each 
prudential regulator identified in section 1a(39) of the CEA. 7 
U.S.C. 1a(39); the Financial Stability Oversight Council; the 
Department of Justice; any Federal Reserve Bank; the Office of 
Financial Research; and any other person the Commission deems 
appropriate.
    \15\ In the Commission's view, it is appropriate to permit 
access to the swap data maintained by SDRs to Appropriate Domestic 
Regulators that have concurrent regulatory jurisdiction over such 
SDRs, without the application of the notice and indemnification 
provisions of sections 21(c)(7) and (d) of the CEA. See SDR Final 
Rules at 54554 n.163. Accordingly, these provisions do not apply to 
an Appropriate Domestic Regulator that has regulatory jurisdiction 
over an SDR registered with it pursuant to a separate statutory 
authority that is also registered with the Commission, if the 
Appropriate Domestic Regulator executes a memorandum of 
understanding (``MOU'') or similar information sharing arrangement 
with the Commission and the Commission, consistent with CEA section 
21(c)(4)(A), designates the Appropriate Domestic Regulator to 
receive direct electronic access. See 17 CFR 17(d)(2).
    \16\ The term ``Appropriate Foreign Regulator'' is defined in 17 
CFR 49.17(b)(2) as a foreign regulator with an existing MOU or 
similar type of information sharing arrangement executed with the 
Commission, and/or a foreign regulator without an MOU as determined 
on a case-by-case basis by the Commission.
---------------------------------------------------------------------------

    The confidentiality and indemnification provisions of new CEA 
section 21 apply only when a regulatory authority seeks access to data 
from an SDR. In the SDR Final Rules, the Commission noted that section 
8(e) of the CEA permits the Commission (as opposed to an SDR) to share 
confidential information in its possession with any department or 
agency of the Government of the United States, or with any foreign 
futures authority, department or agency of any foreign government or 
political subdivision thereof,\17\ acting within the scope of its 
jurisdiction.\18\
---------------------------------------------------------------------------

    \17\ Section 725(f) of the Dodd-Frank Act amended section 8(e) 
of the CEA to include foreign central banks and ministries.
    \18\ See SDR Final Rules at 54554.
---------------------------------------------------------------------------

    The SDR Final Rules became effective on October 31, 2011.\19\ Under 
these rules, trade repositories may apply to the Commission for full 
registration as SDRs. Pending the full implementation of other, related 
regulatory provisions and definitions, however, such registrations are 
deemed ``provisional.'' \20\
---------------------------------------------------------------------------

    \19\ Id.
    \20\ See 17 CFR 49.3(b).
---------------------------------------------------------------------------

II. The Proposed Interpretative Statement

    On May 1, 2012, the Commission issued a proposed interpretative 
statement (``Proposed Statement'') to address issues raised by 
interested members of the public and foreign regulatory authorities 
with respect to the scope and application of the confidentiality and 
indemnification provisions of new section 21(d) of the CEA.\21\ Under 
the Proposed Statement, the Commission clarified that the 
confidentiality and indemnification provisions of CEA section 21(d) 
should not operate to inhibit or prevent foreign regulatory authorities 
from accessing data in which they have an independent and sufficient 
regulatory interest.
---------------------------------------------------------------------------

    \21\ See 77 FR 26709 (May 7, 2012).

---------------------------------------------------------------------------

[[Page 65179]]

    The Proposed Statement provided that a registered SDR would not be 
subject to the confidentiality and indemnification provisions of CEA 
section 21(d) if: (i) such registered SDR is also registered, 
recognized or otherwise authorized in a foreign jurisdiction's 
regulatory regime; and (ii) the data sought to be accessed by a foreign 
regulatory authority has been reported to such registered SDR pursuant 
to the foreign jurisdiction's regulatory regime. In addition, because 
some registered SDRs might also be registered, recognized or otherwise 
authorized in a foreign jurisdiction and may accept swap data reported 
pursuant to a foreign regulatory regime, the Commission concluded that 
the confidentiality and indemnification provisions of CEA section 21(d) 
generally apply only to such data reported pursuant to the CEA and 
Commission regulations.
    As detailed in Section III.B., interested members of the public and 
a foreign regulatory authority responded to the Commission's request to 
receive public comments on all aspects of the Proposed Statement.\22\ 
In adopting this Statement, the Commission has carefully considered 
these comments.
---------------------------------------------------------------------------

