[Federal Register Volume 80, Number 177 (Monday, September 14, 2015)]
[Proposed Rules]
[Pages 55182-55211]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-22844]



[[Page 55181]]

Vol. 80

Monday,

No. 177

September 14, 2015

Part II





Securities and Exchange Commission





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17 CFR Part 240





Access to Data Obtained by Security-Based Swap Data Repositories and 
Exemption From Indemnification Requirement; Proposed Rule

Federal Register / Vol. 80 , No. 177 / Monday, September 14, 2015 / 
Proposed Rules

[[Page 55182]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 240

[Release No. 34-75845; File No. S7-15-15]
RIN 3235-AL74


Access to Data Obtained by Security-Based Swap Data Repositories 
and Exemption From Indemnification Requirement

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: Pursuant to section 763(i) of Title VII (``Title VII'') of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 
(``Dodd-Frank Act''), the Securities and Exchange Commission 
(``Commission'') is proposing amendments to rule 13n-4 under the 
Securities Exchange Act of 1934 (``Exchange Act'') related to 
regulatory access to security-based swap data held by security-based 
swap data repositories. The proposed rule amendments would implement 
the conditional Exchange Act requirement that security-based swap data 
repositories make data available to certain regulators and other 
authorities, and would set forth a conditional exemption from the 
statutory indemnification requirement associated with that regulatory 
access provision.

DATES: Submit comments on or before October 29, 2015.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/proposed.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number S7-15-15 on the subject line; or
     Use the Federal eRulemaking Portal (http://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

     Send paper comments to Secretary, Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090.

    All submissions should refer to File Number S7-15-15. This file 
number should be included on the subject line if email is used. To help 
us process and review your comments more efficiently, please use only 
one method. The Commission will post all comments on the Commission's 
Internet Web site (http://www.sec.gov/rules/proposed.shtml). Comments 
are also available for Web site viewing and printing in the 
Commission's Public Reference Room, 100 F Street NE., Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly.
    Studies, memoranda, or other substantive items may be added by the 
Commission or staff to the comment file during this rulemaking. A 
notification of the inclusion in the comment file of any such materials 
will be made available on the SEC's Web site. To ensure direct 
electronic receipt of such notifications, sign up through the ``Stay 
Connected'' option at www.sec.gov to receive notifications by email.

FOR FURTHER INFORMATION CONTACT: Carol McGee, Assistant Director, or 
Joshua Kans, Senior Special Counsel, at (202) 551-5870; Division of 
Trading and Markets, Securities and Exchange Commission, 100 F Street 
NE., Washington, DC 20549-7010.

SUPPLEMENTARY INFORMATION: The Commission is proposing to add 
paragraphs (b)(9) and (b)(10) to Exchange Act rule 13n-4 to implement 
the statutory requirement that security-based swap data repositories 
conditionally provide data to certain regulators and other authorities. 
The Commission also is proposing to add paragraph (d) to rule 13n-4 to 
provide a conditional exemption from the associated statutory 
indemnification requirement.

I. Background

A. Statutory Requirements for Access to Security-Based Swap Data 
Repository Information

    Title VII of the Dodd-Frank Act amended the Exchange Act to provide 
a comprehensive regulatory framework for security-based swaps, 
including the regulation of security-based swap data repositories.\1\
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    \1\ Public Law 111-203, section 761(a) (adding Exchange Act 
section 3(a)(75) (defining ``security-based swap data repository'')) 
and section 763(i) (adding Exchange Act section 13(n) (establishing 
a regulatory regime for security-based swap data repositories)).
    References in this release to the terms ``data repository,'' 
``trade repository,'' ``repository'' or ``SDR'' generally address 
security-based swap data repositories unless stated otherwise.
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    Those amendments, among other things, require that security-based 
swap data repositories make data available to certain regulators and 
other entities. In particular, the amendments conditionally require 
that security-based swap data repositories ``on a confidential basis 
pursuant to section 24, upon request, and after notifying the 
Commission of the request, make available all data obtained by the 
security-based swap data repository, including individual counterparty 
trade and position data.'' \2\ The repositories must make that data 
available to: ``each appropriate prudential regulator''; \3\ the 
Financial Stability Oversight Council (``FSOC''); the Commodity Futures 
Trading Commission (``CFTC''); the Department of Justice; and ``any 
other person that the Commission determines to be appropriate,'' 
including foreign financial supervisors (including foreign futures 
authorities), foreign central banks and foreign ministries.\4\
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    \2\ Exchange Act section 13(n)(5)(G), 15 U.S.C. 78m(n)(5)(G). 
The confidentiality requirements addressed by Exchange Act section 
24, 15 U.S.C. 78x, are addressed below. See note 84, infra.
    \3\ As discussed below, the term ``prudential regulator'' 
encompasses the Board of Governors of the Federal Reserve System and 
certain other regulators, with regard to certain categories of 
regulated entities. See note 44, infra.
    \4\ Exchange Act section 13(n)(5)(G), 15 U.S.C. 78m(n)(5)(G).
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    This access to data is conditional, however. In part, before a 
repository shares such data, the repository ``shall receive a written 
agreement from each entity stating that the entity shall abide by the 
confidentiality requirements described in section 24 relating to the 
information on security-based swap transactions that is provided.'' \5\ 
Moreover, before such data is shared, ``each entity shall agree to 
indemnify the security-based swap data repository and the Commission 
for any expenses arising from litigation relating to the information 
provided under section 24.'' \6\
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    \5\ Exchange Act section 13(n)(5)(H)(i), 15 U.S.C. 
78m(n)(5)(H)(i).
    \6\ Exchange Act section 13(n)(5)(H)(ii), 15 U.S.C. 
78m(n)(5)(H)(ii).
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B. Prior Proposals and Comments Received

 1. 2010 proposal
    In 2010, the Commission proposed several rules to implement 
statutory provisions related to the registration process, duties and 
core principles applicable to security-based swap data repositories.\7\ 
That proposal, among other things, encompassed rules that

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incorporated the statutory language that set forth the data access 
provisions.\8\
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    \7\ See Security-Based Swap Data Repository Registration, 
Duties, and Core Principles, Exchange Act Release No. 63347 (Nov. 
19, 2010), 75 FR 77306 (Dec. 10, 2010), corrected at 75 FR 79320 
(Dec. 20, 2010) and 76 FR 2287 (Jan. 13, 2011) (``SDR Proposing 
Release'').
    \8\ See SDR Proposing Release, 75 FR 77368 (paragraphs (b)(9) 
and (b)(10) of proposed Exchange Act rule 13n-4 incorporated 
relevant language of Exchange Act sections 13(n)(5)(G) and (H).
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    In proposing those rules, the Commission recognized that 
``regulators may be legally prohibited or otherwise restricted from 
agreeing to indemnify third parties, including SDRs as well as the 
Commission,'' and that the ``indemnification provision could chill 
requests for access to data obtained by SDRs, thereby hindering the 
ability of others to fulfill their regulatory mandates and 
responsibilities.'' \9\ The Commission added that it expected that a 
repository ``would not go beyond the minimum requirements of the 
statute so as not to preclude [recipient entities described by the 
statute] from obtaining the data maintained by an SDR.'' \10\ The 
Commission further noted that the Commission itself had the authority 
to share nonpublic information with, among others, certain domestic and 
foreign regulatory authorities.\11\
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    \9\ 75 FR 77318-19.
    \10\ 75 FR 77319.
    \11\ Id.
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    In response, four commenters addressed the data access 
provisions.\12\ Those commenters generally supported providing relevant 
authorities with access to security-based swap data maintained by 
repositories when the access is within the scope of those authorities' 
mandates, but expressed particular concerns relating to the 
indemnification requirement and to the scope of authorities' access to 
data. Two commenters concurred that relevant authorities likely would 
be unable to agree to indemnify data repositories or the 
Commission.\13\ One commenter expressed the concern that the statutory 
requirement is vague and could result in a data repository providing 
access to persons without proper authority.\14\ Another commenter 
recommended that the Commission adopt rules to help streamline the 
indemnification requirement for an ``efficient exchange of 
information.'' \15\
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    \12\ Cleary Gottlieb comment (Sept. 20, 2011) at 31-32 (comment 
was provided in response to a joint SEC-CFTC roundtable regarding 
the cross-border application of Title VII, and can be found at 
http://www.sec.gov/comments/4-636/4-636.shtml), DTCC comment (Nov. 
15, 2010) at 3, ESMA comment (Jan. 17, 2011) at 2 and Managed Funds 
Association comment (Jan. 24, 2011) at 3.
    \13\ Prior to the proposed rules, one of those commenters 
described the indemnification requirement as contravening the 
purpose of data repositories and jeopardizing market stability by 
diminishing regulators' ability to carry out oversight functions. 
See DTCC comment (Nov. 15, 2010) at 3. This comment and other 
comments that addressed data repository issues in response to a 
general request for comments regarding the implementation of Title 
VII are located on the Commission's Web site at http://www.sec.gov/comments/df-title-vii/swap-data-repositories/swap-data-repositories.shtml.
    Subsequently, in response to the proposed rules, that commenter 
further: (1) Stated that the indemnification requirement should not 
apply where relevant authorities carry out their regulatory 
responsibilities in accordance with international agreements and 
while maintaining the confidentiality of data provided to them; (2) 
suggested that the Commission provide model indemnification 
language; and (3) urged that ``any indemnity should be limited in 
scope to minimize the potential reduction in value of registered 
SDRs to the regulatory community.'' See DTCC comment (Jan. 24, 2011) 
at 12. These and other comments addressing the proposed 
implementation of the data access provisions (as well as other 
aspects of the Commission's 2010 proposal regarding security-based 
swap data repository registration, duties and core principles) are 
located on the Commission's Web site at http://www.sec.gov/comments/s7-35-10/s73510.shtml.
     Another commenter stated that because indemnification would not 
be feasible, ``it would be problematic for [the Commission and the 
CFTC] to require non-U.S. SDRs to register with the Commissions,'' 
and that the indemnification requirement could impede effective 
regulatory coordination. See Cleary Gottlieb comment (Sept. 20, 
2011) at 31-32.
    That commenter further stated that when a non-U.S. data 
repository registers with the Commission ``but is also subject to 
regulatory oversight by an appropriate non-U.S. regulator,'' the SEC 
should adopt the CFTC's interpretation ``that the non-U.S. regulator 
is not as a result subject to Dodd-Frank's notice and 
indemnification provisions.'' See id. The Commission since then has 
issued final rules and interpretations regarding the cross-border 
application of the registration requirement for security-based swap 
data repositories, which exempts certain non-U.S. data repositories 
subject to regulation abroad from having to comply with requirements 
otherwise applicable to repositories. See Exchange Act Release No. 
74246 (Feb. 11, 2015), 80 FR 14438, 14450-51, 14516-17, 14556 (Mar. 
19, 2015) (``SDR Adopting Release'') (generally stating that a non-
U.S. person that performs the functions of a security-based swap 
data repository within the United States is required to register 
with the Commission absent an exemption, and adopting Exchange Act 
rule 13n-12 to provide an exemption from data repository 
requirements for certain non-U.S. persons when regulators with 
supervisory authority over those non-U.S. persons have entered into 
a memorandum of understanding (``MOU'') or other arrangement with 
the Commission regarding the confidentiality of data collected and 
maintained by such non-U.S. person, access by the Commission to such 
data, and any other matters determined by the Commission). Also, 
under the preliminary interpretation discussed below, the conditions 
to the Exchange Act data access requirements would not restrict 
access when a repository registered with the Commission also is 
registered or licensed with a foreign authority that obtains the 
data pursuant to foreign law. See part IV.A, infra.
    \14\ That commenter particularly expressed concern regarding the 
possibility of ``unfettered access'' to security-based swap 
information by regulators, including foreign financial supervisors, 
foreign central banks and foreign ministries, ``beyond their 
regulatory authority and mandate.'' See Managed Funds Association 
comment (Jan. 24, 2011) at 3. That comment further recommended that 
the Commission take an approach similar to that taken by rules 
proposed by the CFTC, requiring any regulator requesting access to 
such data to certify the statutory authority for the request and 
detail the basis for the request. See id. at 3-4. The CFTC 
subsequently adopted that certification requirement as a final rule, 
but did not adopt the proposed requirement that the regulator also 
detail the basis for the request. See note 31, infra, and 
accompanying text.
    \15\ That commenter also reiterated the notion that relevant 
authorities must ensure the confidentiality of security-based swap 
data provided to them, and that the indemnification requirement 
``undermines the key principle of trust according to which exchange 
of information [among relevant authorities] should occur.'' See ESMA 
comment (Jan. 17, 2011) at 2.
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2. 2013 Cross-Border Proposal
a. Proposed Exemption to Indemnification Requirement
    In 2013, the Commission proposed a number of rules related to the 
cross-border application of the Title VII security-based swap 
requirements. At that time, recognizing the significance of commenter 
concerns and understanding that certain authorities may be unable to 
agree to indemnify a data repository and the Commission, the Commission 
preliminarily concluded that the indemnification requirement could 
frustrate the purposes of the statutory requirement that repositories 
make available data to relevant authorities. The Commission further 
took the view that the indemnification requirement should not be 
applied rigidly so as to frustrate the statutory purposes of data 
repositories, and hinder relevant authorities' ability to fulfill their 
regulatory mandates and legal responsibilities.\16\
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    \16\ See Exchange Act Release No. 69490 (May 1, 2013), 78 FR 
30968, 31048-49 (May 23, 2013) (``Cross-Border Proposing Release'').
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    To address these concerns, the Commission proposed an exemption to 
provide that a data repository ``is not required'' to comply with the 
indemnification requirement, conditioned on: (1) An entity requesting 
the information ``to fulfill a regulatory mandate and/or legal 
responsibility''; (2) the request pertaining ``to a person or financial 
product subject to the jurisdiction, supervision or oversight of the 
entity''; and (3) the entity having entered into a supervisory and 
enforcement memorandum of understanding (``MOU'') or other arrangement 
addressing the confidentiality of the information provided and any 
other matter as determined by the Commission.\17\ The Commission took 
the preliminary view that the proposed exemption was consistent with 
commenters' views, including one commenter's suggestion that the 
indemnification requirement not apply when relevant authorities carry 
out their responsibilities in accordance with international agreements 
and while maintaining the

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confidentiality of data provided to them.\18\
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    \17\ See id. at 31209 (paragraph (d) of proposed Exchange Act 
rule 13n-4).
    \18\ See id. at 31049 (addressing DTCC comment from Jan. 24, 
2011). The Commission also stated that the proposal was consistent 
with commenter suggestions that the exemption be ``location 
agnostic'' (by treating relevant domestic and foreign authorities 
similarly), and that the exemption was intended to help preserve the 
``spirit of cooperation and coordination'' between regulators around 
the world. See id.
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    The Commission further stated that the exemption's proposed 
condition that the request be for the purpose of fulfilling a relevant 
authority's regulatory mandate or legal responsibility was aligned with 
statutory requirements to protect the security-based swap information 
maintained by a repository, including proprietary and highly sensitive 
data, from unauthorized disclosure, misappropriation or misuse.\19\ The 
Commission also expressed the preliminary view that the proposed 
condition that the Commission enter into an MOU or other arrangement 
with a relevant authority represented an effective way to streamline 
the indemnification requirement for an ``efficient exchange of 
information'' to help protect the confidentiality of information and 
further the purposes of the Dodd-Frank Act.\20\
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    \19\ See id. at 31049-50.
    \20\ See id. at 31050. The Commission moreover expressed the 
preliminary view that, in determining whether to enter into such an 
MOU or other arrangement, the Commission would consider, among other 
things, whether: (1) ``The relevant authority needs security-based 
swap information from an SDR to fulfill its regulatory mandate or 
legal responsibilities; (2) the relevant authority agrees to protect 
the confidentiality of the security-based swap information provided 
to it; (3) the relevant authority agrees to provide the Commission 
with reciprocal assistance in securities matters within the 
Commission's jurisdiction; and (4) a supervisory and enforcement MOU 
or other arrangement would be in the public interest.'' See id. at 
31049-50.
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b. Additional guidance
    In the Cross-Border Proposing Release, the Commission also 
addressed the application of the statutory requirement that 
repositories notify the Commission regarding data requests. The 
Commission stated its preliminarily belief that repositories could 
satisfy that requirement by providing the Commission with notice of an 
initial request by a relevant authority, and maintaining records of the 
initial request and all subsequent requests.\21\ The Commission further 
expressed preliminary views regarding the process for determining which 
additional authorities may obtain information from data repositories 
pursuant to these data access provisions.\22\
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    \21\ See id. at 31046-47.
    \22\ See id. at 31047-48 (indicating that the Commission would 
make such determinations by order, and that the Commission would 
consider a variety of factors, including whether there is a 
supervisory and enforcement MOU between the Commission and the 
relevant authority, and whether the relevant authority has a 
legitimate need for the information).
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c. Comments
    In response to this proposal, the Commission received one comment 
that addressed the data access provisions, including the 
indemnification requirement. That commenter stated that the proposal 
``did not erase the need for a legislative solution to clarify the 
scope and applicability'' of the indemnification requirement.\23\ The 
commenter further recommended that the Commission incorporate, as part 
of the exemption, a ``safe harbor provision from liability for 
information shared pursuant to global information sharing agreements.'' 
\24\
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    \23\ See DTCC cross-border comment (Aug. 21, 2013) at 6-7 
(expressing concern that the indemnification provision would 
continue to limit data sharing across jurisdictions, leading foreign 
regulators to seek to establish ``national'' repositories that would 
fragment data among jurisdictions). That comment and other comments 
responding to the cross-border proposal are located on the 
Commission's Web site at: http://www.sec.gov/comments/s7-02-13/s70213.shtml.
    \24\ See DTCC cross-border comment at 8.
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    The commenter also objected to the prospect that repositories would 
be required to notify the Commission of an initial information request, 
stating that such a requirement could lead authorities to hesitate to 
make requests if that would trigger notice, ``particularly if such 
request is pursuant to an investigation.'' The commenter instead 
recommended that the Commission consider the notification requirement 
to be satisfied if the request is made ``pursuant to an established 
information sharing agreement.'' \25\
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    \25\ See id. at 7.
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3. Final Rules Reserving Action on the Data Access Provisions
    In February 2015, the Commission adopted a number of final rules 
governing the registration process, duties and core principles 
applicable to security-based swap data repositories.\26\ Those final 
rules, however, neither addressed the statutory data access 
requirements applicable to data repositories, nor provided an exception 
to the indemnification requirement. The Commission instead stated that 
final resolution of the issue would benefit from further consideration 
and public comment.\27\
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    \26\ See SDR Adopting Release.
    \27\ See id., 80 FR 14487-88 (further noting that repositories 
will have to comply with all statutory requirements, including the 
indemnification requirement, when the current exemptive relief from 
requirements applicable to repositories expires). As a result, in 
adopting those final rules the Commission reserved paragraphs (b)(9) 
and (b)(10) of Exchange Act rule 13n-4 (which as proposed would have 
addressed the data access obligations of registered security-based 
swap data repositories), and did not adopt the indemnification 
exemption proposed as paragraph (d) of rule 13n-4.
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C. Treatment of These Issues in the Swaps Context

    The Dodd-Frank Act also revised the Commodity Exchange Act 
(``CEA'') to impose comparable data access requirements--including 
confidentiality and indemnification conditions--upon swap data 
repositories that are subject to CFTC jurisdiction.\28\
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    \28\ See CEA sections 21(c)(7), (d), 7 U.S.C. 24a(c)(7), (d).
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1. Certification of Scope of Jurisdiction
    To implement those requirements, the CFTC adopted rules that in 
part identify the domestic \29\ and foreign regulators \30\ to which a 
swap data repository must make swap data available. The rules provide 
that when those regulators seek access to data maintained by a swap 
data repository, they must file a request with the swap data repository 
and certify that they are acting within the scope of their 
jurisdiction.\31\
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    \29\ The CFTC has defined ``Appropriate Domestic Regulator'' to 
mean: (i) The SEC; (ii) each prudential regulator ``with respect to 
requests related to any of such regulator's statutory authorities, 
without limitation to the activities listed for each regulator'' in 
the statutory definition; (iii) the Financial Stability Oversight 
Council; (iv) the Department of Justice; (v) any Federal Reserve 
Bank; (vi) the Office of Financial Research; and (vii) any other 
person the CFTC deems appropriate. See 17 CFR 49.17(b)(1).
    \30\ The CFTC has defined ``Appropriate Foreign Regulator'' to 
mean foreign regulators ``with an existing memorandum of 
understanding or other similar type of information sharing 
arrangement'' executed with the CFTC, and/or foreign regulators 
``without an MOU as determined on a case-by-case basis'' by the 
CFTC. See 17 CFR 49.17(b)(2).
    \31\ See 17 CFR 49.17(d)(1). In this regard, the CFTC did not 
adopt proposed requirements to require regulators to set forth the 
basis for their requests in sufficient detail, and to require a swap 
data repository to provide access only if it is satisfied that the 
regulator is acting within the scope of its authority. See 76 FR 
54538, 54553 (Sept. 1, 2011).
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2. Scope of Confidentiality and Indemnification Requirements
    The CFTC implementing rules generally require domestic and foreign 
regulators to execute confidentiality and indemnification agreements 
with the swap data repository prior to receipt of any requested swap 
data.\32\ The CFTC,

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however, also recognized that it might be difficult for certain 
regulators to implement those confidentiality and indemnification 
requirements.\33\ Accordingly, the CFTC provided that a domestic 
regulator with regulatory jurisdiction over a swap data repository 
registered with it pursuant to separate statutory authority may access 
such data without the need to enter into confidentiality or 
indemnification agreements if: (i) The domestic regulator executes an 
MOU or similar information sharing arrangement with the CFTC; and (ii) 
the CFTC designates the domestic regulator to receive direct electronic 
access.\34\
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    \32\ See 17 CFR 49.17(d)(6), 49.18(b).
    \33\ See 76 FR 54554.
    \34\ See 17 CFR 49.17(d)(2), 49.18(c); 76 FR 54554 (also 
referencing a separate statutory provision, CEA section 21(c)(4)(A), 
7 U.S.C. 24a(c)(4)(A), that requires swap data repositories to 
provide ``direct electronic access'' to the CFTC and its designees).
    There are differences between the Commission's proposed 
approach, discussed below, and the approach the CFTC has taken in 
adopting rules to implement the data access requirement under the 
CEA. In part, while the CFTC rule requires that entities accessing 
swap data certify that they are acting within the scope of their 
jurisdiction, the Commission's proposal instead anticipates 
considering an entity's interest in the security-based swap 
information when determining whether to determine that entity may 
access security-based swap information. See part II.A.3.a, infra. 
Also, the Commission's proposed exemption from the indemnification 
requirement is conditioned in part on an entity requesting security-
based swap information in connection with a regulatory mandate, or 
legal responsibility or authority. See part III.B.1.a, infra.
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    The CFTC implementing rules further provided that a foreign 
regulator with supervisory responsibility over a swap data repository 
registered with the foreign regulator pursuant to foreign law and/or 
regulation would not need to enter into such confidentiality or 
indemnification agreements.\35\ In addition, the CFTC noted that the 
confidentiality and indemnification requirements would not apply when 
the CFTC itself shares information in its possession with foreign 
authorities.\36\
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    \35\ See 17 CFR 49.17(d)(3), 49.18(c); 76 FR 54555 n.166 (adding 
that the CFTC does not interpret the notification and 
indemnification provisions to apply ``in circumstances in which an 
Appropriate Foreign Regulator possesses independent sovereign legal 
authority to obtain access to the information and data held and 
maintained by an SDR'').
    \36\ See 76 FR 54554.
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    The CFTC subsequently issued an interpretative statement that the 
indemnification and confidentiality provisions under the CEA generally 
apply only to such data reported pursuant to the CEA and CFTC 
regulations, and that those confidentiality and indemnification 
provisions ``should not operate to inhibit or prevent foreign 
regulatory authorities from accessing data in which they have an 
independent regulatory interest (even if that data also has been 
reported pursuant to the CEA and [CFTC] regulations).'' \37\ The CFTC 
further stated that a registered swap data repository would not be 
subject to the indemnification and confidentiality provisions under the 
CEA if the swap data repository is ``registered, recognized or 
otherwise authorized in a foreign jurisdiction's regulatory regime,'' 
when the data sought to be accessed by the foreign regulatory authority 
has been reported to the swap data repository ``pursuant to the foreign 
jurisdiction's regulatory regime.'' \38\
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    \37\ See Swap Data Repositories: Interpretative Statement 
Regarding the Confidentiality and Indemnification Provisions of the 
Commodity Exchange Act, 77 FR 65177, 65180-81 (Oct. 25, 2012).
    \38\ See id. The CFTC added that this principle applies even if 
the applicable data also is reported pursuant to CFTC rules, and 
that foreign and domestic regulatory authorities also may receive 
data from the CFTC (rather than the swap data repository) without 
execution of a confidentiality and indemnification agreement. See 
id. at 65181.
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D. The Current Proposal

    The Commission today is proposing rules related to the data access 
obligation applicable to security-based swap data repositories, 
including rules to provide a conditional exemption from the 
indemnification requirement. This new proposal builds upon the earlier 
proposals, but with certain changes.
    Among other aspects, as discussed below, the proposal would provide 
for the statutory confidentiality agreement requirement to be satisfied 
via the use of MOUs or other agreements between the Commission and the 
entity accessing data from a security-based swap data repository. The 
proposal also encompasses an indemnification exemption that would be 
effective when the relevant conditions are met, in contrast to the 
earlier proposed approach of conditionally allowing a data repository 
to elect whether to waive the indemnification requirement.
    Taken as a whole, the proposal would provide that when the 
conditions to the data access provisions are satisfied--including as 
applicable the conditions to the indemnification exemption--a 
repository would be required to provide security-based swap data to 
relevant authorities.

