U.S. SEC Implements Dodd-Frank Act Title VII: Reporting and Public Dissemination Rules for Security-Based Swaps

April 8, 2015

Implementation of the derivatives market reforms contained in Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) may fairly be characterized as a herculean effort.  The Commodity Futures Trading Commission (CFTC) has finalized dozens of new rules to implement Title VII’s provisions governing "swaps."  Although Title VII requires the Securities and Exchange Commission (SEC or Commission) to implement similar provisions for "security-based swaps" (SBSs), the SEC’s rulemaking process has lagged the CFTC’s.

Earlier this year, the SEC finalized two of its required rules:  one (Final Regulation SBSR) governs the reporting of SBS information to registered security-based swap data repositories (SDRs) and related public dissemination requirements;[1] the other covers the registration and duties of SDRs (SDR Registration Rule).[2]  Additionally, the SEC published a proposed rule to supplement Final Regulation SBSR that addresses, among other things, an implementation timeframe, the reporting of cleared SBSs and platform-executed SBSs, and rules relating to SDR fees (Proposed Regulation SBSR).[3]  Comments on Proposed Regulation SBSR must be submitted to the SEC by May 4, 2015.

This Client Alert focuses on Final Regulation SBSR and Proposed Regulation SBSR, which create a reporting and public dissemination regime for market participants that engage in SBSs akin to Parts 43, 45 and 46 of the CFTC’s swap regulations.  We discuss the key aspects of these rules and how they will affect SBS market participants.  Because many market participants have already gone through the implementation process with respect to the CFTC’s swap reporting rules, we also discuss some of the key differences between Final Regulation SBSR and the final CFTC reporting rules:  a comparison of the SEC and CFTC rules is contained in a chart at the end of this Alert.


Under the Dodd-Frank Act, the CFTC has jurisdiction over foreign exchange, interest rate, and other commodity derivatives, as well as credit default and equity derivatives based on indices, two or more loans, and a broad-based (10 or more) group of securities.  The SEC’s jurisdiction is limited to credit default and equity derivatives based on a single security or loan or a narrow-based (9 or fewer) group or index of securities (including any interest therein or the value thereof), or events relating to a single issuer or issuers of securities in a narrow-based security index.

Section 763 of the Dodd-Frank Act added Section 13A and 13(m) to the Securities Exchange Act of 1934 (Exchange Act) and authorized the SEC to promulgate rules relating to the reporting and public dissemination of SBS transaction data.  Exchange Act Section 13A authorizes the SEC to promulgate rules regarding the reporting of SBS transaction and pricing data to registered SDRs.  Exchange Act Section 13(m)(1) authorizes the SEC to promulgate rules regarding the public dissemination of SBS transaction and pricing data.

On January 14, 2015, the SEC, by party-line votes of 3-2, adopted Final Regulation SBSR, the SDR Registration Rule and Proposed Regulation SBSR.[4]  Commissioner Daniel M. Gallagher issued a dissenting statement noting that the proposal was not yet "ready for prime time" as the final release was "replete with references to anticipated future rulemaking."[5]  Commissioner Michael S. Piwowar echoed Commissioner Gallagher’s concerns and stated that the rules were hastily adopted "in order to achieve ideological ends without sufficient justification."[6]

The SEC’s rules establish a two-step process that allows for the reporting of SBS data for use by regulators and for the dissemination of transaction and pricing data to the public in real time.  Final Regulation SBSR places a reporting obligation on one party to an SBS transaction to provide detailed information about such transaction to an SDR.  Final Regulation SBSR next requires the SDR to disseminate that information to the public in real time after such information is received.


            A.    Transactions Subject to Reporting

Final Regulation SBSR requires that all SBSs be reported to an SDR and publicly disseminated, subject to certain exclusions.  As adopted, a reporting obligation is not triggered for the following SBSs:  (1) clearing transactions (i.e., an SBS "that has a registered clearing agency as a direct counterparty");[7] (2) SBSs executed on a platform that will be submitted for clearing; (3) transactions where there is no U.S. person, registered security-based swap dealer (SBSD), or registered major security-based swap participant (MSBSP) on either side of the transaction; and (4) transactions where there is no SBSD or MSBSP on either side and there is a U.S. person on only one side.  Inter-affiliate SBS transactions would be treated the same as external SBS transactions with unaffiliated third parties.[8]

Proposed Regulation SBSR, if adopted, would eliminate the reporting exemption for clearing transactions and SBSs executed on a platform that will be submitted to clearing, and the SEC anticipates seeking further comment on how Title VII should apply to transactions with no U.S. person or registered SBSD or MSBSP.

With respect to historical SBs, the SEC divides into two categories:  (i) pre-enactment SBSs and (ii) transitional SBSs, both of which must be reported to an SDR.  Pre-enactment SBSs are those "executed before July 21, 2010 . . . the terms of which had not expired as of that date" and transitional SBSs are those "executed on or after July 21, 2010, and before the first date on which trade-by-trade reporting of [SBSs] in that asset class to a registered [SDR] is required."[9] 

            B.    Who Must Report

The SEC, like the CFTC, provides for single-sided reporting in which the responsibility to report an SBS to an SDR falls on one counterparty (the "reporting side") based on a reporting hierarchy set forth in the rule.  Specifically, the reporting hierarchy provides that the reporting side for an SBS will be determined as follows: 

(1)  If both sides of the SBS include an SBSD, the sides shall select the reporting side. 

(2)  If only one side of the SBS includes an SBSD, that side shall be the reporting side. 

(3)  If both sides of the SBS include an MSBSP, the sides shall select the reporting side. 

(4)  If one side of the SBS includes an MSBSP and the other side includes neither an SBSD nor an MSBSP, the side including the MSBSP shall be the reporting side.

