[Federal Register Volume 81, Number 140 (Thursday, July 21, 2016)]
[Notices]
[Pages 47359-47361]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-17229]


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COMMODITY FUTURES TRADING COMMISSION


Order Extending the Designation of the Provider of Legal Entity 
Identifiers To Be Used in Recordkeeping and Swap Data Reporting 
Pursuant to the Commission's Regulations

AGENCY: Commodity Futures Trading Commission.

ACTION: Order.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'') has 
issued an order (``Order'') to extend the Commission's designation of 
the Depository Trust and Clearing Corporation (``DTCC'') and Society 
for

[[Page 47360]]

Worldwide Interbank Financial Telecommunication (``SWIFT'') joint 
venture (``DTCC-SWIFT'') as the provider of legal entity identifiers, 
or ``LEIs,'' pursuant to applicable provisions of the Commodity 
Exchange Act (``CEA'') and the Commission's regulations. DTCC-SWIFT's 
designation was originally made by Commission order issued on July 23, 
2012, for a term of two years. The Commission's order of July 23, 2012 
was amended on June 7, 2013, an Amended and Restated Order issued on 
July 22, 2014 to extend DTCC-SWIFT's designation for an additional one 
year, and an Order was issued on July 17, 2015 to further extend DTCC-
SWIFT's designation for an additional one year. This Order supersedes 
the Commission's Order issued on July 17, 2015 and further extends 
DTCC-SWIFT's designation for an additional one year while the 
transition to a fully operational global LEI system continues. This 
Order permits registered entities and swap counterparties subject to 
the Commission's jurisdiction to comply with the legal entity 
identifier requirements of parts 45 and 46 of the Commission's 
regulations by using identifiers issued by DTCC-SWIFT, or any other 
pre-Local Operating Unit (``pre-LOU'') that has been endorsed by the 
Regulatory Oversight Committee (``ROC'') of the global LEI system as 
being globally acceptable and as issuing globally acceptable legal 
entity identifiers.

FOR FURTHER INFORMATION CONTACT: Srinivas Bangarbale, Chief Data 
Officer, Office of Data and Technology, (202) 418-5315, 
[email protected], or Richard Mo, Attorney Advisor, Division of 
Market Oversight, (202) 418-7637, [email protected], Commodity Futures 
Trading Commission, Three Lafayette Centre, 1155 21st Street NW., 
Washington, DC 20581.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
    A. Legal Entity Identifiers: CEA Section 21(b) and Sec.  45.6 of 
the Commission's Regulations
    B. Order of July 17, 2015
II. Further Extension of Designation of the DTCC-SWIFT Utility
III. Order

