Agency Information Collection Activities: Notice of Intent To Revise and Extend Collection 3038-0111: Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants; Comparability Determinations With Margin Requirements

 
CONTENT
Federal Register, Volume 84 Issue 162 (Wednesday, August 21, 2019)
[Federal Register Volume 84, Number 162 (Wednesday, August 21, 2019)]
[Notices]
[Pages 43589-43591]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-18027]
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COMMODITY FUTURES TRADING COMMISSION
Agency Information Collection Activities: Notice of Intent To
Revise and Extend Collection 3038-0111: Margin Requirements for
Uncleared Swaps for Swap Dealers and Major Swap Participants;
Comparability Determinations With Margin Requirements
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice.
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SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or
``Commission'') is announcing an opportunity for public comment on the
proposed revision and renewal of a collection of certain information by
the agency. Under the Paperwork Reduction Act (``PRA''), Federal
agencies are required to publish notice in the Federal Register
concerning each proposed collection of information, including proposed
extension of an existing collection of information, and to allow 60
days for public comment. This notice solicits comments on the burdens
associated with the following aspects of the Commission's Margin
Requirements for Uncleared Swaps for Swap Dealers and Major Swap
Participants (``Final Rule''): Requesting a comparability determination
from the Commission; maintaining policies and procedures for compliance
with the Commission's special provisions for non-netting jurisdictions
and non-segregation jurisdictions; and maintaining books and records
properly documenting that all of the requirements of the special
provisions for non-netting jurisdictions and non-segregation
jurisdictions are satisfied.
DATES: Comments must be submitted on or before October 21, 2019.
ADDRESSES: You may submit comments, and ``OMB Control No. 3038-0111''
by any of the following methods:
     The Agency's website, at http://comments.cftc.gov/. Follow
the instructions for submitting comments through the website.
     Mail: Christopher Kirkpatrick, Secretary of the
Commission, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street NW, Washington, DC 20581.
     Hand Delivery/Courier: Same as Mail above.
    Please submit your comments using only one method.
FOR FURTHER INFORMATION CONTACT: Lauren Bennett, Special Counsel,
Division of Swap Dealer and Intermediary Oversight, Commodity Futures
Trading Commission, (202) 418-5290 or [email protected].
SUPPLEMENTARY INFORMATION: Under the PRA, 44 U.S.C. 3501 et seq.,
Federal agencies must obtain approval from the Office of Management and
Budget (OMB) for each collection of information they conduct or
sponsor. ``Collection of Information'' is defined in 44 U.S.C. 3502(3)
and 5 CFR 1320.3 and includes agency requests or requirements that
members of the public submit reports, keep records, or provide
information to a third party. Section 3506(c)(2)(A) of the PRA, 44
U.S.C. 3506(c)(2)(A), requires Federal agencies to provide a 60-day
notice in the Federal Register concerning each proposed collection of
information, including each proposed extension of an existing
collection of information, before submitting the collection to OMB for
approval. To comply with this requirement, the CFTC is publishing
notice of the proposed extension and revision to the collection listed
below. An agency may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless it displays
a currently valid OMB control number.
    Title: Margin Requirements for Uncleared Swaps for Swap Dealers and
Major Swap Participants; Comparability Determinations With Margin
Requirements (OMB Control No. 3038-0111). This is a request for an
extension and revision of a currently approved information collection.
    Abstract: Section 731 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (``Dodd-Frank Act''),\1\ amended the Commodity
Exchange Act (``CEA''), 7 U.S.C. 1 et seq., to add, as section 4s(e)
thereof, provisions concerning the setting of initial and variation
margin requirements for swap dealers (``SDs'') and major swap
participants (``MSPs'').\2\ Each SD and MSP for which there is a
Prudential Regulator, as defined in section 1a(39) of the CEA,\3\ must
meet margin requirements established by the applicable Prudential
Regulator, and each SD and MSP for which there is no Prudential
Regulator (``Covered Swap Entities'' or ``CSEs'') must comply with the
Commission's regulations governing margin on all swaps that are not
centrally cleared.
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    \1\ Public Law 111-023, 124 Stat. 1376 (2010).
    \2\ 7 U.S.C. 6s(e).
    \3\ 7 U.S.C. 1a(39).
