17 CFR Part 45 — Commodity Futures Trading Commission (CFTC) Rule

Under Title VII of the Dodd-Frank Act, over-the-counter (“OTC”) derivatives regulated as “swaps” and certain other derivative transactions will be subject to new record-keeping and reporting requirements. All swap counter parties, including end users, will be required to keep complete swap records, with data reporting on all swaps required throughout the life of the trade.

The legislation was enacted to reduce risk, increase transparency, and promote market integrity within the financial system by, among other things:

(3) creating robust record-keeping and real-time reporting regimes;

Items of note

  • End users will not be responsible for reporting data if they transact only with swap dealer counterparties.
  • Financial entities could be responsible for reporting when facing other end users.
  • Inter-affiliate transactions – e.g., derivative transactions between entities that are wholly-owned by the same parent company – will have to be reported, but not in real-time.
  • A complete record should include not only the trade information, but any communications made just prior, during and following the trade.

45.2 Swap recordkeeping;

(b) Recordkeeping by non-SD/MSP counterparties. All non-SD/MSP counterparties subject to the jurisdiction of the Commission shall keep full, complete, and systematic records, together with all pertinent data and memoranda, with respect to each swap in which they are a counterparty, including, without limitation, all records demonstrating that they are entitled, with respect to any swap, to elect the clearing requirement exception in CEA § 2(h)(7). (The yellow highlight has 100,000’s of thousands of words around what that means but it does me communications – I assure you.)

(c) Record retention. All records required to be kept pursuant to this section shall be retained with respect to each swap throughout the life of the swap and for a period of at least five years following the final termination of the swap.

(d) Retention form. Records required to be kept pursuant to this section must be kept as required by paragraph (d)(1) or (d)(2) of this section, as applicable.

(d)(2) Records required to be kept by non-SD/MSP counterparties may be kept in either electronic or paper form, so long as they are retrievable, and information in them is reportable, as required by this section.

(e) Record retrievability.

(2) Each record required by this section or any other section of the CEA to be kept by a non-SD/MSP counterparty shall be retrievable by that counterparty within five business days throughout the period during which it is required to be kept.

(h) Record inspection. All records required to be kept pursuant to this section by any registrant or its affiliates or by any non-SD/MSP counterparty subject to the jurisdiction of the Commission shall be open to inspection upon request by any representative of the Commission, the United States Department of Justice, or the Securities and Exchange Commission, or by any representative of a prudential regulator as authorized by the Commission. Copies of all such records shall be provided, at the expense of the entity or person required to keep the record, to any representative of the Commission upon request. Copies of records required to be kept by any registrant shall be provided either by electronic means, in hard copy, or both, as requested by the Commission, with the sole exception that copies of records originally created and exclusively maintained in paper form may be provided in hard copy only. Copies of records required to be kept by any non-SD/MSP counterparty subject to the jurisdiction of the Commission that is not a Commission registrant shall be provided in the form, whether electronic or paper, in which the records are kept.

For more information:  http://www.law.cornell.edu/cfr/text/17/part-45

 

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