I. Background

A. Legal Entity Identifiers: CEA Section 21(b) and Sec.  45.6 of the 
Commission's Regulations

    Title VII of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (``Dodd-Frank Act'') \1\ amended the CEA \2\ to 
establish a comprehensive new regulatory framework for swaps. 
Amendments to the CEA included the addition of provisions requiring the 
retention, and the reporting to Commission-registered swap data 
repositories (``SDRs''), of data regarding swap transactions, in order 
to enhance transparency, promote standardization and reduce systemic 
risk.\3\ Pursuant to these added provisions, the Commission added to 
its regulations part 45,\4\ which sets forth recordkeeping rules, and 
rules for the reporting of swap transaction data to a registered SDR; 
and part 46,\5\ which sets forth recordkeeping and swap data reporting 
rules for historical swaps.
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    \1\ Pub. L. 111-203, 124 Stat. 1376 (2010).
    \2\ 7 U.S.C. 1 et seq.
    \3\ See, e.g., the following sections added by the Dodd-Frank 
Act: Section 2(a)(13)(G) of the CEA, which requires all swaps, 
whether cleared or uncleared, to be reported to a registered SDR; 
new Section 21(b) of the CEA, which directs the Commission to 
prescribe standards for swap data reporting and attendant 
recordkeeping; and new Sections 4r and 2(h)(5) of the CEA, which, 
among other things, establish reporting requirements for swaps in 
effect as of the enactment of the Dodd-Frank Act (``pre-enactment 
swaps''), as well as swaps in effect after such enactment but prior 
to the effective date for compliance with the Commission's final 
recordkeeping and swap data reporting rules (``transition swaps'' 
and, collectively with pre-enactments swaps, ``historical swaps'').
    \4\ Swap Data Recordkeeping and Reporting Requirements, 77 FR 
2136 (January 13, 2012).
    \5\ Swap Data Recordkeeping and Reporting Requirements: Pre-
Enactment and Transition Swaps, 77 FR 35200 (June 12, 2012).
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    Under the authority granted by section 21(b) of the CEA, which, 
among other things, directs the Commission to prescribe standards that 
specify the data elements for each swap that shall be collected and 
maintained by a registered SDR,\6\ the Commission, in its part 45 
regulations, prescribed the use of a legal entity identifier, or 
``LEI,'' in required recordkeeping and swap data reporting. Section 
45.6 provides that each counterparty to any swap subject to the 
jurisdiction of the Commission shall be identified in all recordkeeping 
and all swap data reporting pursuant to part 45 by means of a single 
legal entity identifier as specified in that section.\7\ In adopting 
this requirement, the Commission highlighted the LEI as a crucial 
regulatory tool to facilitate data aggregation by regulators, which 
furthers, among other goals, the systemic risk mitigation and market 
manipulation prevention purposes of the Dodd-Frank Act.\8\
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    \6\ CEA Section 21(b).
    \7\ 77 FR at 2204. In addition, in part 46 of the Commission's 
regulations, Sec.  46.4 provides that each counterparty to a 
historical swap in existence on or after April 25, 2011, for which 
an initial data report is required pursuant to part 46, must obtain 
a legal entity identifier, which must be used for purposes of 
recordkeeping and swap data reporting under part 46 as prescribed in 
Sec.  46.4. 77 FR at 35228-9.
    \8\ See 77 FR at 2138.
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    Section 45.6 sets forth requirements that the legal entity 
identifier to be used to comply with the Commission's recordkeeping and 
swap data reporting rules must meet, including satisfaction of 
specified technical and governance principles. In adopting these 
requirements, the Commission took into consideration work that had 
commenced at the international level to establish a global LEI 
system.\9\ The Commission expressed its agreement that ``optimum 
effectiveness of [the LEI] as a tool for achieving the systemic risk 
mitigation, transparency and market protection goals of the Dodd-Frank 
Act--goals shared by financial regulators world-wide--would come from 
creation of [an LEI] . . . that is capable of becoming the single 
international standard for unique identification of legal entities 
across the world financial sector.'' \10\ The Commission cited its 
involvement in an international initiative, coordinated by the 
Financial Stability Board (``FSB''),\11\ to establish standards, and a 
governance framework, for a global LEI system--including the 
Commission's participation in an ad hoc, expert group of regulatory 
authorities convened by the FSB to develop recommendations regarding 
the implementation of such a system.\12\
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    \9\ See 77 FR at 2163.
    \10\ Id.
    \11\ The FSB is an international body that develops and promotes 
the implementation of effective regulatory, supervisory and other 
policies in the interest of financial stability. Established in 2009 
as a successor to the Financial Stability Forum, the FSB coordinates 
the work of national financial authorities, international standards 
setting bodies and international financial institutions. Its 
membership includes G-20 members, the International Monetary Fund 
and the World Bank. The FSB Secretariat is located in Basel, 
Switzerland. The FSB's Web site can be accessed at http://www.financialstabilityboard.org.
    \12\ See 77 FR at 2162.
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B. Order of July 17, 2015

    The Commission's July 23, 2012 order was amended on June 7, 2013, 
and the Commission issued an Amended and Restated Order on July 22, 
2014 to extend its designation of the DTCC-SWIFT utility while the 
terms of transition to a fully operational global LEI system were 
finalized and implemented. In the Amended and Restated Order, the 
Commission aligned the legal entity identifier terminology used therein 
with the terminology that is currently in use at the international 
level, and removed certain provisions that, given the current state of

[[Page 47361]]

implementation of the global LEI system, were no longer applicable. On 
July 17, 2015 the Commission issued an Order further extending its 
designation of the DTCC-SWIFT utility for an additional year.
    In the preamble to the Amended and Restated Order, the Commission 
noted that the process to establish the global LEI system continued to 
move forward since the issuance of the Amendment on June 7, 2013, 
noting various implementation milestones,\13\ and that while progress 
towards the establishment of the global LEI system continued, the 
system would not be fully operational before the expiration of DTCC-
SWIFT's two-year term of designation under the July 23, 2012 Order. The 
Commission believed it was appropriate, in order to further the smooth 
transition to a fully operational global LEI system, to extend its 
designation of the DTCC-SWIFT utility, given the significant progress 
made in establishing the global LEI system--including the ROC's 
endorsement of the DTCC-SWIFT utility as a globally acceptable pre-LOU.
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    \13\ In the second half of 2013, the ROC adopted endorsement 
standards for pre-LOUs and the identifiers issued by them, and 
endorsed sixteen member-sponsored pre-LOUs--including DTCC-SWIFT--as 
globally acceptable. The Global LEI Foundation that will provide the 
Central Operating Unit (``COU''), managing the central operations of 
the global LEI system, was formally established under Swiss law. The 
ROC and the Global LEI Foundation are developing a framework for the 
transition of full operational management of the global LEI system 
to the COU, with supervisory oversight by the ROC in the public 
interest.
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II. Further Extension of Designation of the DTCC-SWIFT Utility