    \22\ See public comment file in response to the Proposed 
Statement, available at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1198.
---------------------------------------------------------------------------

III. Considerations Relevant to the Commission's Statement \23\
---------------------------------------------------------------------------

    \23\ Legislation has been introduced in Congress that would 
amend the CEA to eliminate or substantially limit the SDR 
indemnification provision. As discussed in Section III.B., 
commenters expressed the general view that a ``legislative fix'' 
would be the best course of action to resolve issues regarding the 
section 21(d) requirements.
---------------------------------------------------------------------------

A. International Considerations

    As noted above, section 752(a) of the Dodd-Frank Act directs the 
Commission to consult and coordinate with foreign regulatory 
authorities regarding the establishment of consistent international 
standards for the regulation of swaps and various ``swap entities.'' 
Section 752(a) also provides that the Commission ``may agree to such 
information-sharing arrangements [with foreign regulatory authorities] 
as may be deemed to be necessary or appropriate in the public 
interest'' or for the protection of investors and counterparties.\24\
---------------------------------------------------------------------------

    \24\ See section 752(a) of the Dodd-Frank Act.
---------------------------------------------------------------------------

    The Commission is committed to a cooperative international approach 
to the registration and regulation of SDRs, and consulted extensively 
with various foreign regulatory authorities in promulgating both its 
proposed and final regulations concerning SDRs and in the finalization 
of the Proposed Statement.\25\ The Commission notes that the SDR Final 
Rules are largely consistent with the recommendations and goals of the 
May 2010 ``CPSS-IOSCO Consultative Report, Considerations for Trade 
Repositories in the OTC Derivatives Market'' (``Working Group 
Report'').\26\
---------------------------------------------------------------------------

    \25\ See public comment file in response to the proposal for the 
SDR Final Rules, available at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=939 and SDR Final Rules note 6 at 
54539, supra.
    \26\ This working group was jointly established by the Committee 
on Payment and Settlement Systems (``CPSS'') of the Bank of 
International Settlements and the Technical Committee of the 
International Organization of Securities Commissions (``IOSCO''). 
The Working Group Report presented a set of factors to consider in 
connection with the design, operation and regulation of SDRs. A 
significant focus of the Working Group Report is access to SDR data 
by appropriate regulators. The Working Group Report urges that a 
trade repository ``should support market transparency by making data 
available to relevant authorities and the public in line with their 
respective information needs.'' The Working Group Report is 
available at http://www.bis.org/publ/cpss90.pdf. See also CPSS-IOSCO 
Consultative Report, Principles of Financial Market Infrastructures 
(March 2011) available at http://www.bis.org/publ/cpss94.pdf (``PFMI 
Report''). See also Financial Stability Board (``FSB''), 
Implementing OTC Derivatives Market Reforms, Oct. 25, 2010 (``FSB 
Report''); FSB, Derivative Market Reforms, Progress Report on 
Implementation, Apr. 15, 2010 (``FSB Progress Report'').
---------------------------------------------------------------------------

    Consistent with the international harmonization envisioned by 
section 752 of the Dodd-Frank Act, the Commission has engaged in 
consultations with foreign regulatory authorities regarding the 
Commission's adoption and implementation of regulations and the 
issuance of interpretative guidance relating to the Dodd-Frank Act. In 
this context, foreign regulatory authorities have expressed concern 
about the difficulty in complying with the indemnification provisions 
of CEA section 21(d).

B. Comments on the Proposed Statement \27\
---------------------------------------------------------------------------

    \27\ The Commission received five comments, four of which regard 
the Proposed Statement. All comment letters are available on the 
Commission Web site at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1198. Specific comment letters are identified by 
the submitter. Comments addressing the Proposed Statement were 
received from: (i) The European Securities and Markets Authority, 
June 5, 2012; (ii) the Financial Services Roundtable, June 6, 2012; 
(iii) Cloud Strategix, LLC, June 5, 2012; and (iv) the Depository 
Trust & Clearing Corporation, June 6, 2012. The fifth comment 
regards the implementation of section 619 of the Dodd-Frank Act.
---------------------------------------------------------------------------

