As was required under Section 766 of the Dodd-Frank Act, the US Securities and Exchange Commission (SEC) in Release 34-63094 has adopted Interim Final Temporary Rule 13Aa-2T under the Securities Exchange Act of 1934, as amended (Exchange Act). This new rule will require the reporting of all security-based swap1 transactions entered into before July 21, 2010, whose terms have not expired as of that date (pre-enactment unexpired security-based swaps).
Under the new rule, reports are to be made to a registered security-based swap data repository either (i) within 60 days of an appropriate security-based swap data repository becoming registered and commencing operation to receive and maintain data regarding security-based swaps or (ii) by the compliance date to be established by the permanent reporting rules to be promulgated under Sections 3C(e) and 13A(a)(1) of the Exchange Act, whichever is earlier. Additionally, for so long as the Interim Final Temporary Rule is in effect (being the earlier of January 12, 2012, or the operative date of the such permanent reporting rules), reports are also to be made to the SEC upon request; the requested information may vary with the needs of the SEC, but may include actual trade data or summary trade data, including the types of counterparties and reference entities, the total number of security-based swaps and a measure of the frequency and duration thereof.
An Interpretative Note released by the SEC with the Interim Final Temporary Rule provides that the following information is required to be retained in existing format, to the extent that, and in such form as, it presently exists:
- Any information necessary to identify and value the transaction;
- The date and time of execution of the transaction;
- Information relevant to the price of the transaction;
- Whether the transaction was accepted for clearing by any clearing agency or derivatives clearing organization and, if so, the identity thereof;
- Any modification(s) to the terms of the transaction; and
- The final confirmation of the transaction.
The rule also provides for the reporting responsibility for pre-enactment unexpired security-based swaps as follows:
- Where only one counterparty to a security-based swap transaction is a security-based swap dealer or major security-based swap participant, the security-based swap dealer or major security-based swap participant shall report the transaction.
- Where one counterparty to a security-based swap transaction is a security-based swap dealer and the other counterparty is a major security-based swap participant, the security-based swap dealer shall report the transaction.
- Where neither counterparty to the security-based swap transaction is a security-based swap dealer or a major security-based swap participant, the counterparties shall select the counterparty that will report the transaction.
However, until related terms, including “swap,” “security-based swap,” “security-based swap dealer” and “major security-based swap participant,” are further defined, the actual effect and requirements of the Interim Final Temporary Rule will remain uncertain.
The Interim Final Temporary Rule will become effective upon the date of publication in the Federal Register. The SEC’s Release 34-63094 also solicits comments from the public on a number of related matters which should be received by the SEC on or before the date that is 60 days after publication in the Federal Register.
For more information about the Interim Final Temporary Rule or any other matter raised in this Legal Update, please contact J. Paul Forrester at +1 312 701 7366.
Learn more about our Derivatives & Structured Products practice.
1. For more information, see our Legal Update, dated August 23, 2010, “Comments Requested on Proposed ‘Key Definitions’ of the Wall Street Transparency and Accountability Act” and our Legal Update, dated October 7, 2010, “Interim Final Rule Regarding Reporting of Pre-enactment Swap Transactions Issued.”