(5)  If neither side of the SBS includes an SBSD or an MSBSP, but if both sides include a U.S. person,[10] the sides shall select the reporting side.[11]

Currently, the reporting hierarchy does not establish obligations when:  (1) the SBS qualifies as any of the temporary exempted categories discussed above (i.e., a clearing transaction or platform-executed); (2) neither side of a transaction includes an SBSD or MSBSP or U.S. person; or (3) one side consists of a non-registered U.S. person and the other side consists of a non-registered non-U.S. person.[12]  In addition, Final Regulation SBSR does not address the appropriate reporting side for a new SBS that arises from a "life cycle event" of an existing SBS; however, Proposed Regulation SBSR would require parties to follow the reporting hierarchy for other life cycle events.

            C.    What Must Be Reported

Final Regulation SBSR requires SBS market participants to report three categories of SBS transaction information:  (1) primary trade information; (2) secondary trade information; and (3) life cycle events.  The information that is reported must use unique identification codes (UICs)[13] to identify key information necessary for the identification of the SBS transaction and counterparties, including information "sufficient to identify [the SBS’s] ultimate parent(s) and any affiliate(s) of the participant."[14]  Applicable SBS transactions must also report information relating to indirect counterparties to the SBS transaction.[15]  Additionally, Final Regulation SBSR explains the requirements for reporting of information with respect to historical SBS.

Final Regulation SBSR relies on the creation of market-based definitions and specificity related to SBS reporting.  In particular, each SDR is required to establish and maintain its own policies and procedures necessary for the SDR and reporting sides to comply with Final Regulation SBSR.  As a result, reporting sides should examine the SDR’s reporting requirements in addition to the rules and guidance set forth in Final Regulation SBSR.

                        1.    Primary Trade Information           

With respect to any SBS transaction executed after the compliance date of that particular SBS asset class, a reporting side must report primary trade information to an SDR.  Under Rule 901(c), primary trade information includes:

i.            Product ID, if available;[16]

ii.           date and time, to the second, of execution in Coordinated Universal Time;[17]

iii.          price of up-front payments used (and the currency in which they are expressed);

iv.          notional amounts (and the currency in which they are expressed);

v.           whether both sides are registered SBSDs;

vi.          whether the counterparties intend to submit the transaction to clearing;

vii.         any "flags" on the transaction as defined by the policies and procedures of the SDR to which the SBS is being reported; and

 viii.         any other information necessary to determine the material amount of the transaction.

In addition to reported information by the reporting side, for each SBS, the SDR must assign a transaction ID and time stamp indicating when the SBS transaction was first reported.

                        2.    Secondary Trade Information

Final Regulation SBSR also requires that reporting sides report additional information ("secondary trade information") regarding SBSs to an SDR.  Under Rule 901(d), a reporting party must provide:

i.            the counterparty ID or execution agent ID of each counterparty;

ii.           the branch ID, broker ID, execution agent ID, trader ID, and trading desk ID of the direct counterparty on the reporting side, as applicable;

iii.          any additional information relating to the fixed or floating rate payments that were not reported as part of the primary trade information;

iv.          the platform ID, if applicable;

v.           if the SBS is to be submitted for clearing, the name of the clearing agency to which it will be submitted;

vi.          if the SBS is not to be submitted for clearing:

a.       whether the direct counterparties intend to rely on the end-user clearing exception in Section 3C(g) of the Exchange Act; [18]

b.      the title and date of any master agreement, collateral agreement, margin agreement, or any other agreement incorporated by reference into the SBS; and

c.       a description of the settlement terms, including whether the SBS is cash-settled or physically settled, and the method for determining the settlement value; and

vii.         if the SBS arises from the allocation, termination, novation, or assignment of one or more existing SBSs, the transaction ID of the allocated, terminated, assigned, or novated SBS(s), except in the case of a clearing transaction that results from the netting or compression of other clearing transactions.

                        3.    Life Cycle Event Information

Life cycle events are defined under Rule 900(q) as "any event that would result in a change in the primary and secondary trade information reported to the SDR," including changes to "live" historical SBs.  This would include assignments, novations, partial or full terminations, change in cash flows, change in title or date of any relevant documentation (for uncleared SBSs), and corporate actions.

A life cycle event, however, does not include the scheduled expiration of the SBS, a previously described and anticipated interest rate adjustment (such as a quarterly interest rate adjustment), acceptance for clearing, or other event that does not result in any change to the contractual terms of the SBS. The reporting side must report all life cycle events to the same SDR to which the original SBS was reported and must include the transaction ID of the original SBS. 

                        4.    Historical SBSs

Under Rule 901(i), historical SBS transaction reports must include all of the information that would be required for SBSs described in this Section II.C, but only "to the extent that information about such transaction is available." [19]   Information to be reported includes any information that would be reportable under primary and secondary trade information guidelines, including any life cycle event information.

            D.    Timing of Reporting

                        1.    Reporting Window

Final Regulation SBSR creates an interim timeframe for reporting in which all primary trade information and all secondary trade information regarding SBSs entered into on or after the compliance date must be reported to the SDR within 24 hours after the time of execution.  Additionally, any life cycle event must be reported to the SDR 24 hours after the occurrence of such event or the adjustment due to the life cycle event.  This 24-hour reporting window is applicable to all SBSs regardless of their notional size such that block trades and SBSs with large notional amounts would be treated the same as all other SBSs.  In instances where reporting would take place on a non‑business day (a Saturday, Sunday or U.S. federal holiday), the report must be required to be made by the same time on the next business day.

These timing requirements, however, are subject to review and are intended to be temporary in light of additional studies that will be conducted by the SEC.  Moreover, although the timing requirements for when SBSs must be reported to an SDR after execution or a life cycle event have been finalized, the Commission has yet to finalize the compliance dates for the reporting requirements in Final Regulation SBSR.  In Proposed Regulation SBSR, the 24 hour reporting requirements will be triggered once an SDR starts accepting SBS transaction data for that particular SBS asset class.  Further, the timing for reporting historical SBSs (i.e., when a reporting side will need to submit the historical SBS data to an SDR) has not yet been finalized; however, Proposed Regulation SBSR indicates that historical SBSs’ would need to be reported to appropriate SDRs by the proposed compliance date(s) discussed in Section IV.B.1.

