[Federal Register Volume 84, Number 162 (Wednesday, August 21, 2019)]
[Notices]
[Pages 43589-43591]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-18027]


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COMMODITY FUTURES TRADING COMMISSION


Agency Information Collection Activities: Notice of Intent To 
Revise and Extend Collection 3038-0111: Margin Requirements for 
Uncleared Swaps for Swap Dealers and Major Swap Participants; 
Comparability Determinations With Margin Requirements

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice.

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SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or 
``Commission'') is announcing an opportunity for public comment on the 
proposed revision and renewal of a collection of certain information by 
the agency. Under the Paperwork Reduction Act (``PRA''), Federal 
agencies are required to publish notice in the Federal Register 
concerning each proposed collection of information, including proposed 
extension of an existing collection of information, and to allow 60 
days for public comment. This notice solicits comments on the burdens 
associated with the following aspects of the Commission's Margin 
Requirements for Uncleared Swaps for Swap Dealers and Major Swap 
Participants (``Final Rule''): Requesting a comparability determination 
from the Commission; maintaining policies and procedures for compliance 
with the Commission's special provisions for non-netting jurisdictions 
and non-segregation jurisdictions; and maintaining books and records 
properly documenting that all of the requirements of the special 
provisions for non-netting jurisdictions and non-segregation 
jurisdictions are satisfied.

DATES: Comments must be submitted on or before October 21, 2019.

ADDRESSES: You may submit comments, and ``OMB Control No. 3038-0111'' 
by any of the following methods:
     The Agency's website, at http://comments.cftc.gov/. Follow 
the instructions for submitting comments through the website.
     Mail: Christopher Kirkpatrick, Secretary of the 
Commission, Commodity Futures Trading Commission, Three Lafayette 
Centre, 1155 21st Street NW, Washington, DC 20581.
     Hand Delivery/Courier: Same as Mail above.
    Please submit your comments using only one method.

FOR FURTHER INFORMATION CONTACT: Lauren Bennett, Special Counsel, 
Division of Swap Dealer and Intermediary Oversight, Commodity Futures 
Trading Commission, (202) 418-5290 or [email protected].

SUPPLEMENTARY INFORMATION: Under the PRA, 44 U.S.C. 3501 et seq., 
Federal agencies must obtain approval from the Office of Management and 
Budget (OMB) for each collection of information they conduct or 
sponsor. ``Collection of Information'' is defined in 44 U.S.C. 3502(3) 
and 5 CFR 1320.3 and includes agency requests or requirements that 
members of the public submit reports, keep records, or provide 
information to a third party. Section 3506(c)(2)(A) of the PRA, 44 
U.S.C. 3506(c)(2)(A), requires Federal agencies to provide a 60-day 
notice in the Federal Register concerning each proposed collection of 
information, including each proposed extension of an existing 
collection of information, before submitting the collection to OMB for 
approval. To comply with this requirement, the CFTC is publishing 
notice of the proposed extension and revision to the collection listed 
below. An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it displays 
a currently valid OMB control number.
    Title: Margin Requirements for Uncleared Swaps for Swap Dealers and 
Major Swap Participants; Comparability Determinations With Margin 
Requirements (OMB Control No. 3038-0111). This is a request for an 
extension and revision of a currently approved information collection.
    Abstract: Section 731 of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (``Dodd-Frank Act''),\1\ amended the Commodity 
Exchange Act (``CEA''), 7 U.S.C. 1 et seq., to add, as section 4s(e) 
thereof, provisions concerning the setting of initial and variation 
margin requirements for swap dealers (``SDs'') and major swap 
participants (``MSPs'').\2\ Each SD and MSP for which there is a 
Prudential Regulator, as defined in section 1a(39) of the CEA,\3\ must 
meet margin requirements established by the applicable Prudential 
Regulator, and each SD and MSP for which there is no Prudential 
Regulator (``Covered Swap Entities'' or ``CSEs'') must comply with the 
Commission's regulations governing margin on all swaps that are not 
centrally cleared.
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    \1\ Public Law 111-023, 124 Stat. 1376 (2010).
    \2\ 7 U.S.C. 6s(e).
    \3\ 7 U.S.C. 1a(39).
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    With regard to the cross-border application of the Commission's 
margin rules, section 2(i) \4\ of the CEA provides the Commission with 
express authority over activities outside the United States relating to 
swaps when certain conditions are met. Section 2(i) of the CEA provides 
that the provisions of the CEA relating to swaps that were enacted by 
the Wall Street Transparency and Accountability Act of 2010 (including 
any rule prescribed or regulation promulgated under that Act), shall 
not apply to activities outside the United States unless those 
activities (1) have a direct and significant connection with activities 
in, or effect on, commerce of the United States or (2) contravene such 
rules or regulations as the Commission may prescribe or promulgate as 
are necessary or appropriate to prevent the evasion of any provision of 
the CEA that was enacted by the Wall Street Transparency and 
Accountability Act of 2010.
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    \4\ 7 U.S.C. 2(i).
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    On May 31, 2016, the Commission published a final rule addressing 
the cross-border application of its margin requirements for uncleared 
swaps applicable to CSEs.\5\ As described below, the adopting release 
for the Final Rule contained a collection of information regarding 
requests for comparability determinations, which was previously 
included in the proposing release, and for which the Office of 
Management and Budget (``OMB'') assigned OMB control number 3038-0111, 
titled ``Margin Requirements for Uncleared Swaps for Swap Dealers and 
Major Swap Participants; Comparability Determinations With Margin 
Requirements.'' In addition, the adopting release included two 
additional information collections