II. Proposed Data Access Rules

    The Commission is proposing rules, to implement the data access 
provisions of Exchange Act sections 13(n)(5)(G) and (H),\39\ that 
address commenter concerns and reflect the Commission's further 
consideration of the issues. Under the proposal:
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    \39\ 15 U.S.C. 78m(n)(5)(G) and (H).
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     Security-based swap data repositories generally would be 
required, on a confidential basis after notifying the Commission, to 
make available security-based swap data, including individual 
counterparty trade and position data, to certain entities that are 
identified in the proposed rules and any other persons that are 
determined by the Commission to be appropriate.\40\
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    \40\ See proposed Exchange Act rule 13n-4(b)(9).
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     The data access requirement would be subject to a 
confidentiality provision that conditions the data access requirement 
on there being an agreement between the Commission and the entity (in 
the form of an MOU or otherwise) that addresses the confidentiality of 
the information received.\41\
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    \41\ See proposed Exchange Act rule 13n-4(b)(10).
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     In addition, as discussed below, there would be a 
conditional exemption to the statutory provision that conditions the 
data access on the recipient of the data agreeing to indemnify the 
repository and the Commission for expenses arising from litigation 
related to the information provided.\42\
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    \42\ See proposed Exchange Act rule 13n-4(b)(ii).
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A. Data Access Requirement

1. Application to Prudential Regulators and Federal Reserve Banks
    The Exchange Act specifically states that a repository is 
conditionally obligated to make information available to, among others, 
``each appropriate prudential regulator.'' \43\ The proposed rules 
would specifically identify, as being eligible to access data, each of 
the entities encompassed within the statutory ``prudential regulator'' 
definition: The Board of Governors of the Federal Reserve System 
(``Board''), the Office of the Comptroller of the Currency, the Federal 
Deposit Insurance Corporation (``FDIC''), the Farm Credit 
Administration, and the Federal Housing Finance Agency.\44\
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    \43\ See Exchange Act section 13(n)(5)(G)(i), 15 U.S.C. 
78m(n)(5)(G)(i).
    \44\ See proposed Exchange Act rule 13n-4(b)(9)(i)-(v).
    Exchange Act section 3(a)(74), 15 U.S.C. 78c(a)(74), defines 
``prudential regulator'' by reference to the CEA. The CEA, in turn, 
defines ``prudential regulator'' to encompass: (a) The Board, (b) 
the Office of the Comptroller of the Currency, (c) the FDIC, (d) the 
Farm Credit Administration or (e) the Federal Housing Finance 
Agency--in each case with respect to swap dealers, major swap 
participants, security-based swap dealers or major security-based 
swap participants (cumulatively, ``dealers'' or ``major 
participants'') that fall within the regulator's authority. See CEA 
section 1a(39); 7 U.S.C. 1a(39).
    For example, the definition provides that the Board is a 
prudential regulator with regard to, among others, certain dealers 
and major participants that are: State-chartered banks and agencies, 
foreign banks that do not operate insured branches, or members of 
bank holding companies. Also, for example, the definition provides 
that the Office of the Comptroller of the Currency is a prudential 
regulator with regard to, among others, certain dealers or major 
participants that are national banks, federally chartered branches 
or agencies of foreign banks or federal saving associations.

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[[Page 55186]]

    Under this approach of specifically identifying each of those 
regulators, rather than generally referring to ``appropriate prudential 
regulators,'' the ability of those regulators to access security-based 
swap data would not vary depending on whether entities regulated by the 
regulators are acting as security-based swap dealers, as major 
security-based swap participants, or in some other capacity.\45\ For 
similar reasons, under this approach those regulators' access also 
would not vary depending on whether the regulator acts in a 
``prudential'' capacity in connection with the information.\46\
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    \45\ This approach particularly addresses the fact that the 
statutory ``prudential regulator'' definition noted above 
specifically refers to those regulators in connection with dealers 
and major participants that fall within their authority. In the 
Commission's preliminary view the application of the data access 
provision should not vary depending on whether an entity regulated 
by the regulator is acting as a dealer or major participant, or in 
some other capacity. Such a reading would not further the purposes 
of Title VII, and the Dodd-Frank Act more generally, including 
facilitating regulator access to security-based swap information to 
help address the risks associated with those instruments. 
Accordingly, the proposed rule does not limit those regulators' 
access to security-based swap information based on the capacity in 
which a regulated entity is acting.
    \46\ Those regulators' ability to access security-based swap 
data accordingly would not be limited to situations in which they 
act in the capacity of a prudential supervisor. Thus, for example, 
the FDIC would conditionally be authorized to access security-based 
swap data from a repository in connection with all of its statutory 
capacities, including its prudential supervisory capacity as well as 
other capacities such as the FDIC's resolution authority pursuant to 
the Federal Deposit Insurance Act and the Orderly Liquidation 
Authority provisions of Title II of the Dodd-Frank Act.
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    The proposed rules also would include ``any Federal Reserve Bank'' 
among the entities conditionally eligible to access security-based swap 
data from repositories,\47\ in accordance with the Exchange Act 
provision that extends data access to ``any other person that the 
Commission determines to be appropriate.'' \48\ Consistent with the 
standards the Commission expects to consider in connection with 
determining other entities to be authorized to access such data--
including consideration of a relevant authority's interest in accessing 
security-based swap data based on its regulatory mandate, or legal 
responsibility or authority \49\--the Commission preliminarily believes 
that it is appropriate for the Federal Reserve Banks to be able to 
access such data. The Commission particularly understands that the 
Federal Reserve Banks occupy important oversight roles under delegated 
authority from the Board, including supervision of banks that are under 
the Board's authority, and gathering and analyzing information to 
inform the Federal Open Market Committee regarding financial 
conditions.\50\ We further understand that the Federal Reserve Banks, 
as well as the Board, would use data from security-based swap data 
repositories to fulfill statutory responsibilities related to 
prudential supervision and financial stability.\51\ The Commission 
accordingly believes preliminarily that the Federal Reserve Banks' 
access to security-based swap data held by repositories would 
appropriately fall within their regulatory mandate and legal 
responsibility or authority, and that the Federal Reserve Banks should 
conditionally have access to the security-based swap data.\52\
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    \47\ See proposed Exchange Act rule 13n-4(b)(9)(i).
    \48\ See Exchange Act section 13(n)(5)(G)(v), 15 U.S.C. 
78m(n)(5)(G)(v). The CFTC has identified the Federal Reserve Banks 
as being ``appropriate domestic regulators'' that may access swap 
data from swap data repositories. See note 29 supra.
    \49\ See part II.A.3, infra.
    \50\ Section 11(k) of the Federal Reserve Act grants the Board 
authority ``to delegate, by published order or rule . . . any of its 
functions, other than those relating to rulemaking or pertaining to 
monetary and credit policies to . . . members or employees of the 
Board, or Federal Reserve banks.'' 12 U.S.C. 248(k). The Federal 
Reserve Banks carry out the Board's activities including the 
supervision, examination and regulation of financial institutions as 
directed by the Board and under its supervision. See the Board's 
Rules of Organization, sec. 3(j) FRRS 8-008 (providing that the 
Director of the Board's Division of Banking Supervision and 
Regulation ``coordinates the System's supervision of banks and bank 
holding companies and oversees and evaluates the Reserve Banks' 
examination procedures''). The Board further has delegated extensive 
authority to the Reserve Banks with respect to numerous supervisory 
matters. See 12 CFR 265.11 (functions delegated by the Board to the 
Federal Reserve Banks).
    \51\ We understand that the Board and the Federal Reserve Banks 
jointly would use the data in support of the prudential supervision 
of institutions under the Board's jurisdiction, such as state member 
banks, bank holding companies, and Edge Act corporations. See, e.g., 
section 9 of the Federal Reserve Act, 12 U.S.C. 321-338a 
(supervision of state member banks); the Bank Holding Company Act, 
12 U.S.C. 1841-1852 (supervision of bank holding companies); the 
Edge Act, 12 U.S.C. 610 et seq. (supervision of Edge Act 
corporations). We also understand that the Board and the Federal 
Reserve Banks would use the data in support of the implementation of 
monetary policy, such as through market surveillance and research. 
See, e.g., section 12A of the Federal Reserve Act, 12 U.S.C. 263 
(establishing the Federal Open Market Committee); and section 2A of 
the Federal Reserve Act, 12 U.S.C. 225a (setting monetary policy 
objectives). In addition, we understand that the Board and the 
Federal Reserve Banks would use the data in fulfilling the Board's 
responsibilities with respect to assessing, monitoring and 
mitigating systemic risk, such as supervision of systemically 
important institutions. See, e.g., section 113 of the Dodd-Frank 
Act, 12 U.S.C. 5323 (SIFIs); and section 807 of the Dodd-Frank Act, 
12 U.S.C. 5466 (designated FMUs).
    \52\ The Federal Reserve Banks' access to this information, like 
the access of the entities directly identified by the statute, would 
be subject to conditions related to confidentiality and 
indemnification as discussed below, including conditions to limit an 
authority's access to data by linking the scope of the exemption 
from the indemnification requirement to information that is related 
to persons or activities within an entity's regulatory mandate or 
its legal responsibility or authority, as specified in an MOU 
between the Commission and the entity. See parts II.C and III.C, 
infra.
     In proposing to permit the Federal Reserve Banks to access 
security-based swap information pursuant to the data access 
provisions, the Commission preliminarily believes that the Federal 
Reserve Banks' access should not be limited to information regarding 
security-based swap transactions entered into by banks supervised by 
the Board, but should be available more generally with regard to 
security-based swap transaction data. This is consistent with the 
fact that Title VII does not limit the Board's access to data in 
such a way. This view also reflects the breadth of the Federal 
Reserve Banks' responsibilities regarding prudential supervision and 
financial stability, as addressed above.
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    A Federal Reserve Bank's ability to access such data would be 
subject to conditions related to confidentiality and indemnification 
(as would the ability of any other entity that is identified by statute 
or determined by the Commission to access such data).\53\
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    \53\ In this regard, the Commission notes that personnel of the 
Board and the Reserve Banks already are subject to a number of 
confidentiality requirements. See 18 U.S.C. 1905 (imposing criminal 
sanctions on U.S. government personnel who disclose non-public 
information except as provided by law), 18 U.S.C. 641 (imposing 
criminal sanctions on the unauthorized transfer of records), 5 CFR 
2635.703 (Office of Government Ethics regulations prohibiting 
unauthorized disclosure of nonpublic information); see also Federal 
Reserve Bank Code of Conduct section 3.2 (requiring Reserve Bank 
employees to maintain the confidentiality of nonpublic information).
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2. FSOC, CFTC, Department of Justice and Office of Financial Research
    The Exchange Act also states that FSOC, CFTC, and the Department of 
Justice may access security-based swap data.\54\ The proposed rules 
accordingly would identify those entities as being conditionally 
authorized to access such data.\55\
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    \54\ See Exchange Act sections 13(n)(5)(G)(ii)-(iv), 15 U.S.C. 
78m(n)(5)(G)(ii)-(iv).
    \55\ See proposed Exchange Act rule 13n-4(b)(9)(vi)-(viii).
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    The proposed rules further would make the Office of Financial 
Research (``OFR'') conditionally eligible to access such data,\56\ in 
accordance with the Exchange Act provision that that extends data 
access to ``any other person

[[Page 55187]]

that the Commission determines to be appropriate.''
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    \56\ See proposed Exchange Act rule 13n-4(b)(9)(ix), (x).
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    The Commission preliminarily believes that such access by the OFR 
is appropriate in light of the OFR's regulatory mandate and legal 
responsibility and authority.\57\ The OFR was established by Title I of 
the Dodd-Frank Act to support FSOC and FSOC's member agencies by 
identifying, monitoring and assessing potential threats to financial 
stability thorough the collection and analysis of financial data 
gathered from across the public and private sectors.\58\ In connection 
with this statutory mandate to monitor and assess potential threats to 
financial stability, the OFR's access to security-based swap 
transaction data may be expected to help assist it in examining the 
manner in which derivatives exposures and counterparty risks flow 
through the financial system, and in otherwise assessing those risks. 
The Commission accordingly believes preliminarily that the OFR's access 
to security-based swap data held by repositories would appropriately 
fall within its regulatory mandate and legal responsibility and 
authority, and that the OFR should conditionally have access to the 
security-based swap data.\59\
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    \57\ See proposed Exchange Act rule 13n-4(b)(9)(ix). We note 
that the CFTC has identified the OFR as being an ``appropriate 
domestic regulator'' that may access swap data from swap data 
repositories. See note 29, supra.
    \58\ See Dodd-Frank Act section 153(a) (identifying the purpose 
of the OFR as: (1) Collecting data on behalf of FSOC and providing 
such data to FSOC and its member agencies; (2) standardizing the 
types and formats of data reported and collected; (3) performing 
applied research and essential long-term research; (4) developing 
tools for risk measurement and monitoring; (5) performing other 
related services; (6) making the results of the activities of the 
Office available to financial regulatory agencies; and (7) assisting 
those member agencies in determining the types and formats of data 
authorized by the Dodd-Frank Act to be collected by the member 
agencies); Dodd-Frank Act section 154(c) (requiring that OFR's 
Research and Analysis Center, on behalf of FSOC, develop and 
maintain independent analytical capabilities and computing resources 
to: (A) Develop and maintain metrics and reporting systems for risks 
to U.S. financial stability; (B) monitor, investigate, and report on 
changes in systemwide risk levels and patterns to FSOC and Congress; 
(C) conduct, coordinate, and sponsor research to support and improve 
regulation of financial entities and markets; (D) evaluate and 
report on stress tests or other stability-related evaluations of 
financial entities overseen by FSOC member agencies; (E) maintain 
expertise in such areas as may be necessary to support specific 
requests for advice and assistance from financial regulators; (F) 
investigate disruptions and failures in the financial markets, 
report findings and make recommendations to FSOC based on those 
findings; (G) conduct studies and provide advice on the impact of 
policies related to systemic risk; and (H) promote best practices 
for financial risk management).
    The OFR is also required to report annually to Congress its 
analysis of any threats to the financial stability of the United 
States. See Dodd-Frank Act section 154(d).
    \59\ As discussed below, the conditions to the proposed 
indemnification exemption would limit an entity's access to data by 
linking the scope of the exemption to information that related to 
persons or activities within an entity's regulatory mandate or legal 
responsibility or authority, as specified in an MOU between the 
Commission and the entity. See part III.C, infra.
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    As with the other entities that may access data pursuant to the 
data access provision, the OFR's ability to access such data would be 
subject to conditions related to confidentiality and 
indemnification.\60\
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    \60\ As U.S. government personnel, OFR personnel are subject to 
the same general confidentiality requirements that are addressed 
above in the context of the Board and the Federal Reserve Banks. See 
note 53, supra. In addition, the OFR is required to keep data 
collected and maintained by the OFR data center secure and protected 
against unauthorized disclosure. See Dodd-Frank Act section 
154(b)(3); see also 12 CFR 1600.1 (ethical conduct standards 
applicable to OFR employees, including post-employment restrictions 
linked to access to confidential information); 31 CFR 0.206 
(Treasury Department prohibition on employees disclosing official 
information without proper authority).
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3. Future Commission Determination of Additional Entities
    The proposal also would require that repositories provide data to 
any other person that the Commission determines to be appropriate. The 
Commission anticipates that entities that may seek such access would 
likely include foreign financial supervisors (including foreign futures 
authorities), foreign central banks and foreign ministries.\61\ One or 
more self-regulatory organizations also potentially may seek such 
access. The proposal further would provide that the Commission will 
make such determinations through the issuance of Commission orders, and 
that such determinations may be conditional or unconditional.\62\ A 
relevant authority would be able to request that the Commission make 
such a determination.
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    \61\ See proposed Exchange Act rule 13n-4(b)(9)(x).
    \62\ See id. In those respects, the proposed rule would 
implement the corresponding statutory language, which provides the 
Commission with the authority to allow data access to ``any other 
person that the Commission determines to be appropriate.'' See 
Exchange Act section 13(n)(5)(G)(v), 15 U.S.C. 78m(n)(5)(G)(v).
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a. Determination Factors and Conditions
    The Commission continues to expect that it would consider a variety 
of factors in connection with making such a determination, and that it 
may impose associated conditions in connection with the determination. 
The Commission expects to consider the factors discussed below, as well 
as any other factors the Commission determines to be relevant.\63\
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    \63\ The factors discussed below that may be expected to be 
relevant to a Commission's determination that a person is eligible 
to access security-based swap information pursuant the statutory 
data access provisions--including factors related to the presence of 
a confidentiality MOU and related to a person's regulatory mandate, 
or legal responsibility or authority--parallel certain of the 
conditions to the exemption from the indemnification requirement. 
See parts III.B, C, infra.
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    In part, the Commission expects to consider whether there is an MOU 
or other arrangement \64\ between the Commission and the relevant 
authority that is designed to protect the confidentiality of the 
security-based swap data provided to the authority.\65\ The Commission 
also expects to consider whether information accessed by the applicable 
authority would be subject to robust confidentiality safeguards. The 
Commission believes that these factors are important given the 
proprietary and highly sensitive nature of the data maintained by the 
repository.\66\
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    \64\ The Cross-Border Proposing Release specifically referred to 
a ``supervisory and enforcement MOU or other arrangement'' in this 
context. See Cross-Border Proposing Release, 78 FR 31047. The 
Commission is revising its proposed guidance to refer to MOUs and 
other arrangements generally--rather than ``supervisory and 
enforcement'' MOUs and arrangements--to allow the parties more 
flexibility in arriving at such confidentiality arrangements.
    \65\ Such an MOU or other arrangement may also satisfy the 
statutory requirement that a security-based swap data repository 
obtain a confidentiality agreement from the authority. See part 
II.B.1, infra (proposed Exchange Act rule 13n-4(b)(10)(i) would 
permit an agreement between the Commission and a relevant authority 
to satisfy the statutory condition that the repository obtain a 
confidentiality agreement from the authority).
    Moreover, this MOU or other arrangement further may satisfy the 
proposed indemnification exemption's condition that there be an 
arrangement between the Commission and an entity regarding the 
confidentiality of the information provided. See part III.C, infra. 
To the extent that a relevant authority's needs access to additional 
information, the relevant authority may request that the Commission 
consider revising its determination order, and MOU or other 
arrangement, as applicable.
    \66\ See Exchange Act section 13(n)(5)(H)(i).
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    In making a determination the Commission also may consider the 
relevant authority's interest in access to security-based swap data 
based on the relevant authority's regulatory mandate, or legal 
responsibility or authority. Limiting the amount of information 
accessed by an authority in this manner may help minimize the risk of 
unauthorized disclosure, misappropriation, or misuse of security-based 
swap data because each relevant authority will only have access to 
information within its regulatory mandate, or legal responsibility or 
authority.

[[Page 55188]]

    Consistent with this factor, the Commission preliminarily expects 
that such determination orders typically would incorporate conditions 
that specify the scope of a relevant authority's access to data, and 
that limit this access in a manner that reflects the relevant 
authority's regulatory mandates or legal responsibility or 
authority.\67\ Depending on the nature of the relevant authority's 
interest in the data, such conditions potentially could address factors 
such as the domicile of the counterparties to the security-based swap, 
and the domicile of the underlying reference entity.\68\ Focusing 
access to data in this way should help address one commenter's concerns 
regarding ``unfettered access'' to such proprietary data.\69\
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    \67\ To appropriately limit a relevant authority's access to 
only security-based swap data that is consistent with the MOU 
between the Commission and the relevant authority, a repository may, 
for example, need to customize permissioning parameters to reflect 
each relevant authority's electronic access to security-based swap 
data. See generally note 103, infra (discussing access criteria 
currently used by DTCC in connection with current voluntary 
disclosure practices).
    \68\ See note 105, infra, and accompanying text (discussing 
application of those factors in the context of the indemnification 
exemption).
    \69\ See note 14, supra (comment voicing concerns about 
``unfettered access'' to security-based swap information by 
regulators, including foreign financial supervisors, foreign central 
banks and foreign ministries, beyond their regulatory authority and 
mandate).
    As discussed below, moreover, the availability of the proposed 
indemnification exemption would similarly be conditioned to reflect 
the recipient's regulatory mandates or legal responsibility or 
authority. See part III.C, infra. Accordingly, based on the 
expectation that persons who seek access pursuant to these 
provisions would rely on the indemnification exemption, there would 
be comparable limitations to access applicable to persons directly 
identified by Exchange Act sections 15(n)(5)(i) through (iv) (the 
``prudential regulators,'' FSOC, CFTC and Department of Justice) or 
added by the proposed rules (the Federal Reserve Banks and the OFR).
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    The Commission further anticipates taking into account any other 
factors that are appropriate to the determination, including whether 
such a determination would be in the public interest. This 
consideration likely would include whether the relevant authority 
agrees to provide the Commission and other U.S. authorities with 
reciprocal assistance in matters within their jurisdiction.
b. Additional Matters Related to the Determinations
    The Commission contemplates taking various approaches in deciding 
whether to impose additional conditions in connection with its 
consideration of requests for determination orders. For example, the 
Commission may issue a determination order that is for a limited time. 
The Commission further may revoke a determination at any time. For 
example, the Commission may revoke a determination or request 
additional information from a relevant authority to support the 
continuation of the determination if for example a relevant authority 
fails to comply with the MOU, such as by failing to keep confidential 
security-based swap data provided to it by a repository. Even absent 
such a revocation, moreover, an authority's access to data pursuant to 
these provisions also would cease upon the termination of the MOU or 
other arrangement used to satisfy the confidentiality condition, or, as 
applicable, the indemnification exemption.\70\
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    \70\ See parts II.B and III.B, C, supra.
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    The Commission preliminarily believes that the determination 
process described above represents a reasonable approach toward 
providing appropriate access to relevant authorities. Moreover, the 
Commission preliminarily believes that this process--particularly the 
link between access and the authority's interest in the information--
appropriately builds upon existing voluntary frameworks, in accordance 
with one commenter's suggestion that the applicable framework 
incorporate other cooperative efforts with regard to access to 
information.\71\
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    \71\ See DTCC comment (June 3, 2011) at 6-7 (``It is critical 
that the United States, the European Union and the other major 
global markets align their regulatory regimes to limit opportunities 
for market distorting arbitrage. The creation of a global credit 
default swap repository would not have occurred without the global 
regulatory cooperation achieved through the OTC Derivatives 
Regulators' Forum (`ODRF') and the OTC Derivatives Regulators 
Supervisors Group (`ODSG'). It is important that the global SDR 
framework incorporate their efforts, particularly the ODRF's 
guidelines on regulatory access to information stored in trade 
repositories for over-the-counter derivatives.''); DTCC comment 
(Jan. 24, 2011) at 3 (``DTCC relies upon the direction provided by 
the OTC Derivatives Regulators' Forum (`ODRF'), whose membership 
includes the SEC and the Commodity Futures Trading Commission 
(`CFTC'). DTCC's Trade Information Warehouse (the `Warehouse' or 
`TIW') has followed the ODRF's guidance, recognizing that broad 
agreement among global regulators is difficult to achieve. DTCC is 
committed to complying with the policies adopted by the regulators 
and working with the Commission in this regard.'').
    In this regard, DTCC further has stated that it routinely 
provides U.S. regulators with credit default swap data related to 
overseas transactions entered into by non-U.S. persons on U.S. 
reference entities, and that it provides European regulators with 
data related to transactions in the U.S. by U.S. persons on European 
reference entities. See DTCC comment (Jan. 24, 2011) at 12; see also 
DTCC comment (June 3, 2011) at 7-8.
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    The Commission expects that repositories will provide relevant 
authorities with access to security-based swap data in accordance with 
the determination orders, and the Commission generally does not expect 
to be involved in reviewing, signing-off on or otherwise approving 
relevant authorities' requests for security-based swap data from 
repositories that are made in accordance with a determination order. 
Moreover, the Commission continues preliminarily to believe that it is 
not necessary to prescribe by rule specific processes to govern a 
repository's treatment of requests for access.\72\
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    \72\ See Cross-Border Proposing Release, 78 FR 31047-48. One 
commenter suggested that the Commission adopt an approach proposed 
by the CFTC, whereby a regulator requesting access to data first 
file a request for access and certify the statutory authority for 
the request and detail the basis for the request. See Managed Funds 
Association comment (Jan. 24, 2011) at 3-4. In contrast to that 
proposal, however, the final CFTC rules do not require relevant 
authorities to detail the basis for their requests, and do not 
require a swap data repository to provide access only if it is 
satisfied that the regulator is acting within the scope of its 
authority. See note 31, supra.
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    Finally, the Commission notes that it may elect to apply these 
determination factors and consider applying protections similar to 
those in the data access provisions of Exchange Act sections 
13(n)(5)(G) and (H) when designating authorities to receive direct 
access under section 13(n)(5)(D). Section 13(n)(5)(D) states that a 
repository must provide direct electronic access to the Commission ``or 
any designee of the Commission, including another registered entity.'' 
\73\ In practice, the Commission expects that security-based swap data 
repositories may satisfy their obligation to make available data 
pursuant to sections 13(n)(5)(G) and (H) by providing electronic access 
to appropriate authorities. To the extent a repository were to satisfy 
those requirements by some method other than electronic access, 
however, the Commission separately may consider whether to also 
designate particular authorities as being eligible for electronic 
access to the repository pursuant to section 13(n)(5)(D). In making 
such assessments under section 13(n)(5)(D), the Commission 
preliminarily believes that it may consider factors similar to the 
above determination factors, including the presence of confidentiality 
safeguards, and the authority's interest in the information based on 
its regulatory mandate or legal responsibility or authority.
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    \73\ 15 U.S.C. 78m(n)(5)(D).
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4. Notification Requirement
    The proposal would implement the statutory notification 
requirement--which states that a repository must notify the Commission 
when an entity requests that the repository make

