Everyone’s Human: CFTC Rationalizes Swap Error Reporting
On July 31, 2025, the Commodity Futures Trading Commission (“CFTC”) issued no-action relief for certain swap reporting counterparties that fail to submit a swap data error correction notification (“NAL 25-25”). This relief will allow many reporting parties to focus their efforts on submitting corrected swap data, instead of notifying the CFTC that they may not submit a correction on time.
In this Legal Update, we provide background on the swap data error correction requirements and describe how NAL 25-25 provides relief for many reporting parties.
Background
As part of the implementation of the Dodd-Frank Act, the CFTC imposed requirements that swaps be reported to swap data repositories (“SDRs”) for regulatory purposes and real-time public disclosure of certain anonymized terms.1 Reporting requirements apply to all swaps, including swaps between two end-users, swaps for non-dealing purposes (e.g., hedging), and swaps that are exempt from other requirements (e.g., clearing, trade execution, and margining), as well as foreign exchange swaps and forwards.
If a reporting party discovers an error or omission in previously reported data, it is generally required to file a correction as soon as technologically practicable after discovery of the error, but no later than seven business days after discovery.2 If a party to a swap that is not a reporting party discovers an error or omission in previously reported data, it is generally required to notify the reporting party as soon as technologically practicable after discovery of the error, but no later than three business days after discovery.
In November 2020, the CFTC amended the swap reporting requirements.3 Among other things, those amendments introduced a requirement that a reporting party notify CFTC staff if it will not timely correct a swap data error. Such notifications must be made to staff within 12 hours of the reporting party’s determination that it will fail to timely correct an error. Further, the notification must include an initial assessment of the scope of the error or errors that were discovered, and an initial remediation plan for correcting the error or errors, if an initial remediation plan exists.
NAL 25-25
Compliance with the 2020 changes to the reporting requirements has been required since late-2022.4 According to NAL 25-25, the CFTC receives approximately 150 notifications each month of a party’s expected failure to promptly correct a reporting error.
Industry participants expressed concern that the new notification requirements require reporting persons to expend unnecessary effort, and noted that “there can be many reasons that a reporting counterparty may need longer than seven business days to correct even an immaterial error.” CFTC staff agreed with industry that the new notifications requirements impose an unreasonable burden and issued NAL 25-25 to reduce that burden.
Under NAL 25-25, CFTC staff will not recommend the CFTC take an enforcement action against a reporting party that fails to submit a swap data error correction notification with respect to an error if, at the time the reporting party initially discovers and assesses the impact of an error, the reporting party makes a reasonable determination that the number of reportable trades affected by the error does not exceed 5% of their open swaps in an asset class for which it was the reporting counterparty. The no-action relief is effective until the compliance date of an agency action (e.g., rulemaking, order) to address the notification requirement, if one is taken.
Takeaways
As Alexander Pope originally said, “to err is human.” Swap data reporting is a complex process that requires humans to describe the relevant terms of a swap through dozens of poorly defined fields and variables. Particularly for reporting parties that are not registered dealers, the process can be fraught with judgment calls and best efforts. Errors will happen and may take longer than seven days to correct. For example, a reporting party may need to employ external consultants, communicate with swap data repository staff, and correspond with the other parties to the swap to fully resolve a reporting error.
Further, while it may be reasonable to require people to expeditiously correct errors, there is little regulatory purpose or public benefit served by requiring preemptive notice that a person will not file a correction by an arbitrary deadline. The time spent preparing that notification might be better used to file the corrections as soon as possible, regardless of the deadline. NAL 25-25 recognizes this by requiring reporting parties to provide notice of an expected failure to timely correct a reporting error only if the error affects a material portion of their swaps book.
Hopefully, NAL 25-25 will serve as the vanguard of CFTC efforts to reassess the value and necessity of its many notice requirements. Ranging from the annual registration exemption filings under Rule 4.13(a) to the annual clearing exception filings under Rule 50.50, there are plenty of other notice requirements that arguably could be excised from the derivatives regulations.
2 17 C.F.R. §§ 43.3(e), 45.14(a).
3 85 Fed. Reg. 75,601 (Nov. 25, 2020).
4 CFTC, Staff Ltr. 22-03 (Jan. 31, 2022) (“DOD will not recommend that the Commission take an enforcement action against an entity for failure to comply with the amendments before December 5, 2022”).