    The Depository Trust & Clearing Corporation (``DTCC'') stated its 
support of the adoption of the Proposed Statement as a ``necessary 
first step.'' Nevertheless, DTCC concluded that the statutory language 
at issue requires a ``legislative fix'' to clarify the scope and 
applicability of the confidentiality and indemnification provisions of 
CEA section 21(d) because ``the indemnification requirement'' would 
limit the sharing of trade repository data across borders. DTCC noted 
that a foreign regulator might have an interest in SDR data related to 
a swap transaction entered into by parties not subject to the foreign 
regulator's ``oversight authority.'' In this regard, DTCC noted 
concerns expressed by foreign regulatory authorities who believe that a 
``jurisdictional nexus'' would nonetheless exist with respect to the 
terms of swap transactions (e.g., swap transactions using currencies or 
underlying reference entities subject to a foreign regulator's 
oversight authority) that are not reported ``pursuant to the foreign 
jurisdiction's regulatory regime.'' DTCC pointed out that access to 
such swap transaction data that is not reported ``pursuant to the 
foreign jurisdiction's regulatory regime'' would not be available 
unless the foreign regulator enters into a confidentiality and 
indemnification agreement with the SDR.
    DTCC also suggested certain substantive modifications to the 
Proposed Statement.\28\ Among them, DTCC suggested that the Commission 
expand on the meaning of ``registered, recognized or otherwise 
authorized'' in the Proposed Statement or, alternatively, state that 
operation in accordance with the PFMI Report would mean that an SDR is 
``authorized'' for purposes of this Statement.
---------------------------------------------------------------------------

    \28\ DTCC suggested that the Commission consider the following 
modifications to the Proposed Statement: (i) Provide that no 
registration or licensing would be necessary with respect to the 
condition that a registered SDR is also registered, recognized or 
otherwise authorized in a foreign jurisdiction's regulatory regime; 
(ii) provide that SDRs operating in accordance with principles 
relevant to trade repositories under the PFMI Report should be 
deemed authorized; and (iii) provide that with respect to the 
condition that the SDR data sought to be accessed by a foreign 
regulator is reported pursuant to the foreign jurisdiction's 
regulatory regime, the meaning attributed to regulatory regime 
includes a foreign jurisdiction's adherence to the PFMI Report 
provisions outlined for market regulators.
---------------------------------------------------------------------------

    The European Securities and Markets Authority (``ESMA'') noted that 
it considers the Commission's ``recognition of foreign regimes and the 
access to data requirements originating from them'' under the Proposed 
Statement as a ``step in the right direction'' that would allow 
relevant European authorities to obtain data in accordance with 
relevant European Union laws and forthcoming

[[Page 65180]]

regulations. However, ESMA noted its concern that the Commission's 
interpretation of the indemnification provision of CEA section 21(d) 
``cannot overrule the [Dodd-Frank] Act itself'' and concluded that 
``the confidentiality and indemnification issue could only be fully 
addressed with a legislative amendment by repealing the original 
provision in the Dodd-Frank Act.'' In addition, consistent in part with 
DTCC's comment, ESMA noted that relevant European Union authorities 
could have an interest in accessing swap transaction data reported to a 
registered SDR pursuant to the Dodd-Frank Act, but not reported 
pursuant to European Union laws and forthcoming regulations. 
Accordingly, ESMA suggested certain modifications to the Proposed 
Statement.\29\
---------------------------------------------------------------------------

    \29\ ESMA suggested that the Commission consider the following 
alternative modifications to the Proposed Statement: (i) delete the 
second condition of the Proposed Statement (i.e., ``The data sought 
to be accessed by a foreign regulatory authority is reported to such 
registered SDR pursuant to the foreign regulatory regime.''); or 
(ii) add the following bracketed language to the second condition 
such that it would read as follows: ``The data sought to be accessed 
by a foreign regulatory authority has been reported to such 
registered SDR pursuant to the foreign jurisdiction's regulatory 
regime [or the foreign regulatory authority is entitled to access 
such data pursuant to its regulatory regime to fulfill its 
respective responsibilities and mandates.]''
---------------------------------------------------------------------------

    The Financial Services Roundtable (``FSR'') requested that the 
Commission support a legislative solution which would remove the 
indemnification provision from CEA section 21(d). FSR also requested 
that the Commission continue its discussions with regulators in other 
jurisdictions as well as its participation in standard-setting bodies 
to develop international standards relevant to the swap markets.
    Cloud Strategix, LLC (``Cloud Strategix''), representing the data 
hosting and cloud computing industry, in relevant part expressed a 
general concern with respect to the ``several costs, unintended 
consequences, and impracticalities'' related to the Proposed Statement 
and the SDR Final Rules. Specifically, Cloud Strategix noted that the 
Proposed Statement ``does not seem to consider the great cost to the 
data center that hosts the SDR in assisting the SDR with compliance 
with foreign regulators.'' In this context, Cloud Strategix suggested 
that the Commission ``provide an exemption for all data centers to 
indemnify SDRs for regulatory inquiries, enforcement proceedings, or 
litigation for both foreign and domestic regulators.''

