Compliance Briefing — September 17, 2020
The CFTC approved sweeping amendments to Parts 43, 45, 46, and 49 of its swap data reporting rules, tightening Unique Transaction Identifier governance and setting a May 2022 compliance date for repositories and reporting counterparties.
Executive briefing: On 17 September 2020 the U.S. Commodity Futures Trading Commission (CFTC) approved a major rewrite of its swap data reporting rules (Parts 43, 45, 46) to align with global harmonisation efforts, improve data quality, and reduce reporting burdens. Swap dealers, major swap participants, derivatives clearing organisations, and swap execution facilities must overhaul reporting architectures ahead of the May 2022 compliance date (with certain obligations deferred to December 2022).
Scope and key rule changes
The amendments introduce streamlined data elements aligned with the CFTC Technical Specification, adopting the Unique Transaction Identifier (UTI), Unique Product Identifier (UPI), and Critical Data Elements (CDEs) developed by CPMI-IOSCO. They mandate verification of swap data repository (SDR) records, require reporting entities to correct errors within seven business days, and extend real-time public reporting timelines for block trades (from 15 minutes to as long as 48 hours depending on asset class and notional size). The rules harmonise reporting to the Secured Overnight Financing Rate (SOFR) for interest rate swaps and adopt day count conventions consistent with industry standards.
Part 45 introduces event-based reporting, eliminating continuation data fields in favour of lifecycle events that align with industry practices. Reporting of collateral, margin, and valuation data is now quarterly rather than daily. Part 43 expands the capped notional categories and adjusts block trade thresholds. Part 49 revisions require SDRs to validate data upon submission and coordinate error correction workflows with reporting entities. Relief for end users includes elimination of certain reporting obligations for swaps executed on swap execution facilities and cleared through derivatives clearing organisations.
Programme governance and impact assessment
Establish a regulatory change programme involving compliance, front-office, operations, technology, data management, and legal stakeholders. Conduct a gap analysis comparing current reporting data elements, message formats, and validation rules against the CFTC technical specification. Inventory systems generating swap data—trading platforms, risk systems, collateral management, and clearing interfaces—and map data lineage through middleware to SDR submissions.
Assess third-party dependencies, including SDRs (DTCC, ICE, CME), middleware providers (MarkitSERV, Traiana), and reporting vendors. Review contractual obligations and upgrade timelines to ensure alignment with rule effective dates. Develop a roadmap with milestones for design, build, test, and deployment phases.
Data model redesign and technology upgrades
Redesign data models to accommodate UTI, UPI, and CDE requirements. Implement UTI generation logic consistent with industry hierarchy (e.g., execution venue, clearing house, dealer). Coordinate with counterparties to agree on UTI creation and sharing. Integrate global product identifiers (UPIs) once the Association of National Numbering Agencies (ANNA) Derivatives Service Bureau publishes the catalogue.
Enhance data quality controls: implement validation rules at ingestion, transformation, and pre-submission stages to check for mandatory fields, code lists, and logical consistency. Deploy data lakes or warehouses capable of storing historical swap data for reconciliation, audit, and regulatory inquiries. Build dashboards that highlight submission status, rejection rates, and error remediation progress.
Lifecycle event management
Transition to event-based reporting requires reconfiguring trade capture to tag lifecycle events such as terminations, novations, compressions, and amendments. Define business event taxonomies aligned with the CFTC’s event types. Update middle-office workflows to capture event timestamps, responsible parties, and downstream impacts. For cleared swaps, coordinate with clearinghouses to ensure event data is timely and accurate.
Automate event enrichment where possible. For example, integrate compression platform outputs (TriOptima, Capitolis) to trigger lifecycle reports automatically. Maintain audit trails documenting who initiated events, approvals obtained, and systems updated.