[[Page 55189]]

available security-based swap data \74\--by requiring the repository to 
inform the Commission upon its receipt of the first request for data 
from a particular entity (which may include any request that the entity 
be provided ongoing online or electronic access to the data).\75\ A 
repository must keep such notifications and any related requests 
confidential.\76\
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    \74\ See Exchange Act section 13(n)(5)(G), 15 U.S.C. 
78m(n)(5)(G). As discussed below, see part IV, infra, the 
notification requirement does not apply to circumstances in which 
disclosures are made outside of the requirements of Exchange Act 
section 13(n)(5)(G), 15 U.S.C. 78m(n)(5)(G), particularly when a 
dually regulated data repository makes disclosure pursuant to 
foreign law, or when the Commission provides security-based swap 
data to an entity.
    \75\ See proposed Exchange Act rule 13n-4(e). The rule does not 
require the repository to proactively inform the Commission of 
subsequent requests.
    \76\ Exchange Act section 13(n)(5)(G), 15 U.S.C. 78m(n)(5)(G), 
and proposed rule 13n-4(b)(9) both require that a repository must 
make data available ``on a confidential basis.'' Failure by a 
repository to treat such notifications and requests as confidential 
could have adverse effects on the underlying basis for the requests. 
If, for example, a regulatory use of the data is improperly 
disclosed, such disclosure could signal a pending investigation or 
enforcement action, which could have detrimental effects.
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    The repository further would have to maintain records of all 
information related to the initial and all subsequent requests for data 
access requests from that entity, including records of all instances of 
online or electronic access, and records of all data provided in 
connection with such requests or access.\77\ For these purposes, we 
believe that ``all information related to'' such requests would likely 
include, among other things: The identity of the requestor or person 
accessing the data; the date, time and substance of the request or 
access; and copies of all data reports or other aggregations of data 
provided in connection with the request or access.
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    \77\ See proposed Exchange Act rule 13n-4(e).
    We note that Exchange Act rule 13n-7(b)(1) requires security-
based swap data repositories to maintain copies of ``all documents 
and policies and procedures required by the Act and the rules and 
regulations thereunder, correspondence, memoranda, papers, books, 
notices, accounts and other such records as shall be made or 
received by it in the course of its business as such.'' See also SDR 
Adopting Release, 80 FR 14501 (``This rule includes all electronic 
documents and correspondence, such as data dictionaries, emails and 
instant messages, which should be furnished in their original 
electronic format.''). Proposed Exchange Act rule 13n-4(e) 
identifies specific types of records that must be maintained in the 
specific context of access request to repositories.
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    In the Commission's preliminary view, the proposed notification 
requirement is designed to account for the way in which we believe 
entities are likely to access such data from repositories, by 
distinguishing steps that an entity takes to arrange access from 
subsequent electronic instructions and other means by which the 
recipient obtains data. By making relevant data available to the 
Commission in this manner, the proposed approach would place the 
Commission on notice that a recipient has the ability to access 
security-based swap data, and place the Commission in a position to 
examine such access as appropriate, while avoiding the inefficiencies 
that would accompany an approach whereby a repository must direct to 
the Commission information regarding each instance of access by each 
recipient. Moreover, the proposed approach would be consistent with the 
manner in which the Commission examines the records of regulated 
entities under the Commission's authority.
    The Commission recognizes that one commenter opposed any 
requirement that the Commission receive notice of a recipient's initial 
request, on the grounds that such notice may cause other authorities to 
hesitate to make such requests.\78\ While the Commission appreciates 
the commenter's concerns, the Commission preliminarily believes that it 
is necessary for the Commission to be informed of the initial request 
from a particular entity so that the Commission may assess whether the 
initial conditions to data access (i.e., MOUs or other arrangements as 
needed to satisfy the confidentiality condition and the indemnification 
exemption) \79\ have been met at the time the repository first is 
requested to provide the entity with information pursuant to the data 
access provisions, and, more generally, to facilitate the Commission's 
ongoing assessment of the repository's compliance with the data access 
provisions. The Commission also believes that commenter concerns that 
other regulators may be reluctant to place the Commission on notice of 
such initial requests are mitigated by the Commission's long history of 
cooperation with other authorities in supervisory and enforcement 
matters.\80\
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    \78\ See DTCC comment (Aug. 13, 2013) (``DTCC discourages the 
Commission from requiring a notification requirement upon initial 
request as suggested by the Cross-Border Proposal. Authorities will 
likely be hesitant to make such request to an SDR if it triggers a 
notice to another authority, particularly if such request is 
pursuant to an investigation. DTCC proposes that the Commission 
consider notification to be deemed satisfied if the request is made 
by an entity to the SDR pursuant to an established information 
sharing arrangement[.]'').
    \79\ See parts II.B and III.B, infra.
    \80\ The Commission also recognizes that the same commenter 
stated that ``regulators want direct electronic access to data in 
SDRs where that data is needed to fulfill regulatory 
responsibilities'' rather than access ``by request, with notice to 
another regulatory authority.'' See DTCC comment (Jan. 24, 2011) at 
11-12. Data repositories in fact can provide direct electronic 
access to relevant authorities under the proposed interpretation. 
The proposed requirement that the repository inform the Commission 
when the relevant authority first requests access to security-based 
swap data maintained by the repository, and to retain records of 
subsequent access, is designed to facilitate such direct access.
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5. Limitation to ``Security-Based Swap Data''
    Repositories that obtain security-based swap data may also obtain 
data regarding other types of financial instruments, such as swaps 
under the CFTC's jurisdiction. We do not read the data access 
provisions of Exchange Act sections 13(n)(5)(G) and (H)--which were 
added by Subtitle B of Title VII (which focused on the regulatory 
treatment of security-based swaps) \81\ to the Exchange Act (which 
generally addresses the regulation of securities such as security-based 
swaps)--to require a repository to make available data that does not 
involve security-based swaps. The statutory confidentiality condition 
to the data access requirement further suggests that the data access 
provisions are intended to apply only to security-based swap data.\82\ 
Accordingly, the proposed rules specifically address access to 
``security-based swap data'' obtained by a security-based swap data 
repository.\83\
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    \81\ See Dodd-Frank Act section 763(i) (addressing ``public 
reporting and repositories for security-based swaps,'' including the 
addition of section 13(n), 15 U.S.C. 78m(n), to the Exchange Act to 
address security-based swap data repositories); see generally 
Subtitle B to Title VII of the Dodd-Frank Act, section 761 et seq. 
(addressing ``Regulation of Security-Based Swap Markets'').
    \82\ In particular, the confidentiality condition to the data 
access provisions specifically requires that the recipient entity 
abide by confidentiality requirements for ``the information on 
security-based swap transactions that is provided,'' suggesting that 
the Exchange Act data access provisions are intended solely to 
address security-based swap data. See Exchange Act section 
13(n)(5)(H)(i), 15 U.S.C. 78m(n)(5)(H)(i).
    Moreover, this approach is consistent with the CFTC's comparable 
rules, which apply only to swap data. See 17 CFR 49.17(d) and 49.18 
(discussing regulators' access to swap data under the CEA).
    \83\ See proposed Exchange Act rule 13n-4(b)(9).
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B. Confidentiality Condition

    The Exchange Act provides that, prior to providing data, a 
repository ``shall receive a written agreement from each entity stating 
that the entity shall abide by the confidentiality requirements 
described in section 24 relating to the information on security-based 
swap transactions that is provided.'' \84\
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    \84\ See Exchange Act section 13(n)(5)(H)(i), 15 U.S.C. 
78m(n)(5)(H)(i).
    Exchange Act section 24, 15 U.S.C. 78x, generally addresses 
disclosures of information by the Commission and its personnel. In 
relevant part it provides that the Commission may, ``in its 
discretion and upon a showing that such information is needed,'' 
provide all records and other information ``to such persons, both 
domestic and foreign, as the Commission by rule deems appropriate if 
the person receiving such records or information provides such 
assurances of confidentiality as the Commission deems appropriate.'' 
See Exchange Act section 24(c), 15 U.S.C. 78x(c); see also Exchange 
Act rule 24c-1(b) (providing that the Commission may, upon ``such 
assurances of confidentiality as the Commission deems appropriate,'' 
provide non-public information to persons such as domestic and 
foreign governments or their political subdivisions, authorities, 
agencies or instrumentalities, self-regulatory organizations and 
foreign financial authorities).

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[[Page 55190]]

    The proposed rule implementing this condition would require that, 
before a repository provides information pursuant to the data access 
provisions, ``there shall be in effect an arrangement between the 
Commission and the entity (in the form of a memorandum of understanding 
or otherwise) to address the confidentiality of the security-based swap 
information made available to the entity.'' \85\ The proposed rule 
further would provide that this arrangement would be deemed to satisfy 
the statutory requirement that the repository receive a written 
confidentiality agreement from the entity.\86\
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    \85\ See proposed Exchange Act rule13n-4(b)(10).
    \86\ See Exchange Act section 13(n)(5)(H)(1). As discussed 
below, see part IV, infra, the confidentiality condition does not 
apply to circumstances in which disclosures are made outside of the 
requirements of Exchange Act section 13(n)(5)(G), 15 U.S.C. 
78m(n)(5)(G), particularly when a dually regulated data repository 
makes disclosure pursuant to foreign law, or when the Commission 
provides security-based swap data to an entity.
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    This proposed approach to implementing the confidentiality 
condition, in other words, would use an arrangement between the 
Commission and a regulator or other recipient entity to satisfy the 
statutory confidentiality condition. The approach would not necessitate 
the use of confidentiality agreements entered into by repositories.\87\
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    \87\ In this regard, the Commission notes that the statute does 
not require that the security-based swap data repository ``agree'' 
with the entity, ``enter into'' an agreement, or otherwise be a 
party to the confidentiality agreement. The statute merely states 
that the repository ``receive'' such an agreement. See Exchange Act 
section 13(n)(5)(H)(i), 15 U.S.C. 78m(n)(5)(H)(i). Accordingly, we 
believe that, at a minimum, the statutory language is ambiguous as 
to whether the data repository must itself be a party to the 
confidentiality agreement. In light of this ambiguity, we have 
preliminarily determined to read the statute to permit the 
Commission to enter into confidentiality agreements with the entity, 
with the repository receiving the benefits of the agreement. 
Accordingly, the Commission believes that it is appropriate to view 
a security-based swap data repository as having received a 
confidentiality agreement when the entity enters into a 
confidentiality agreement with the Commission and that agreement 
runs to the benefit of the repository.
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    In the Commission's preliminary view, this approach reflects an 
appropriate way to satisfy the interests associated with the 
confidentiality condition, while facilitating the statutory data access 
provision's goal of promoting the flow of information to authorities. 
The approach further would build upon the Commission's experience in 
negotiating MOUs with other regulators in connection with enforcement 
and supervision, particularly the Commission's experience in connection 
with the development of provisions related to maintaining the 
confidentiality of information.
    As a result, the approach would potentially obviate the need for 
each individual repository to negotiate and enter into dozens of 
confidentiality agreements. By building upon the Commission's 
experience and expertise in this area, moreover, the Commission expects 
that this approach also would help avoid the possibility of uneven and 
potentially inconsistent application of confidentiality protections 
across data repositories and recipient entities.
    In proposing this approach, the Commission also is mindful that the 
statutory provision specifically references the ``confidentiality 
requirements described in section 24'' of the Exchange Act. In the 
Commission's preliminary view this statutory language articulates a 
standard which requires that there be adequate confidentiality 
assurances. Thus, the Commission preliminarily believes that the 
proposed provision, under which the Commission would negotiate and 
enter into agreements providing such confidentiality assurances, 
appropriately implements the statutory reference to section 24.

C. Request for Comment

    The Commission requests comment regarding all aspects of these 
proposed rules regarding access to security-based swap data from 
repositories. Among other things, commenters particularly are invited 
to address the proposal that the confidentiality agreement requirement 
would be satisfied by an MOU or other agreement between the Commission 
and another entity. Commenters also are invited to address: The 
proposed limitation of the data access requirement to security-based 
swap data; the proposed provisions related to access by prudential 
regulators, the Federal Reserve Banks and the OFR; the criteria that 
the Commission should consider in evaluating whether to determine to 
permit additional entities to access data from repositories; whether 
the orders that make such determinations generally should encompass 
conditions that limit a relevant authority's access to information to 
reflect its regulatory mandate or legal responsibility or authority; 
whether the Commission should prescribe specific processes to govern 
requests for such access; and whether the Commission should prescribe a 
process to govern a repository's treatment of requests for access.
    In addition, commenters are invited to address the proposed rules 
implementing the notification requirement, including the proposed 
provisions regarding the maintenance of information related to data 
requests. In this regard, is there an alternative to requiring 
repositories to maintain copies of all data they provide in connection 
with the data access provisions that would still permit the Commission 
to assess the repository's ongoing compliance with those provisions? 
For example, are alternative approaches available such that the 
Commission should not require repositories to maintain actual copies of 
all reports or other aggregations of data provided pursuant to the data 
access provisions, such as if the repository instead implements 
policies and procedures sufficient to demonstrate a process for 
creating records that reflect the data provided, and the repository 
produces promptly copies of such records upon request by a 
representative of the Commission? \88\ Would such an alternative 
approach reduce the burdens on repositories while still permitting the 
Commission to assess ongoing compliance?
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    \88\ For example, in adopting Exchange Act rule 17a-4(b)(13) to 
provide that broker-dealers must preserve certain written policies 
and procedures in connection with creditworthiness assessments, the 
Commission stated that although the rule does not require that a 
broker-dealer maintain a record of each such creditworthiness 
determination, a broker-dealer would need to be able to support each 
such determination, and that the broker-dealer may do so by either 
maintaining documentation of those determinations or by being in a 
position to ``replicate the original credit risk determination using 
the same process, information, and inputs employed to make the 
original determination.'' See Exchange Act Release No. 71194 (Dec. 
27, 2013), 79 FR 1522, 1528-29, 1550 (Jan. 8, 2014).
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    Commenters further are invited to address whether the Commission 
should determine that other domestic authorities, such as one or more 
self-regulatory organizations, should be eligible to access security-
based swap data pursuant to these provisions. If so, should the access 
of such self-regulatory organizations be limited in any particular 
respects?

[[Page 55191]]

III. Proposed Exemption From the Indemnification Requirement

A. Proposed Exemption

    The Exchange Act also conditions the data access requirement on 
each recipient entity agreeing ``to indemnify the security-based swap 
data repository and the Commission for any expenses arising from 
litigation relating to information provided under section 24.'' \89\
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    \89\ Exchange Act section 13(n)(5)(H)(ii), 15 U.S.C. 
78m(n)(5)(H)(ii). As discussed below, see part IV, infra, the 
statutory indemnification requirement would not always be triggered 
by the disclosure of security-based swap information.
     In the event that the proposed exemption is unavailable, the 
Commission agrees with one commenter's view that ``any indemnity 
should be limited in scope to minimize the potential reduction in 
value of registered SDRs to the regulatory community.'' See DTCC 
comment (Jan. 24, 2011) at 12. Consistent with that view, as stated 
in the Cross-Border Proposing Release, the Commission would not 
expect that an indemnification agreement would include a provision 
requiring a relevant authority to indemnify the repository from the 
repository's own wrongful or negligent acts. See Cross-Border 
Proposing Release, 78 FR 31051 n.829.
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    Pursuant to the Commission's authority under Exchange Act section 
36,\90\ the Commission is proposing a conditional exemption from that 
statutory indemnification requirement. This proposed exemption would be 
effective whenever the applicable conditions are met, in contrast with 
the earlier proposal, which would have conditionally exempted 
regulators and other authorities from the indemnification requirement 
only at the election of the data repository.\91\
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    \90\ 15 U.S.C. 78mm (providing the Commission with general 
exemptive authority . . . ``to the extent that such exemption is 
necessary or appropriate in the public interest, and is consistent 
with the protection of investors'').
    \91\ To implement this approach, the Commission proposes in 
relevant part that the indemnification requirement conditionally 
``shall not be applicable'' with regard to the repository's 
disclosure of security-based swap information. See proposed Exchange 
Act rule 13n-4(d)(1). The earlier proposal would have conditionally 
provided that a registered security-based swap data repository ``is 
not required to comply'' with the indemnification requirement. See 
Cross-Border Proposing Release, 78 FR 31209 (paragraph (d) of 
proposed rule 13n-4).
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    This proposed exemption reflects the Commission's preliminary 
concern that requiring authorities to agree to provide indemnification 
could lead to negative consequences in practice. The Commission 
continues to understand that certain authorities may be legally 
prohibited or otherwise limited from agreeing to indemnify data 
repositories or the Commission for expenses arising in connection with 
the information received from a repository.\92\
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    \92\ As stated in the Cross-Border Proposing Release, the 
Commission recognizes that certain domestic authorities, including 
some of those expressly identified in Exchange Act section 
13(n)(5)(G), 15 U.S.C. 78m(n)(5)(G), as a matter of law cannot 
provide an open-ended indemnification agreement. See Cross-Border 
Proposing Release, 78 FR 31048-49 (particularly noting that the 
Antideficiency Act prohibits certain U.S. federal agencies from 
obligating or expending federal funds in advance or in excess of an 
appropriation, apportionment, or certain administrative subdivisions 
of those funds, e.g., through an unlimited or unfunded 
indemnification).
---------------------------------------------------------------------------

    As a result, application of the indemnification requirement may 
chill some requests by regulators or other authorities for access to 
security-based swap data, which would hinder those authorities' ability 
to address their own regulatory mandate or legal responsibility or 
authority.\93\ The resulting lack of access also may impair 
coordination among regulators with regard to the oversight of market 
participants that engage in security-based swap transactions across 
national boundaries. For example, European Union (``EU'') law provides 
that the ability of certain non-EU regulators to access data from EU 
repositories is conditioned on there being an international agreement 
that ensures that EU authorities have ``immediate and continuous access 
to all of the information needed for the exercise of their duties.'' 
\94\ As a result, application of the indemnification requirement 
without an exemption being available potentially could preclude EU 
authorities from accessing data from U.S. security-based swap data 
repositories. Under such circumstances, it is possible that EU 
authorities may be unwilling to permit the Commission and other U.S. 
regulators to access security-based swap data from EU repositories. The 
resulting concerns associated with a lack of regulatory access to 
security-based swap data are particularly significant given that data 
access allows relevant authorities to be in a better position to, among 
other things, monitor risk exposures of individual counterparties to 
swap and security-based swap transactions, monitor concentrations of 
risk exposures and evaluate risks to financial stability.\95\
---------------------------------------------------------------------------

    \93\ See DTCC cross-border comment (Aug. 21, 2013) at 6 (``The 
continued presence of the Indemnification Provision (even as 
modified by the exemption in the Cross-Border Proposal) may pose 
problems for Commission-regulated, U.S.-based SDRs and their ability 
to share information with third-party regulatory authorities. As a 
result, foreign regulators may seek to establish their own 
`national' repositories to ensure access to the information they 
need, fragmenting the data among jurisdictions. Similarly, non-U.S. 
trade repositories may find themselves subject to similar reciprocal 
impediments to sharing information with the Commission or other U.S. 
regulatory agencies absent a confidentiality and indemnification 
agreement.''); see also DTCC comment (Nov. 15, 2010) at 3 (``DTCC 
remains concerned that regulators are not likely to grant SDRs 
indemnification in exchange for access to the information and, 
accordingly, regulators may actually receive less aggregated market 
data. Such an outcome would result in a reduction of information 
accessible to regulators on a timely basis both domestically and 
internationally, which contravenes the purpose of SDRs and 
jeopardizes market stability.''); Cleary Gottlieb comment (Sept. 20, 
2011) at 31 (``[T]he indemnification requirement could be a 
significant impediment to effective regulatory coordination, since 
non-US regulators may establish parallel requirements for U.S. 
regulators to access swap data reported in their jurisdictions.''); 
ESMA comment (Jan. 17, 2011) at 2 (``We believe that ensuring 
confidentiality is essential for exchanging information among 
regulators and such indemnification agreement undermines the key 
principle of trust according to which exchange of information should 
occur.'').
    \94\ See EU regulation 648/2012 (``EMIR''), art. 75(2).
    \95\ See Darrell Duffie, Ada Li, and Theo Lubke, Policy 
Perspectives of OTC Derivatives Market Infrastructure, Federal 
Reserve Bank of New York Staff Report No. 424, dated January 2010, 
as revised March 2010 (with data from repositories regulators can 
``explore the sizes and depths of the markets, as well as the nature 
of the products being traded. With this information, regulators are 
better able to identify and control risky market practices, and are 
better positioned to anticipate large market movements.''); see also 
DTCC comment (June 3, 2011) at 5 (noting that a data repositories 
should be able to provide: (i) Enforcement authorities with 
necessary trading information; (ii) regulatory agencies with 
counterparty-specific information about systemic risk based on 
trading activity; (iii) aggregate trade information on market-wide 
activity and aggregate gross and net open interest for publication; 
and (iv) real-time reporting from [security-based swap execution 
facilities] and bilateral counterparties and related dissemination).
---------------------------------------------------------------------------

    Such a result associated with application of the indemnification 
requirement further may make substituted compliance unavailable in 
connection with security-based swap data reporting requirements, given 
that under rules adopted by the Commission the availability of 
substituted compliance for those requirements is predicated in part on 
the Commission's ability to directly access data in foreign 
repositories.\96\
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    \96\ See Regulation SBSR, rule 908(c)(2)(iii)(C), 17 CFR 
242.908(c)(2)(iii)(C) (conditioning the availability of substituted 
compliance in part on the Commission having ``direct electronic 
access to the security-based swap data held by a trade repository or 
foreign regulatory authority to which security-based swaps are 
reported pursuant to the rules of that foreign jurisdiction''); see 
also Exchange Act Release No. 74244 (Feb. 11, 2015), 80 FR 14564, 
14661 (Mar.19, 2015) (``Regulation SBSR Adopting Release'') 
(``granting substituted compliance without direct electronic access 
would not be consistent with the underlying premise of substituted 
compliance: That a comparable regulatory result is reached through 
compliance with foreign rules rather than with the corresponding 
U.S. rules.'').
---------------------------------------------------------------------------