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    With regard to the cross-border application of the Commission's
margin rules, section 2(i) \4\ of the CEA provides the Commission with
express authority over activities outside the United States relating to
swaps when certain conditions are met. Section 2(i) of the CEA provides
that the provisions of the CEA relating to swaps that were enacted by
the Wall Street Transparency and Accountability Act of 2010 (including
any rule prescribed or regulation promulgated under that Act), shall
not apply to activities outside the United States unless those
activities (1) have a direct and significant connection with activities
in, or effect on, commerce of the United States or (2) contravene such
rules or regulations as the Commission may prescribe or promulgate as
are necessary or appropriate to prevent the evasion of any provision of
the CEA that was enacted by the Wall Street Transparency and
Accountability Act of 2010.
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    \4\ 7 U.S.C. 2(i).
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    On May 31, 2016, the Commission published a final rule addressing
the cross-border application of its margin requirements for uncleared
swaps applicable to CSEs.\5\ As described below, the adopting release
for the Final Rule contained a collection of information regarding
requests for comparability determinations, which was previously
included in the proposing release, and for which the Office of
Management and Budget (``OMB'') assigned OMB control number 3038-0111,
titled ``Margin Requirements for Uncleared Swaps for Swap Dealers and
Major Swap Participants; Comparability Determinations With Margin
Requirements.'' In addition, the adopting release included two
additional information collections
[[Page 43590]]
regarding non-netting jurisdictions \6\ and non-segregation
jurisdictions \7\ that were not previously proposed. Subsequently, on
August 2, 2016, the Commission requested a revision of the collection
for Margin Requirements for Uncleared Swaps for Swap Dealers and Major
Swap Participants; Comparability Determinations With Margin
Requirements (OMB control number 3038-0111) to include the burden
estimates for the provisions regarding non-netting jurisdictions and
non-segregation jurisdictions.\8\
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    \5\ 81 FR 34818 (May 31, 2016).
    \6\ As used in the adopting release, a ``non-netting
jurisdiction'' is a jurisdiction in which a CSE cannot conclude,
with a well-founded basis, that the netting agreement with a
counterparty in that foreign jurisdiction meets the definition of an
``eligible master netting agreement'' set forth in the Final Rule,
as described in section II.B.5.b of the adopting release.
    \7\ As used in the adopting release, a ``non-segregation
jurisdiction'' is a jurisdiction where inherent limitations in the
legal or operational infrastructure of the foreign jurisdiction make
it impracticable for the CSE and its counterparty to post initial
margin pursuant to custodial arrangements that comply with the
Commission's margin rules, as further described in section II.B.4.b
of the adopting release.
    \8\ 81 FR 50690 (Aug. 2, 2016).
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    Under section 23.160(c)(1) of the Final Rule, a CSE that is
eligible for substituted compliance or a foreign regulatory agency that
has direct supervisory authority over one or more CSEs and that is
responsible for administering the relevant foreign jurisdiction's
margin requirements may request, individually or collectively, that the
Commission make a determination that a CSE that complies with margin
requirements in the relevant foreign jurisdiction would be deemed to be
in compliance with the Commission's corresponding margin rule
promulgated by the Commission (a ``comparability determination''). Once
a comparability determination is made for a jurisdiction, it applies
for all entities or transactions in that jurisdiction to the extent
provided in the comparability determination, as approved by the
Commission and subject to any conditions specified by the Commission.
All CSEs, regardless of whether they rely on a comparability
determination, remain subject to the Commission's examination and
enforcement authority.
    Section 23.160(c)(2) of the Final Rule requires that applicants for
a comparability determination provide copies of the relevant foreign
jurisdiction's margin requirements and descriptions of their
objectives, how they differ from the BCBS/IOSCO international
framework, and how they address the elements of the Commission's margin
requirements. The applicant must identify the specific legal and
regulatory provisions of the foreign jurisdiction's margin requirements
that correspond to each element and, if necessary, whether the relevant
foreign jurisdiction's margin requirements do not address a particular
element.
    Section 23.160(d) of the Final Rule includes a special provision
for non-netting jurisdictions. This provision allows CSEs that cannot
conclude after sufficient legal review with a well-founded basis that
the netting agreement with a counterparty in a foreign jurisdiction
meets the definition of an ``eligible master netting agreement'' set
forth in the Final Rule to nevertheless net uncleared swaps in
determining the amount of margin that they post, provided that certain
conditions are met. In order to avail itself of this special provision,
a CSE must treat the uncleared swaps covered by the agreement on a
gross basis in determining the amount of initial and variation margin
that it must collect, but may net those uncleared swaps in determining
the amount of initial and variation margin it must post to the
counterparty, in accordance with the netting provisions of the Final
Rule. A CSE that enters into uncleared swaps in ``non-netting''
jurisdictions in reliance on this provision must have policies and
procedures ensuring that it is in compliance with the special
provision's requirements, and maintain books and records properly
documenting that all of the requirements of this exception are
satisfied.