                        2.    The Embargo Rule

Similar to the CFTC’s reporting rules, parties to a reportable SBS transaction may share SBS and pricing information with other market participants upon transmission of such data to an applicable SDR.  Rule 902(d) clarifies that only disclosures to post-trade processors,[20] including those that are affiliates of an SBS counterparty, are permitted prior to reporting to the SDR.  Unlike the CFTC’s regulations, Regulation SBSR restricts all other communications prior to transmission to the SDR.

            E.    Where to Report

All applicable SBS transactions must be reported to an SDR that accepts the applicable asset class.  In instances where a counterparty is updating SBS data or reporting a life cycle event, the counterparty must report the information to the original SDR to which the SBS was first reported.  SDRs are not required to accept all SBS asset classes; however, once an SDR accepts an SBS in a particular asset class, it must accept all SBS in that asset class.  In instances where there is no accepting SDR for an asset class, reporting must be made to the SEC under the same standards.

"Asset class" is defined under Rule 900(b) as those "[SBSs] in a particular broad category, including, but not limited to, credit derivatives and equity derivatives."[21]  Accordingly, the onus is on the reporting side to determine whether any SDR accepts the particular asset class of its SBS transaction.  Moreover, differences between the asset classes under the SEC’s jurisdiction compared to the CFTC’s jurisdiction will require SDRs to specify the differences in the data elements in their policies and procedures.[22]


Once an SDR is in possession of SBS and pricing information provided by a reporting side, Exchange Act Section 13(m)(1)(B) authorizes the SEC "to make [SBS] transaction and pricing data available to the public in such form and at such times as the Commission determines appropriate to enhance price discovery."[23]  To facilitate public dissemination, Final Regulation SBSR requires SDRs to publicly disseminate certain SBS and pricing data "through the Internet or other electronic data feed that is widely accessible and in machine-readable electronic format."[24]  In other words, when a reporting side reports SBS data to the SDR, the SDR is then obligated to disseminate certain data fields publicly.[25]

Such SBS information must be publicly disseminated "immediately upon receipt" of such information by the SDR or "upon re-opening following a period when the [SDR] was closed."[26]  This means that once a reporting side reports the information to the SDR within the 24-hour reporting timeframe, the SDR will immediately publicly disseminate it.  Accordingly, market participants will want to consider the potential market impact of the public dissemination of SBS information when determining when to report such information to the SDR.  For example, if there is sensitivity regarding the public dissemination of such SBS data (e.g., liquidity concerns or concerns of being front-run), a reporting side would likely want to wait as long as possible to report the SBS data to an SDR.

Exchange Act Section 13(m)(1)(E) requires that the rule promulgated by the SEC with respect to the public dissemination of SBS data must protect the anonymity of market participants and take into account whether public disclosure will materially reduce market liquidity.  In developing a regulatory regime for post-trade transparency, the SEC Staff determined that there is "no discernable empirical evidence of economically meaningful effects of the introduction of post-trade transparency in the swap market at this time."[27]  Consequently, the SEC has taken the stance that post‑trade transparency does not negatively affect the liquidity of the SBS markets.  As discussed below, Regulation SBSR, in its current final form, deviates substantially from CFTC dissemination requirements and does not implement varying dissemination requirements based on asset class or party characteristics; however, the SEC has explained that further clarifications to these rules should be expected as it collects more data.  

            A.    Transactions Subject to Dissemination

Certain primary trade information regarding all new SBS transactions required to be reported to an SDR pursuant to Rule 901(c), as well as any life cycle event of an SBS, is required to be publicly disseminated by the SDR to which that information is reported.  Secondary trade information of already reported SBSs and historical SBSs are not required to be publicly disseminated; however, should a life cycle event pertaining to a historical SBS change a reporting element of that SBS, public dissemination of such information by the SDR is required.

            B.    Who Must Disseminate

Under Regulation SBSR, only SDRs that are registered with the SEC as SDRs and also registered as securities information processors (SIPs) may disseminate SBS and pricing information.[28]  Given that the SDR Registration Rule was recently finalized, the SEC has yet to register any SDRs for SBSs.

            C.    What Information Will Be Publicly Disseminated

Final Regulation SBSR’s public dissemination guidelines require an SDR to publicly disseminate all of the information reportable under Rule 901(c), including any additional disclosure established by the SDR’s policies and procedures under Rule 907 (i.e., conditional flags).  Under Rules 901(c) and 907, information disclosed to the public will contain data such as the true notional amounts for all SBSs, regardless of the size.  Because Rule 901(c) only covers primary trade information, secondary trade information will not be publicly disseminated.

After outlining the general category of information that needs to be disclosed under Final Regulation SBSR, the SEC relies on an exclusionary approach to dissemination, defining seven categories of reportable SBS data that cannot be publicly disseminated:

(1)  Counterparty Identities:  Information regarding counterparty identities can never be publicly disseminated by an SDR.

(2)  Business Transactions and Market Positions:  To help preserve the confidential information of market participants, SDRs are prohibited from disclosing any information related to the business transactions and market positions of any person involved in an SBS which is not submitted to clearing.

(3)  Historical SBSs:  The practicalities of disclosing historical SBS information were taken into consideration by the SEC and as a result, primary trade information regarding historical SBSs is not required to be publicly disseminated; however, as mentioned above, dissemination obligations may arise due to life cycle events of historical SBSs.