    The Commission recognizes that indemnification may help support 
confidentiality safeguards by making a recipient liable for expenses 
that a repository or the Commission incurs in connection with breaches 
of confidentiality. Nonetheless, the

[[Page 55192]]

countervailing considerations noted above indicate that 
indemnification--of either the repository or the Commission--should not 
be required so long as appropriate confidentiality protections are 
provided in other ways.
    For these reasons the Commission preliminarily believes that it is 
necessary and appropriate in the public interest, and consistent with 
the protection of investors, that the indemnification requirement be 
subject to an exemption that applies whenever the applicable conditions 
are satisfied.\97\
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    \97\ The Commission is not incorporating a commenter's 
suggestion that there be ``a safe harbor provision from liability 
for information shared pursuant to global information sharing 
agreements into the Indemnification Exemption for SDRs operating 
pursuant to information sharing arrangements, as defined in the 
Indemnification Exemption, or comparable to those published by the 
OTC Derivatives Regulators Forum (``ODRF'') or CPSS-IOSCO.'' See 
DTCC cross-border comment (Aug. 21, 2013) at 7; see also DTCC 
comment (Jan. 24, 2011) at 3 (urging the Commission to aim for 
regulatory comity as reflected in ODRF and CPSS-IOSCO standards); 
DTCC comment (June 3, 2011) at 6-7 (urging that the global framework 
incorporate efforts of the ODRF and the OTC Derivatives Regulators 
Supervisors Group).
    To the extent that the commenter suggests that there be a safe 
harbor from the indemnification requirement, the Commission 
preliminarily believes that this proposed exemption, which is more 
narrowly tailored than the commenter's suggestion, would 
sufficiently address a repository's need for certainty. The 
Commission further notes that a repository's statutory duty to 
maintain the privacy of the information received is separate and 
distinct from its statutorily mandated duty to provide security-
based swap data to relevant authorities when specific conditions are 
satisfied, and that the privacy of security-based swap data provided 
to relevant authorities was addressed by Congress through the 
confidentiality agreement requirement in Exchange Act section 
13(n)(5)(H), 15 U.S.C. 78m(n)(5)(H).
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B. Confidentiality Arrangement Condition

    The proposal in part would condition the indemnification exemption 
upon there being in effect one or more arrangements (in the form of an 
MOU or otherwise) between the Commission and the entity that addresses 
the confidentiality of the security-based swap information provided and 
other matters as determined by the Commission.\98\ The Commission 
preliminarily believes that such an MOU or other arrangement would 
address similar confidentiality interests that appear to be reflected 
by the statutory indemnification requirement, particularly given that 
the disclosure of confidential information inconsistent with such 
arrangements can lead to the termination of the arrangement and the 
loss of data access. Just as an indemnification agreement may be 
expected to incentivize the confidential treatment of information, such 
a confidentiality arrangement would help strengthen the authority's 
incentive to maintain the confidentiality of information.
---------------------------------------------------------------------------

    \98\ See proposed Exchange Act rule 13n-4(d)(2)(ii).
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    The Commission anticipates that in determining whether to enter 
into such an MOU or other arrangement, it would consider, among other 
things, whether: (a) Security-based swap information from a repository 
would help fulfill the relevant authority's regulatory mandate, or 
legal responsibility or authority; (b) the relevant authority provides 
such assurances of confidentiality as the Commission deems appropriate 
with respect to the security-based swap information provided to the 
authority; (c) the relevant authority is subject to statutory and/or 
regulatory confidentiality safeguards; (d) the relevant authority 
agrees to provide the Commission with reciprocal assistance in matters 
within the Commission's jurisdiction; and (e) an MOU or other 
arrangement would be in the public interest. These considerations are 
comparable to the criteria that the Commission anticipates considering 
as it determines whether an entity is eligible to access information 
pursuant to the data access provisions.\99\ Accordingly, for regulators 
or other authorities whose access is subject to a determination order, 
the same confidentiality MOUs or other agreements that are needed to 
satisfy the indemnification exemption may also serve to satisfy those 
prerequisites to the determinations.\100\
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    \99\ See notes 64 through 69, supra, and accompanying text.
    \100\ Those entities that are expressly identified in the 
statute or the implementing rules (and thus are not subject to the 
determination process) also would need to enter into a separate MOU 
or other agreement to satisfy the confidentiality agreement 
condition.
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C. Condition Regarding Regulatory Mandate or Legal Responsibility or 
Authority

    The proposal further would condition the indemnification exemption 
on the requirement that the information relate to persons or activities 
within the recipient entity's regulatory mandate, or legal 
responsibility or authority.\101\ This proposed condition should reduce 
the potential for disclosure of confidential information by limiting 
the quantity of information each recipient may access. This limitation 
on access also should help address commenter concerns regarding 
``unfettered access'' to security-based swap data.\102\ This approach 
of limiting the availability of data to reflect such considerations 
also has parallels to the approach that one commenter indicated that it 
follows on a voluntary basis for providing relevant authorities with 
access to certain credit default swap information.\103\
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    \101\ See proposed Exchange Act rule 13n-4(d)(1).
    \102\ See note 14, supra.
    \103\ See note 71, supra (DTCC statement that it routinely 
provides U.S. regulators with data related to overseas credit 
default swap transactions entered into by non-U.S. persons on U.S. 
reference entities, and that it provides European regulators with 
data related to credit default swap transactions in the U.S. by U.S. 
persons on European reference entities).
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    The proposal would implement this requirement by further 
conditioning the indemnification exemption by requiring that the MOU or 
other arrangement between the Commission and the entity accessing the 
data would specify the types of security-based swap information that 
would relate to the recipient entity's regulatory mandate, or legal 
responsibility or authority.\104\ While the relevant factors for 
specifying which information is within an entity's regulatory mandate, 
or legal responsibility or authority for these purposes may vary 
depending on the relevant facts and circumstances, such factors 
potentially would include the location of a counterparty to the 
transaction and the location of the reference entity.\105\ In this way, 
the MOU or other arrangement would help reduce uncertainty regarding 
how the associated condition to the indemnification exemption may apply

[[Page 55193]]

to particular types of information requests, and would provide 
direction to repositories regarding which disclosures would be covered 
by the indemnification exemption.\106\
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    \104\ See proposed Exchange Act rule 13n-4(d)(2)(ii).
    \105\ As an example, in the event of a request for access by a 
foreign authority that is responsible for security-based swap market 
surveillance and enforcement--and subject to negotiation of such an 
MOU or other arrangement between the Commission and that authority--
criteria indicative of data regarding a transaction being within the 
authority's regulatory mandate or legal responsibility or authority 
may include: (i) One or more of the counterparties to the 
transaction being domiciled or having a principal place of business 
in the foreign jurisdiction (including branches of entities that are 
domiciled or that have a principal place of business in that 
jurisdiction); (ii) one or more of the counterparties being a 
subsidiary of a person domiciled or having a principal place of 
business in the foreign jurisdiction; (iii) one or more of the 
counterparties being a fund or other collective investment vehicle 
with an adviser that is domiciled or that have a principal place of 
business in the foreign jurisdiction; (iv) one or more of the 
counterparties being registered with the authority as a dealer or in 
some other capacity; or (v) the reference entity for the security-
based swap being domiciled or having a principal place of business 
in the foreign jurisdiction.
    As another example, in the case of a foreign authority that is 
responsible for prudential regulation, criteria indicative of data 
regarding a transaction being within the entity's regulatory mandate 
or legal responsibility or authority may include one or more of the 
counterparties to the transaction being part of a consolidated 
organization that is supervised by the prudential authority, 
including all affiliates within that consolidated organization.
    \106\ The Commission anticipates that data repositories would be 
able to rely on the guidance provided by such arrangements when 
assessing whether particular information would be subject to the 
indemnification exemption, thus permitting an authority to access 
that information without an indemnification agreement.
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D. Request for Comment

    The Commission requests comment on all aspects of the proposed 
exemption to the statutory indemnification requirement. Commenters 
particularly are invited to address whether the exemption's proposed 
scope would adequately address the concerns associated with 
implementing the indemnification requirement. Among other things, 
commenters are invited to address whether alternative approaches or 
other considerations more effectively reflect the access and 
confidentiality interests associated with the Dodd-Frank Act? Also, 
should additional conditions be incorporated into the exemption?
    Commenters further are invited to address whether the proposal 
appropriately would make use of an MOU or other arrangement to provide 
sufficient guidance to a repository regarding an entity's regulatory 
mandate, or legal responsibility or authority in connection with a 
request for security-based swap data. In this respect, would the 
proposed approach provide a repository with an adequate degree of 
guidance regarding which disclosures of information may or may not be 
subject to protection? Are there particular criteria that would be 
useful for incorporating into the MOU or other arrangement to help 
delimit which information would fall within an entity's regulatory 
mandate, or legal responsibility or authority?

IV. Applicability of Exchange Act Data Access and Indemnification 
Provisions

    The Exchange Act provisions addressed above--sections 13(n)(5)(G) 
and (H) \107\--establish one means by which certain regulators and 
other authorities may access security-based swap data from 
repositories. It is important to recognize, however, that those 
provisions do not exclusively govern the means by which such regulators 
or other authorities might access security-based swap data.
---------------------------------------------------------------------------

    \107\ 15 U.S.C. 78m(n)(5)(G) and (H).
---------------------------------------------------------------------------

    In particular, in the circumstances discussed below, regulators and 
other authorities in certain circumstances may access security-based 
swap data via authority that is independent of the above provisions. In 
those circumstances, the Commission preliminarily believes that the 
conditions associated with those data access provisions--particularly 
the provisions regarding indemnification, notification and 
confidentiality agreements--should not govern access arising from such 
independent authority.

A. Data Access Authorized by Foreign Law

    The Commission continues to believe preliminarily, as discussed in 
the Cross-Border Proposing Release, that ``the Indemnification 
Requirement does not apply when an SDR is registered with the 
Commission and is also registered or licensed with a foreign authority 
and that authority is obtaining security-based swap information 
directly from the SDR pursuant to that foreign authority's regulatory 
regime.'' \108\ In those circumstances, the dually registered data 
repository would be subject to a data access obligation that is 
independent of the Exchange Act data access obligation, and the 
notification, confidentiality and indemnification conditions to the 
Exchange Act data access provision would not apply.
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    \108\ See Cross-Border Proposing Release, 78 FR 31049 n.807.
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B. Receipt of Information Directly From the Commission

    The Exchange Act also provides that relevant authorities may obtain 
security-based swap data from the Commission, rather than directly from 
data repositories.\109\
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    \109\ See Cross-Border Proposing Release, 78 FR 31045.
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    First, Exchange Act section 21(a)(2) \110\ states that, upon 
request of a foreign securities authority, the Commission may provide 
assistance in connection with an investigation the foreign securities 
authority is conducting to determine whether any person has violated, 
is violating or is about to violate any laws or rules relating to 
securities matters that the requesting authority administers or 
enforces.\111\ That section further provides that, as part of this 
assistance, the Commission in its discretion may conduct an 
investigation to collect information and evidence pertinent to the 
foreign securities authority's request for assistance.\112\
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    \110\ 15 U.S.C. 78u(a)(2).
    \111\ Exchange Act section 3(a)(50), 15 U.S.C. 78c(a)(50), 
broadly defines ``foreign securities authority'' to include ``any 
foreign government, or any governmental body or regulatory 
organization empowered by a foreign government to administer or 
enforce its laws as they relate to securities matters.''
    \112\ Exchange Act section 21(a)(2), 15 U.S.C. 78u(a)(2), also 
states that the Commission may provide such assistance without 
regard to whether the facts stated in the request also would 
constitute a violation of U.S. law.
    That section further states that when the Commission decides 
whether to provide such assistance to a foreign securities 
authority, the Commission shall consider whether the requesting 
authority has agreed to provide reciprocal assistance in securities 
matters to the United States, and whether compliance with the 
request would prejudice the public interest of the United States.
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    In addition, the Commission may share ``nonpublic information in 
its possession'' with, among others, any ``federal, state, local, or 
foreign government, or any political subdivision, authority, agency or 
instrumentality of such government . . . [or] a foreign financial 
regulatory authority.'' \113\ This authority is subject to the 
recipient providing ``such assurances of confidentiality as the 
Commission deems appropriate.'' \114\
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    \113\ See Exchange Act rule 24c-1(c) (implementing Exchange Act 
section 24(c), 15 U.S.C. 78x(c), which states that the Commission 
may, ``in its discretion and upon a showing that such information is 
needed,'' provide records and other information ``to such persons, 
both domestic and foreign, as the Commission by rule deems 
appropriate,'' subject to assurances of confidentiality).
    \114\ See id.
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    In the Commission's view, and consistent with Commission practice 
for many years, these sections provide the Commission with separate, 
additional authority to assist domestic and foreign authorities in 
certain circumstances, such as, for example, by providing security-
based swap data directly to the authority. At those times, the 
authority would receive information not from the data repository, but 
instead from the Commission.

C. Request for Comment

    The Commission requests comment on these preliminary 
interpretations regarding the scope of the data access requirement and 
conditions set forth in Exchange Act sections 13(n)(5)(G) and (H).

V. Paperwork Reduction Act

    Certain provisions of the proposed rules contain ``collection of 
information'' requirements within the meaning of the Paperwork 
Reduction Act of 1995 (``PRA'').\115\ The SEC has submitted them to the 
Office of Management and Budget (``OMB'') for review in accordance with 
44 U.S.C. 3507 and 5 CFR 1320.11. The title of the new collection of 
information is ``Security-Based Swap Data Repository Data Access 
Requirements.'' An agency may not conduct or sponsor, and a

[[Page 55194]]

person is not required to respond to, a collection of information 
unless it displays a currently valid OMB control number. OMB has not 
yet assigned a control number to the new collection of information.
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    \115\ 44 U.S.C. 3501 et seq.
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A. Summary of Collection of Information

    The proposal would require security-based swap data repositories to 
make security-based swap data available to other parties, including 
certain government bodies. This data access obligation would be 
conditioned on confidentiality and indemnification requirements, and 
the indemnification requirement itself would be subject to a 
conditional exemption. The proposal further would require such 
repositories to create and maintain information regarding such data 
access.

B. Proposed Use of Information

    The data access requirement and associated conditions would provide 
the regulators and other authorities that receive the relevant 
security-based swap data with tools to assist with the oversight of the 
security-based swap market and of dealers and other participants in the 
market, and to assist with the monitoring of risks associated with that 
market.

C. Respondents

    The data access requirement will apply to every person required to 
be registered with the Commission as a security-based swap data 
repository--that is every U.S. person performing the functions of a 
security-based swap data repository, and to every non-U.S. person 
performing the functions of a security-based swap data repository 
within the United States absent an exemption.\116\ Commission staff is 
aware of seven persons that have, to date, filed applications for 
registration with the CFTC as swap data repositories, three of which 
have withdrawn their applications and four of which are provisionally 
registered with the CFTC. It is reasonable to estimate that a similar 
number of persons provisionally registered with the CFTC may seek to 
register with the Commission as security-based swap data repositories. 
Therefore, the Commission estimates, for PRA purposes, that ten persons 
might register with the Commission as security-based swap data 
repositories.\117\
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    \116\ As discussed above, see note 13, supra, the Commission has 
determined that a non-U.S. person that performs the functions of a 
security-based swap data repository within the United States is 
required to register with the Commission absent an exemption. The 
Commission also has adopted Exchange Act rule 13n-12 to provide an 
exemption from data repository requirements for certain non-U.S. 
persons.
    \117\ The Commission used the same estimate when adopting final 
rules to implement statutory provisions related to the registration 
process, duties and core principles applicable to security-based 
swap data repositories. See SDR Adopting Release, 80 FR 14521.
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    The conditions to data access under these proposed rules further 
will affect all persons that may seek access to security-based swap 
data pursuant to these provisions. As discussed below, these may 
include up to 30 domestic entities.

D. Total Annual Reporting and Recordkeeping Burden

1. Data Access Generally
    The data access provisions may implicate various types of PRA 
burdens and costs: (i) Burdens and costs that regulators and other 
authorities incur in connection with negotiating MOUs or other 
arrangements with the Commission in connection with the data access 
provisions; (ii) burdens and costs that certain authorities that have 
not been determined by statute or Commission rule may incur in 
connection with requesting that the Commission grant them access to 
repository data; \118\ (iii) burdens and costs associated with 
information technology systems that repositories develop in connection 
with providing data to regulators and other authorities; and (iv) 
burdens and costs associated with the requirement that repositories 
notify the Commission of requests for access to security-based swap 
data, including associated recordkeeping requirements.
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    \118\ These include MOUs and other arrangements in connection 
with: The determination of additional entities that may access 
security-based swap data (see part II.A.3, supra), the 
confidentiality condition (see part II.B.1, supra) and the 
indemnification exemption (see parts III.B.2, 3, supra).
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a. MOUs
    As discussed above, entities that access security-based swap data 
pursuant to these data access provisions would be required to enter 
into MOUs or other arrangements with the Commission to address the 
confidentiality condition and the indemnification exemption. In some 
cases, those entities also would enter into MOUs or other arrangements 
in connection with the Commission's determination of the entity as 
authorized to access such data (to the extent that the entity's access 
is already determined by statute or by the proposed rules). For 
purposes of the PRA requirements, the Commission estimates that up to 
30 domestic entities potentially might enter into such MOUs or other 
arrangements, reflecting the nine entities specifically identified by 
statute or the proposed rules, and up to 21 additional domestic 
governmental entities or self-regulatory organizations that may seek 
access to such data. Based on the Commission's experience in 
negotiating similar MOUs that address regulatory cooperation, including 
confidentiality issues associated with regulatory cooperation, the 
Commission preliminarily believes that each regulator on average would 
expend 500 hours in negotiating such MOUs.\119\
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    \119\ It may be expected that the initial MOU or other 
arrangement that is entered into between the Commission and another 
regulator may take up to 1,000 hours for that regulator to 
negotiate. In practice, however, subsequent MOUs and other 
arrangements involving other recipient entities would be expected to 
require significantly less time on average, by making use of using 
the prior MOUs as a basis for negotiation. Based on these 
principles, the Commission preliminarily estimates that the average 
amount of time that domestic and foreign recipients of data would 
incur in connection with negotiating these arrangements would be 500 
hours.
    To the extent that each of those 30 domestic entities were to 
seek to access data pursuant to these provisions, and each of the 
applicable MOUs or other arrangements were to take 500 hours on 
average, the total burden would amount to 15,000 hours.
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b. Requests for Access
    Separately, certain entities that are not identified by statute 
and/or the proposed rules may request that the Commission determine 
that they may access such security-based swap data. For those entities, 
in light of the relevant information that the Commission preliminarily 
would consider in connection with such determinations (apart from the 
MOU issues addressed above)--including information regarding how the 
entity would be expected to use the information, information regarding 
the entity's regulatory mandate or legal responsibility or authority, 
and information regarding reciprocal access--the Commission 
preliminarily estimates that each such entity would expend 40 hours in 
connection with such request. As noted above, the Commission estimates 
that 21 domestic entities not encompassed in the proposed rule may seek 
access to the data. Accordingly, to the extent that 21 domestic 
entities were to request access (apart from the nine entities 
identified by statute or the proposed rule), the Commission estimates a 
total burden of 840 hours for these entities to prepare and submit 
requests for access.
c. Systems Costs
    The Commission previously addressed the PRA costs associated with 
the Exchange Act's data access

[[Page 55195]]

requirement in 2010, when the Commission initially proposed rules to 
implement those data access requirements in conjunction with other 
rules to implement the duties applicable to security-based swap data 
repositories. At that time, based on discussions with market 
participants, the Commission estimated that a series of proposed rules 
to implement duties applicable to security-based swap data 
repositories--including the proposed data access rules as well as other 
rules regarding repository duties (e.g., proposed rules requiring 
repositories to accept and maintain data received from third parties, 
to calculate and maintain position information, and to provide direct 
electronic access to the Commission and its designees)--together would 
result in an average one-time start-up burden per repository of 42,000 
hours and $10 million in information technology costs for establishing 
systems compliant with all of those requirements. The Commission 
further estimated the average per-repository ongoing annual costs of 
such systems to be 25,200 hours and $6 million.\120\
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    \120\ See SDR Proposing Release, 75 FR 77348-49. The Commission 
previously estimated, for PRA purposes, that ten persons may 
register with the Commission as security-based swap data 
repositories. See SDR Adopting Release, 80 FR 14521, 14523. Based on 
the estimate of ten respondents, the Commission estimated total one-
time costs of 420,000 hours and $10 million, and total annual 
ongoing systems costs of 252,000 and $60 million. See SDR Proposing 
Release, 75 FR 77349.
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    The Commission incorporated those same burden estimates earlier 
this year, when the Commission adopted final rules to implement the 
duties applicable to security-based swap data repositories, apart from 
the data access requirement.\121\
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    \121\ See SDR Adopting Release, 80 FR 14523. The Commission 
submitted the PRA burden associated with that release to OMB for 
approval, and the OMB has approved that collection of information.
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    Subject to the connectivity issues addressed below, the Commission 
believes that the burden estimates associated with the 2010 proposed 
repository rules encompassed the costs and burdens associated with the 
proposed data access requirements in conjunction with other system-
related requirements applicable to security-based swap dealers. To 
comply with those other system-related requirements--including in 
particular requirements that repositories provide direct electronic 
access to the Commission and its designees--we preliminarily believe 
that it is reasonable to expect that repositories may use the same 
systems as they would also use to comply with the data access 
requirements at issue here, particularly given that both types of 
access requirements would require repositories to provide security-
based swap information to particular recipients subject to certain 
parameters.\122\ As a result, subject to per-recipient connectivity 
burdens addressed below, the Commission preliminarily believes that 
would be no additional burdens associated with information technology 
costs to implement the data access requirements of the proposed rule.
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    \122\ The Commission also anticipates that repositories would 
use the same systems in connection with the Exchange Act data access 
requirements as they use in connection with the corresponding 
requirements under the CEA.
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    The Commission also recognizes, however, that once the relevant 
systems have been set up, repositories may be expected to incur 
addition incremental burdens and costs associated with setting up 
access to security-based swap data consistent with the recipient's 
regulatory mandate or legal responsibility or authority.\123\ The 
Commission preliminarily believes that, for any particular recipient, 
security-based swap data repositories on average would incur a burden 
of 26 hours.\124\ As discussed below, based on the estimate that 
approximately 300 relevant authorities may make requests for data from 
security-based swap data repositories,\125\ the Commission 
preliminarily estimates that each repository would incur a one-time 
burden of 7,800 hours in connection with providing that 
connectivity.\126\
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    \123\ In addressing those burdens, the Commission expects that 
the MOUs or other arrangements that are used to satisfy the 
conditions of the indemnification exemption will set forth objective 
criteria that delimit the scope of a recipient's ability to access 
security-based swap data pursuant to the indemnification exemption. 
The Commission further expects that repositories would use those 
criteria to program their data systems to reflect the scope of the 
recipient's access to repository data. Absent such objective and 
programmable criteria, repositories would be expected to incur 
greater burdens to assess whether an authority's request satisfies 
the relevant conditions, particularly with regard to whether 
particular information relates to persons or activities within the 
entity's regulatory mandate or legal responsibility or authority.
    \124\ This estimate is based on the view that for each recipient 
requesting data, a repository would incur a 25 hour burden 
associated with programming or otherwise inputting the relevant 
parameters, encompassing 20 hours of programmer analyst time and 
five hours of senior programmer time. The estimate also encompasses 
one hour of attorney time in connection with each such recipient.
    \125\ See part VI.C.3.ii, infra.
    \126\ Across an estimated ten repositories, accordingly, the 
Commission estimates that repositories cumulatively would incur a 
one-time burden of 78,000 hours in connection with providing such 
connectivity.
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d. Providing Notification of Requests, and Associated Records 
Requirements
    Under the proposed rules, repositories would be required to inform 
the Commission when they receive the first request for security-based 
swap data from a particular entity.\127\ As discussed below, based on 
the estimate that approximately 300 relevant authorities may make 
requests for data from security-based swap data repositories, the 
Commission estimates that each repository would provide the Commission 
with actual notice approximately 300 times.\128\ Moreover, based on the 
estimate that ten persons may register with the Commission as security-
based swap data repository, the Commission estimates that repositories 
in the aggregate would provide the Commission with actual notice a 
total of 3,000 times. The Commission preliminarily estimates that each 
such notice would take no more than one-half hour to make on average, 
leading to a cumulative estimate of 1,500 hours associated with the 
notice requirement.
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    \127\ See proposed Exchange Act rule 13n-4(e) (further requiring 
the repository to maintain records of the initial and all subsequent 
requests).
    \128\ See part VI.C.3.a.ii, infra.
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    The proposed rule further requires that repositories must maintain 
records of all information related to the initial and all subsequent 
requests for data access, including records of all instances of online 
or electronic access, and records of all data provided in connection 
with such access.\129\ The Commission estimates that there cumulatively 
may be 360,000 subsequent data requests or access per year across all 
security-based swap data repositories, for which repositories must 
maintain records as required by the proposed rule.\130\ Based on its 
experience with recordkeeping costs associated with security-based 
swaps generally, the Commission preliminarily estimates that for each 
repository this requirement would create an initial burden of roughly 
360 hours, and an annualized burden of roughly 280 hours and $40,000 in 
information technology costs.\131\
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    \129\ See proposed Exchange Act rule 13n-4(e).
    \130\ See part VI.C.3.a.ii, infra.
    \131\ Across an estimated ten repositories, accordingly, the 
Commission preliminarily estimates that repositories cumulatively 
will incur an initial burden of roughly 3,600 hours in information 
technology costs, and an annualized burden of roughly 2,800 hours 
and $400,000 in information technology costs.
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2. Confidentiality Condition
    The Commission preliminarily does not believe that the 
confidentiality provision of the proposal would be

[[Page 55196]]

associated with collections of information that would result in a 
reporting or recordkeeping burden for security-based swap data 
repositories. This is because, under the proposal, the confidentiality 
condition would be satisfied by an MOU or other arrangement between the 
Commission and the recipient entity (i.e., another regulatory 
authority) addressing confidentiality. We preliminarily expect that in 
practice that the condition will be addressed by MOUs or other 
arrangements entered into by the Commission, and that repositories 
accordingly would not be involved in the drafting or negotiation of 
confidentiality agreements.
    As discussed above, moreover, the confidentiality provision would 
be expected to impose burdens on authorities that seek to access data 
pursuant to these provisions, as a result of the need to negotiate 
confidentiality MOUs or other arrangements.\132\
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    \132\ See part V.D.1.a, supra.
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E. Collection of Information Is Mandatory

    The conditional data access requirements of Exchange Act sections 
13(n)(5)(G) and (H) and the underlying rules are mandatory for all 
security-based swap data repositories. The confidentiality condition is 
mandatory for all entities that seek access to data under those 
requirements. Also, the conditions to the indemnification exemption are 
mandatory to entities that seek to rely on the exemption, which the 
Commission believes will be all entities that seek data pursuant to 
these requirements.