    Section 23.160(e) of the Final Rule includes a special provision
for non-segregation jurisdictions that allows non-U.S. CSEs that are
Foreign Consolidated Subsidiaries (as defined in the Final Rule) and
foreign branches of U.S. CSEs to engage in swaps in foreign
jurisdictions where inherent limitations in the legal or operational
infrastructure make it impracticable for the CSE and its counterparty
to post collateral in compliance with the custodial arrangement
requirements of the Commission's margin rules, subject to certain
conditions. In order to rely on this special provision, a Foreign
Consolidated Subsidiary (``FCS'') or foreign branch of a U.S. CSE is
required to satisfy all of the conditions of the rule, including that
(1) inherent limitations in the legal or operational infrastructure of
the foreign jurisdiction make it impracticable for the CSE and its
counterparty to post any form of eligible initial margin collateral for
the uncleared swap pursuant to custodial arrangements that comply with
the Commission's margin rules; (2) foreign regulatory restrictions
require the CSE to transact in uncleared swaps with the counterparty
through an establishment within the foreign jurisdiction and do not
permit the posting of collateral for the swap in compliance with the
custodial arrangements of section 23.157 of the Final Rule in the
United States or a jurisdiction for which the Commission has issued a
comparability determination under the Final Rule with respect to
section 23.157; (3) the CSE's counterparty is not a U.S. person and is
not a CSE, and the counterparty's obligations under the uncleared swap
are not guaranteed by a U.S. person; (4) the CSE collects initial
margin in cash on a gross basis, in cash, and posts and collects
variation margin in cash, for the uncleared swap in accordance with the
Final Rule; (5) for each broad risk category, as set out in Sec.
23.154(b)(2)(v) of the Final Rule, the total outstanding notional value
of all uncleared swaps in that broad risk category, as to which the CSE
is relying on Sec.  23.160 (e), may not exceed 5 percent of the CSE's
total outstanding notional value for all uncleared swaps in the same
broad risk category; (6) the CSE has policies and procedures ensuring
that it is in compliance with the requirements of this provision; and
(7) the CSE maintains books and records properly documenting that all
of the requirements of this provision are satisfied.
    With respect to the collection of information, the CFTC invites
comments on:
     Whether the proposed collection of information is
necessary for the proper performance of the functions of the
Commission, including whether the information will have a practical
use;
     The accuracy of the Commission's estimate of the burden of
the proposed collection of information, including the validity of the
methodology and assumptions used;
     Ways to enhance the quality, usefulness, and clarity of
the information to be collected; and
     Ways to minimize the burden of collection of information
on those who are to respond, including through the use of appropriate
automated electronic, mechanical, or other technological collection
techniques or other forms of information technology; e.g., permitting
electronic submission of responses.
    All comments must be submitted in English, or if not, accompanied
by an English translation. Comments will be posted as received to
http://www.cftc.gov. You should submit only information that you wish
to make available publicly. If you wish the Commission to consider
information
[[Page 43591]]
that you believe is exempt from disclosure under the Freedom of
Information Act, a petition for confidential treatment of the exempt
information may be submitted according to the procedures established in
Sec.  145.9 of the Commission's regulations.\9\
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    \9\ 17 CFR 145.9.
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    The Commission reserves the right, but shall have no obligation, to
review, pre-screen, filter, redact, refuse or remove any or all of your
submission from http://www.cftc.gov that it may deem to be
inappropriate for publication, such as obscene language. All
submissions that have been redacted or removed that contain comments on
the merits of the ICR will be retained in the public comment file and
will be considered as required under the Administrative Procedure Act
and other applicable laws, and may be accessible under the Freedom of
Information Act.
    Burden Statement--Information Collection for Comparability
Determinations: The Commission estimates that approximately 55 CSEs may
request a comparability determination pursuant to section 23.160(c) of
the Final Rule.\10\ The Commission notes that any foreign regulatory
agency that has direct supervisory authority over one or more CSEs and
that is responsible for administering the relevant foreign
jurisdiction's margin requirements may also apply for a comparability
determination. Further, once a comparability determination is made for
a jurisdiction, it will apply for all entities or transactions in that
jurisdiction to the extent provided in the determination, as approved
by the Commission. To date, the Commission has issued a comparability
determination for 3 jurisdictions.\11\ Accordingly, the Commission
estimates that it will receive requests from the 13 remaining
jurisdictions within the G20, in addition to Switzerland. In light of
its experience in evaluating requests for comparability determinations,
the Commission is revising its estimate for the number of burden hours
associated with such requests from 10 hours to 40 hours. Accordingly,
the respondent burden for this collection is estimated to be as
follows:
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    \10\ Currently, there are approximately 107 swap entities
provisionally registered with the Commission. The Commission
estimates that of the approximately 107 swap entities that are
provisionally registered, approximately 55 are CSEs for which there
is no Prudential Regulator, and are therefore subject to the
Commission's margin rules.