Error remediation and verification processes
The rules require reporting entities to verify the accuracy of SDR records, acknowledging records within two business days and correcting errors within seven business days. Develop reconciliation processes comparing internal records with SDR-confirmed data. Use exception management tools to track discrepancies, assign ownership, and document resolution steps.
Establish escalation protocols for material errors that cannot be corrected within prescribed timelines, including notifications to the CFTC and counterparties. Maintain documentation evidencing reasonable efforts to identify and remediate issues. Train staff on new verification obligations and integrate them into daily operations.
Real-time public reporting adjustments
Update real-time reporting engines to accommodate revised timing thresholds and block trade categories. For block trade determinations, implement logic referencing the updated CFTC block sizes by asset class (interest rates, credit, equity, FX, commodities) and capped notional amounts. Ensure workflows flag block-eligible trades for manual review when necessary and apply appropriate delays before dissemination.
Review masking requirements for bespoke products to protect counterparty identities while satisfying transparency goals. Coordinate with SDRs to confirm dissemination formats, including use of the FAST message schema. Provide training for traders and execution desk staff on block trade reporting rules to avoid inadvertent violations.
Collateral, margin, and valuation reporting
Quarterly reporting of collateral and valuation data requires updates to risk and finance systems. Align data sources (e.g., margin call systems, valuation engines) with reporting windows. Implement controls to ensure valuations are calculated using consistent models and market data. Document methodologies and governance for valuation adjustments (CVA, FVA) and collateral haircuts.
Coordinate with treasury and collateral operations to schedule data extraction and reconciliation ahead of reporting deadlines. Maintain documentation on collateral eligibility, segregation, and rehypothecation practices to respond to regulator queries.
Testing and implementation timeline
Develop a detailed plan:
- 2020 Q4–2021 Q1: Complete gap analysis, confirm vendor roadmaps, and design target-state data models.
- 2021 Q2–Q3: Build and integrate system changes, develop test cases, and initiate unit and integration testing.
- 2021 Q4–2022 Q1: Conduct end-to-end testing with SDRs, perform parallel runs, and validate reconciliation and error handling processes.
- 2022 Q2: Go-live for core Part 43/45 obligations, with deferred requirements (e.g., collateral reporting) completed by December 2022.
Establish governance checkpoints with steering committees, escalate risks, and maintain documentation for internal audit and regulatory examinations.
Global alignment and cross-jurisdiction considerations
Coordinate with teams handling reporting in other jurisdictions (EU EMIR Refit, Australian ASIC reporting, Canadian amendments) to leverage synergies. Harmonise data models and reporting workflows to reduce duplication. Monitor CPMI-IOSCO guidance, IOSCO Level 2 assessments, and industry working groups (ISDA Reporting and Analytics, FIA) for implementation updates.
Assess cross-border data transfer implications, especially when using offshore vendors or cloud solutions. Ensure compliance with data privacy laws, cybersecurity requirements, and contractual obligations. Maintain business continuity plans addressing pandemic disruptions, remote work challenges, and vendor resilience.
Leadership focus
Executive sponsors should allocate budget for technology upgrades, dedicated programme management, and external advisory support. Track key performance indicators—error rates, timeliness, UTI sharing success—and integrate them into risk dashboards. Communicate progress to regulators and industry bodies to demonstrate proactive compliance. By delivering accurate, timely swap data under the revised CFTC regime, firms can reduce regulatory risk, support market transparency, and streamline global reporting operations.
Follow-up: Reporting counterparties had to comply with the revised Parts 43 and 45 standards by 5 December 2022, and CFTC staff letters in 2023–2024 focus on remediation of critical errors within the new two-day correction window.
Sources
- CFTC Approves Final Rule on Swap Data Reporting Requirements — Commodity Futures Trading Commission; CFTC press release announcing adoption of final rules revising Parts 43, 45, and 49 swap data reporting.
- Swap Data Recordkeeping and Reporting Requirements (Final Rule) — Federal Register; Federal Register publication detailing the revised CFTC swap data reporting rules and compliance dates.