F. Confidentiality

    The Commission will make public requests for a determination that 
an authority is appropriate to conditionally access security-based swap 
data, as well as Commission determinations issued in response to such 
requests. The Commission preliminarily expects that it will make 
publicly available the MOUs or other arrangements with the Commission 
used to satisfy the confidentiality and indemnification conditions.
    Initial notices of requests for access provided to the Commission 
by repositories will be kept confidential, subject to the provisions of 
applicable law. To the extent that the Commission obtains subsequent 
requests for access that would be required to be maintained by the 
repositories, the Commission also will keep those records confidential, 
subject to the provisions of applicable law.

G. Request for Comment

    We request comment on our approach and the accuracy of the current 
estimates. Pursuant to 44 U.S.C. 3506(c)(2)(A), the Commission solicits 
comments to: (1) Evaluate whether the collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility; (2) 
evaluate the accuracy of the Commission's estimate of burden of the 
collection of information; (3) determine whether there are ways to 
enhance the quality, utility and clarity of the information to be 
collected; and (4) evaluate whether there are ways to minimize the 
burden of the collection of information on those who are required to 
respond, including through the use of automated collection techniques 
or other forms of information technology.
    In this regard, the Commission particularly requests comment 
regarding the systems-related costs associated with these data access 
requirements. Among other things, commenters are invited to address the 
burdens associated with establishing and programming systems to provide 
regulators and other authorities with connectivity to repository data 
systems, including whether such costs would be incremental to the 
systems-related costs associated with the existing rule requiring that 
repositories provide direct electronic access to the Commission and its 
designees, and whether such systems-related costs would encompass 
capacity-related elements linked to the total number of regulators and 
other authorities that access repositories pursuant to these data 
access provisions. Commenters also are invited to address the estimated 
burdens associated with the requirement that repositories maintain 
records in connection with the notification requirement.
    The Commission further requests comment regarding the burdens 
associated with the negotiation of MOUs or other arrangements between 
the Commission and other authorities, including the average time 
required for those regulators to negotiate such MOUs or other 
arrangements, and whether those other authorities may incur costs to 
retain outside counsel in connection with such negotiations.
    Persons submitting comments on the collection of information 
requirements should direct the comments to the Office of Management and 
Budget, Attention: Desk Officer for the Securities and Exchange 
Commission, Office of Information and Regulatory Affairs, Washington, 
DC 20503, and send a copy to Secretary, Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090, with reference 
to File No. S7-___. Requests for materials submitted to OMB by the 
Commission with regard to these collections of information should be in 
writing, refer to File No. S7-___, and be submitted to the Securities 
and Exchange Commission, Office of FOIA Services, 100 F Street NE., 
Washington, DC 20549-2736. OMB is required to make a decision 
concerning the collection of information between 30 and 60 days after 
publication of this release. Consequently, a comment to OMB is assured 
of having its full effect if OMB receives it within 30 days of 
publication.

VI. Economic Analysis

    As discussed above, the Commission is proposing rules to implement 
data access requirements for relevant authorities other than the 
Commission that the Dodd-Frank Act imposes on security-based swap 
repositories, and to provide an exemption from the associated 
indemnification requirement. To carry out their regulatory mandate, or 
legal responsibility or authority, certain relevant entities other than 
the Commission may periodically need access to security-based swap data 
collected and maintained by SEC-registered security-based swap data 
repositories, and the proposed rules are intended to facilitate such 
access.
    The Commission is sensitive to the economic effects of its rules, 
including the costs and benefits and the effects of its rules on 
efficiency, competition, and capital formation. Section 3(f) \133\ of 
the Exchange Act requires the Commission, whenever it engages in 
rulemaking pursuant to the Exchange Act, to consider or determine 
whether an action is necessary or appropriate in the public interest, 
and to consider, in addition to the protection of investors, whether 
the action would promote efficiency, competition, and capital 
formation. In addition, section 23(a)(2) \134\ of the Exchange Act 
requires the Commission, when promulgating rules under the Exchange 
Act, to consider the impact such rules would have on competition. 
Exchange Act section 23(a)(2) also provides that the Commission shall 
not adopt any rule which would impose a burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the 
Exchange Act.
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    \133\ 15 U.S.C. 78c(f).
    \134\ 15 U.S.C. 78w(a)(2).

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[[Page 55197]]

A. Economic Considerations

1. Title VII Transparency Framework
    The security-based swap market prior to the passage of the Dodd-
Frank Act has been described as being opaque, in part because 
transaction-level data were not widely available to market participants 
or to regulators.\135\ To increase the transparency of the over-the-
counter derivatives market to both market participants and regulatory 
authorities, Title VII requires the Commission to undertake a number of 
rulemakings, including rules the Commission adopted earlier this year 
to address the registration process, duties and core principles 
applicable to security-based swap data repositories,\136\ and to 
address regulatory reporting and public dissemination of security-based 
swap information.\137\ Among other matters, those rules address market 
transparency by requiring security-based swap data repositories, absent 
an exemption, to collect and maintain accurate security-based swap 
transaction data, and address regulatory transparency by requiring 
security-based swap data repositories to provide the Commission with 
direct electronic access to such data.\138\
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    \135\ With respect to one type of security-based swap, credit 
default swaps (``CDSs''), the Government Accountability Office found 
that ``comprehensive and consistent data on the overall market have 
not been readily available,'' ``authoritative information about the 
actual size of the [CDS] market is generally not available'' and 
regulators currently are unable ``to monitor activities across the 
market.'' Government Accountability Office, GAO-09-397T, Systemic 
Risk: Regulatory Oversight and Recent Initiatives to Address Risk 
Posed by Credit Default Swaps, at 2, 5, 27, (2009) available at: 
http://www.gao.gov/new.items/d09397t.pdf; see also Robert E. Litan, 
The Derivatives Dealers' Club and Derivatives Market Reform: A Guide 
for Policy Makers, Citizens and Other Interested Parties, Brookings 
Institution (Apr. 7, 2010), http://www.brookings.edu/~/media/
research/files/papers/2010/4/07%20derivatives%20litan/
0407_derivatives_litan.pdf; Michael Mackenzie, Era of an Opaque 
Swaps Market Ends, Financial Times, June 25, 2010, available at: 
http://www.ft.com/intl/cms/s/0/f49f635c-8081-11df-be5a-00144feabdc0.html#axzz3HLUjYNI7.
    \136\ See SDR Adopting Release, note 13, supra.
    \137\ See Regulation SBSR Adopting Release.
    \138\ See Exchange Act rule 13n-5 (requiring repositories to 
comply with data collection and data maintenance standards related 
to transaction and position data); Exchange Act rule 13n-4(b)(5) 
(requiring repositories to provide direct electronic access to the 
Commission and its designees).
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    Consistent with the goal of increasing transparency to regulators, 
the data access provisions at issue here set forth a framework for 
security-based swap data repositories to provide access to security-
based swap data to relevant authorities other than the Commission. The 
proposed rules would implement that framework for repositories to 
provide data access to other relevant entities in order to fulfill 
their regulatory mandate, or legal responsibility or authority.
2. Transparency in the Market for Security-Based Swaps
    The proposed data access rules and indemnification exemption, in 
conjunction with the transparency-related requirements generally 
applicable to security-based swap data repositories, are designed to, 
among other things, make available to the Commission and other relevant 
authorities data that will provide a broad view of the security-based 
swap market and help monitor for pockets of risk and potential market 
abuses that might not otherwise be observed by those authorities.\139\ 
Unlike most other securities transactions, security-based swaps involve 
ongoing financial obligations between counterparties during the life of 
transactions that typically span several years. Counterparties to a 
security-based swap rely on each other's creditworthiness and bear this 
credit risk and market risk until the security-based swap terminates or 
expires. This can lead to market instability when a large market 
participant, such as a security-based swap dealer, major security-based 
swap market participant, or central counterparty (``CCP'') becomes 
financially distressed. The default of a large market participant could 
introduce the potential for sequential counterparty failure; the 
resulting uncertainty could reduce the willingness of market 
participants to extend credit, and substantially reduce liquidity and 
valuations for particular types of financial instruments.\140\
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    \139\ See, e.g., Exchange Act section 13(n)(5)(D), 15 U.S.C. 
78m(n)(5)(D), and rule 13n-4(b)(5) (requiring SDRs to provide direct 
electronic access to the Commission). See also 156 Cong. Rec. S5920 
(daily ed. July 15, 2010) (statement of Sen. Lincoln) (``These new 
`data repositories' will be required to register with the CFTC and 
the SEC and be subject to the statutory duties and core principles 
which will assist the CFTC and the SEC in their oversight and market 
regulation responsibilities.'').
    \140\ See, e.g., Markus K. Brunnermeier and Lasse Heje Pedersen, 
Market Liquidity and Funding Liquidity, 22 Review of Financial 
Studies 2201 (2009); Denis Gromb and Dimitri Vayanos, A Model of 
Financial Market Liquidity Based on Intermediary Capital, 8 Journal 
of the European Economic Association 456 (2010).
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    A broad view of the security-based swap market, including 
information regarding aggregate market exposures to particular 
reference entities (or securities), positions taken by individual 
entities or groups, and data elements necessary to determine the market 
value of the transaction, may be expected to provide the Commission and 
other relevant authorities with a better understanding of the actual 
and potential risks in the market and promote better risk monitoring 
efforts. The information provided by security-based swap data 
repositories also may be expected to help the Commission and other 
relevant authorities investigate market manipulation, fraud and other 
market abuses.
3. Global Nature of the Security-Based Swap Market
    As highlighted in more detail in the Economic Baseline below, the 
security-based swap market is a global market. Based on market data in 
the Depository Trust and Clearing Corporation's Trade Information 
Warehouse (``DTCC-TIW''), the Commission estimates that only 12 percent 
of the global transaction volume that involves either a U.S.-domiciled 
counterparty or a U.S-domiciled reference entity (as measured by gross 
notional) between 2008 and 2014 was between two U.S.-domiciled 
counterparties, compared to 48 percent entered into between one U.S.-
domiciled counterparty and a foreign-domiciled counterparty and 40 
percent entered into between two foreign-domiciled counterparties.\141\
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    \141\ The data the Commission receives from the DTCC-TIW does 
not include transactions between two non-U.S. domiciled 
counterparties that reference a non-U.S. entity or security. This is 
approximately 19 percent of global transaction volume. See note 152, 
infra. Therefore, factoring in these transactions, approximately 10 
percent of global transaction volume involves two U.S.-domiciled 
counterparties, 39 percent involve one U.S.-domiciled counterparty 
and one foreign counterparty, and 51 percent are between two 
foreign-domiciled counterparties.
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    In light of the security-based swap market's global nature there is 
the possibility that regulatory data may be fragmented across 
jurisdictions, particularly because a large fraction of transaction 
volume includes at least one counterparty that is not a U.S. person 
\142\ and the applicable U.S. regulatory reporting rules depend on the 
U.S. person status of the counterparties.\143\ As discussed further 
below,

[[Page 55198]]

fragmentation of data can increase the difficulty in consolidating and 
interpreting security-based swap market data from repositories, 
potentially reducing the general economic benefits derived from 
transparency of the security-based swap market to regulators. Absent a 
framework for the cross-border sharing of data reported pursuant to 
regulatory requirements in various jurisdictions, the relevant 
authorities responsible for monitoring the security-based swap market 
may not be able to access data consistent with their regulatory 
mandate, or legal responsibility or authority.
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    \142\ This statement is based on staff analysis of voluntary CDS 
transaction data reported to the DTCC-TIW, which includes self-
reported counterparty domicile. See note 161, infra. The Commission 
notes that the DTCC-TIW entity domicile may not be completely 
consistent with the Commission's definition of ``U.S. person'' in 
all cases but preliminarily believes that these two characteristics 
have a high correlation.
    \143\ See Regulation SBSR rule 908(a) (generally requiring 
regulatory reporting and public dissemination when at least one 
direct or indirect counterparty is a U.S. person). Note that current 
voluntary reporting considers the self-reported domicile of the 
counterparty but the recently adopted SBSR rules consider the 
counterparty's status as a U.S. person.
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4. Economic Purposes of the Rulemaking
    The proposed data access requirements and indemnification exemption 
are designed to increase the quality and quantity of transaction and 
position information available to relevant authorities about the 
security-based swap market while helping to maintain the 
confidentiality of that information. The increased availability of 
security-based swap information may be expected to help relevant 
authorities act in accordance with their regulatory mandate, or legal 
responsibility or authority, and to respond to market developments.
    Moreover, by facilitating access to security-based swap data for 
relevant authorities, including non-U.S. authorities designated by the 
Commission, the Commission anticipates an increased likelihood that the 
Commission itself will have commensurate access to security-based swap 
data stored in trade repositories located in foreign 
jurisdictions.\144\ This may be particularly important in identifying 
transactions in which the Commission has a regulatory interest (e.g., 
transactions involving a U.S. reference entity or security) but may not 
have been reported to a registered security-based swap data repository 
due to the transactions occurring outside of the U.S. between two non-
U.S. persons.\145\ This should assist the Commission in fulfilling its 
regulatory mandate and legal responsibility and authority, including by 
facilitating the Commission's ability to detect and investigate market 
manipulation, fraud and other market abuses, by providing the 
Commission with greater access to security-based swap information than 
that provided under the current voluntary reporting regime.\146\
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    \144\ As discussed above, for example, EU law conditions the 
ability of non-EU authorities to access data from EU repositories on 
EU authorities having ``immediate and continuous'' access to the 
information they need. See note 94, supra, and accompanying text.
    Also, as discussed above, the Commission anticipates considering 
whether or not the relevant authority requesting access agrees to 
provide the Commission and other U.S. authorities with reciprocal 
assistance in matters within their jurisdiction when making a 
determination as to whether the requesting authority shall be 
granted access to security-based swap data held in registered SDRs. 
See part II.A.3(a) supra.
    \145\ For example, it is possible to replicate the economic 
exposure of either a long or short position in a debt security that 
trades in U.S. markets by trading in U.S. treasury securities and 
credit default swaps that reference the debt security. Transactions 
between two non-U.S. persons on a U.S. reference entity supervised 
by the Commission or novations between two non-U.S. persons that 
reduce exposure to a U.S. registrant may provide information to the 
Commission about the market's views concerning the financial 
stability or creditworthiness of the registered entity.
    \146\ See part VI.B, supra, for a description of the data the 
Commission receives from DTCC-TIW under the current voluntary 
reporting regime.
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    Such data access may be especially critical during times of market 
turmoil, by giving the Commission and other relevant authorities 
information to examine risk exposures incurred by individual entities 
or in connection with particular reference entities. Increasing the 
available data about the security-based swap market should further give 
the Commission and other relevant authorities better insight into how 
regulations are affecting or may affect the market, which may allow the 
Commission and other regulators to better craft regulations to achieve 
desired goals, and therefore increase regulatory effectiveness.

B. Baseline

    To assess the economic impact of the proposed data access rules and 
indemnification exemption, the Commission is using as a baseline the 
security-based swap market as it exists today, including applicable 
rules that have already been adopted and excluding rules that have been 
proposed but not yet finalized. Thus we include in the baseline the 
rules that the Commission adopted earlier this year to govern the 
registration process, duties and core principles applicable to 
security-based swap data repositories, and to govern regulatory 
reporting and public dissemination of security-based swap transactions.
    Because those rules were adopted only recently, there are not yet 
any registered swap data repositories, and the Commission does not yet 
have access to regulatory reporting data. Hence, our characterization 
of the economic baseline, including the quantity and quality of 
security-based swap data available to the Commission and other relevant 
authorities and the extent to which data are fragmented, considers the 
anticipated effects of the final SDR rules and Regulation SBSR. The 
Commission acknowledges limitations in the degree to which it can 
quantitatively characterize the current state of the security-based 
swap market. As described in more detail below, because the available 
data on security-based swap transactions do not cover the entire 
market, the Commission has developed an understanding of market 
activity using a sample that includes only certain portions of the 
market.
1. Regulatory Transparency in the Security-Based Swap Market
    There currently is no robust, widely accessible source of 
information about individual security-based swap transactions. In 2006, 
a group of major dealers expressed their commitment in support of 
DTCC's initiative to create a central trade industry warehouse for 
credit derivatives.\147\ Moreover, in 2009, the leaders of the G20--
whose members include the United States, 18 other countries, and the 
European Union--called for global improvements in the functioning, 
transparency, and regulatory oversight of over-the-counter (``OTC'') 
derivatives markets and agreed, among other things, that OTC 
derivatives contracts should be reported to trade repositories.\148\ A 
single repository, the DTCC-TIW, makes the data reported to it under 
the voluntary reporting regime available to the Commission and other 
relevant authorities in accordance with the agreement between DTCC-TIW 
and the OTC Derivatives Regulatory Forum (``ODRF''), of which the 
Commission is a member.\149\ Although many jurisdictions have 
implemented rules concerning reporting of security-based swaps to trade 
repositories,\150\ the Commission understands that many market 
participants continue to report voluntarily to the DTCC-TIW.
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    \147\ See Letter to Timothy Geithner, President, Federal Reserve 
Bank of New York, Mar. 10, 2006, available at: http://www.newyorkfed.org/newsevents/news/markets/2006/industryletter2.pdf.
    \148\ See G20 Leaders Statement from the 2009 Pittsburgh Summit, 
available at: http://www.g20.utoronto.ca/2009/2009communique0925.html.
    \149\ See note 71, supra.
    \150\ See Eighth Progress Report on Implementation of OTC 
Derivatives Market Reforms (Nov. 2014), available at: http://www.financialstabilityboard.org/wp-content/uploads/r_141107.pdf.
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    The data that the Commission receives from DTCC-TIW do not 
encompass CDS transactions that both: (i) Do not involve any U.S. 
counterparty, and (ii) are not based on a U.S. reference entity.\151\ 
Based on a comparison of

[[Page 55199]]

weekly transaction volume publicly disseminated by DTCC-TIW with data 
provided to the Commission under the voluntary arrangement, we estimate 
that the transaction data provided to the Commission covers 
approximately 77 percent of the global single-name credit default swap 
market.\152\
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    \151\ The Commission notes that the identification of entity 
domicile in the voluntary data reported to DTCC-TIW may not be 
consistent with the Commission's definition of ``U.S. person'' in 
all cases.
    \152\ In 2014, DTCC-TIW reported on its Web site new trades in 
single-name CDSs with gross notional of $15.4 trillion. During the 
same period, data provided to the Commission by DTCC-TIW, which 
include only transactions with a U.S. counterparty or transactions 
written on a U.S. reference entity or security, included new trades 
with gross notional equaling $12.4 trillion, or 81% of the total 
reported by DTCC-TIW.
---------------------------------------------------------------------------

    While DTCC-TIW generally provides detailed data on positions and 
transactions to regulators that are members of the ODRF, DTCC-TIW makes 
only summary information available to the public.\153\
---------------------------------------------------------------------------

    \153\ The DTCC-TIW publishes weekly transaction and position 
reports for single-name credit default swaps. In addition, ICE Clear 
Credit provides aggregated volumes of clearing activity, and large 
multilateral organizations periodically further report measures of 
market activity. For example, the Bank for International Settlements 
(``BIS'') reports gross notional outstanding for single-name credit 
default swaps and equity forwards and swaps semiannually.
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2. Current Security-Based Swap Market
    The Commission's analysis of the current state of the security-
based swap market is based on data obtained from DTCC-TIW, particularly 
data regarding the activity of market participants for single-name 
credit-default swaps from 2008 to 2014. While other repositories also 
may collect data on transactions in total return swaps on equity and 
debt, the Commission does not currently have access to such data for 
those products (or for other products that are security-based swaps). 
Although the definition of ``security-based swap'' is not limited to 
single-name credit-default swaps, the Commission believes that the 
single-name credit default swap data are sufficiently representative of 
the security-based swap market and therefore can directly inform the 
analysis of the state of the current security-based swap market.\154\ 
The Commission believes that DTCC-TIW's data for single-name credit 
default swaps appear reasonably comprehensive because they include data 
on almost all single-name credit default swap transactions and market 
participants trading in single-name credit default swaps.\155\
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    \154\ According to data published by BIS, the global notional 
amount outstanding in equity forwards and swaps as of December 2014 
was $2.50 trillion. The notional amount outstanding was 
approximately $9.04 trillion for single-name CDSs, approximately 
$6.75 trillion for multi-name index CDSs, and approximately $0.61 
trillion for multi-name, non-index CDSs. See Bank of International 
Settlement, BIS Quarterly Review, Statistical Annex, Table 19 (June 
2015), available at: http://www.bis.org/publ/qtrpdf/r_qt1506.htm. 
For purposes of this analysis, the Commission assumes that multi-
name index CDSs are not narrow-based security index CDSs, and 
therefore do not fall within the definition of security-based swap. 
See Exchange Act section 3(a)(68)(A), 15 U.S.C. 78c(a)(68)(A); see 
also Further Definition of ``Swap,'' ``Security-Based Swap,'' and 
``Security-Based Swap Agreement''; Mixed Swaps; Security-Based Swap 
Agreement Recordkeeping, Exchange Act Release No. 67453 (July 18, 
2012), 77 FR 48207 (Aug. 13, 2012). The Commission also assumes that 
instruments reported as equity forwards and swaps include 
instruments such as total return swaps on individual equities that 
fall with the definition of security-based swap. Based on these 
assumptions, single-name CDS appear to constitute roughly 80 percent 
of the security-based swap market. Although the BIS data reflects 
the global OTC derivatives market, and not only the U.S. market, the 
Commission is not aware of any reason to believe that these ratios 
differ significantly in the U.S. market.
    \155\ See ISDA, CDS Marketplace, Exposures & Activity, available 
at: http://www.isdacdsmarketplace.com/exposures_and_activity (``DTCC 
Deriv/SERV's Trade Information Warehouse is the only comprehensive 
trade repository and post-trade processing infrastructure for OTC 
credit derivatives in the world. Its Deriv/SERV matching and 
confirmation service electronically matches and confirms more than 
98% of credit default swaps transactions globally.'').
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    Based on this information, our analysis below indicates that the 
current security-based swap market: (i) Is global in scope, and (ii) is 
concentrated among a small number of dealing entities. Although under 
the voluntary reporting regime discussed above there was a single 
repository, as various jurisdictions have implemented mandatory 
reporting rules in their jurisdictions the number of trade repositories 
holding security-based swap data has grown.\156\
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    \156\ See, for example, the list of trade repositories 
registered by ESMA, available at: http://www.esma.europa.eu/content/List-registered-Trade-Repositories. As of May 28, 2015, there were 
six repositories registered by ESMA, all of which are authorized to 
receive data on credit derivatives.
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a. Security-Based Swap Market Participants
    A key characteristic of security-based swap activity is that it is 
concentrated among a relatively small number of entities that engage in 
dealing activities.\157\ Based on the Commission's analysis of DTCC-TIW 
data, there were 1,879 entities engaged directly in trading credit 
default swaps between November 2006 and December 2014.\158\ Table 1 
below highlights that of these entities, there were 17, or 
approximately 0.9 percent, that were ISDA-recognized dealers.\159\ 
ISDA-recognized dealers executed the vast majority of transactions 
(82.6 percent) measured by the number of counterparties (each 
transaction has two counterparties or transaction sides). Many of these 
dealers are regulated by entities other than, or in addition to, the 
Commission. In addition, thousands of other market participants appear 
as counterparties to security-based swap transactions, including, but 
not limited to, investment companies, pension funds, private (hedge) 
funds, sovereign entities, and non-financial companies.
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    \157\ See Exchange Act Release No.72472 (Jun. 25, 2014), 79 FR 
47278, 47293 (Aug. 12, 2014) (``Cross-Border Definitions Adopting 
Release''). All data in this section cites updated data from that 
release and its accompanying discussion.
    \158\ These 1,879 transacting agents represent over 10,000 
accounts representing principal risk holders. See Cross-Border 
Definitions Adopting Release, 79 FR 47293-94 (discussing the number 
of transacting agents and accounts of principal risk holders).
    As noted above, the data provided to the Commission by the DTCC-
TIW only includes transactions that either include at least one 
U.S.-domiciled counterparty or reference a U.S. entity or security. 
Therefore, any entity that is not domiciled in the U.S., never 
trades with a U.S.-domiciled entity and never buys or sells 
protection on a U.S. reference entity or security would not be 
included in this analysis.
    \159\ For the purpose of this analysis, the ISDA-recognized 
dealers are those identified by ISDA as a recognized dealer in any 
year during the relevant period. Dealers are only included in the 
ISDA-recognized dealer category during the calendar year in which 
they are so identified. The complete list of ISDA recognized dealers 
is: JP Morgan Chase NA (and Bear Stearns), Morgan Stanley, Bank of 
America NA (and Merrill Lynch), Goldman Sachs, Deutsche Bank AG, 
Barclays Capital, Citigroup, UBS, Credit Suisse AG, RBS Group, BNP 
Paribas, HSBC Bank, Lehman Brothers, Soci[eacute]t[eacute] 
G[eacute]n[eacute]rale, Credit Agricole, Wells Fargo, and Nomura. 
See ISDA, Operations Benchmarking Surveys, available at: http://www2.isda.org/functional-areas/research/surveys/operations-benchmarking-surveys.