C. Commission Determination

    After considering the comments received to the Proposed Statement 
and following the aforementioned consultations with foreign regulatory 
authorities pursuant to the Congressional mandate for cooperation in 
section 752 of the Dodd-Frank Act, the Commission has concluded that 
the guidance described in the Proposed Statement is necessary to ensure 
that appropriate access by foreign regulatory authorities is not 
unnecessarily inhibited. Accordingly, while the SDR Final Rules address 
foreign regulators with supervisory authority and regulatory 
responsibility, the Commission is issuing this Statement to ensure that 
foreign regulators receive sufficient access to data reported to SDRs 
where such foreign regulators have an independent and sufficient 
regulatory interest.
    In response to DTCC's comment regarding expanding on the meaning of 
``registered, recognized or otherwise authorized'' of the Proposed 
Statement or, alternatively, stating that operation in accordance with 
the PFMI Report would mean that an SDR is ``authorized'' for purposes 
of this Statement, the Commission believes, consistent with DTCC's 
comment, that a foreign regulator with ``oversight responsibilities'' 
of an SDR pursuant to the regulatory regime of the applicable foreign 
jurisdiction would meet the ``registered, recognized or otherwise 
authorized'' prong herein. Nonetheless, the Commission declines to 
express a more detailed view on the regulatory or jurisdictional 
structures applicable to SDRs governed within foreign jurisdictions 
that would meet the ``registered, recognized or otherwise authorized'' 
prong herein. As the Commission indicated in its Proposed Statement, 
access by foreign regulatory authorities ``should be governed by such 
foreign jurisdiction's regulatory regime,'' and the Commission believes 
that ``registered, recognized or otherwise authorized'' is sufficiently 
broad to cover a wide variety of foreign regulatory structures and 
regimes.
    Similarly, and in response to DTCC's and ESMA's comment regarding 
accessing data which is not reported pursuant to European Union laws 
and forthcoming regulations, the Commission acknowledges the difficulty 
that certain foreign regulators may face in this regard. The Commission 
reiterates that foreign and domestic regulators may nonetheless be able 
to receive confidential data from the Commission without the execution 
of a confidentiality and indemnification agreement.
    In response to FSR's comment regarding consultations and 
participation with standard-setting bodies, the Commission agrees and 
notes its participation in various international regulatory and 
industry-led working groups.\30\
---------------------------------------------------------------------------

    \30\ Among the working groups the Commission is actively 
participating in to develop consistent international standards are 
the FSB, CPSS and IOSCO working group on data access (see infra n. 
36), the Technical Committee of IOSCO which developed the ``Report 
on OTC derivatives and aggregation requirements,'' and the FSB's 
Legal Entity Identifier Expert Group.
---------------------------------------------------------------------------

    In response to the cost-benefit considerations raised by Cloud 
Strategix, the Commission has previously acknowledged such costs in its 
consideration of the costs and benefits of compliance with its SDR 
Final Rules \31\ and Data Final Rules.\32\ The Commission does not 
believe that the Proposed Statement changes or modifies its earlier 
consideration of the costs and benefits of the applicable final rules.
---------------------------------------------------------------------------

    \31\ See SDR Final Rules, supra n. 6, at 54572.
    \32\ See Data Final Rules, supra n. 5, at 2176.
---------------------------------------------------------------------------

IV. Interpretative Statement

    In consideration of the foregoing, the Commission is providing 
guidance regarding the confidentiality and indemnification provisions 
of CEA section 21(d) by adopting the substance of the Proposed 
Statement. In this regard, the Commission seeks to ensure an orderly 
transition to the Dodd-Frank Act's swap data reporting regime by 
providing certainty to market participants and regulators with respect 
to the confidentiality and indemnification provisions of CEA section 
21(d).