(4)  Non-mandatory Reports:  Reports submitted to an SDR that are not required by Final Regulation SBSR are not allowed to be publicly disseminated.  For example, if a reporting side reports to an SDR, but then another counterparty elects to report that same information to a second SDR, the second SDR is prohibited from disclosing that information because to do so would exceed the initial reporting requirements mandated by Final Regulation SBSR, under which the reporting obligations were satisfied upon initial disclosure to the first SDR.

(5)  Certain Cross-border SBSs:  Any information regarding reportable cross-border SBS information when there is a direct or indirect counterparty on either or both sides of the transaction that is a registered SBSD or registered MSBSP.[29]

(6)  Cleared Transactions:  The Commission reasons that at this time, "reports of clearing transactions that arise from the acceptance of a [SBS] for clearing by a registered clearing agency or that result from netting other clearing transactions would be unlikely to further Title VII’s transparency objectives."[30]

(7)  SBS Allocation Information:  Information regarding the allocation of an SBS transaction will be prohibited from dissemination.  Only the aggregate notional amount of the executed bunched order can be disseminated under Regulation SBSR. 

As a result of this exclusionary approach, SDRs will be tasked with implementing a data scrubbing system that can remove prohibited data and disseminate, in real‑time, SBS and pricing data to the public.  In addition to the burdens SDRs face, reporting parties will also share in the duty to censor information prohibited from dissemination.  Specifically, reporting parties will be responsible for flagging information in SBS reports that cannot be disseminated, pursuant to Rule 907.  In instances where a reporting party fails to flag such information, the SDR will not be liable for public dissemination of that data.

            D.    Timing of Public Dissemination

An SDR must disseminate SBS information, including block trade information,[31] certain cross-border trade information,[32] and life cycle event information, "immediately upon receipt of information about the [SBS], or upon re‑opening following a period when the registered [SDR] was closed."[33]  In this context, "immediately" is contemplated by the Commission to imply an automated process that registers the information and publicly disseminates the appropriate information through electronic means.  Although Final Regulation SBSR requires SDRs to disseminate SBS transaction and pricing information immediately upon receipt of the information, public dissemination may not accurately reflect real-time market transactions, as the reporting requirements allow a 24-hour reporting delay by parties to an SBS.[34]  For example, parties could execute a trade at 12:01 p.m., but would not be required to report that information until 12:01 p.m. the next business day; as a result, the counterparties could delay reporting for nearly 24 hours (or longer if the next day is not a business day).  Accordingly, real-time dissemination to the public may reflect significant delays from the actual time of execution.

As discussed in Section II.D.2 above, Final Regulation SBSR implements Rule 902(d), the Embargo Rule, which prohibits the release of SBS data to persons, other than the counterparties to the transaction, until such SBS transaction and pricing data is sent to an SDR.[35]   The SEC explains that the Embargo Rule is designed to protect against front-running.  It is likely that this rule could also be a means to try to encourage earlier reporting of SBS data to the SDR so that the information can be shared.

            E.    Form of Publicly Disseminated SBS Data

Final Regulation SBSR requires that publicly disseminated SBS transaction and pricing data be "available through the Internet or other electronic data feed that is widely accessible and in machine-readable electronic format."[36]  Final Regulation SBSR does not elaborate as to the appropriate manner or location of SBS transaction and pricing data, but suggests "the Internet" as one possible venue.  There currently is no defined form in which an SDR must disseminate SBS data, but the Commission has noted that it anticipates proposing acceptable formats and taxonomies of SBS and pricing data.


Final Regulation SBSR and the SDR Registration Rule establish certain compliance deadlines relating to the registration and compliance of SDRs that accept SBSs.  The compliance deadlines for market participants to begin reporting and for SDRs to publicly disseminate SBS data are not yet finalized, but have been proposed in Proposed Regulation SBSR.

            A.    Final Regulation SBSR Compliance Deadlines

Entities that wish to operate as SDRs that accept SBS data in a particular asset class must register with the SEC by March 18, 2016.  SDRs must also register with the SEC as SIPs, which they can do at the same time and on the same form (Form SDR) with which they register as an SDR.  Further, in order to register, an SDR must have in place all policies and procedures, including specifying reporting procedures, data formats and data elements.

            B.    Proposed Regulation SBSR Compliance Deadlines

In light of the need for SDRs to register with the Commission and implement policies and procedures for reporting and disseminating SBS data, the Commission recognized that an implementation timeframe is needed for market participants to review the SDR requirements, develop and implement systems, and perform adequate testing.  Accordingly, Proposed Regulation SBSR would create an implementation timeframe pegged to the date on which an SDR for a particular asset class first commences operations and is registered with the Commission.[37]

                        1.    Reporting SBS and Pricing Data

Proposed Regulation SBSR provides a compliance schedule for Rules 901, 902, 903, 904, 905, 906, and 908 of Final Regulation SBSR.  On the date that is six months after the first registered SDR commences operations and accepts reports of SBSs in a particular asset class (Compliance Date 1), persons with a duty to report SBSs (reporting sides) must report all newly executed SBSs in that asset class to a registered SDR.  Following Compliance Date 1, such persons with a duty to report must also report any life cycle events of any SBS that had been required to be reported.

Further, by Compliance Date 1, "to the extent the information is available," persons that have an obligation to report historical SBSs in such asset class must report such SBS data to a registered SDR in accordance with Rule 901(i). [38]   The SEC specifically explains that it is proposing that all historical SBSs "be reported by Compliance Date 1, not on Compliance Date 1."[39]   However, to do so, the registered SDR would need to comply with requirements that are not subject to phased-in compliance such as timestamping requirements and assigning transaction IDs.  Further, once a historical SBS is reported to an SDR, life cycle events with respect to such SBS must be reported to the  same SDR.

                        2.    Written Policies and Procedures of SBSDs and MSBSPs

By Compliance Date 1, SBSDs and MSBSPs must "establish, maintain, and enforce written policies and procedures that are reasonably designed to ensure that it complies with any obligations to report information to a[n] [SDR]" and "shall review and update its policies and procedures at least annually." [40]  Further, SBSDs and MSBSPs must provide to the SDR data relating to the SBSD’s or MSBSP’s ultimate parent and any affiliates that are also participants of the SBS by Compliance Date 1.