    Progress towards the establishment of the global LEI system 
continues. The Global LEI Foundation (``GLEIF'') is incorporated and 
has finalized the Master Agreement with pre-LOUs, including DTCC-
SWIFT's Global Markets Entity Identifier (``GMEI'') utility. The ROC 
continues, within its authority, to facilitate that process. The 
finalization of the Master Agreement was the result of a deliberative 
process that included several multi-party discussions.\14\ As pre-LOUs 
sign the Master Agreement and go through the process to become 
accredited, they will become LOUs and will be under the direct 
operational oversight of the GLEIF, which in turn will be under the 
oversight of the ROC. While it is expected that DTCC-SWIFT will be 
accredited in the near term, given the international and deliberative 
nature of the process, the Commission finds it appropriate to provide 
sufficient time for the process to conclude successfully and smoothly.
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    \14\ In its 2015 Annual Report, the GLEIF reported certain 
milestones regarding the implementation of the Master Agreement, 
including the arrival of an agreed framework for business operations 
between the GLEIF and the LOUs. See GLEIF 2015 Annual Report, 
available at https://www.gleif.org/content/1-about/5-governance/10-annual-report/2016-05-03_gleif_2015_annual_report_final.pdf.
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    Accordingly, the Commission is issuing this Order, to further 
extend the Commission's designation of the DTCC-SWIFT utility while the 
transition to a fully operational global LEI system is implemented. The 
Commission is not otherwise modifying the terms or conditions found in 
the Amended and Restated Order.

III. Order

    It is ordered, pursuant to Section 21(b) of the CEA and Sec.  45.6 
of the Commission's regulations that:
    1. Subject to the conditions and terms below, the Depository Trust 
and Clearing Corporation (``DTCC'') and Society for Worldwide Interbank 
Financial Telecommunications (``SWIFT'') joint venture (``DTCC-SWIFT'') 
is designated as the provider of legal entity identifiers (``LEIs''), 
to be used in recordkeeping and swap data reporting pursuant to parts 
45 and 46 of the Commission's regulations.
    a. This designation is conditioned on DTCC-SWIFT's continuing 
compliance, for as long as it is authorized to provide LEIs by this 
order or any future order of the Commission, with all of the legal 
entity identifier requirements of part 45 of the Commission's 
regulations, and any related requirements as set forth in this order or 
in the requirements document provided to DTCC-SWIFT during the 
determination and designation process; including, without limitation, 
the requirement to be subject to supervision by a governance structure 
that includes the Commission and other financial regulators in any 
jurisdiction requiring use of legal entity identifiers pursuant to 
applicable law, for the purpose of ensuring that issuance and 
maintenance of LEIs and of associated reference data adheres on an 
ongoing basis to the Commission's requirements set forth in part 45.
    b. This designation is further conditioned on the requirement that, 
subject to applicable confidentiality laws and other applicable law, 
(1) DTCC-SWIFT shall make public all LEIs and associated reference 
data, utility operations, and identity validation processes, and (2) if 
DTCC-SWIFT fails to satisfy the conditions of this designation, or upon 
any termination of this designation pursuant to Section 2(c)(2) below, 
DTCC-SWIFT shall, as instructed by the Commission, pass to a successor 
LEI utility specified by the Commission, or to the global LEI system, 
free of charge, all LEIs issued by DTCC-SWIFT and associated reference 
data and all LEI intellectual property rights.
    c. This designation is made for a limited term, expiring on July 
24, 2017 and may be terminated by the Commission on three months' 
notice in connection with (1) the establishment of the global LEI 
system, or (2) DTCC-SWIFT's exit from the global LEI system.
    2. To comply with the legal entity identifier requirements of parts 
45 and 46 of the Commission's regulations:
    a. Registered entities and swap counterparties subject to the 
Commission's jurisdiction may use LEIs provided by DTCC-SWIFT, any 
other pre-Local Operating Unit (``pre-LOU'') endorsed by the Regulatory 
Oversight Committee of the global LEI system (``ROC'') as globally 
acceptable and as issuing globally acceptable LEIs, or any Local 
Operating Unit (``LOU'') accredited by the Global LEI Foundation 
(``GLEIF''). The list of pre-LOUs that are currently approved by the 
ROC as globally acceptable and that are issuing globally acceptable 
LEIs, including the Web site address via which registered entities and 
swap counterparties may contact each such pre-LOU, is available at 
http://www.leiroc.org/publications/gls/lou_20131003_2.pdf. The list of 
accredited LOUs can be found on the GLEIF Web site at http://www.gleif.org.
    b. As provided in Sec.  45.6(b)(1) of the Commission's regulations, 
registered entities and swap counterparties subject to the Commission's 
jurisdiction shall be identified in all swap recordkeeping and swap 
data reporting by a single LEI.
    3. This Order supersedes the Commission's Order issued on July 17, 
2015.

    Issued in Washington, DC, on July 18, 2016, by the Commission.
Robert N. Sidman,
Deputy Secretary of the Commission.

Appendix to Order Extending the Designation of the Provider of Legal 
Entity Identifiers To Be Used in Recordkeeping and Swap Data Reporting 
Pursuant to the Commission's Regulations--Commission Voting Summary

    On this matter, Chairman Massad and Commissioners Bowen and 
Giancarlo voted in the affirmative. No Commissioner voted in the 
negative.

[FR Doc. 2016-17229 Filed 7-20-16; 8:45 am]
 BILLING CODE 6351-01-P