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Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations
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concomitant trade execution exemption.48 Promoting central clearing of standardized swaps is a key objective of the G20 commitments set out at the 2009 Pittsburgh Summit, as implemented by Section 2h of the CEA.49 A rule requiring counterparties to elect not to clear a swap in order to claim a trade execution requirement exemption would frustrate this purpose.
Moreover, the Commission finds this exemption appropriate for counterparties that meet the definition of eligible affiliate counterparty but decide to clear the swap perhaps because they recognize a benefit from clearing or they do not want to satisfy the other conditions of 50.52 that are required to elect that exemption from the clearing requirement.
As explained previously, the Commission recognizes the benefits of inter-affiliate swap transactions, including their contributions to efficient risk management within corporate groups. Given that inter-affiliate trades are not executed on a competitive basis and therefore do not contribute to meaningful price discovery, the Commission does not believe that subjecting such transactions to the trade execution requirement would provide any benefit to the swaps markets that would justify the costs and burdens of such a requirement, which may discourage corporate groups from using these transactions as part of an effective risk-management strategy.
For these reasons, the exemption from the trade execution requirement for affiliated counterparties is appropriate and consistent with the public interest and purposes of the CEA. This exemption is limited to transactions between eligible affiliate counterparties.
The transactions subject to this exemption are still required to be reported under the Commissions regulatory reporting requirements under part 45. Therefore, the Commission will still be able to conduct oversight and surveillance of the transactions covered by the exemption. For these reasons, the Commission does not believe that it would have a materially adverse effect on the ability of the Commission or any SEF or DCM to discharge its regulatory 48 As noted above, the Commission previously determined that swaps for which the counterparties claim the inter-affiliate clearing exemption are not subject to the trade execution requirement. Supra note 37 and accompanying text.
49 See Leaders Statement at the Pittsburgh Summit Sept. 2425, 2009, available at https
www.treasury.gov/resource-center/international/g7g20/Documents/pittsburgh_summit_leaders_
statement_250909.pdf stating that standardized derivatives should be centrally cleared and should be traded on exchanges or electronic trading platforms where appropriate.

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or self-regulatory duties under the CEA.
Finally, under the exemption, swap transactions would still be entered into solely between ECPs, whom the Commission believes, for purposes of this Final Rule, to be appropriate persons.
III. Related Matters A. Regulatory Flexibility Act The Regulatory Flexibility Act RFA 50 requires Federal agencies, in promulgating regulations, to consider the impact of those regulations on small businesses. The regulations adopted herein will affect SEFs, DCMs, and ECPs. The Commission has previously established certain definitions of small entities to be used by the Commission in evaluating the impact of its regulations on small entities in accordance with the RFA.51 The Commission previously concluded that SEFs and DCMs are not small entities for the purpose of the RFA.52 The Commission has also previously stated its belief that ECPs 53 as defined in section 1a18 of the CEA,54 are not small entities for purposes of the RFA.55
As noted above, one commenter, Mercaris, stated that the Proposed Rule would have an adverse impact on small swaps broking entities due to its expansion of the types of swaps that are subject to the trade execution requirement to include all swaps that are required to be cleared as well as the types of entities that are required to register as SEFs to include trading platforms operated by swaps broking entities. Mercaris accordingly requested exemptions from the trade execution requirement for swaps that are based on new agricultural assets or have a notional value not exceeding $5 billion, and stated that a failure to provide such exemptions would violate the RFA.56
Because the Final Rule would not adopt either of the changes that Mercaris cited as having an adverse impact on small swaps broking entities, Mercariss exemption requests and statements 50 5

U.S.C. 601 et seq.
FR 1861818621 Apr. 30, 1982.
52 SEF Core Principles Final Rule, 78 FR 33476, 33548 June 4, 2013 citing 47 FR 18618, 18621
Apr. 30, 1982 discussing DCMs; 66 FR 42256, 42268 Aug. 10, 2001 discussing derivatives transaction execution facilities, exempt commercial markets, and exempt boards of trade; and 66 FR
45604, 45609 Aug. 29, 2001 discussing registered derivatives clearing organizations DCOs.
53 17 CFR 37.703.
54 7 U.S.C. 1a18.
55 66 FR 20740, 20743 Apr. 25, 2001 stating that ECPs by the nature of their definition in the CEA
should not be considered small entities.
56 Mercaris Letter at 12.
51 47

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regarding the RFA are inapplicable to the Final Rule.
Therefore, the Chairman, on behalf of the Commission, hereby certifies, pursuant to 5 U.S.C. 605b, that the regulations will not have a significant economic impact on a substantial number of small entities.
B. Paperwork Reduction Act The Paperwork Reduction Act of 1995
PRA 57 imposes certain requirements on Federal agencies including the Commission in connection with conducting or sponsoring any collection of information, 58 as defined by the PRA.
Among its purposes, the PRA is intended to minimize the paperwork burden to the private sector, to ensure that any collection of information by a government agency is put to the greatest possible use, and to minimize duplicative information collections across the government.59
The PRA applies to all information, regardless of form or format, whenever the government is obtaining, causing to be obtained, or soliciting information, and includes required disclosure to third parties or the public, of facts or opinions, when the information collection calls for answers to identical questions posed to, or identical reporting or recordkeeping requirements imposed on, ten or more persons.60 The PRA requirements have been determined to include not only mandatory, but also voluntary information collections, and include both written and oral communications.61
The Final Rule establishes two exemptions from the trade execution requirement. The Final Rule will not create any new, or revise any existing, collections of information under the PRA. Therefore, no information collection request has been submitted to the Office of Management and Budget for review.
C. Cost-Benefit Considerations 1. Introduction Section 15a of the CEA requires the Commission to consider the costs and benefits of its actions before promulgating a regulation under the CEA or issuing certain orders.62 Section 15a further specifies that the costs and 57 44

U.S.C. 3501 et seq.
purposes of this PRA discussion, the terms information collection and collection of information have the same meaning, and this section will use the terms interchangeably.
59 44 U.S.C. 3501.
60 44 U.S.C. 3502.
61 5 CFR 1320.3c1.
62 7 U.S.C. 19a.
58 For
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