                        3.    SDR Internal Systems and UIC reports

Beginning on Compliance Date 1, all SDRs will be required to have systems for the continuous receipt and public dissemination of SBS transaction and pricing data and to provide each participant with a report of any missing UICs.  SBSDs and MSBSPs must be able to respond to reports for missing UIC data sent by SDRs.

                        4.    Dissemination of SBS and Pricing Data

Proposed Regulation SBSR provides that within nine months after the first registered SDR accepts SBS data in a particular asset class (Compliance Date 2), each registered SDR in that asset class will be required to comply with the public dissemination rules of Final Regulation SBSR–except for covered cross-border transactions.  Effectively, registered SDRs will have a period of three months from the time they begin accepting data from market participants in an asset class to resolve any issues relating to the public dissemination of such information.


Proposed Regulation SBSR, released at the same time as Final Regulation SBSR, offers guidance and several revisions to Final Regulation SBSR that would more closely align Final Regulation SBSR with the Dodd‑Frank Act mandates.  As discussed in Section IV.B above, Proposed Regulation SBSR outlines the timing of the implementation of the compliance regime for the reporting and public dissemination of SBS transaction and pricing data.  Further, as noted in Final Regulation SBSR, certain rules in Final Regulation SBSR were meant to be temporary in light of additional considerations and public comment.[41]  As a result, Proposed Regulation SBSR proposes a handful of additions and revisions related to the reporting and public dissemination of SBS transaction and pricing data. 

Significantly, Proposed Regulation SBSR would eliminate reporting exemptions for clearing transactions and platform-executed SBS transactions submitted for clearing.  Registered SBS execution facilities would be required to report SBS data and pricing information to SDRs for public dissemination.[42]  Further, Proposed Regulation SBSR would also require the reporting of so-called "clearing transactions," thus requiring clearing agencies to report each new SBS comprising the beta and gamma transactions;[43]  however, these clearing transactions would not be subject to public dissemination.[44]

Proposed Regulation SBSR also offers several clarifications to the application of Final Regulation SBSR.  The Commission offers guidance related to reporting requirements for bunched orders[45] and allocation, particularly with respect to the allocated SBS transactions and cleared bunched order transactions.  Proposed Regulation SBSR would also clarify reporting obligations for SBS transactions involving prime brokers.[46]  Because prime brokerage transactions involve a series of SBS transactions to reach the final end product, it is the Commission’s position that each SBS transaction executed under this arrangement is required to be reported and publicly disseminated.[47]

Lastly, Proposed Regulation SBSR would prohibit "registered SDR[s] from charging fees for, or imposing usage restrictions on, the [SBS] transaction data that it is required to publicly disseminate under Final Regulation SBSR."[48]  Registered SDRs would be able to charge fees for value-added data products that incorporate publicly disseminated data, provided that the registered SDR has first satisfied its dissemination duties.[49]


Reporting to the SDR


CFTC Rules

SEC Rules

Reporting Party

One-sided reporting; "reporting counterparty" reports to an SDR based on a reporting hierarchy (differences may result because of differences in "swap dealer" and SBSD registrations).

One-sided reporting; "reporting side" to an SBS reports to an SDR based on a reporting hierarchy (differences may result because of differences in "swap dealer" and SBSD registrations).

Reporting Timing

"As soon as technologically practicable" from the time of execution with backstops based on asset class, counterparty and implementation timing; reporting counterparties cannot hold the reports.

24-hour window (or longer if next day is not a business day) from the time of execution for all trades, subject to revision by the Commission upon additional market studies; reporting sides can hold the reports.

Entity to Which Data is Reported

SDRs registered with the CFTC.

SDRs registered with the SEC and also registered as SIPs.

Use of Identifiers

Requires legal entity identifiers for parties to the swap, a unique product identifier and a unique swap identifier.

Requires UICs for parties to the SBS, asset managers, platforms, brokers, trading desks, individual traders, branches, products and transactions.

Data Fields to Be Reported

Provides specific data fields that must be reported to an SDR; also provides that the SDR may ask for additional information and specify the format.

Does not specify particular data elements for each product type; requires SDRs to establish and publish policies and procedures setting the reportable data elements and formats for SBS information

Cleared Transactions

If the derivatives clearing organization (DCO) accepts a swap for clearing, the DCO is required to report the initial swap (i.e., alpha swap) to the SDR.

Resulting swaps with the DCO are required to be reported by the DCO to the SDR.

Requires the reporting of daily valuation data for cleared swaps by the DCO and by the swap dealer/major swap participant.

The counterparty (i.e., reporting side) to the initial SBS (i.e., alpha swap) is required to report to the SDR.

Resulting SBS with the clearing agency are not required to be reported to the SDR at this time.

Does not require reporting of valuation data for cleared SBSs.

Life Cycle Events

Permits reporting of continuation data for swaps using snapshot or state data.

Permits only snapshot reporting for continuation data.

Public Dissemination of Data


CFTC Rules

SEC Rules

Reporting Party

One-sided reporting; "reporting party" reports to an SDR based on a reporting hierarchy; SDR reporting and reporting for real-time public reporting fall under two different rules and the hierarchies are slightly different.

Satisfied by the SDR report; one-sided reporting; the "reporting side" reports to an SDR based on a reporting hierarchy; falls under the same report as SDR reporting (it is just one rule).

Entity that Publicly Disseminates Data

SDRs registered with the CFTC.

SDRs registered with the SEC and registered as SIPs.

Reporting Timing for Information to be Publicly Disseminated

"As soon as technologically practicable" from the time of execution.

Satisfied by the SDR report (24-hour window from the time of execution for all trades, subject to revision by the Commission upon additional market studies; reporting sides can hold the reports).