[[Page 55200]]



Table 1--The Number of Transacting Agents in the Single-Name CDS Market by Counterparty Type and the Fraction of
     Total Trading Activity, From November 2006 Through December 2014, Represented by Each Counterparty Type
----------------------------------------------------------------------------------------------------------------
                                                                                                   Transaction
                      Transacting agents                            Number          Percent           share
                                                                                                    (percent)
----------------------------------------------------------------------------------------------------------------
Investment Advisers...........................................           1,419             75.5             10.9
    SEC registered............................................             572             30.4              6.9
Banks.........................................................             260             13.8              5.0
Pension Funds.................................................              29              1.5              0.1
Insurance Companies...........................................              38              2.0              0.3
ISDA-Recognized Dealers \160\.................................              17              0.9             82.6
Other.........................................................             116              6.2              1.2
                                                               -------------------------------------------------
    Total.....................................................           1,879            100              100
----------------------------------------------------------------------------------------------------------------

    Although the security-based swap market is global in nature, 
approximately 60 percent of the transaction volume in the 2008-2014 
period included at least one U.S.-domiciled entity (see Figure 1). 
Moreover, 48 percent of the single-name CDS transactions reflected in 
DTCC-TIW data that include at least one U.S.-domiciled counterparty or 
a U.S. reference entity or security were between U.S.-domiciled 
entities and foreign-domiciled counterparties.
---------------------------------------------------------------------------

    \160\ For the purpose of this analysis, the ISDA-recognized 
dealers are those identified by ISDA as belonging to the G14 or G16 
dealer group during the period: JP Morgan Chase NA (and Bear 
Stearns), Morgan Stanley, Bank of America NA (and Merrill Lynch), 
Goldman Sachs, Deutsche Bank AG, Barclays Capital, Citigroup, UBS, 
Credit Suisse AG, RBS Group, BNP Paribas, HSBC Bank, Lehman 
Brothers, Soci[eacute]t[eacute] G[eacute]n[eacute]rale, Credit 
Agricole, Wells Fargo and Nomura. See, e.g., http://www.isda.org/c_and_a/pdf/ISDA-Operations-Survey-2010.pdf.
[GRAPHIC] [TIFF OMITTED] TP14SE15.000

    The fraction of new accounts with transaction activity that are 
domiciled in the U.S. fell through the 2008-2014 period. Figure 2 below 
is a chart of: (1) The percentage of new accounts with a domicile in 
the United States,\161\ (2) the

[[Page 55201]]

percentage of new accounts with a domicile outside the United States, 
and (3) the percentage of new accounts that are domiciled outside the 
United States but managed by a U.S. entity, foreign accounts that 
include new accounts of a foreign branch of a U.S. bank, and new 
accounts of a foreign subsidiary of a U.S. entity. Over time, a greater 
share of accounts entering the DTCC-TIW data either have had a foreign 
domicile or have had a foreign domicile while being managed by a U.S. 
person. The increase in foreign accounts may reflect an increase in 
participation by foreign accountholders, and the increase in foreign 
accounts managed by U.S. persons may reflect the flexibility with which 
market participants can restructure their market participation in 
response to regulatory intervention, competitive pressures and other 
factors. There are, however, alternative explanations for the shifts in 
new account domicile in Figure 2. Changes in the domicile of new 
accounts through time may reflect improvements in reporting by market 
participants to DTCC-TIW. Additionally, because the data include only 
accounts that are domiciled in the United States, transact with U.S.-
domiciled counterparties or transact in single-name CDSs with U.S. 
reference entities or securities, changes in the domicile of new 
accounts may reflect increased transaction activity between U.S. and 
non-U.S. counterparties.
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    \161\ The domicile classifications in DTCC-TIW are based on the 
market participants' own reporting and have not been verified by 
Commission staff. Prior to enactment of the Dodd-Frank Act, account 
holders did not formally report their domicile to DTCC-TIW because 
there was no systematic requirement to do so. After enactment of the 
Dodd-Frank Act, the DTCC-TIW has collected the registered office 
location of the account. This information is self-reported on a 
voluntary basis. It is possible that some market participants may 
misclassify their domicile status because the databases in DTCC-TIW 
do not assign a unique legal entity identifier to each separate 
entity. It is also possible that the domicile classifications may 
not correspond precisely to the definition of ``U.S. person'' under 
the rules defined in Exchange Act rule 3a71-3(a)(4), 17 CFR 
240.3a71-3(a)(4). Notwithstanding these limitations, the Commission 
believes that the cross-border and foreign activity demonstrates the 
nature of the single-name CDS market.
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    We note that cross-border rules related to regulatory reporting and 
public dissemination of security-based swap transactions depend on, 
among other things, the U.S. person status of the counterparties.\162\ 
The analyses behind Figures 1 and 2 show that the security-based swap 
market is global, with an increasing share of the market characterized 
by cross-border trade.
---------------------------------------------------------------------------

    \162\ See note 143, supra.
    \163\ Following publication of the Warehouse Trust Guidance on 
CDS data access, TIW surveyed market participants, asking for the 
physical address associated with each of their accounts (i.e., where 
the account is organized as a legal entity). This is designated the 
registered office location by TIW. When an account does not report a 
registered office location, we have assumed that the settlement 
country reported by the investment adviser or parent entity to the 
fund or account is the place of domicile. This treatment assumes 
that the registered office location reflects the place of domicile 
for the fund or account.
[GRAPHIC] [TIFF OMITTED] TP14SE15.001

b. Security-Based Swap Data Repositories
    No security-based swap data repositories are currently registered 
with the Commission. The Commission is aware of one entity in the 
market (i.e., the DTCC-TIW) that has been accepting voluntary reports 
of single-name and index credit default swap transactions. In 2014, 
DTCC-TIW received approximately 4 million records of single-name credit 
default swap transactions, of which approximately 868,000 were price-
forming transactions.\164\
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    \164\ Price-forming credit default swap transactions include all 
new transactions, assignments, modifications to increase the 
notional amounts of previously executed transactions and 
terminations of previously executed transactions. Transactions 
terminated or entered into in connection with a compression 
exercise, and expiration of contracts at maturity, are not 
considered price-forming and are therefore excluded, as are 
replacement trades and all bookkeeping-related trades.

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[[Page 55202]]

    The CFTC has provisionally registered four swap data 
repositories.\165\ These swap data repositories are: BSDR LLC, Chicago 
Mercantile Exchange Inc., DTCC Data Repository LLC, and ICE Trade 
Vault, LLC. The Commission believes that these entities will likely 
register with the Commission as security-based swap data repositories 
and that other persons may seek to register with both the CFTC and the 
Commission as swap data repositories and security-based swap data 
repositories, respectively.\166\
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    \165\ CFTC rule 49.3(b) provides for provisional registration of 
a swap data repository. 17 CFR 49.3(b).
    \166\ For the purpose of estimating PRA related costs, the 
number of swap data repositories is estimated to be as high as ten. 
See part V.C, supra.
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    Efforts to regulate the swap and security-based swap markets are 
underway not only in the United States, but also abroad. Consistent 
with the call of the G20 leaders for global improvements in the 
functioning, transparency and regulatory oversight of OTC derivatives 
markets,\167\ substantial progress has been made in establishing the 
trade repository infrastructure to support the reporting of OTC 
derivatives transactions.\168\ Currently, multiple trade repositories 
operate, or are undergoing approval processes to do so, in a number of 
different jurisdictions.\169\ Combined with the fact that the 
requirements for trade reporting differ across jurisdictions, the 
result is that security-based swap data is fragmented across many 
locations, stored in a variety of formats, and subject to many 
different rules for authorities' access. The data in these trade 
repositories accordingly will need to be aggregated in various ways if 
authorities are to obtain a comprehensive and accurate view of the 
global OTC derivatives markets.
---------------------------------------------------------------------------

    \167\ See note 148, supra, and accompanying text.
    \168\ See Eighth Progress Report on Implementation of OTC 
Derivatives Market Reforms (Nov. 2014), available at: http://www.financialstabilityboard.org/wp-content/uploads/r_141107.pdf.
    \169\ Id.
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C. Economic Costs and Benefits, Including Impact on Efficiency, 
Competition, and Capital Formation

    As discussed above, the security-based swap market to date largely 
has developed as an opaque OTC market with limited dissemination of 
transaction-level price and volume information.\170\ Accordingly, the 
Commission envisions that registered security-based swap data 
repositories, by storing the security-based swap transaction and 
position data required to be reported to them by market participants, 
will become an essential part of the infrastructure of the market in 
part by providing the data to relevant authorities in accordance with 
their regulatory mandate, or legal responsibility or authority.
---------------------------------------------------------------------------

    \170\ See part VI.B.1, supra (addressing limited information 
currently available to market participants and regulators).
---------------------------------------------------------------------------

    In proposing these rules to implement the Exchange Act data access 
requirement and to provide a conditional exemption from the 
indemnification requirement, the Commission has attempted to balance 
different goals. On the one hand, the Commission preliminarily believes 
that the proposed rules will facilitate the sharing of information held 
by repositories with relevant authorities, which should assist those 
authorities in acting in accordance with their regulatory mandate, or 
legal responsibility or authority. At the same time, although 
regulatory access raises important issues regarding the confidentiality 
of the information, the Commission preliminarily believes that the 
proposed rules should appropriately reduce the risk of breaching the 
confidentiality of the data by providing for a reasonable assurance 
that confidentiality will be maintained before access is granted.
    Additionally, we note that the magnitude of the costs and benefits 
of the proposed rules depend in part on the type of access granted to 
relevant authorities. Ongoing, unrestricted direct electronic access by 
relevant authorities may be most beneficial in terms of facilitating 
efficient access to data necessary for those authorities to act in 
accordance with their regulatory mandate, or legal responsibility or 
authority, but at the cost of increasing the risk of improper 
disclosure of confidential information. Restricting each relevant 
authority's access to only that data consistent with that authority's 
regulatory mandate, or legal responsibility or authority reduces the 
quantity of data that could become subject to improper disclosure. On 
the other hand, restricting a relevant authority's access to data may 
make it more difficult for it to effectively act in accordance with its 
regulatory mandate or legal responsibility or authority.
    The potential economic effects stemming from the proposed rules can 
be grouped into several categories. In this section, we first discuss 
the general costs and benefits of the proposed rules, including the 
benefits of reducing data fragmentation, data duplication and enhancing 
regulatory oversight, as well as the risks associated with potential 
breaches of data confidentiality. Next, we discuss the effects of the 
rules on efficiency, competition and capital formation. Finally, we 
discuss specific costs and benefits linked to the proposed rules.
1. General Costs and Benefits
    As discussed above, the proposed rules would implement the 
statutory provisions that require a security-based swap data repository 
to disclose information to certain relevant authorities, conditional 
upon the authority agreeing to keep the information confidential and to 
indemnify the repository and the Commission for any expenses arising 
from litigation relating to the information provided. The proposal also 
would set forth a conditional exemption from the requirement that 
entities requesting data agree to provide indemnification. The 
exemption would be conditional on the requested information relating to 
a regulatory mandate and/or legal responsibility of the entity 
requesting the data, and on the entity entering into an MOU with the 
Commission addressing the confidentiality of the information provided 
and any other matters as determined by the Commission.
a. Anticipated Benefits
    The proposed rules should facilitate access to security-based swap 
transaction and position data by entities that require such information 
to fulfill their regulatory mandate or legal responsibility or 
authority. Market participants accordingly should benefit from relevant 
domestic authorities other than the Commission having access to the 
data necessary to fulfill their responsibilities. In particular, such 
access could help promote stability in the security-based swap market 
particularly during periods of market turmoil,\171\ and thus could 
indirectly contribute to improved stability in related financial 
markets, including equity and bond markets.\172\
---------------------------------------------------------------------------

    \171\ SDR Adopting Release, 80 FR 14531 (``Enhanced transparency 
could produce additional market-wide benefits by promoting stability 
in the [security-based swap] market, particularly during periods of 
market turmoil, and it should indirectly contribute to improved 
stability in related financial markets, including equity and bond 
markets.'').
    \172\ See Darrell Duffie, Ada Li, and Theo Lubke, Policy 
Perspectives of OTC Derivatives Market Infrastructure, Federal 
Reserve Bank of New York Staff Report No. 424 (Jan. 2010, as revised 
Mar. 2010), note 95, supra (``Transparency can have a calming 
influence on trading patterns at the onset of a potential financial 
crisis, and thus act as a source of market stability to a wider 
range of markets, including those for equities and bonds.'').

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[[Page 55203]]

    Moreover, as noted in part II.A(3)(a), the Commission anticipates, 
when making a determination concerning a relevant authority's access to 
security-based swap data, considering whether the relevant authority 
agrees to provide the Commission and other U.S. authorities with 
reciprocal assistance in matters within their jurisdiction. Allowing 
access to security-based swap data held by registered security-based 
swap data repositories by non-U.S. authorities may be expected to help 
facilitate the Commission's own ability to access data held by 
repositories outside the United States.\173\ Accordingly, to the extent 
the Commission obtains access, the proposed rules further may be 
expected to assist the Commission in fulfilling its regulatory 
responsibilities, including by detecting market manipulation, fraud and 
other market abuses by providing the Commission with greater access to 
global security-based swap information.\174\
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    \173\ See note 94, supra, and accompanying text.
    \174\ See SDR Adopting Release, 80 FR 14450 (``Requiring U.S. 
persons that perform the functions of an SDR to be operated in a 
manner consistent with the Title VII regulatory framework and 
subject to the Commission's oversight, among other things, helps 
ensure that relevant authorities are able to monitor the build-up 
and concentration of risk exposure in the [security-based swap] 
market, reduce operational risk in that market, and increase 
operational efficiency.''); id. at 14529 (``In conjunction with 
Regulation SBSR, the SDR Rules should assist the Commission in 
fulfilling its regulatory mandates and legal responsibilities such 
as detecting market manipulation, fraud, and other market abuses by 
providing it with greater access to [security-based swap] 
information than that provided under the voluntary reporting 
regime.''); see also DTCC comment (Nov. 15, 2010) at 1 (``A 
registered SDR should be able to provide (i) enforcement agents with 
necessary information on trading activity; (ii) regulatory agencies 
with counterparty-specific information about systemic risk based on 
trading activity; (iii) aggregate trade information for publication 
on market-wide activity; and (iv) a framework for real-time 
reporting from swap execution facilities and derivatives 
clearinghouses.'').
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    The ability of other relevant authorities to access data held in 
trade repositories registered with the Commission, as well as the 
ability of the Commission to access data held in repositories 
registered with other regulators, may be especially crucial during 
times of market turmoil. Increased data sharing should provide the 
Commission and other relevant authorities more-complete information to 
monitor risk exposures taken by individual entities and exposures 
connected to particular reference entities, and should promote global 
stability through enhanced regulatory transparency. Security-based swap 
data repositories registered with the Commission are required to retain 
complete records of security-based swap transactions and maintain the 
integrity of those records.\175\ Based on discussions with other 
regulators, the Commission believes repositories registered with other 
authorities are likely to have comparable requirements. As a result, 
rules to facilitate regulatory access to those records in line with the 
recipient authorities' regulatory mandate, or legal responsibility or 
authority are designed to help position the Commission and other 
authorities to: detect market manipulation, fraud and other market 
abuses; monitor the financial responsibility and soundness of market 
participants; perform market surveillance and macroprudential 
supervision; resolve issues and positions after an institution fails; 
monitor compliance with relevant regulatory requirements; and respond 
to market turmoil.\176\
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    \175\ See SDR Adopting Release, 80 FR 14531 (``The SDR 
Requirements [Exchange Act section 13(n) and the rules and 
regulations thereunder], including requirements that SDRs register 
with the Commission, retain complete records of [security-based 
swap] transactions, maintain the integrity and confidentiality of 
those records, and disseminate appropriate information to the public 
are intended to help ensure that the data held by SDRs is reliable 
and that the SDRs provide information that contributes to the 
transparency of the [security-based swap] market while protecting 
the confidentiality of information provided by market 
participants.''); see also Exchange Act section 13(n)(5)(C), 15 
U.S.C. 78m(n)(5)(c) (requiring SDRs to maintain security-based swap 
data)); Exchange Act rules 13n-5(b)(3) and (4) (requiring SDRs to 
establish, maintain, and enforce policies and procedures reasonably 
designed to ensure that transaction data and positions are accurate 
and to maintain the transaction data and positions for specified 
periods of time).
    \176\ See, e.g., SDR Proposing Release, 75 FR 77307, 77356, 
corrected at 76 FR 79320 (stating that the ``data maintained by an 
SDR may also assist regulators in (i) preventing market 
manipulation, fraud, and other market abuses; (ii) performing market 
surveillance, prudential supervision, and macroprudential (systemic 
risk) supervision; and (iii) resolving issues and positions after an 
institution fails,'' and further stating that ``increased 
transparency on where exposure to risk reside in financial markets . 
. . will allow regulators to monitor and act before the risks become 
systemically relevant. Therefore, SDRs will help achieve systemic 
risk monitoring.''); Cross-Border Proposing Release, 78 FR 31186-
31187 (discussing benefits of providing relevant foreign authorities 
with access to data maintained by SDRs).
---------------------------------------------------------------------------

    Additionally, improving the availability of data regarding the 
security-based swap market should give the Commission and other 
relevant authorities improved insight into how regulations are 
affecting, or may affect, the market. This may be expected to help 
increase regulatory effectiveness by allowing the Commission and other 
regulators to better craft regulation to achieve desired goals.
    In addition, the Commission believes that providing relevant 
foreign authorities with access to data maintained by repositories may 
help reduce costs to market participants by reducing the potential for 
duplicative security-based swap transaction reporting requirements in 
multiple jurisdictions.\177\ The Commission anticipates that relevant 
foreign authorities will likely impose their own reporting requirements 
on market participants within their jurisdictions.\178\ Given the 
global nature of the security-based swap market and the large number of 
cross-border transactions, the Commission recognizes that it is likely 
that such transactions may be subject to the reporting requirements of 
at least two jurisdictions.\179\ However, the Commission preliminarily 
believes that if relevant authorities are able to access security-based 
swap data in trade repositories outside their jurisdiction, such as 
repositories registered with the Commission, as needed, then relevant 
authorities may be more inclined to permit market participants involved 
in such transactions to fulfill their reporting requirements by 
reporting the transactions to a single trade repository.\180\ If market 
participants can report a transaction to a single trade repository 
rather than to separate trade repositories in each applicable