[[Page 43590]]

regarding non-netting jurisdictions \6\ and non-segregation 
jurisdictions \7\ that were not previously proposed. Subsequently, on 
August 2, 2016, the Commission requested a revision of the collection 
for Margin Requirements for Uncleared Swaps for Swap Dealers and Major 
Swap Participants; Comparability Determinations With Margin 
Requirements (OMB control number 3038-0111) to include the burden 
estimates for the provisions regarding non-netting jurisdictions and 
non-segregation jurisdictions.\8\
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    \5\ 81 FR 34818 (May 31, 2016).
    \6\ As used in the adopting release, a ``non-netting 
jurisdiction'' is a jurisdiction in which a CSE cannot conclude, 
with a well-founded basis, that the netting agreement with a 
counterparty in that foreign jurisdiction meets the definition of an 
``eligible master netting agreement'' set forth in the Final Rule, 
as described in section II.B.5.b of the adopting release.
    \7\ As used in the adopting release, a ``non-segregation 
jurisdiction'' is a jurisdiction where inherent limitations in the 
legal or operational infrastructure of the foreign jurisdiction make 
it impracticable for the CSE and its counterparty to post initial 
margin pursuant to custodial arrangements that comply with the 
Commission's margin rules, as further described in section II.B.4.b 
of the adopting release.
    \8\ 81 FR 50690 (Aug. 2, 2016).
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    Under section 23.160(c)(1) of the Final Rule, a CSE that is 
eligible for substituted compliance or a foreign regulatory agency that 
has direct supervisory authority over one or more CSEs and that is 
responsible for administering the relevant foreign jurisdiction's 
margin requirements may request, individually or collectively, that the 
Commission make a determination that a CSE that complies with margin 
requirements in the relevant foreign jurisdiction would be deemed to be 
in compliance with the Commission's corresponding margin rule 
promulgated by the Commission (a ``comparability determination''). Once 
a comparability determination is made for a jurisdiction, it applies 
for all entities or transactions in that jurisdiction to the extent 
provided in the comparability determination, as approved by the 
Commission and subject to any conditions specified by the Commission. 
All CSEs, regardless of whether they rely on a comparability 
determination, remain subject to the Commission's examination and 
enforcement authority.
    Section 23.160(c)(2) of the Final Rule requires that applicants for 
a comparability determination provide copies of the relevant foreign 
jurisdiction's margin requirements and descriptions of their 
objectives, how they differ from the BCBS/IOSCO international 
framework, and how they address the elements of the Commission's margin 
requirements. The applicant must identify the specific legal and 
regulatory provisions of the foreign jurisdiction's margin requirements 
that correspond to each element and, if necessary, whether the relevant 
foreign jurisdiction's margin requirements do not address a particular 
element.
    Section 23.160(d) of the Final Rule includes a special provision 
for non-netting jurisdictions. This provision allows CSEs that cannot 
conclude after sufficient legal review with a well-founded basis that 
the netting agreement with a counterparty in a foreign jurisdiction 
meets the definition of an ``eligible master netting agreement'' set 
forth in the Final Rule to nevertheless net uncleared swaps in 
determining the amount of margin that they post, provided that certain 
conditions are met. In order to avail itself of this special provision, 
a CSE must treat the uncleared swaps covered by the agreement on a 
gross basis in determining the amount of initial and variation margin 
that it must collect, but may net those uncleared swaps in determining 
the amount of initial and variation margin it must post to the 