Public Dissemination Timing

Varies based on notional size (e.g., block trade) as set forth in Appendix C to Part 43.  The SDR holds the information from public dissemination based on the specific timeframes.

All SBSs are "immediately" publicly disseminated upon receipt by the SDR.  The SDR does not hold the data from public dissemination.

Transactions Subject to Real-time Public Reporting

Limited to "publicly reportable swap transactions" (i.e., arms-length transactions) and related life cycle events; generally does not include inter-affiliate swaps.

All SBSs and all life cycle events; would include inter-affiliate SBS.

Public Dissemination Timing

Varies based on notional size (e.g., block trade) as set forth in Appendix C to Part 43.  The SDR holds the information from public dissemination based on the specific timeframes.

All SBSs are "immediately" publicly disseminated upon receipt by the SDR.  The SDR does not hold the data from public dissemination.

Data to be Publicly Disseminated

All data fields in Appendix A to Part 43 of the CFTC’s regulations; notional amounts to be publicly disseminated are capped; certain information is masked when disseminated.

All data fields reported to an SDR except those defined in Rule 902(c).  See also supra Section III.C.

Embargo Rule

Data cannot be shared until reportable swap data is "sent" to the SDR.

Data cannot be shared until reportable SBS data is "sent" to the SDR.  Exception for post-trade affiliates of counterparties. 

Block Trades

The CFTC has set forth specific rules and sizes for block trades in all asset classes.  These rules are set forth in CFTC regulation 43.6 and Appendix F to Part 43.

Treated like all other SBS transactions, including notional amount dissemination. 

Subject to revision by the SEC upon additional market studies. 

Masking and Rounding of Notional Amounts for Public Dissemination

Public dissemination of notional amounts is rounded and capped for block trades and swaps with large notional amounts.

The true notional amount for an SBS is publicly disseminated (as opposed to a capped and/or rounded amount), regardless of the size of the SBS.[50]

Cross-Border Transactions


CFTC Rules

SEC Rules

Treatment of Cross-border Transactions

CFTC applies the transaction-level rules set forth in the CFTC’s Final Cross-Border Guidance; cross-border swaps are subject to reporting and public dissemination.

Territorial approach to SBSs involving U.S. persons and sufficient nexus as provided under Rule 908(a); where both sides include a U.S. person or the SBS is accepted by a U.S. clearing agency, both reporting and public dissemination are required; where not accepted at a U.S. clearing agency and neither side is a U.S. person, but at least one side is a Registered Person, only reporting, but not public dissemination is required; where no U.S. and no Registered Person, are not subject to reporting or public dissemination.

Substituted Compliance

CFTC has not found substituted compliance with respect to reporting rules for any jurisdiction.

SEC has not found substituted compliance with respect to reporting rules for any jurisdiction.


Although the compliance dates for Final Regulation SBSR and certain other aspects regarding the reporting obligations have not yet been finalized, market participants should recognize the immediacy of the proposed compliance deadlines.  Once SDRs begin accepting SBS data and pricing information for particular asset classes, market participants will have only six months to comply with the mandatory reporting requirements for all applicable SBSs, including historical SBS transactions.  In light of the time sensitive nature of the proposed compliance deadlines, market participants will need to start addressing these regulatory burdens.  Accordingly, market participants should begin gathering information relating to historical SBS data, developing policies and procedures relating to the reporting of SBSs, and interpreting and understanding Final Regulation SBSR. 

In order to determine how and where they can leverage off existing systems and reporting infrastructure, market participants should begin to better familiarize themselves with the rules and differences between the SEC’s and CFTC’s reporting rules.  Though Final Regulation SBSR provides a mechanism for substituted compliance, the lack of harmonization between the CFTC and SEC rules, as well as the rules of foreign jurisdictions, will only increase the complexity of the global reporting landscape.  In particular, the SEC has yet to make any substitute compliance determinations, so market participants will need to consider their involvement in cross-border transactions and variations in reporting requirements under the rules of foreign jurisdictions. 

Where regulatory requirements diverge, market participants must develop practical and sound reporting policies and procedures for each respective reporting regime.  At minimum, procedures related to Final Regulation SBSR should account for the gathering and reporting of historical SBS transactions, establish the procedures for trade reporting, and ensure that subsequent transactions and life cycle events are properly monitored and reported to the appropriate SDR.[51]   

Many of the regulations relating to clearing transactions and block trades are still being developed by the Commission.  To better facilitate these transitions, market participants must recognize the temporal nature of the current finalized rules.  Market participants should design their internal systems to accommodate Final Regulation SBSR, but also recognize the need for adaptability in the changing regulatory landscape.  These systems should be set up with the understanding that there will be additional changes once Proposed Regulation SBSR and future changes are finalized.

Proposed Regulation SBSR, as well as future final rules and proposals from the SEC, will undoubtedly further develop the SBS reporting rules and impose additional burdens on market participants.  Market participants still have an opportunity to help to shape the reporting rules by providing comments on Proposed Regulation SBSR and future SEC proposals.   

    [1]   See Final Rule, Regulation SBSR–Reporting and Dissemination of Security-Based Swap Information, 80 Fed. Reg. 14,564 (Mar. 19, 2015), available at https://www.sec.gov/rules/final/2015/34-74244.pdf.  The SEC originally proposed this rule in 2010.  See Proposed Rule, Regulation SBSR–Reporting and Dissemination of Security-Based Swap Information, 75 Fed. Reg. 75,208 (Dec. 2, 2010).

   [2]   See Final Rule, Security-Based Swap Data Repository Registration, Duties, and Core Principles, 80 Fed. Reg. 14,438 (Mar. 19, 2015), available at https://www.sec.gov/rules/final/2015/34-74246.pdf.  The SEC originally proposed this rule in 2010.  See Proposed Rule, Security-Based Swap Data Repository, Duties, and Core Principles, 75 Fed. Reg. 77,306 (Dec. 10, 2010).