[[Page 55204]]

jurisdiction, their compliance costs may be reduced. Similarly, to the 
extent that security-based swap data repositories provide additional 
ancillary services,\181\ if market participants choose to make use of 
such services, they would likely find such services that make use of 
all of their data held in a single trade repository more useful than 
services that are applied only to a portion of that market 
participant's transactions. Ancillary services applied to only a 
portion of a participant's transactions could result if data were 
divided across multiple repositories as a result of regulations 
requiring participants to report data to separate trade repositories in 
each applicable jurisdiction.
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    \177\ Cf. Cleary Gottlieb comment (Sept. 20, 2011) at 31 (the 
indemnification requirement ``could be a significant impediment to 
effective regulatory coordination, since non-U.S. regulators may 
establish parallel requirements for U.S. regulators to access swap 
data reported in their jurisdictions.'').
    \178\ For example, EU law requires that counterparties to 
derivatives contracts report the details of the contract to a trade 
repository, registered or recognized in accordance with EU law, no 
later than the working day following the conclusion, modification or 
termination of the contract. See EMIR art. 9; see also EC Delegated 
Regulation no. 148/2013 (regulatory technical standards implementing 
the reporting requirement).
    \179\ For example, as noted above, market data regarding single-
name CDS transactions involving U.S.-domiciled counterparties and/or 
U.S.-domiciled reference entities indicates that 13 percent of such 
transactions involve two U.S.-domiciled counterparties, while 48 
percent involve a U.S.-domiciled counterparty and a foreign-
domiciled counterparty. See note 141, supra, and accompanying text.
    \180\ For example, EU law anticipates the possibility that 
market participants may be able to satisfy their EU reporting 
obligations by reporting to a trade repository established in a 
third country, so long as that repository has been recognized by the 
European Securities and Markets Authority. See EMIR art. 77; see 
also Regulation SBSR, rule 908(c) (providing that to the extent that 
the Commission has issued a substituted compliance order/
determination, compliance with Title VII regulatory reporting and 
public dissemination requirements may be satisfied by compliance 
with the comparable rules of a foreign jurisdiction).
    \181\ According to one commenter, ancillary services ``may 
include: asset servicing, confirmation, verification and affirmation 
facilities, collateral management, settlement, trade compression and 
netting services, valuation, pricing and reconciliation 
functionalities, position limits management, dispute resolution, 
counterparty identity verification and others.'' See MarkitSERV 
comment (Jan. 24, 2011) at 4 (comment in response to SDR Proposing 
Release).
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b. Anticipated Costs
    The Commission believes that although there are benefits to 
security-based swap data repositories providing access to relevant 
authorities to data maintained by the repositories, such access will 
likely involve certain costs and potential risks. For example, the 
Commission expects that repositories will maintain data that are 
proprietary and highly sensitive \182\ and that are subject to strict 
privacy requirements.\183\ Extending access to such data to anyone, 
including relevant authorities, increases the risk that the 
confidentiality of the data maintained by repositories may not be 
preserved.\184\ A relevant authority's inability to protect the 
confidentiality of data maintained by repositories could erode market 
participants' confidence in the integrity of the security-based swap 
market and increase the overall risks associated with trading.\185\ As 
we discuss below, this may ultimately lead to reduced trading activity 
and liquidity in the market, hindering price discovery and impeding the 
capital formation process.\186\
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    \182\ As the Commission noted in the SDR Proposing Release, such 
data could include information about a market participant's trades 
or its trading strategy; it may also include non-public personal 
information. SDR Proposing Release, 75 FR 77339.
    \183\ See Exchange Act section 13(n)(5)(F), 15 U.S.C. 
78m(n)(5)(F) (requiring an SDR to maintain the privacy of security-
based swap transaction information); Exchange Act rules 13n-4(b)(8) 
and 13n-9 (implementing Exchange Act section 13(n)(5)(F)).
    \184\ See, e.g., ESMA comment (Jam. 17, 2011) at 2 (noting that 
relevant authorities must ensure the confidentiality of security-
based swap data provided to them).
    \185\ For example, should it become generally known by market 
participants that a particular dealer had taken a large position in 
order to facilitate a trade by a customer and was likely to take 
offsetting positions to reduce its exposure, other market 
participants may take positions in advance of the dealer attempting 
to take its offsetting positions. This ``front running'' of the 
dealer's trades would likely raise its trading costs. Should the 
dealer believe that its market exposure may become public before it 
has the opportunity to hedge, the price quote offered to its 
customer to establish the original position would reflect the 
increased hedging cost.
    \186\ See SDR Proposing Release, 75 FR 77307 (``Failure to 
maintain privacy of [SDR data] could lead to market abuse and 
subsequent loss of liquidity.'').
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    To help mitigate these risks and potential costs to market 
participants, the Exchange Act and the proposed rules impose certain 
conditions on relevant authorities' access to data maintained by 
repositories.\187\ In part, the Exchange Act and the proposed rules 
limit the authorities that may access data maintained by a security-
based swap data repository to a specific list of domestic authorities 
and other persons, including foreign authorities, determined by the 
Commission to be appropriate,\188\ and further require that a 
repository notify the Commission when the repository receives an 
authority's initial request for data maintained by the repository.\189\ 
Restricting access to security-based swap data available to relevant 
authorities should reduce the risk of unauthorized disclosure, 
misappropriation or misuse of security-based swap data because each 
relevant authority will only have access to information within its 
regulatory mandate, or legal responsibility or authority.
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    \187\ Exchange Act section 13(n)(5)(G) and (H), 15 U.S.C. 
78m(n)(5)(G) and (H); see also Exchange Act rules 13n-4(b)(9) 
(implementing Exchange Act sections 13(n)(5)(G), 15 U.S.C. 
78m(n)(5)(G)) and (b)(10) (implementing Exchange Act section 
13(n)(5)(H), 15 U.S.C. 78m(n)(5)(H)).
    \188\ As discussed above in part II.A.3(a), the Commission 
anticipates that such determinations may be conditioned, in part, by 
specifying the scope of a relevant authority's access to data, and 
may limit this access to reflect the relevant authority's regulatory 
mandate, or legal responsibility or authority.
    \189\ See Exchange Act section 13(n)(5)(G), 15 U.S.C. 
78m(n)(5)(G); proposed Exchange Act rule 13n-4(b)(9).
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    The proposed rules further require that, before a repository shares 
security-based swap information with a relevant authority, there must 
be an arrangement (in the form of a MOU or otherwise) between the 
Commission and the relevant authority that addresses the 
confidentiality of the security-based swap information provided, and 
under which the relevant authority agrees to indemnify the Commission 
and the repository for any expenses arising from litigation relating to 
the information provided.\190\ While the proposal also conditionally 
exempts the relevant authority requesting data from the indemnification 
requirement, it does so only if the requested information relates to a 
regulatory mandate or legal responsibility or authority of the entity 
requesting the data, and there is in effect an arrangement between the 
Commission and such relevant authority that addresses the 
confidentiality of the information provided.\191\ The arrangement 
should further reduce the likelihood of confidential trade or position 
data being inadvertently made public.
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    \190\ See Exchange Act section 13(n)(5)(H), 15 U.S.C. 
78m(n)(5)(H); proposed Exchange Act rule 13n-4(b)(10).
    \191\ See proposed Exchange Act rule 13n-4(d).
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    Although the statutory indemnification requirement could provide a 
strong incentive for relevant authorities to take appropriate care in 
safeguarding data they might receive from a registered SDR, the 
Commission recognizes the significance of commenter concerns regarding 
the impact of requiring indemnification,\192\ and understands that 
certain authorities may be unable to agree to indemnify a data 
repository and the Commission. Therefore, the Commission preliminarily 
believes that the indemnification requirement could frustrate the 
purposes of the statutory requirement that repositories make available 
data to relevant authorities. The Commission preliminarily believes 
that the proposed approach appropriately balances confidentiality 
concerns associated with regulatory access with the benefits accruing 
to security-based swap market participants from increased regulatory 
transparency.
---------------------------------------------------------------------------

    \192\ See note 13, supra.
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2. Effects on Efficiency, Competition and Capital Formation
    The rules described in this proposal are intended to facilitate 
access for relevant authorities to data stored in SEC-registered 
repositories and therefore affect such repositories, but do not 
directly affect security-based swap market participants. As discussed 
below, access by relevant authorities to security-based swap data could 
indirectly affect market participants through the benefits that accrue 
from the relevant authorities' improved ability to fulfill their 
regulatory mandate or legal responsibility or authority as well as the 
potential impact of disclosure of confidential data.

[[Page 55205]]

However, because the Commission preliminarily believes that its rules 
will condition access to security-based swap data on the agreement of 
the relevant authorities to protect the confidentiality of the data, 
the Commission expects these rules to have little effect on the 
structure or operations of the security-based swap market. Therefore, 
the Commission preliminarily believes that effects of the proposed 
rules on efficiency, competition and capital formation will be 
small.\193\ Nevertheless, there are some potential effects, 
particularly with respect to efficiency and capital formation, which 
flow from efficient collection and aggregation of security-based swap 
data. We describe these effects below.
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    \193\ See part VI.C.1b above for a discussion of the potential 
impact on capital formation of inadequate data confidentiality 
protections. The Commission preliminarily believes that the proposed 
approach balances the need for data confidentiality and the need for 
regulatory transparency.
---------------------------------------------------------------------------

    In part VI.B of this release, the Commission describes the baseline 
used to evaluate the economic impact of the proposed rules, including 
the impact on efficiency, competition and capital formation. In 
particular, the Commission noted that the security-based swap data 
currently available from the DTCC-TIW is the result of a voluntary 
reporting system and access to that data is made consistent with 
guidelines published by the ODRF.
    Under the voluntary reporting regime, CDS transaction data 
involving counterparties and reference entities from most jurisdictions 
is reported to a single entity, the DTCC-TIW. The DTCC-TIW, using the 
ODRF guidelines, then allows relevant authorities, including the 
Commission, to obtain data necessary to carry out their respective 
authorities and responsibilities with respect to OTC derivatives and 
the regulated entities that use derivatives.\194\ As various regulators 
implement reporting rules within their jurisdictions, counterparties 
within those jurisdictions may or may not continue to report to the 
DTCC-TIW. As a result, the ability of the Commission and other relevant 
authorities to obtain the data required consistent with their 
regulatory mandate, or legal responsibility or authority, may require 
the ability to access data held in a trade repository outside of their 
own jurisdictions. That is, because the market is global and 
interconnected, effective regulatory monitoring of the security-based 
swap market may require regulators to have access to information on the 
global market, particularly during times of market turmoil. The 
proposed data access rule amendments and indemnification exemption 
should facilitate access of relevant authorities other than the 
Commission to security-based swap data held in repositories, and may 
indirectly facilitate Commission access to data held by trade 
repositories registered with regulators other than the Commission. To 
the extent that the proposed data access rules and indemnification 
exemption facilitate the ability of repositories to collect security-
based swap information involving counterparties across multiple 
jurisdictions, there may be benefits in terms of efficient collection 
and aggregation of security-based swap data.
---------------------------------------------------------------------------

    \194\ See note 149, supra.
---------------------------------------------------------------------------

    To the extent that the proposed data access provisions and the 
indemnification exemption increase the quantity of transaction and 
position information available to regulatory authorities about the 
security-based swap market, the ability of the Commission and other 
relevant authorities to respond in an appropriate and timely manner to 
market developments could enhance investor protection through improved 
detection, and facilitating the investigation of fraud and other market 
abuses. Moreover, as noted above, we do not anticipate that the 
proposed rules would directly affect market participants, such 
enhancements in investor protections may decrease the risks and 
indirect costs of trading and could therefore encourage greater 
participation in the security-based swap market for a wider range of 
entities seeking to engage in a broad range of hedging and trading 
activities.\195\ While we believe that increased participation is a 
possible outcome of the Commission's transparency initiatives, 
including these proposed rules, relative to the level of participation 
in this market if these initiatives were not undertaken, we 
preliminarily believe that the benefits that flow from improved 
detection, facilitating the investigation of fraud and other market 
abuses, and more-efficient data aggregation are the more direct 
benefits of the rules.
---------------------------------------------------------------------------

    \195\ Indirect trading costs refer to costs other than direct 
transaction costs. Front running costs described above provide an 
example of indirect trading costs. In the context of investor 
protection, the risk of fraud represents a cost of trading in a 
market with few investor protections or safeguards.
---------------------------------------------------------------------------

    In addition, the improvement in the quantity of data available to 
regulatory authorities, including the Commission, should improve their 
ability to monitor concentrations of risk exposures and evaluate risks 
to financial stability and could promote the overall stability in the 
capital markets.\196\
---------------------------------------------------------------------------

    \196\ See note 95, supra.
---------------------------------------------------------------------------

    Aside from the effects that the proposed data access rules may have 
on regulatory oversight and market participation, we expect the 
proposed rules potentially to affect how SDRs are structured. In 
particular, the proposed data access rules and indemnification 
exemption could reduce the potential for SDRs to be established along 
purely jurisdictional lines, with multiple repositories established in 
different countries or jurisdictions. That is, effective data sharing 
may reduce the need for repositories to be established along 
jurisdictional lines, reducing the likelihood that a single security-
based swap transaction must be reported to multiple swap-data 
repositories. As noted previously by the Commission, due to high fixed 
costs and increasing economies of scale, the total cost of providing 
trade repository services to the market for security-based swaps may be 
lower if the total number of repositories is not increased due to a 
regulatory environment that results in trade repositories being 
established along jurisdictional lines.\197\ To the extent that the 
proposed rules result in fewer repositories that potentially compete 
across jurisdictional lines, cost savings realized by fewer 
repositories operating on a larger scale could result in reduced fees, 
with the subsequent cost to market participants to comply with 
reporting requirements being lower.\198\
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    \197\ See SDR Adopting Release, 80 FR 14533 (discussion of high 
fixed costs and increasing economies of scale in the provision of 
security-based swap data repository services); see also SDR Adopting 
Release, 80 FR 14479 (discussion of rule 13n-4(c)(1)(i), which 
requires each SDR to ensure that any dues, fees or other charges 
that it imposes, and any discounts or rebates that it offers, are 
fair and reasonable and not unreasonably discriminatory; 
particularly noting that ``[o]ne factor that the Commission has 
taken into consideration to evaluate the fairness and reasonableness 
of fees, particularly those of a monopolistic provider of a service, 
is the cost incurred to provide the service'').''
    \198\ Alternatively, fewer repositories could result in those 
few repositories having the ability to take advantage of the reduced 
level of competition to charge higher prices.
---------------------------------------------------------------------------

    Furthermore, multiple security-based swap data repositories with 
duplication of reporting requirements for cross-border transactions 
increase data fragmentation and data duplication, both of which 
increase the potential for difficulties in data aggregation. To the 
extent that the proposed data access rule amendments and 
indemnification exemption facilitate the establishment of SDRs that 
accept transactions from multiple jurisdictions, there may be

[[Page 55206]]

benefits in terms of efficient collection and aggregation of security-
based swap data. As discussed above, to the extent that the 
indemnification exemption allows relevant authorities to have better 
access to the data necessary to form a more complete picture of the 
security-based swap market--including information regarding risk 
exposures and asset valuations--the exemption should help the 
Commission and other relevant authorities perform their oversight 
functions in a more effective manner.
    However, while reducing the likelihood of having multiple SDRs 
established along jurisdictional lines would resolve many of the 
challenges involved in aggregating security-based swap data, there may 
be costs associated with having fewer repositories. In particular, the 
existence of multiple repositories may reduce operational risks, such 
as the risk that a catastrophic event or the failure of a repository 
leaves no registered repositories to which transactions can be 
reported, impeding the ability of the Commission and relevant 
authorities to obtain information about the security-based swap market.
    Finally, as we noted above, a relevant authority's inability to 
protect the privacy of data maintained by repositories could erode 
market participants' confidence in the integrity of the security-based 
swap market. More specifically, confidentiality breaches, including the 
risk that trading strategies may no longer be anonymous due to a 
breach, may increase the overall risks associated with trading or 
decrease the profits realized by certain traders. Increased risks or 
decreased profits may reduce incentives to participate in the security-
based swap markets, which may lead to reduced trading activity and 
liquidity in the market. Depending on the extent of confidentiality 
breaches, as well as the extent to which such breaches lead to market 
exits, disclosures of confidential information could hinder price 
discovery and impede the capital formation process.\199\
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    \199\ See SDR Proposing Release, 75 FR 77307 (``Failure to 
maintain privacy of [SDR data] could lead to market abuse and 
subsequent loss of liquidity.'').
---------------------------------------------------------------------------

3. Additional Costs and Benefits of Specific Rules
    Apart from the general costs and benefits associated with the 
structure of the Exchange Act data access provisions and proposed 
implementing rules, certain discrete aspects of the proposed rules and 
related interpretation raise additional issues related to economic 
costs and benefits.
a. Benefits
i. Determination of Recipient Authorities
    The Commission is proposing an approach to determining whether an 
authority, other than those expressly identified in the Exchange Act 
and the implementing rules,\200\ should be provided access to data 
maintained by SDRs. The Commission believes that this proposed approach 
has the benefit of appropriately limiting relevant authorities' access 
to data maintained by repositories to protect the confidentiality of 
the data.\201\ The Commission expects that relevant authorities from a 
number of jurisdictions may seek to obtain a determination by the 
Commission that they may appropriately have access to repository data. 
Each of these jurisdictions may have a distinct approach to 
supervision, regulation or oversight of its financial markets or market 
participants and to the protection of proprietary and other 
confidential information. The Commission believes that the proposed 
factors--which among other things would consider whether an authority 
has an interest in access to security-based swap data based on the 
relevant authority's regulatory mandate or legal responsibility or 
authority, whether there is an MOU or other arrangement between the 
Commission and the relevant authority that addresses the 
confidentiality of the security-based swap data provided to the 
authority, and whether information accessed by the applicable authority 
would be subject to robust confidentiality safeguards \202\--
appropriately condition an authority's ability to access data on the 
confidentiality protections the authority will afford that data. This 
focus further would be strengthened by the Commission's ability to 
revoke its determination where necessary, including, for example, if a 
relevant authority fails to keep such data confidential.\203\ This 
approach should increase market participants' confidence that their 
confidential trade data will be protected, reducing perceived risks of 
transacting in security-based swaps.
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    \200\ See part II.A for a discussion of specific authorities 
included in the implementing rules.
    \201\ See ESMA comment (Jan. 17, 2011) at 2 (noting that 
relevant authorities must ensure the confidentiality of security-
based swap data provided to them).
    \202\ See part II.A.3.a, supra.
    \203\ See part II.A.4, supra.
---------------------------------------------------------------------------

    The Commission also believes that its proposed approach in 
determining the appropriate relevant authorities would reduce the 
potential for fragmentation and duplication of security-based swap data 
among trade repositories by facilitating mutual access to the data. 
Narrower approaches such as allowing regulatory access to security-
based swap data only to those entities specifically identified in the 
Exchange Act \204\ may increase fragmentation and duplication, and 
hence increase the difficulty in consolidating and interpreting 
security-based swap market data from repositories, potentially reducing 
the general economic benefits discussed above.
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    \204\ See Exchange Act section 3(a)(74), 15 U.S.C. 78c(a)(74).
---------------------------------------------------------------------------

    Furthermore, the Commission believes that its proposed approach in 
conditioning access to security-based swap data held in SDRs by 
requiring there to be in effect an arrangement between the Commission 
and the authority in the form of a MOU would promote the intended 
benefits of access by relevant authorities to data maintained by SDRs. 
Under the proposed approach, rather than requiring regulatory 
authorities to negotiate confidentiality agreements with multiple SDRs, 
a single MOU between the Commission and the relevant authority can 
serve as the confidentiality agreement that will satisfy the 
requirement for a written agreement stating that the relevant authority 
will abide by the confidentiality requirements described in section 24 
of the Exchange Act relating to the security-based swap data. The 
Commission routinely negotiates MOUs or other arrangements with 
relevant authorities to secure mutual assistance or for other purposes, 
and the Commission preliminarily believes that the proposed approach is 
generally consistent with this practice.
    The Commission further preliminarily believes that negotiating a 
single such agreement with the Commission will be less costly for the 
authority requesting data than negotiating directly with each 
registered SDR and eliminate the need for each SDR to negotiate as many 
as 200 confidentiality agreements with requesting authorities. This 
approach would also avoid the difficulties that may be expected to 
accompany an approach that requires SDRs to enter into confidentiality 
agreements--particularly questions regarding the parameters of an 
adequate confidentiality agreement, and the presence of uneven and 
potentially inconsistent confidentiality protections across SDRs and 
recipient entities.

[[Page 55207]]

ii. Notification Requirement
    The Commission is proposing an approach by which SDRs may satisfy 
the notification requirement by notifying the Commission upon the 
initial request for security-based swap data by a relevant authority 
and maintaining records of the initial request and all subsequent 
requests.\205\ The Commission estimates that approximately 300 relevant 
authorities may make requests for data from security-based swap data 
repositories.\206\ Based on the Commission's experience in making 
requests for security-based swap data from trade repositories, the 
Commission estimates that each relevant authority will access security-
based swap data held in SDRs using electronic access. Such access may 
be to satisfy a narrow request concerning a specific counterparty or 
reference entity or security, to create a summary statistic of trading 
activity or outstanding notional, or to satisfy a large request for 
detailed transaction and position data. Requests may occur as seldom as 
once per month if the relevant authority is downloading all data to 
which it has access in order to analyze it on its own systems, or may 
occur 100 or more times per month if multiple staff of the relevant 
authority are making specific electronic requests concerning particular 
counterparties or reference entities and associated positions or 
transactions. Therefore, under the Commission's proposed approach to 
notification requirement compliance, the Commission estimates based on 
staff experience that each repository would provide the Commission with 
actual notice as many as 300 times, and that repositories cumulatively 
would maintain records of as many as 360,000 subsequent data requests 
per year.\207\ The proposed rule would be expected to permit 
repositories to respond to requests for data by relevant authorities 
more promptly and at lower cost than if notification was required for 
each request for data access, while helping to preserve the 
Commission's ability to monitor whether the repository provides data to 
each relevant entity consistent with the applicable conditions.
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    \205\ See proposed Exchange Act rule 13n-4(e).
    \206\ See proposed Exchange Act rule 13n-4(b)(9)(i)-(v) for a 
list of prudential regulators that may request data maintained by 
SDRs from SDRs. The Exchange Act also states that FSOC, the CFTC, 
and the Department of Justice may access security-based swap data. 
See parts II.A.1, 2, supra. The Commission also expects that certain 
self-regulatory organizations and registered futures associations 
may request security-based swap data from repositories. Therefore, 
the Commission estimates that up to approximately 30 relevant 
authorities in the United States may seek to access security-based 
swap data from repositories. The Commission preliminarily believes 
that most requests will come from authorities in G20 countries, and 
estimates that each of the G20 countries will also have no more and 
likely fewer than 30 relevant authorities that may request data from 
SDRs. Certain authorities from outside the G20 also may request 
data. Accounting for all of those entities, the Commission estimates 
that there will likely be a total of no more than 300 relevant 
domestic and foreign authorities that may request security-based 
swap data from repositories.
    \207\ The annual estimate of 360,000 is calculated based on 300 
recipient entities each making 100 requests per month cumulatively 
across all repositories. The estimate of 100 requests per authority 
is based on staff experience with similar data requests in other 
contexts.
---------------------------------------------------------------------------

    The Commission's proposed rule would also simplify relevant 
authorities' direct access to security-based swap data needed in 
connection with their regulatory mandate or legal responsibility or 
authority, because repositories would not be required to provide the 
Commission with actual notice of every request prior to providing 
access to the requesting relevant authority.
iii. Use of Confidentiality Agreements Between the Commission and 
Recipient Authorities
    The proposed rules in part would condition regulatory access on 
there being an arrangement between the Commission and the recipient 
entity, in the form of an MOU or otherwise, addressing the 
confidentiality of the security-based swap information made available 
to the recipient. The proposed rules add that those arrangements shall 
be deemed to satisfy the statutory requirement for a written 
confidentiality agreement.\208\
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    \208\ See proposed Exchange Act rule 13n-4(10)(i).
---------------------------------------------------------------------------

    As discussed above, the Commission preliminarily believes that this 
approach reflects an appropriate way to satisfy the interests 
associated with the confidentiality condition. The benefits associated 
with this approach include obviating the need for repositories to 
negotiate and enter into multiple confidentiality agreements, avoiding 
difficulties regarding the parameters of an adequate confidentiality 
agreement, and avoiding uneven and potentially inconsistent 
confidentiality protections. The proposed approach also would build 
upon the Commission's experience in negotiating such agreements.\209\
---------------------------------------------------------------------------

    \209\ See part II.B.1, supra.
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iv. Indemnification Exemption
    The Commission also is proposing a conditional indemnification 
exemption, recognizing that application of the indemnification 
requirement could prevent some relevant domestic and foreign 
authorities from obtaining security-based swap information from 
repositories, because they cannot provide an indemnification 
agreement.\210\ Effectively prohibiting some authorities other than the 
Commission from obtaining access to security-based swap data maintained 
by repositories potentially would greatly reduce the market 
transparency to regulators provided by Title VII.\211\ Moreover, 
although relevant authorities could obtain security-based swap data 
from the Commission,\212\ repositories are likely to have systems in 
place and expertise that allows them to provide such data to relevant 
authorities quickly, and economic incentives to minimize their own cost 
of providing data.
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    \210\ See part III.A, supra.
    \211\ See Proposing Release, 75 FR 77307 (describing expected 
benefits of SDRs, including the market transparency benefits of 
access by regulators); id. at 77356 (``The ability of the Commission 
and other regulators to monitor risk and detect fraudulent activity 
depends on having access to market data.''); see also part VI.B.1 of 
this release discussing transparency in the security-based swap 
market.
    \212\ See part IV.B, supra (discussing information sharing under 
Exchange Act sections 21 and 24); see also Proposing Release, 75 FR 
77319.
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    The Commission also preliminarily believes that the absence of an 
exemption to the indemnification requirement could increase the 
likelihood that foreign authorities would require duplicate reporting 
of cross-border transactions to repositories within the foreign 
jurisdiction. To the extent that relevant foreign authorities are 
effectively restricted in obtaining data maintained by SEC-registered 
repositories, the Commission's own ability to access security-based 
swap data may similarly be restricted.\213\ More generally, the 
resulting restrictions on regulatory access may likely lead to 
duplication and fragmentation of security-based swap data among trade 
repositories in multiple jurisdictions, which may increase other costs 
that relevant authorities may incur, including, for example, the 
difficulty of aggregating data across multiple repositories.\214\
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    \213\ See note 94, supra, and accompanying text.
    \214\ See Proposing Release, 75 FR 77358. The costs associated 
with aggregating the data of multiple repositories would likely be 
significantly higher under the circumstances described here, as 
different jurisdictions might impose different requirements 
regarding how data is to be reported and maintained.
---------------------------------------------------------------------------

    The Commission preliminarily believes that the proposed 
indemnification exemption further would be beneficial by mitigating the 
risks associated with permitting relevant

