The CFTC has approved its final rule on real-time reporting of swaps. This rule is intended to provide swap transaction and pricing data to the public on a real-time basis so as to enhance price discovery.

What Swaps Must Be Reported

The new rule defines “publicly reportable swap transactions” as (1) any swap that is an arm’s-length transaction between two parties that results in a corresponding change in the market risk position between the two parties; or (2) any termination, assignment, novation, exchange, transfer, amendment, conveyance, or extinguishing of rights or obligations of a swap that changes the pricing of a swap. The rule covers such swaps in all five asset classes (i.e., interest rate, credit, equity, foreign exchange, and other commodity), whether cleared or uncleared, and regardless of the method of execution (e.g., executed bilaterally, or on a registered swap execution facility or designated contract market). However, certain swaps in the “other commodity” asset class are not subject to the rule’s requirements.

The rule specifies data fields that are to be reported for each swap for the purpose of categorizing the swap and capturing its price and volume data.

Who Must Report

For those publicly reportable swap transactions executed on or pursuant to the rules of a registered swap execution facility or designated contract market, the parties satisfy their reporting obligation by executing the transaction on or pursuant to the rules of the execution facility. A registered swap execution facility or designated contract market must report the swap transaction and pricing data to the appropriate registered swap data repository for public dissemination.

For those publicly reportable swap transactions that are not executed on or pursuant to the rules of a registered swap execution facility or designated contract market, unless otherwise agreed to by the parties prior to execution, the parties to the transaction would report to the appropriate registered swap data repository for public dissemination as follows:
• If only one party is a swap dealer or major swap participant, then the swap dealer or major swap participant should report to the registered swap data repository;
• If one party is a swap dealer and the other party is a major swap participant, then the swap dealer should report to the registered swap data repository; and
• In all other situations, the parties shall designate which party should report to the registered swap data repository.

When and To Whom Swaps Must Be Reported

Swaps must be reported “as soon as technologically practicable” after execution. Swaps will be reportable to a registered swap data repository. The compliance dates for the real-time public reporting requirements are as follows:
• Compliance date 1, the date on which exchanges, swap dealers (SDs), and major swap participants (MSPs) must commence compliance with respect to interest rate and credit swaps, is the later of (a) July 16, 2012, or (b) 60 days after publication of Commission definitions of “swap,” “swap dealer,” and “major swap participant.”
• Compliance date 2, the date on which such entities and counterparties must commence compliance with respect to equity swaps, foreign exchange transactions, and other commodity swaps, is 90 calendar days after compliance date 1.
• Compliance date 3, the date on which non-SD/MSP counterparties must begin compliance with respect to swaps in all asset classes, is 90 calendar days after compliance date 2.