   [3]   See Proposed Rule, Regulation SBSR–Reporting and Dissemination of Security-Based Swap Information, 80 Fed. Reg. 14,740 (Mar. 19, 2015), available at https://www.sec.gov/rules/proposed/2015/34-74245.pdf.

   [4]   See SEC Release No. 2015-6, SEC Adopts Rules to Increase Transparency in Security-Based Swap Market, available at http://www.sec.gov/news/pressrelease/2015-6.html.  After an SEC clerical error that failed to take into consideration comments by the International Swaps and Derivatives Association (ISDA), the leading industry group for the derivatives markets, the Commission was forced to reexamine ISDA’s comments and vote again because of the changes.  Accordingly, the final rules were not made publicly available until February 11, 2015.  See Administrative Notice (Feb. 11, 2015), available at http://www.sec.gov/rules/proposed/2015/sec-administratrive-notice-021115.shtml.

   [5]   Public Statement, SEC Commissioner Daniel M. Gallagher, Dissenting Statement Regarding Adoption of Regulation SDR and Regulation SBSR (Jan. 14, 2015), available at http://www.sec.gov/news/statement/dissent-adoption-of-regulation-sdr-commissioner-gallagher.html#.VRV78ZhOWHs.

   [6]   Public Statement, SEC Commissioner Michael S. Piwowar, Dissenting Statement at Open Meeting Concerning Rules Regarding Security-Based Swap Data Repositories and Regulation SBSR (Jan. 14, 2015), available at   http://www.sec.gov/news/statement/security-based-swap-data-rules-dissent-commissioner-piwowar.html#.VRV9q5hOWHs.

   [7]   That is, the "alpha" SBS between the SBS counterparties is would be required to be reported to an SDR; however, the "beta" and "gamma" SBSs that result from clearing the transaction with a registered clearing agency are not required to be reported at this time.  See 80 Fed. Reg. at 14,599, n.292.

   [8]   The SEC explains, "the Commission believes generally that inter-affiliate security-based swaps should be subject to regulatory reporting and public dissemination."  80 Fed. Reg. at 14,591.  See id. at 14,627-30.

   [9]   80 Fed. Reg. at 14,729; Rules 900(y) and 900(nn).

  [10]   Final Regulation SBSR uses the definition of "U.S. person" that was adopted by the SEC in its Cross-Border Adopting Release as Exchange Act Rule 3a71-3(a)(4).  See Final Rules; Interpretation, Application of "Security-Based Swap Dealer" and "Major Security-Based Swap Participant" Definitions to Cross-Border Security-Based Swap Activities; Republication, 79 Fed. Reg. 47,278, 47,312 (Aug. 12, 2014) (Cross-Border Adopting Release).

        Accordingly, a U.S. person is "(A) a natural person resident in the United States; (B) a partnership, corporation, trust, investment vehicle, or other legal person organized, incorporated, or established under the laws of the United States or having its principle place of business in the United States; (C) an account (whether discretionary or nondiscretionary) of a U.S. person; or (D) any estate of a decedent who was a resident of the United States at the time of death"; however, a U.S. person would not include "the International Monetary Fund, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the United Nations, and their agencies and pension plans, and any other similar organizations, their agencies and pension plans."  Cross-Border Adopting Release at 47,371.  Additionally, transactions conducted through a foreign branch or office of a U.S. person are treated as transactions by U.S. persons and subject to both regulatory reporting and public dissemination.  See 80 Fed. Reg. at 14,650, 14,652.

  [11]   See 80 Fed. Reg. at 14,598, 14,730; Rule 901(a)(2)(ii).

  [12]   80 Fed. Reg. at 14,597.  In recognition of the possibility of similar regulation by foreign regulators, Final Regulation SBSR provides for a "substituted compliance" framework for persons subject to comparable regulatory requirements.  See id. at 14,688; Rule 908(c).

  [13]   Although UICs are established by Final Regulation SBSR, they are not defined by the rules and, accordingly, require an SDR or registered third party to establish its own internal guidelines; however, if an internationally recognized standards setting system has assigned a UIC, and is recognized by the SEC, all SDRs and participants are required to abide by such designations.  See 80 Fed. Reg. at 14,709.

        In instances where there is no product UIC for the SBS, parties must provide information regarding their:  (1) asset class; (2) the assets, issuers, or indexes the transaction is based on; (3) the effective and termination dates of the SBS; (3) fixed or floating rate payments, including the frequency of payments; and (4) whether the above information is sufficient to calculate price.  See id. at 14,570-71.  In addition, if the fixed or floating rate payment is highly customized–for example, if the payment includes resets to interest rates–additional disclosure is necessary to understand the terms and contingencies of the payments.  See id. at 14,585.

  [14]   Id. at 14,645; Rule 906(b).

  [15]   Under this nexus approach, an "indirect counterparty" is defined as any guarantor of a direct counterparty’s obligation under an SBS such that other direct counterparties can exercise a right of recourse against the indirect party in connection with the SBS.  See 80 Fed. Reg. at 14,729, 14,730; Rules 900(p) and 901(d)(1).

  [16]   If no product ID is available for an SBS, additional information regarding the primary terms of the SBS will be required to be reported to the SDR in lieu of such product ID.  See 80 Fed. Reg. at 14,730; Rule 901(c)(1).

  [17]   "Time of execution" is defined as "the point at which the counterparties to a[n] [SBS] become irrevocably bound under applicable law."  80 Fed. Reg. at 14,729; Rule 900(ii).  This includes the time of execution, to the second, of voice executed trades.  See 80 Fed. Reg. at 14,576.

  [18]   Upon timely notification to the Commission, non-financial entities that use SBSs to hedge or mitigate commercial risk may be exempt from SBS clearing requirements.  See 15 U.S.C. § 78c-3(g).