counterparty, in accordance with the netting provisions of the Final 
Rule. A CSE that enters into uncleared swaps in ``non-netting'' 
jurisdictions in reliance on this provision must have policies and 
procedures ensuring that it is in compliance with the special 
provision's requirements, and maintain books and records properly 
documenting that all of the requirements of this exception are 
satisfied.
    Section 23.160(e) of the Final Rule includes a special provision 
for non-segregation jurisdictions that allows non-U.S. CSEs that are 
Foreign Consolidated Subsidiaries (as defined in the Final Rule) and 
foreign branches of U.S. CSEs to engage in swaps in foreign 
jurisdictions where inherent limitations in the legal or operational 
infrastructure make it impracticable for the CSE and its counterparty 
to post collateral in compliance with the custodial arrangement 
requirements of the Commission's margin rules, subject to certain 
conditions. In order to rely on this special provision, a Foreign 
Consolidated Subsidiary (``FCS'') or foreign branch of a U.S. CSE is 
required to satisfy all of the conditions of the rule, including that 
(1) inherent limitations in the legal or operational infrastructure of 
the foreign jurisdiction make it impracticable for the CSE and its 
counterparty to post any form of eligible initial margin collateral for 
the uncleared swap pursuant to custodial arrangements that comply with 
the Commission's margin rules; (2) foreign regulatory restrictions 
require the CSE to transact in uncleared swaps with the counterparty 
through an establishment within the foreign jurisdiction and do not 
permit the posting of collateral for the swap in compliance with the 
custodial arrangements of section 23.157 of the Final Rule in the 
United States or a jurisdiction for which the Commission has issued a 
comparability determination under the Final Rule with respect to 
section 23.157; (3) the CSE's counterparty is not a U.S. person and is 
not a CSE, and the counterparty's obligations under the uncleared swap 
are not guaranteed by a U.S. person; (4) the CSE collects initial 
margin in cash on a gross basis, in cash, and posts and collects 
variation margin in cash, for the uncleared swap in accordance with the 
Final Rule; (5) for each broad risk category, as set out in Sec.  
23.154(b)(2)(v) of the Final Rule, the total outstanding notional value 
of all uncleared swaps in that broad risk category, as to which the CSE 
is relying on Sec.  23.160 (e), may not exceed 5 percent of the CSE's 
total outstanding notional value for all uncleared swaps in the same 
broad risk category; (6) the CSE has policies and procedures ensuring 
that it is in compliance with the requirements of this provision; and 
(7) the CSE maintains books and records properly documenting that all 
of the requirements of this provision are satisfied.
    With respect to the collection of information, the CFTC invites 
comments on:
     Whether the proposed collection of information is 
necessary for the proper performance of the functions of the 
Commission, including whether the information will have a practical 
use;
     The accuracy of the Commission's estimate of the burden of 
the proposed collection of information, including the validity of the 
methodology and assumptions used;
     Ways to enhance the quality, usefulness, and clarity of 
the information to be collected; and
     Ways to minimize the burden of collection of information 
on those who are to respond, including through the use of appropriate 
automated electronic, mechanical, or other technological collection 
techniques or other forms of information technology; e.g., permitting 
electronic submission of responses.
    All comments must be submitted in English, or if not, accompanied 
by an English translation. Comments will be posted as received to 
http://www.cftc.gov. You should submit only information that you wish 
to make available publicly. If you wish the Commission to consider 
information