    \11\ See Comparability Determination for Japan: Margin
Requirements for Uncleared Swaps for Swap Dealers and Major Swap
Participants, 81 FR 63376 (Sep. 15, 2016); Comparability
Determination for the European Union: Margin Requirements for
Uncleared Swaps for Swap Dealers and Major Swap Participants, 82 FR
48394 (Oct. 18, 2017) (``Margin Comparability Determination for the
European Union''); and Comparability Determination for Australia:
Margin Requirements for Uncleared Swaps for Swap Dealers and Major
Swap Participants, 84 FR 12908 (Apr. 3, 2019). The Commission
subsequently amended its comparability determination for Japan. See
Amendment to Comparability Determination for Japan: Margin
Requirements for Uncleared Swaps for Swap Dealers and Major Swap
Participants, 84 FR 12074 (Apr. 1, 2019).
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    Estimated Number of Respondents: 14.
    Estimated Average Burden Hours per Respondent: 40.
    Estimated Total Annual Burden Hours: 560.
    Frequency of Collection: Once.
    There are no capital costs or operating and maintenance costs
associated with this collection.
    Burden Statement--Information Collection for Non-Netting
Jurisdictions: The Commission estimates that approximately 55 CSEs may
rely on section 23.160(d) of the Final Rule.\12\ Furthermore, the
Commission estimates that these CSEs would incur an average of 10
annual burden hours to maintain books and records properly documenting
that all of the requirements of this exception are satisfied (including
policies and procedures ensuring compliance). Accordingly, the
respondent burden for this collection is estimated to be as follows:
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    \12\ Currently, there are approximately 107 swap entities
provisionally registered with the Commission. The Commission
estimates that of the approximately 107 swap entities that are
provisionally registered, approximately 55 are CSEs for which there
is no Prudential Regulator, and are therefore subject to the
Commission's margin rules. Because all of these CSEs are eligible to
use the special provision for non-netting jurisdictions, the
Commission estimates that 55 CSEs may rely on section 23.160(d) of
the Final Rule.
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    Estimated Number of Respondents: 55.
    Estimated Average Burden Hours per Respondent: 10.
    Estimated Total Annual Burden Hours: 550.
    Frequency of Collection: Once; As needed.
    There are no capital costs or operating and maintenance costs
associated with this collection.
    Burden Statement--Information Collection for Non-Segregation
Jurisdictions: The Commission estimates that there are eight
jurisdictions for which the first two conditions specified above for
non-segregation jurisdictions are satisfied and where FCSs and foreign
branches of U.S. CSEs that are subject to the Commission's margin rules
may engage in swaps. The Commission estimates that approximately 12
FCSs or foreign branches of U.S. CSEs may rely on section 23.160(e) of
the Final Rule in some or all of these jurisdictions. The Commission
estimates that each FCS or foreign branch of a U.S. CSE relying on this
provision would incur an average of 20 annual burden hours to maintain
books and records properly documenting that all of the requirements of
this provision are satisfied (including policies and procedures for
ensuring compliance) with respect to each jurisdiction as to which they
rely on the special provision. Thus, based on the estimate of eight
non-segregation jurisdictions, the Commission estimates that each of
the approximately 12 FCSs or foreign branches of U.S. CSEs that may
rely on this provision will incur an estimated 160 average burden hours
per year (i.e., 20 average burden hours per jurisdiction multiplied by
8). Accordingly, the respondent burden for this collection is estimated
to be as follows:
    Estimated Number of Respondents: 12.
    Estimated Average Burden Hours per Respondent: 160.
    Estimated Total Annual Burden Hours: 1,920.
    Frequency of Collection: Once; As needed.
    There are no capital costs or operating and maintenance costs
associated with this collection.
(Authority: 44 U.S.C. 3501 et seq.)
    Dated: August 16, 2019.
Robert Sidman,
Deputy Secretary of the Commission.
[FR Doc. 2019-18027 Filed 8-20-19; 8:45 am]
 BILLING CODE 6351-01-P