  [19]   80 Fed. Reg. at 14,591, 14,731.

  [20]   "Post-trade processors" are defined under Rule 900 as "any person that provides affirmation, confirmation, matching, reporting, or clearing services for a[n] [SBS] transaction."  See also id. at 14,614.

  [21]   Id. at 14,728.

  [22]   Id. at 14,570.

  [23]   See 15 U.S.C. § 78m(m)(1)(B).

  [24]   See 80 Fed. Reg. at 14,608; Rule 900(cc).

  [25]   Contrast this approach with the CFTC’s approach for public dissemination wherein the CFTC has separate data streams for regulatory data and publicly reportable data, and CFTC regulation 43.2 defines "publicly reportable swap transaction" to mean (1) any executed swap that is an arm’s length transaction between two parties that results in a corresponding change in market risk between the two parties; or (2) any termination, assignment, novation, exchange, transfer, amendment, conveyance or extinguishing of rights or obligations of a swap that changes the price of the swap.  17 C.F.R. § 43.2.

  [26]   80 Fed. Reg. at 14,731; Rule 902(a).

  [27]   80 Fed. Reg. at 14,619.

  [28]   All SDRs that accept and publicly disseminate SBS data are required to be registered with the SEC as both SDRs and as SIPs.  See id. at 14,669, 14,734; Rule 909.  The CFTC does not have a similar requirement for SDRs that accept "swaps" to register as SIPs.

  [29]   See 80 Fed. Reg. at 14,678.

  [30]   Id. at 14,609.

  [31]   The Commission is currently collecting data and assessing the need for immediate disclosure of block trades.  Id. at 14,611.

  [32]   Cross-border transactions subject to dissemination under Final Regulation SBSR include any SBS where:  (i) there is a direct or indirect counterparty that is a U.S. person on either or both sides of the transaction; or (ii) the SBS is accepted for clearing by a clearing agency having its principal place of business in the United States.  Id. at 14,733; Rule 908(1).

  [33]   80 Fed. Reg. at 14,607.

  [34]   See id. at 14,731; Rule 901(j).

  [35]   Rule 902(d) provides a carve out from the Embargo Rule for post-trade processors in order "to promote efficiency in the processing of [SBS] transactions by recognizing that the policy goals of the Embargo Rule are not served by impeding the ability of [SBS] counterparties to obtain post-trade processing services."  80 Fed. Reg. at 14,724.

  [36]   Id. at 14,729.  Proposed amendments to Final Regulation SBSR include a prohibition on SDRs from "charging fees for or imposing usage restrictions" on access to information that SDRs are required to publicly disseminate.  Id. at 14,759.

  [37]   The SEC explains that while "a registered SDR will have demonstrated its operational capability during the registration process, a registered SDR is not required to and likely will not formally commence operations as a registered SDR on the same day that it is approved for registration."  Id. at 14,763, n.141.

  [38]   Id.

  [39]   Id.

  [40]   Proposed Rule 906(c); 80 Fed. Reg. at 14,704, 14,732-33.

  [41]   For example, the Commission "intends for the [final] rules relating to public dissemination to apply only on an interim basis."  80 Fed. Reg. at 14,568.

  [42]   Proposed Regulation SBSR would require a bunched order alpha executed on a platform to be reported and disseminated as a single transaction, showing the full notional amount.  Id. at 14,753.

  [43]   The Commission explains beta and gamma transactions as follows:  "If both direct counterparties to the alpha are clearing members, the direct counterparties would submit the transaction to the clearing agency directly and the resulting beta would be between the clearing agency and one clearing member, and the gamma would be between the clearing agency and the other clearing member."  Id. at 14,742, n.17.  Similarly, if the alpha transaction was between a clearing member and non-clearing member (the "customer), "the customer side of the trade would be submitted for clearing by a clearing member acting on behalf of the customer.  When the clearing agency accepts the alpha for clearing, one of the resulting swaps–in this case, assume the beta–would be between the clearing agency and the customer, with the customer’s clearing member acting as guarantor for the customer’s trade.  The other resulting swap–the gamma–would be between the clearing agency and the clearing member that was a direct counterparty to the alpha."  Id.

  [44]   See Rule 902(c)(6).

  [45]   The Commission notes that market participants may call "bunched orders" by other terms such as "blocks," "parent/child" transactions, and "splits."  80 Fed Reg. 14,753, n.82.

  [46]   "[U]nder a prime brokerage arrangement, a customer of a prime broker will negotiate and agree to the economic terms of a [SBS] with a registered [SBS] dealer (the ‘executing dealer’) but both the customer and the executing dealer ultimately will face the prime broker, rather than each other."  Id. at 14,755.

  [47]   Each prime brokerage transaction (i.e., the customer/executing dealer transaction, the prime broker/executing dealer transaction, and the prime broker/customer transaction, is subject to dissemination.  See id. at 14,756; Rule 902(a).

  [48]   80 Fed. Reg. at 14,760.

  [49]   Id. at 14,762.  Similarly, the CFTC allows SDRs to charge for value-added products after public dissemination.  See 17 C.F.R. § 49.17(g).

  [50]   Id. at 14,624.

  [51]   Subject to future SEC rulemakings, SBSDs and MSBSPs may have specific requirements regarding policies and procedures for reporting SBS data.

Gibson, Dunn & Crutcher LLP     

Gibson, Dunn & Crutcher’s Financial Institutions Practice Group lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact any member of the Gibson Dunn team, the Gibson Dunn lawyer with whom you usually work, or the following:

Michael D. BoppWashington, D.C. (+1 202-955-8256, [email protected])
Arthur S. Long – New York (+1 212-351-2426, [email protected])
Brian E. O’Keefe – New York (+1 2123512446, [email protected])
Jeffrey L. Steiner - Washington, D.C. (+1 202-887-3632, [email protected])

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