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Federal Register / Vol. 86, No. 4 / Thursday, January 7, 2021 / Rules and Regulations
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or FCM, a list of the positions held by the U.S. person or FCM, and the amount of the U.S. persons or FCMs financial obligation.
Finally, the Commission proposed 39.6c2viii to require an exempt DCO to provide notice to the Commission of any action the exempt DCO has taken against a U.S. person or FCM, no later than two business days after taking such action.
The Commission requested comment in the 2018 Proposal, with regard to proposed 39.6c2iii, on whether, instead of requiring an exempt DCO to provide prompt notice to the Commission regarding any change in its home country regulatory regime that is material to the exempt DCOs continuing observance of the PFMIs, any requirements set forth in 39.6, or the order of exemption issued by the Commission thereby requiring the exempt DCO to determine whether a change is material, the Commission should require an exempt DCO to provide prompt notice of any change in its home country regulatory regime.
ASX and JSCC supported requiring an exempt DCO to determine whether a change to its home country regulatory regime constitutes a material change.
ASX and JSCC believe an exempt DCO
is best situated to easily identify changes to its home country regulatory regime as well as determine whether such changes are material. JSCC also commented that having the exempt DCO
make this materiality determination would avoid redundant reporting and review for an exempt DCO and the Commission of any change to the home country regulatory regime.
The Commission agrees with the commenters that an exempt DCO should be required to determine whether a change to its home country regulatory regime would constitute a material change, especially as the Commission would otherwise need to review changes to home country regulatory regimes in multiple jurisdictions.
The Commission is adopting 39.6c as proposed.
4. Regulation 39.6dSwap Data Reporting Requirements The Commission proposed 39.6d to require an exempt DCO, if it accepts for clearing a swap that has been reported to an SDR pursuant to part 45
of the Commissions regulations, to report to an SDR data for the two swaps that result from the novation of the original swap. The exempt DCO would also be required to report the termination of the original swap to the same SDR that received the original swap report. To avoid duplicative
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reporting for such transactions, the Commission also proposed to require an exempt DCO to have rules that prohibit the reporting of the two new swaps by the counterparties to the original swap.
Citadel commented that the Commission should ensure that reporting requirements pursuant to parts 43 and 45 of the Commissions regulations continue to be fulfilled in an accurate manner for in-scope transactions, including the cleared or uncleared field in part 43 and the clearing indicator and clearing venue fields in part 45. JSCC supported clearly defining an exempt DCOs swap data reporting obligations within part 39. However, JSCC was concerned that the counterparties to the original swap would still be required to report the cleared transaction arising from the novation of the original swap at an exempt DCO to an SDR under part 45, which JSCC viewed as in conflict with proposed 39.6d. JSCC commented that proposed 39.6d could create confusion about reporting expectations for exempt DCOs and their respective clearing members.36 JSCC was hopeful that part 45 would be amended to address this issue.
CCP12 acknowledged that transparency in the swaps markets, which it believes is supported by SDR
reporting, provides a number of benefits. However, CCP12 argued that the current SDR reporting requirements applied to exempt DCOs pose significant operational challenges, such as on-boarding with a U.S. SDR that has a different reporting format than that of the exempt DCOs home country. CCP12
also commented that SDR reporting fees are a burden based on the number of reported transactions. The Commission believes that transparency in the swaps market as provided by the swap data reporting requirements, which are applicable to all registered DCOs, including non-U.S. DCOs and existing exempt DCOs, strongly warrants requiring exempt DCOs to report such information pursuant to 39.6d.
In response to JSCCs concern that 39.6d could cause confusion given the time-limited no-action relief provided in CFTC Letter 1803, the Commission notes that 39.6d specifically requires an exempt DCO to have rules that prohibit the counterparties to the original swap from reporting to an SDR pursuant to part 45
the two new swaps which result from novation of the original swap. As 36 JSCC cited CFTC Letter 1803: Extension of NoAction Relief from Certain Reporting Obligations for Counterparties Clearing Swaps through Derivatives Clearing Organizations Acting Under Exemptive Orders or No-Action Relief Feb. 20, 2018.

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explained in the 2018 Proposal, the exempt DCOs rules prohibiting reporting by the counterparties to the original swap are intended to avoid duplicative reporting.37
In response to CCP12s concern related to onboarding with an SDR that uses a different reporting format than the exempt DCOs home country, the Commission notes that it recently adopted revisions to part 45 of the Commissions regulations that include standardized data fields that accommodate reporting for swaps cleared under either the agency clearing model or the principal clearing model.38 In regards to SDR fees, the Commission notes that SDRs are required to provide their services on a fair, open, and equal basis and an SDRs fees must be equitable and applied in a uniform and non-discriminatory manner.39 As such, the burdens associated with SDR fees for exempt DCOs will be no different than the burdens for other DCOs that clear swaps that must be reported to SDRs. The Commission is adopting 39.6d as proposed.
5. Regulation 39.6eApplication Procedures The Commission proposed 39.6e to codify the procedures a non-U.S.
clearing organization must follow when applying for an exemption from DCO
registration.
Specifically, the Commission proposed 39.6e1 to require a clearing organization to file an application for exemption with the Secretary of the Commission in the format and manner specified by the Commission. After reviewing the application, the Commission may: 1
Grant an exemption without conditions;
2 grant an exemption with conditions;
or 3 deny the application.
Proposed 39.6e2 requires an applicant to submit a complete application, including all applicable information and documentation as outlined therein, and provide that the Commission will not commence processing an application unless the 37 See Exemption From Derivatives Clearing Organization Registration, 83 FR at 39928, n.32.
38 See Swap Data Recordkeeping and Reporting Requirements, 85 FR 75503, 75567 Nov. 25, 2020
appendix 1 to part 45 contains the clearing member field, which contains instructions for reporting the field under the agency clearing model or the principal clearing model. See also Technical Specification Document: Parts 43 and 45 swap reporting and public dissemination requirements at 12, available at https www.cftc.gov/media/3496/
DMO_Part43_45TechnicalSpecification022020/
download containing the technical specifications for the clearing member field.
39 See 17 CFR 49.27 containing the SDR access and fees requirements.

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