A. Data Reported to Registered SDRs

    The Commission understands that some registered SDRs also may be 
registered, recognized or otherwise authorized in a foreign 
jurisdiction and may accept swap data reported pursuant to the foreign 
regulatory regime. The Commission concludes that the confidentiality 
and indemnification provisions of CEA section 21(d) generally apply 
only to such data reported pursuant to the CEA and Commission 
regulations.
    The Commission further concludes that the confidentiality and 
indemnification provisions should not operate to inhibit or prevent 
foreign regulatory authorities from accessing data in which they have 
an independent and sufficient regulatory interest (even if that data 
also has been reported

[[Page 65181]]

pursuant to the CEA and Commission regulations).
    Accordingly, and consistent with the Commission's SDR Final Rules, 
the Commission interprets CEA section 21(d) such that a registered SDR 
would not be subject to the confidentiality and indemnification 
provisions of that section if:
     Such registered SDR also is registered, recognized or 
otherwise authorized in a foreign jurisdiction's regulatory regime; and
     The data sought to be accessed by a foreign regulatory 
authority has been reported to such registered SDR pursuant to the 
foreign jurisdiction's regulatory regime.
    This Statement is grounded in principles of international law and 
comity. For example, in F. Hoffmann-La Roche Ltd. v. Empagran S.A., the 
U.S. Supreme Court, in reviewing the extraterritorial applicability of 
a different federal statute, stated that extraterritorial jurisdiction 
should be construed, where ambiguous, ``to avoid unreasonable 
interference with the sovereign authority of other nations.''\33\ In 
cases considering concepts of international law and comity in 
evaluating the extraterritorial scope of federal statutes, the Supreme 
Court has noted that the principles in the Third Restatement of Foreign 
Relations Law are relevant to the interpretation of U.S. law.\34\
---------------------------------------------------------------------------

    \33\ F. Hoffmann-LaRoche, Ltd. v. Empagran S.A., 542 U.S. 155, 
164 (2004). In Hoffmann-LaRoche, the Supreme Court also stated that 
canons of statutory construction ``assume that legislators take 
account of the legitimate sovereign interests of other nations when 
they write American laws.'' Id.
    \34\ Id. at 164-165.
---------------------------------------------------------------------------

    Specifically, section 403 of the Third Restatement of Foreign 
Relations Law states, in relevant part:
    Whether exercise of jurisdiction over a person or activity is 
unreasonable is determined by evaluating all relevant factors, 
including, where appropriate:

    (a) The link of the activity to the territory of the regulating 
state, i.e., the extent to which the activity takes place within the 
territory, or has substantial, direct, and foreseeable effect upon 
or in the territory;
    (b) The connections, such as nationality, residence, or economic 
activity, between the regulating state and the person principally 
responsible for the activity to be regulated, or between that state 
and those whom the regulation is designed to protect;
    (c) The character of the activity to be regulated, the 
importance of regulation to the regulating state, the extent to 
which other states regulate such activities, and the degree to which 
the desirability of such regulation is generally accepted;
    (d) The existence of justified expectations that might be 
protected or hurt by the regulation;
    (e) The importance of the regulation to the international 
political, legal, or economic system;
    (f) The extent to which the regulation is consistent with the 
traditions of the international system;
    (g) The extent to which another state may have an interest in 
regulating the activity; and
    (h) The likelihood of conflict with regulation by another 
state.\35\
---------------------------------------------------------------------------

    \35\ Rest. 3d., Third Restatement Foreign Relations Law section 
403 (scope of a statutory grant of authority must be construed in 
the context of international law and comity including, as 
appropriate, the extent to which regulation is consistent with the 
traditions of the international system).

    To avoid unnecessary interference with the sovereign authority of 
foreign regulatory authorities, this Statement is supported and 
underpinned by principles of international law and comity.

