As we have discussed in several previous Alerts, Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") set forth a new regulatory structure for over-the-counter swaps markets. Dodd-Frank required the Securities and Exchange Commission ("SEC") and the Commodity Futures Trading Commission ("CFTC") to further define the scope of the new regulatory system through regulations. After delaying the rulemaking process on several occasions, in a flurry of rulemaking in January the CFTC repeatedly noted that Title VII derivative market regulation "was intended to reduce risk, increase transparency and promote market integrity within the financial system . . . ."
On January 9, 2012, the CFTC finalized rules regarding real-time public reporting of swap transaction data, explaining that the rules are founded on "the [CFTC's] belief that real-time public dissemination of swap transaction and pricing data supports the fairness and efficiency of markets and increases transparency, which in turn improves price discovery and decreases risk (e.g., liquidity risk)." The rules broadly require that (1) parties to swap transactions report information about the transactions to Swap Data Repositories ("SDRs"); and (2) SDRs disseminate certain swap transaction data to the public.
The new rules provide a detailed description of the type of information to be reported, specifically excluding public dissemination of information that would identify the parties to a swap contract. Most transactions must be reported to an SDR and, in turn, to the public "as soon as technologically practicable." Swap transactions that meet a threshold for being considered "large notional swap transactions" or "block trades" are subject to delayed public dissemination; however, the CFTC deferred on defining the relevant thresholds. Certain types of swaps that would not provide useful information to the public, such as swaps between affiliates and portfolio compression exercises, need not be reported. Where a swap transaction is executed on or pursuant to the rules of a registered swap execution facility or designated contract market, those entities are responsible for reporting to the SDR, and the counterparties are deemed to have fulfilled their reporting obligations without further action. The real-time public reporting requirements become effective March 9, 2012. However, the compliance schedule will be phased in beginning the later of July 16, 2012, or 60 days after the CFTC finalizes certain relevant definitions.
Although the CFTC's public reporting rules certainly stand to provide greater transparency in the swap market, they are also likely to impose a significant burden on swap market participants. Financial institutions that participate in these transactions should carefully monitor the series of compliance deadlines to determine when (and if) they are required to report information about their swap transactions, as well as when they will be able to benefit from publicly-available information about other swap transactions.
 Real-Time Public Reporting of Swap Transaction Data, 77 Fed. Reg. 1,182 (Jan. 9, 2012), corrected by Real-Time Public Reporting of Swap Transaction Data, 77 Fed. Reg. 2,909 (Jan. 20, 2012)