[[Page 55208]]

authorities to obtain access to data maintained by repositories. The 
exemption would be available only for requests that are consistent with 
each requesting authority's regulatory mandate, or legal responsibility 
or authority. The Commission preliminarily believes that these 
conditions would significantly reduce the confidentiality concerns 
relating to relevant authorities' access to data maintained by 
repositories.\215\ Limiting an authority's access to data to that 
relating to its mandate, or legal responsibility or authority would 
reduce the opportunity for improper disclosure of the data in part 
because such limits reduce the quantity of data that is subject to 
potential improper disclosure, and because an authority is likely to be 
familiar with the need to maintain the confidentiality of data that 
relates to its mandate or legal responsibility or authority. Further, 
the Commission will have an opportunity to evaluate the confidentiality 
protections provided by the relevant authority in the context of 
negotiations of an MOU or other arrangement.\216\ Should the Commission 
believe the relevant authority has failed to comply with the 
confidentiality provisions of the MOU, it may terminate access by 
revoking a determination by the Commission that the relevant entity was 
appropriate, or by terminating the MOU or other arrangement used to 
satisfy the confidentiality condition, or, as applicable, the 
indemnification exemption.\217\
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    \215\ See, e.g., ESMA comment (Jan. 17, 2011) at 2 (noting that 
relevant authorities must ensure the confidentiality of security-
based swap data provided to them).
    \216\ For the indemnification exemption to apply to the requests 
of a particular requesting authority, the authority would be 
required to enter into an MOU or other arrangement with the 
Commission, which would enable the Commission to determine, prior to 
operation of the indemnification exemption, that the authority has a 
regulatory mandate, or legal responsibility or authority to access 
data maintained by SDRs, that the authority agrees to protect the 
confidentiality of any security-based swap information provided to 
it and that the authority will provide reciprocal assistance in 
securities matters within the Commission's jurisdiction. See part 
III, supra (discussing the proposed indemnification exemption).
    \217\ See part II.A.3, supra.
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b. Costs
    The Commission recognizes that the proposed approach to providing 
access to relevant authorities other than the Commission to security-
based swap data held in repositories has the potential to involve 
certain costs and risks.
    The relevant authorities requesting securities-based swap data 
would incur some costs in seeking a Commission order deeming the 
authority appropriate to receive security-based swap data. These costs 
would include the negotiation of an MOU to address the confidentiality 
of the security-based swap information it seeks to obtain and providing 
information to justify that the security-based swap data relates to the 
entity's regulatory mandate or legal responsibility or authority. As 
discussed above, the Commission estimates that up to 300 entities 
potentially might enter into such MOUs or other arrangements.\218\ 
Based on the Commission staff's experience in negotiating MOUs that 
address regulatory cooperation, the Commission preliminarily estimates 
the cost to each relevant authority requesting data associated with 
negotiating such an arrangement of approximately $205,000 per entity 
for a total of $61,500,000.\219\
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    \218\ See part VI.C.3.a.ii, supra.
    \219\ These figures are based on 300 entities each requiring 500 
personnel hours on average to negotiate an MOU. See part V.D.1.a, 
supra. The cost per entity is 400 hours x attorney at $380 per hour 
+ 100 hours x deputy general counsel at $530 per hour = $205,000, or 
a total of $61,500,000. We use salary figures from SIFMA's 
Management & Professional Earnings in the Securities Industry 2013, 
modified by SEC staff to account for a 1800-hour year-week and 
multiplied by 5.35 to account for bonuses, firm size, employee 
benefits and overhead.
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    In addition, authorities that are not specified by the proposed 
rule may request that that the Commission determine them to be 
appropriate to receive access to such security-based swap data. Given 
the relevant information that the Commission preliminarily would 
consider in connection with such designations (apart from the MOU 
issues addressed above)--including information regarding how the 
authority would be expected to use the information, information 
regarding the authority's regulatory mandate or legal responsibility or 
authority, and information regarding reciprocal access--the Commission 
preliminarily estimates the cost associated with such a request to be 
approximately $15,200 per requesting entity for a total of 
$4,560,000.\220\
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    \220\ These figures are based on roughly 300 entities (noting 
that certain entities designated by statute or rule would not need 
to prepare such requests) requiring 40 personnel hours to prepare a 
request for access. See part V.D.1.b, supra. The cost per entity is 
40 hours x attorney at $380 per hour = $15,200, or a total of 
$4,560.000. We use salary figures from SIFMA's Management & 
Professional Earnings in the Securities Industry 2013, modified by 
SEC staff to account for a 1800-hour year-week and multiplied by 
5.35 to account for bonuses, firm size, employee benefits and 
overhead.
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    Security-based swap data repositories would incur some costs to 
verify that an entity requesting data entered into the requisite 
agreements concerning confidentiality with the Commission, and that the 
entity either has agreed to indemnify the Commission and the 
repository, or that the indemnification exemption applies. The 
Commission generally expects that such verification costs would be 
minimal because information regarding such Commission arrangements 
would generally be readily available.\221\
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    \221\ As a general matter, the Commission provides a list of 
MOUs and other arrangements on its public Web site, which are 
available at: http://www.sec.gov/about/offices/oia/oia_cooparrangements.shtml.
---------------------------------------------------------------------------

    To the extent that the security-based swap data repository provides 
the requested data through direct electronic means, the repository may 
incur some cost in providing the requesting authority access to the 
system that provides such access and setting data permissions to allow 
access only to the information that relates to the authority's 
regulatory mandate, or legal responsibility or authority. The 
Commission preliminarily believes most of the costs associated with 
providing such access would be the fixed costs incurred in designing 
and building the systems to provide the direct electronic access 
required by the recently adopted SDR rules.\222\ The Commission 
preliminarily believes the marginal cost of providing access to an 
additional relevant authority and setting the associated permissions is 
approximately $6,295.\223\ Based on an estimated 300 entities 
requesting access to each of ten registered SDRs, we estimate the total 
cost of connecting entities to SDRs to be approximately $18,885,000.
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    \222\ See SDR Adopting Release, 80 FR 14523 (estimating the 
aggregate one-time systems costs for ten respondents to be 420,000 
hours and $10 million, and estimating the aggregate ongoing systems 
costs as being 252,000 hours and $60 million); see also part 
IV.D.1.c, supra.
    \223\ This figure is based on the view that, for each recipient 
requesting data, a repository would incur an 25 hour burden 
associated with programming or otherwise inputting the relevant 
parameters, encompassing 20 hours of programmer analyst time and 
five hours of senior programmer time. The estimate also encompasses 
one hour of attorney time in connection with each such recipient. 
See part V.D.1.c, supra. The cost per entity is 20 hours x 
programmer analyst at $220 per hour + 5 hours x senior programmer at 
$303 per hour + 1 hour x attorney at $380 per hour = $6,295, We use 
salary figures from SIFMA's Management & Professional Earnings in 
the Securities Industry 2013, modified by SEC staff to account for a 
1800-hour year-week and multiplied by 5.35 to account for bonuses, 
firm size, employee benefits and overhead.
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    The Commission further recognizes that the conditions in the 
proposed indemnification exemption would not necessarily provide 
repositories and the Commission with the same level of confidentiality-
related protection that an indemnification agreement would provide 
(i.e., coverage for any expenses

[[Page 55209]]

arising from litigation relating to information provided to a relevant 
authority). The Commission preliminarily believes, however, that the 
conditions in the proposed indemnification exemption, related to the 
need for a confidentiality arrangement and requiring that the 
information provided relate to a regulatory mandate, or legal 
responsibility or authority of the recipient entity, would provide 
appropriate protection of the confidentiality of data maintained by 
SDRs, albeit one that is different from the protection provided by an 
indemnification agreement that addresses potential costs of litigation 
associated with the data provided to it by the SDR.
    In addition, under the Commission's proposed notification 
compliance rule, SDRs would be required to notify the Commission of the 
initial request for data but would not have to inform the Commission of 
all relevant authorities' requests for data prior to a SDR fulfilling 
such requests. Based on the estimate that approximately 300 relevant 
authorities may make requests for data from security-based swap data 
repositories, the Commission estimates that a repository would provide 
the Commission with actual notice approximately 300 times.\224\ 
Moreover, based on the estimate that ten persons may register with the 
Commission as SDRs,\225\ this suggests that repositories in the 
aggregate would provide the Commission with actual notice up to a total 
of 3,000 times. The Commission preliminarily estimates that the total 
of providing such notice to be $57,000 per SDR for a total of 
$570,000.\226\
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    \224\ See part VI.C.3.ii, supra.
    \225\ See note 117, supra, and accompanying text.
    \226\ These figures are based each of ten SDRs providing notice 
for each of 300 requesting entities. See part V.D.1.d, supra. The 
cost per SDR is 300 requesting entities x 0.5 hours x attorney at 
$380 per hour = $57,000, or a total of $570,000. We use salary 
figures from SIFMA's Management & Professional Earnings in the 
Securities Industry 2013, modified by SEC staff to account for a 
1800-hour year-week and multiplied by 5.35 to account for bonuses, 
firm size, employee benefits and overhead.
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    Pursuant to rule, SDRs would be required to maintain records of 
subsequent requests.\227\ Not receiving actual notice of all requests 
may impact the Commission's ability to track such requests, but the 
Commission preliminarily believes that the benefits of receiving actual 
notice of each request would not justify the additional costs that 
repositories would incur in providing such notices and the potential 
delay in relevant authorities receiving data that they need to fulfill 
their regulatory mandate, or legal responsibility or authority. At the 
same time, providing notice of initial requests will help to preserve 
the Commission's ability to monitor whether the repository provides 
data to each relevant entity consistent with the applicable conditions. 
As discussed above, the Commission preliminarily estimates that the 
average initial paperwork burden associated with maintaining certain 
records related to data requests or access would be roughly 360 hours, 
and that the annualized burden would be roughly 280 hours and $120,000 
for each repository.\228\ Assuming a maximum of ten security-based swap 
data repositories, the estimated aggregate one-time dollar cost would 
be roughly $1 million,\229\ and the estimated aggregate annualized 
dollar cost would be roughly $1.2 million.\230\
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    \227\ See part V.D.1.d, supra. As noted above, existing rules 
require SDRs to maintain copies of all documents they make or 
receive in their course of business, including electronic documents. 
See note 77, supra.
    \228\ See part V.D.1.d, supra.
    \229\ The Commission preliminarily anticipates that a repository 
would assign the associated responsibilities primarily to a 
compliance manager and a senior systems analyst. The total estimated 
dollar cost would be roughly $100,000 per repository, reflecting the 
cost of a compliance manager at $283 per hour for 300 hours, and a 
senior systems analyst at $260 per hour for 60 hours. Across the 
estimated ten repositories, this would amount to roughly $1 million.
    \230\ The Commission preliminarily anticipates that a repository 
would assign the associated responsibilities primarily to a 
compliance manager. The total estimated dollar cost would be roughly 
$120,000 per repository, reflecting $40,000 annualized information 
technology costs, as well as a compliance manager at $283 per hour 
for 280 hours. Across the estimated ten repositories, this would 
amount to roughly $1.2 million.
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D. Alternatives

    The Commission considered a number of alternative approaches to 
implementing the Exchange Act data access provisions, including the 
indemnification requirement, but, for the reasons discussed below, is 
not proposing them.
1. No Indemnification Exemption
    The Commission considered not proposing any exemptive relief from 
the indemnification requirement. As discussed above, application of the 
indemnification requirement may prevent some relevant authorities from 
accessing security-based swap data directly from repositories 
registered with the Commission.\231\ Although relevant authorities 
could obtain such data from the Commission,\232\ that alternative would 
be expected to be associated with delays and higher costs, particularly 
during periods of market stress and particularly since repositories are 
likely to have expertise in providing such data to relevant authorities 
and economic incentives for doing so efficiently.\233\
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    \231\ See, e.g., DTCC comment (Nov. 15, 2010) at 3 (discussing 
how the indemnification requirement would result in the reduction of 
information accessible to regulators on a timely basis and would 
greatly diminish regulators' ability to carry out oversight 
functions).
    \232\ See part IV.B, supra, discussing information sharing under 
Exchange Act sections 21 and 24; see also SDR Proposing Release, 75 
FR 77319.
    \233\ See part VI.C.3.a.iv, supra.
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    To the extent that relevant foreign authorities are effectively 
restricted in obtaining data maintained by SEC-registered repositories, 
the Commission's own ability to access security-based swap data may 
similarly be restricted.\234\ More generally, the resulting 
restrictions on regulatory access may likely lead to duplication and 
fragmentation of security-based swap data among trade repositories in 
multiple jurisdictions, which may increase other costs that relevant 
authorities may incur, including, for example, the difficulty of 
aggregating data across multiple repositories.\235\
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    \234\ See note 94, supra, and accompanying text.
    \235\ See note 214, supra.
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2. Repository Option To Waive Indemnification
    The Commission also considered whether to adopt the approach set 
forth in the Cross-Border Proposing Release, to allow the SDR the 
option to waive the indemnification requirement.\236\ As discussed 
above, however, the Commission preliminarily believes that the proposed 
approach would more effectively address the relevant concerns 
associated with implementing the indemnification provision.\237\ Also, 
requiring each repository to elect whether to waive the indemnification 
requirement for each requesting entity would likely impose additional 
costs on repositories and may result in inconsistent treatment of data 
requests across repositories.
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    \236\ See note 91, supra, and accompanying text.
    \237\ See part III.A, supra.
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3. Additional Conditions to Indemnification Requirement or Proposed 
Indemnification Exemption
    The Commission also considered whether to prescribe additional 
conditions or limitations to the indemnification requirement or the 
proposed indemnification exemption. In part, the Commission considered 
one commenter's suggestion that the Commission provide model 
indemnification language in connection with the indemnification 
requirement,

[[Page 55210]]

but concluded preliminarily that the benefits of such model language 
are largely mitigated by an indemnification exemption that would 
condition the indemnification exemption upon there being in effect one 
or more arrangements (in the form of an MOU or otherwise) between the 
Commission and the entity that addresses the confidentiality of the 
security-based swap information provided and other matters as 
determined by the Commission.\238\
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    \238\ See note 98, supra.
---------------------------------------------------------------------------

4. Use of Confidentiality Arrangements Directly Between Repositories 
and Recipients
    The Commission considered the alternative approach of permitting 
confidentiality agreement between SDRs and the recipient of the 
information to satisfy the confidentiality condition to the data access 
requirement. The Commission preliminarily believes, however, that the 
proposed approach, which would make use of confidentiality arrangements 
between the Commission and the recipients of the data, would avoid 
difficulties such as questions regarding the parameters of the 
confidentiality agreement, and the presence of uneven and inconsistent 
confidentiality protections.\239\ This also would avoid the need for 
SDRs to potentially negotiate and enter into dozens of confidentiality 
agreements, instead such costs would be borne by the Commission.
---------------------------------------------------------------------------

    \239\ See part II.B.1, supra.
---------------------------------------------------------------------------

6. Notice of Individual Requests for Data Access
    Finally, the Commission considered requiring repositories to 
provide notice to the Commission of all requests for data prior to 
repositories fulfilling such requests, rather than the proposed 
approach of requiring such notice only of the first request from a 
particular recipient, with the repository maintaining records of all 
subsequent requests.\240\ The Commission preliminarily believes that 
the benefits of receiving actual notice for each and every request 
would not justify the additional costs that would be imposed on 
repositories to provide such notice, and providing notice of subsequent 
requests may not be feasible if data is provided by direct electronic 
access.
---------------------------------------------------------------------------

    \240\ See part II.A.4, supra.
---------------------------------------------------------------------------

E. Comments on the Economic Analysis

    The Commission requests comment on all aspects of this economic 
analysis. Commenters particularly are requested to address whether 
there are other costs or benefits--not addressed above--that the 
Commission should take into account when adopting final rules. 
Commenters also are requested to address whether the Commission has 
appropriately weighed the costs and benefits of the potential 
alternative approaches addressed above, and whether there are other 
potential alternative approaches that the Commission should assess.

VII. Consideration of Impact on the Economy

    For purposes of the Small Business Regulatory Enforcement Fairness 
Act of 1996 (``SBREFA'') \241\ the Commission must advise OMB whether 
the proposed regulation constitutes a ``major'' rule. Under SBREFA, a 
rule is considered ``major'' where, if adopted, it results or is likely 
to result in: (1) An annual effect on the economy of $100 million or 
more; (2) a major increase in costs or prices for consumers or 
individual industries; or (3) significant adverse effect on 
competition, investment or innovation.
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    \241\ Public Law 104-121, Title II, 110 Stat. 857 (1996) 
(codified in various sections of 5 U.S.C., 15 U.S.C. and as a note 
to 5 U.S.C. 601).
---------------------------------------------------------------------------

    The Commission requests comment on the potential impact of the 
proposed rules and amendments on the economy on an annual basis. 
Commenters are requested to provide empirical data and other factual 
support for their views to the extent possible.

VIII. Regulatory Flexibility Act Certification

    Section 3(a) of the Regulatory Flexibility Act of 1980 (``RFA'') 
\242\ requires the Commission to undertake an initial regulatory 
flexibility analysis of the proposed rules on ``small entities.'' 
Section 605(b) of the RFA \243\ provides that this requirement shall 
not apply to any proposed rule or proposed rule amendment which, if 
adopted, would not have a significant economic impact on a substantial 
number of small entities. Pursuant to 5 U.S.C. 605(b), the Commission 
hereby certifies that the proposed rules would not, if adopted, have a 
significant economic impact on a substantial number of small entities. 
In developing these proposed rules, the Commission has considered their 
potential impact on small entities. For purposes of Commission 
rulemaking in connection with the RFA, a small entity includes: (1) 
When used with reference to an ``issuer'' or a ``person,'' other than 
an investment company, an ``issuer'' or ``person'' that, on the last 
day of its most recent fiscal year, had total assets of $5 million or 
less; \244\ or (2) a broker-dealer with total capital (net worth plus 
subordinated liabilities) of less than $500,000 on the date in the 
prior fiscal year as of which its audited financial statements were 
prepared pursuant to Rule 17a-5(d) under the Exchange Act,\245\ or, if 
not required to file such statements, a broker-dealer with total 
capital (net worth plus subordinated liabilities) of less than $500,000 
on the last day of the preceding fiscal year (or in the time that it 
has been in business, if shorter); and is not affiliated with any 
person (other than a natural person) that is not a small business or 
small organization.\246\
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    \242\ 5 U.S.C. 603(a).
    \243\ 5 U.S.C. 605(b).
    \244\ See 17 CFR 240.0-10(a).
    \245\ 17 CFR 240.17a-5(d).
    \246\ See 17 CFR 240.0-10(c).
    For purposes of the Regulatory Flexibility Act, the definition 
of ``small entity'' also encompasses ``small governmental 
jurisdictions,'' which in relevant part means governments of locales 
with a population of less than fifty thousand. 5 U.S.C. 601(5), (6). 
Although the Commission anticipates that this proposal may be 
expected to have an economic impact on various governmental entities 
that access data pursuant to Dodd-Frank's data access provisions, 
the Commission does not anticipate that any of those governmental 
entities would be small entities.
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    In initially proposing rules regarding the registration process, 
duties and core principles applicable to SDRs, the Commission stated 
that it preliminarily did not believe that any persons that would 
register as repositories would be considered small entities.\247\ The 
Commission further stated that it preliminarily believed that most, if 
not all, SDRs would be part of large business entities with assets in 
excess of $5 million and total capital in excess of $500,000, and, as a 
result, the Commission certified that the proposed rules would not have 
a significant impact on a substantial number of small entities and 
requested comments on this certification.\248\ The Commission 
reiterated that conclusion earlier this year in adopting final rules 
generally addressing repository registration, duties and core 
principles.\249\
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    \247\ See 75 FR 77365.
    \248\ See id. (basing the conclusions on review of public 
sources of financial information about the current repositories that 
are providing services in the OTC derivatives market).
    \249\ See SDR Adopting Release, 80 FR 14549 (noting that the 
Commission did not receive any comments that specifically addressed 
whether the applicable rules would have a significant economic 
impact on small entities).
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    The Commission continues to hold the view that any persons that 
would register as SDRs would not be considered small entities. 
Accordingly, the Commission certifies that the proposed rules--related 
to regulatory access to data held by SDRs and providing a conditional 
exemption from

[[Page 55211]]

the associated indemnification requirement--would not have a 
significant economic impact on a substantial number of small entities 
for purposes of the RFA. The Commission encourages written comments 
regarding this certification. The Commission solicits comment as to 
whether the proposed rules could have an effect on small entities that 
has not been considered. The Commission requests that commenters 
describe the nature of any impact on small entities and provide 
empirical data to support the extent of such impact.

Statutory Basis and Text of Proposed Rules

    Pursuant to the Exchange Act, and particularly sections 3(b), 
13(n), 23(a) and 36 thereof, 15 U.S.C. 78c(b), 78m(n), 78w(a) and 78mm, 
the Commission is proposing to amend rule 13n-4 by adding paragraphs 
(b)(9), (b)(10), (d) and (e) to that rule.

List of Subjects in 17 CFR Part 240

    Confidential business information, Reporting and recordkeeping 
requirements, Securities.

Text of Proposed Rules

    For the reasons stated in the preamble, the Commission is proposing 
to amend Title 17, Chapter II, of the Code of Federal Regulations as 
follows:

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

0
1. The authority citation for part 240 continues to read, in part, as 
follows:

    Authority:  15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4, 
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 
80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq., and 
8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350; and 
Pub. L. 111-203, 939A, 124 Stat. 1376 (2010), unless otherwise 
noted.
* * * * *
0
2. In Sec.  240.13n-4, amend paragraph (b)(8) by removing the word 
``and'' at the end of the paragraph and adding paragraphs (b)(9), 
(b)(10), (d), and (e).
    The additions read as follows:


Sec.  240.13n-4  Duties and core principles of security-based swap data 
repository.

* * * * *
    (b) * * *
    (9) On a confidential basis, pursuant to section 24 of the Act (15 
U.S.C. 78x), upon request, and after notifying the Commission of the 
request in a manner consistent with paragraph (e) of this section, make 
available security-based swap data obtained by the security-based swap 
data repository, including individual counterparty trade and position 
data, to the following:
    (i) The Board of Governors of the Federal Reserve System and any 
Federal Reserve Bank;
    (ii) The Office of the Comptroller of the Currency;
    (iii) The Federal Deposit Insurance Corporation;
    (iv) The Farm Credit Administration;
    (v) The Federal Housing Finance Agency;
    (vi) The Financial Stability Oversight Council;
    (vii) The Commodity Futures Trading Commission;
    (viii) The Department of Justice;
    (ix) The Office of Financial Research; and
    (x) Any other person that the Commission determines to be 
appropriate, conditionally or unconditionally, by order, including, but 
not limited to--
    (A) Foreign financial supervisors (including foreign futures 
authorities);
    (B) Foreign central banks; and
    (C) Foreign ministries;
    (10) Before sharing information with any entity described in 
paragraph (b)(9) of this section, there shall be in effect an 
arrangement between the Commission and the entity (in the form of a 
memorandum of understanding or otherwise) to address the 
confidentiality of the security-based swap information made available 
to the entity; this arrangement shall be deemed to satisfy the 
requirement, set forth in section 13(n)(5)(H)(i) of the Act (15 U.S.C. 
78m(n)(5)(H)(i)), that the security-based swap data repository receive 
a written agreement from the entity stating that the entity shall abide 
by the confidentiality requirements described in section 24 of the Act 
(15 U.S.C. 78x) relating to the information on security-based swap 
transactions that is provided; and
* * * * *
    (d) Exemption from the indemnification requirement. The 
indemnification requirement set forth in section 13(n)(5)(H)(ii) of the 
Act (15 U.S.C. 78m(n)(5)(H)(ii)) shall not be applicable to an entity 
described in paragraph (b)(9) of this section with respect to 
disclosure of security-based swap information by the security-based 
swap data repository to such entity if:
    (1) Such information relates to persons or activities within the 
entity's regulatory mandate, or legal responsibility or authority; and
    (2) There is in effect one or more arrangements (in the form of 
memoranda of understanding or otherwise) between the Commission and 
such entity that:
    (i) Address the confidentiality of the security-based swap 
information provided and any other matters as determined by the 
Commission; and
    (ii) Specify the types of security-based swap information that 
would relate to persons or activities within the entity's regulatory 
mandate, legal responsibility or authority for purposes of paragraph 
(d)(1) of this section.
    (e) Notification requirement compliance. To satisfy the 
notification requirement of the data access provisions of paragraph 
(b)(9) of this section, a security-based swap data repository shall 
inform the Commission upon its receipt of the first request for 
security-based swap data from a particular entity (which may include 
any request to be provided ongoing online or electronic access to the 
data), and the repository shall maintain records of all information 
related to the initial and all subsequent requests for data access from 
that entity, including records of all instances of online or electronic 
access, and records of all data provided in connection with such 
requests or access.
* * * * *

    By the Commission.

     Dated: September 4, 2015.
Brent J. Fields,
Secretary.
[FR Doc. 2015-22844 Filed 9-11-15; 8:45 am]
 BILLING CODE 8011-01-P