B. Foreign Regulatory Access

    In the Commission's view, a foreign regulator's access to data held 
in a registered SDR that also is registered, recognized, or otherwise 
authorized in a foreign jurisdiction's regulatory regime, should be 
governed by such foreign jurisdiction's regulatory regime where the 
data sought to be accessed has been reported pursuant to that 
regulatory regime. The Commission concludes that it is appropriate not 
to apply the requirements of CEA section 21(d) in these circumstances, 
in light of, among other things, the importance of such data to the 
foreign jurisdiction's regulatory regime, foreign regulators' interest 
in unfettered access to such data, and the traditions of mutual trust 
and cooperation among international regulators.\36\
---------------------------------------------------------------------------

    \36\ The Commission notes that access to data held by trade 
repositories is a concept under discussion and development among 
international regulators. At the request of the FSB, CPSS and IOSCO 
have established a working group of relevant authorities to produce 
a forthcoming report regarding authorities' access to trade 
repository data.
---------------------------------------------------------------------------

    Therefore, the Commission concludes that a foreign regulator's 
access to data from a registered SDR that also is registered, 
recognized, or otherwise authorized in a foreign jurisdiction's 
regulatory regime, where the data to be accessed has been reported 
pursuant to that regulatory regime, will be dictated by that foreign 
jurisdiction's regulatory regime and not by the CEA or Commission 
regulations. Such access is appropriate, in the Commission's view, even 
if the applicable data is also reported to the registered SDR pursuant 
to the Commission's Data Final Rules.\37\
---------------------------------------------------------------------------

    \37\ Regarding the Commission's access to SDR data, section 
21(b)(1)(A) of the CEA states that the Commission ``shall prescribe 
standards that specify the data elements for each swap that shall be 
collected and maintained by each registered swap data repository.'' 
Section 21(c)(1) of the CEA requires registered SDRs to ``accept 
data prescribed by the Commission for each swap under subsection 
(b).'' With respect to Commission access to data held in registered 
SDRs, the Commission concludes that the direct electronic access 
provisions of CEA section 21(c)(4) apply only to such data that the 
SDR is required to accept under section 21(c)(1), which is further 
defined by part 45 of the Commission's regulations. In this respect, 
the Commission concludes that its direct electronic access applies 
only to such data reported pursuant to section 21 and Commission 
regulations promulgated thereunder.
---------------------------------------------------------------------------

    Additionally, the Commission reiterates that a foreign regulatory 
authority, like domestic regulators, can nonetheless receive 
confidential data, without the execution of a confidentiality and 
indemnification agreement, from the Commission (as opposed to an SDR) 
pursuant to section 8(e) of the CEA.\38\ Such data sharing and access 
would be governed by the confidentiality provisions of section 8 of the 
CEA.\39\ The Commission is committed to continuing its close 
cooperation with: (i) foreign regulatory authorities to promptly 
address such information requests; and (ii) registered SDRs that 
request the Commission's assistance in determining if a foreign 
regulatory authority has an independent and regulatory interest in data 
that has been reported to such registered SDR pursuant to the relevant 
foreign jurisdiction's regulatory regime.
---------------------------------------------------------------------------

    \38\ CEA section 8(e), 7 U.S.C. 12(e), allows the Commission to 
share confidential information in its possession obtained in 
connection with the administration of the CEA with ``any department 
or agency of the Government of the United States'' or with any 
foreign futures authority or a department, central bank or ministry, 
or agency of a foreign government or political subdivision thereof, 
acting within the scope of its jurisdiction.
    \39\ 7 U.S.C. 12.
---------------------------------------------------------------------------

* * * * *

    Issued in Washington, DC on October 22, 2012 by the Commission.
Stacy D. Yochum,
Counsel.
    Appendices to Swap Data Repositories: Interpretative Statement 
Regarding the Confidentiality and Indemnification Provisions of Section 
21(d) of the Commodity Exchange Act--

    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 Chilton and 
Wetjen voted in the affirmative; Commissioners Sommers and O'Malia 
voted in the negative.

Appendix 2--Statement of Chairman Gary Gensler

    I support the final interpretative guidance regarding the 
confidentiality and

[[Page 65182]]