[[Page 43591]]

that you believe is exempt from disclosure under the Freedom of 
Information Act, a petition for confidential treatment of the exempt 
information may be submitted according to the procedures established in 
Sec.  145.9 of the Commission's regulations.\9\
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    \9\ 17 CFR 145.9.
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    The Commission reserves the right, but shall have no obligation, to 
review, pre-screen, filter, redact, refuse or remove any or all of your 
submission from http://www.cftc.gov that it may deem to be 
inappropriate for publication, such as obscene language. All 
submissions that have been redacted or removed that contain comments on 
the merits of the ICR will be retained in the public comment file and 
will be considered as required under the Administrative Procedure Act 
and other applicable laws, and may be accessible under the Freedom of 
Information Act.
    Burden Statement--Information Collection for Comparability 
Determinations: The Commission estimates that approximately 55 CSEs may 
request a comparability determination pursuant to section 23.160(c) of 
the Final Rule.\10\ The Commission notes that any foreign regulatory 
agency that has direct supervisory authority over one or more CSEs and 
that is responsible for administering the relevant foreign 
jurisdiction's margin requirements may also apply for a comparability 
determination. Further, once a comparability determination is made for 
a jurisdiction, it will apply for all entities or transactions in that 
jurisdiction to the extent provided in the determination, as approved 
by the Commission. To date, the Commission has issued a comparability 
determination for 3 jurisdictions.\11\ Accordingly, the Commission 
estimates that it will receive requests from the 13 remaining 
jurisdictions within the G20, in addition to Switzerland. In light of 
its experience in evaluating requests for comparability determinations, 
the Commission is revising its estimate for the number of burden hours 
associated with such requests from 10 hours to 40 hours. Accordingly, 
the respondent burden for this collection is estimated to be as 
follows:
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    \10\ Currently, there are approximately 107 swap entities 
provisionally registered with the Commission. The Commission 
estimates that of the approximately 107 swap entities that are 
provisionally registered, approximately 55 are CSEs for which there 
is no Prudential Regulator, and are therefore subject to the 
Commission's margin rules.
    \11\ See Comparability Determination for Japan: Margin 
Requirements for Uncleared Swaps for Swap Dealers and Major Swap 
Participants, 81 FR 63376 (Sep. 15, 2016); Comparability 
Determination for the European Union: Margin Requirements for 
Uncleared Swaps for Swap Dealers and Major Swap Participants, 82 FR 
48394 (Oct. 18, 2017) (``Margin Comparability Determination for the 
European Union''); and Comparability Determination for Australia: 
Margin Requirements for Uncleared Swaps for Swap Dealers and Major 
Swap Participants, 84 FR 12908 (Apr. 3, 2019). The Commission 
subsequently amended its comparability determination for Japan. See 
Amendment to Comparability Determination for Japan: Margin 
Requirements for Uncleared Swaps for Swap Dealers and Major Swap 
Participants, 84 FR 12074 (Apr. 1, 2019).
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    Estimated Number of Respondents: 14.
    Estimated Average Burden Hours per Respondent: 40.
    Estimated Total Annual Burden Hours: 560.
    Frequency of Collection: Once.
    There are no capital costs or operating and maintenance costs 
associated with this collection.
    Burden Statement--Information Collection for Non-Netting 
Jurisdictions: The Commission estimates that approximately 55 CSEs may 
rely on section 23.160(d) of the Final Rule.\12\ Furthermore, the 
Commission estimates that these CSEs would incur an average of 10 
annual burden hours to maintain books and records properly documenting 
that all of the requirements of this exception are satisfied (including 
policies and procedures ensuring compliance). Accordingly, the 
respondent burden for this collection is estimated to be as follows:
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    \12\ Currently, there are approximately 107 swap entities 
provisionally registered with the Commission. The Commission 
estimates that of the approximately 107 swap entities that are 
provisionally registered, approximately 55 are CSEs for which there 
is no Prudential Regulator, and are therefore subject to the 
Commission's margin rules. Because all of these CSEs are eligible to 
use the special provision for non-netting jurisdictions, the 
Commission estimates that 55 CSEs may rely on section 23.160(d) of 
the Final Rule.
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    Estimated Number of Respondents: 55.
    Estimated Average Burden Hours per Respondent: 10.
    Estimated Total Annual Burden Hours: 550.
    Frequency of Collection: Once; As needed.
    There are no capital costs or operating and maintenance costs 
associated with this collection.
    Burden Statement--Information Collection for Non-Segregation 
Jurisdictions: The Commission estimates that there are eight 
jurisdictions for which the first two conditions specified above for 
non-segregation jurisdictions are satisfied and where FCSs and foreign 
branches of U.S. CSEs that are subject to the Commission's margin rules 
may engage in swaps. The Commission estimates that approximately 12 
FCSs or foreign branches of U.S. CSEs may rely on section 23.160(e) of 
the Final Rule in some or all of these jurisdictions. The Commission 
estimates that each FCS or foreign branch of a U.S. CSE relying on this 
provision would incur an average of 20 annual burden hours to maintain 
books and records properly documenting that all of the requirements of 
this provision are satisfied (including policies and procedures for 
ensuring compliance) with respect to each jurisdiction as to which they 
rely on the special provision. Thus, based on the estimate of eight 
non-segregation jurisdictions, the Commission estimates that each of 
the approximately 12 FCSs or foreign branches of U.S. CSEs that may 
rely on this provision will incur an estimated 160 average burden hours 
per year (i.e., 20 average burden hours per jurisdiction multiplied by 
8). Accordingly, the respondent burden for this collection is estimated 
to be as follows:
    Estimated Number of Respondents: 12.
    Estimated Average Burden Hours per Respondent: 160.
    Estimated Total Annual Burden Hours: 1,920.
    Frequency of Collection: Once; As needed.
    There are no capital costs or operating and maintenance costs 
associated with this collection.

(Authority: 44 U.S.C. 3501 et seq.)

    Dated: August 16, 2019.
Robert Sidman,
Deputy Secretary of the Commission.
[FR Doc. 2019-18027 Filed 8-20-19; 8:45 am]
 BILLING CODE 6351-01-P