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Federal Register / Vol. 86, No. 228 / Wednesday, December 1, 2021 / Proposed Rules affected by the proposed recordkeeping amendments. The Commission estimates that 5 registered OTC
derivatives dealers will be impacted by the proposed amendments to Rule 17a 4.
2. Security-Based Swap Markets:
Activity and Participants i. Available Data From the SecurityBased Swap Market
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The Commissions understanding of the market is informed, in part, by available data on security-based swap transactions, though the Commission acknowledges that limitations in the data limit the extent to which it is possible to quantitatively characterize the market.125 Since this data does not cover the entire market, the Commission has analyzed market activity using a sample of transactions that includes only certain segments of the market. The Commission believes, however, that the data underlying this analysis provides reasonably comprehensive information regarding single-name credit default swap CDS transactions and the composition of the participants in the single-name CDS market.
The Commissions analysis of the current state of the security-based swap market is based on data obtained from the Depositary Trust & Clearing Corporation DTCC Derivatives Repository Limited Trade Information Warehouse TIW, especially data regarding the activity of market participants in the single-name CDS
market during the period from 2008 to 2021.126 Although the definition of security-based swaps is not limited to single-name CDS,127 the Commission believes that the single-name CDS data is sufficiently representative of the 125 The Commission also relies on qualitative information regarding market structure and evolving market practices provided by commenters and the knowledge and expertise of Commission staff.
126 In prior releases, the Commission has examined data for other time periods. For example, in the business conduct standards adopting release, the Commission presented an analysis of TIW data for November 2006 through December 2014. While the exact numbers of various groups of transacting agents and account holders in that analysis differ from the figures reported in this section for a longer time period, the Commission does not observe significant structural differences in market participation. Compare 81 FR at 30102 Tables 1
and 2, with Tables 1 and 2 below.
127 While other repositories may collect data on transactions in total return swaps on equity and debt, the Commission does not currently have access to such data for these products or other products that are security-based swaps.
Additionally, the Commission explains below that data related to single-name CDS provides reasonably comprehensive information for the purpose of this analysis.

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market to inform our analysis of the current security-based swap market.
According to data published by the Bank for International Settlements BIS, the global notional amount outstanding in single-name CDS was approximately $3.5 trillion,128 in multiname index CDS was approximately $4.5 trillion, and in multi-name, nonindex CDS was approximately $347
billion.129 The total gross market value outstanding in single-name CDS was approximately $77 billion, and in multiname CDS instruments was approximately $125 billion.130 The global notional amount outstanding in equity forwards and swaps as of December 2020 was $3.6 trillion, with total gross market value of $321
billion.131
ii. Affected SBS Entities Final SBS Entity registration rules have been adopted and compliance was required as of November 1, 2021.132 As of November 9, 2021, there are 41
entities registered with the Commission as SBSDs, and no entities have registered as MSBSPs.133
Firms that act as dealers play a central role in the security-based swap market.
128 The global notional amount outstanding represents the total face amount used to calculate payments under outstanding contracts. The gross market value is the cost of replacing all open contracts at current market prices.
129 See BIS, Semi-annual OTC derivatives statistics at December 2020, Table D5.2, available at https stats.bis.org/statx/srs/table/d5.2 accessed Aug. 18, 2021.
130 See id.
131 These totals include swaps and security-based swaps, as well as products that are excluded from the definition of swap, such as certain equity forwards. See OTC, equity-linked derivatives statistics, Table D5.1, available at https
stats.bis.org/statx/srs/table/d5.1 accessed Aug. 18, 2021. For the purposes of this analysis, the Commission assumes that multi-name index CDS
are not narrow-based index CDS and therefore, do not fall within the security-based swap definition.
See 15 U.S.C. 78ca68A; see also Further Definition of Swap, Security-Based Swap, and Security-Based Swap Agreement; Mixed Swaps;
Security-Based Swap Agreement Recordkeeping, 77
FR 48208. The Commission also assumes that all instruments reported as equity forwards and swaps are security-based swaps, potentially resulting in underestimation of the proportion of the securitybased swap market represented by single-name CDS. Therefore, when measured on the basis of gross notional outstanding single-name CDS
contracts appear to constitute roughly 49% of the security-based swap market. Although the BIS data reflects the global OTC derivatives market, and not just the U.S. market, the Commission has no reason to believe that these ratios differ significantly in the U.S. market.
132 See Key Dates for Registration of SecurityBased Swap Dealers and Major Security-Based Swap Participants, available at: https
www.sec.gov/page/key-dates-registration-securitybased-swap-dealers-and-major-security-basedswap-participants.
133 See section V.C. of this release discussing the number of SBS Entities that would be subject to the proposed rules.

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Based on an analysis of 2020 singlename CDS data in TIW, accounts of dealers intermediated transactions with a gross notional amount of approximately $1.99 trillion, with approximately 55 percent of the gross notional intermediated by the top five dealer accounts.134
iii. Other Markets and Dual Registrants The numerous financial markets are integrated, often attracting the same market participants that trade across corporate bond, swap, and securitybased swap markets, among others. For example, persons who will register as SBS Entities are likely also to be engaged in swap activity. In part, this overlap reflects the relationship between single-name CDS contracts, which are security-based swaps, and index CDS contracts, which may be swaps or security-based swaps. A
single-name CDS contract covers default events for a single reference entity or reference security. Index CDS contracts and related products make payouts that are contingent on the default of index components and allow participants in these instruments to gain exposure to the credit risk of the basket of reference entities that comprise the index, which is a function of the credit risk of the index components. A default event for a reference entity that is an index component will result in payoffs on both single-name CDS written on the reference entity and index CDS written on indices that contain the reference entity. Because of this relationship between the payoffs of single-name CDS
and index CDS products, prices of these products depend upon one another,135
creating hedging opportunities across these markets.
These hedging opportunities mean that participants that are active in one market are likely to be active in the other. Commission staff analysis of approximately 4,149 TIW accounts that participated in the market for singlename CDS in 2020 revealed that approximately 3,096 of those accounts, or 75 percent, also participated in the market for index CDS. Of the accounts that participated in both markets, data regarding transactions in 2020 suggests that, conditional on an account transacting in notional volume of index CDS in the top third of accounts, the 134 The Commission staff analysis of TIW
transaction records indicates that approximately 99% of single-name CDS price-forming transactions in 2020 involved an ISDA-recognized dealer.
135 Correlation typically refers to linear relationships between variables; dependence captures a broader set of relationships that may be more appropriate for certain swaps and securitybased swaps. See, e.g., George Casella & Roger L.
Berger, Statistical Inference 171 2nd ed. 2002.

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