indemnification provisions of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (Dodd-Frank Act).
    The confidentiality and indemnification provisions in the Dodd-
Frank Act state that before a registered swap data repository (SDR) 
may share information with certain domestic and foreign regulators, 
those regulators must first agree in writing to abide by the 
confidentiality provisions of Section 8 of the Commodity Exchange 
Act (CEA). In addition, the Dodd-Frank Act requires that regulators 
also must indemnify both the SDR and the Commodity Futures Trading 
Commission (Commission) for any expenses arising from litigation 
relating to the information provided under Section 8 of the CEA.
    The Commission recognizes the importance to foreign regulators 
of swap data reported under foreign regulatory regimes. The 
Commission's final SDR rules specified that confidential swap data 
reported to and maintained by an SDR may be accessed by an 
``appropriate foreign regulator'' without a confidentiality and 
indemnification agreement when the SDR is also registered with that 
foreign regulator.
    To provide further clarity for foreign regulators, the 
Commission is issuing this interpretative guidance on the Dodd-Frank 
Act confidentiality and indemnification provisions. The final 
interpretative guidance makes clear that a foreign regulator will 
not be prevented from accessing data in which it has an independent 
and sufficient regulatory authority over the SDR and such data has 
been reported pursuant to the foreign jurisdiction's regulatory 
regime.
    With this interpretive guidance, the Commission has taken 
another important step to ensure appropriate access to SDRs by 
foreign regulatory authorities consistent with the provisions of the 
Dodd-Frank Act.

Appendix 3--Statement of Commissioners Jill E. Sommers and Scott D. 
O'Malia

    We respectfully dissent from issuing this Final Interpretative 
Statement Regarding the Confidentiality and Indemnification 
Provisions of Section 21(d) of the Commodity Exchange Act (CEA) 
(Final Interpretative Statement). When the Commission issued the 
proposed guidance (Proposed Interpretative Statement) in May of this 
year, we were concerned that the statement did not actually solve 
the problem with the statutory language beyond providing some 
additional clarity to the Swap Data Repository (SDR) rules and we 
called for a permanent solution by way of a legislative repeal of 
the indemnification provisions.
    When finalizing the SDR rules, the Commission stated that a 
foreign regulator may have direct access to confidential swap data 
reported to and maintained by an SDR registered with the Commission 
without executing a Confidentiality and Indemnification Agreement 
when the SDR is also registered with the foreign regulator and the 
foreign regulator is acting in a regulatory capacity with respect to 
the SDR. See Swap Data Repositories: Registration Standards, Duties 
and Core Principles, 76 FR 54,538, 54,554 (Sept. 1, 2011). The Final 
Interpretative Statement expands this to SDRs that are registered, 
recognized or otherwise authorized in a foreign regulator's 
regulatory regime and clarifies that direct access to data should be 
granted even if the data the foreign regulator seeks also has been 
reported pursuant to the CEA and Commission regulations.
    The Commission received a comment from the European Securities 
and Markets Authority (ESMA) suggesting that we consider modifying 
the conditions that would need to be met so that a foreign regulator 
could escape being subject to the indemnification provisions. 
Specifically, ESMA suggested that the Commission consider the 
following alternative modifications: (1) delete the second condition 
of the Proposed Interpretative Statement, (i.e., ``The data sought 
to be accessed by a foreign regulatory authority is reported to such 
registered SDR pursuant to the foreign regulatory regime''), which 
would leave the sole condition that the SDR be registered, 
recognized or otherwise authorized in the foreign regulatory regime; 
or (2) add language to the second condition such that it would read 
as follows: ``The data sought to be accessed by a foreign regulatory 
authority has been reported to such registered SDR pursuant to the 
foreign jurisdiction's regulatory regime or the foreign regulatory 
authority is entitled to access such data pursuant to its regulatory 
regime to fulfill its respective responsibilities and mandates.'' 
Although the Commission acknowledges the comment in the Final 
Interpretative Statement, we do not adopt either suggestion and do 
not justify their exclusion.
    Our second concern involves the distinction the Commission made 
in the SDR rules between an Appropriate Domestic Regulator and an 
Appropriate Domestic Regulator with Regulatory Responsibilities. 
Under the current rules only the CFTC and the SEC are able to 
directly access SDR data absent an indemnification agreement. All 
other U.S. Regulators (i.e. ``Appropriate Domestic Regulators'') 
would have to execute an indemnification agreement--something that 
we are told they are prohibited from doing. Adopting the second ESMA 
option and extending it to Appropriate Domestic Regulators would 
allow them direct access to data they believe is necessary to 
fulfill their regulatory mandate, and in our view is something that 
is within the Commission's discretion. Instead, the Commission has 
purposely chosen to interpret the statute in a manner that 
constrains other domestic regulators' ability to examine swap market 
data. For these reasons we cannot support the guidance issued today 
by the Commission.

[FR Doc. 2012-26298 Filed 10-24-12; 8:45 am]
BILLING CODE 6351-01-P