81_FR_44509 81 FR 44379 - Security-Based Swap Data Repositories; DTCC Data Repository (U.S.) LLC; Notice of Filing of Application for Registration as a Security-Based Swap Data Repository

81 FR 44379 - Security-Based Swap Data Repositories; DTCC Data Repository (U.S.) LLC; Notice of Filing of Application for Registration as a Security-Based Swap Data Repository

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 130 (July 7, 2016)

Page Range44379-44388
FR Document2016-16112

Federal Register, Volume 81 Issue 130 (Thursday, July 7, 2016)
[Federal Register Volume 81, Number 130 (Thursday, July 7, 2016)]
[Notices]
[Pages 44379-44388]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-16112]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78216; File No. SBSDR-2016-02]


Security-Based Swap Data Repositories; DTCC Data Repository 
(U.S.) LLC; Notice of Filing of Application for Registration as a 
Security-Based Swap Data Repository

June 30, 2016.

I. Introduction

    On April 6, 2016 and as amended on April 25, 2016, DTCC Data 
Repository (U.S.) LLC (``DDR'') filed with the Securities and Exchange 
Commission (``Commission'') a Form SDR seeking registration as a 
security-based swap data repository (``SDR'') under Section 13(n) of 
the Securities Exchange Act of 1934 (``Exchange Act'') \1\ and the 
Commission's rules promulgated thereunder.\2\ DDR states that it 
proposes to operate as a registered SDR for security-based swap 
(``SBS'') transactions in the credit, equity, and interest rates \3\ 
derivatives asset classes. The Commission is publishing this notice to 
solicit comments from interested persons regarding DDR's Form SDR,\4\ 
and the Commission will consider any comments it receives in making its 
determination whether to grant DDR registration as an SDR.\5\
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    \1\ 15 U.S.C. 78m(n)(3).
    \2\ 17 CFR 240.13n-1 through 240.13n-12.
    \3\ DDR seeks to include in its application the ``rates'' asset 
class based on feedback from potential DDR participants who have 
identified certain types of transactions which will be reported 
through the interest rate infrastructure within the industry and 
that the industry participants have identified as falling under the 
definition of a SBS. The Commission notes that DDR's application is 
for registration as a SBS data repository, which the Exchange Act 
defines as a ``person that collects and maintains information or 
records with respect to transactions or positions in, or the terms 
and conditions of, security-based swaps entered into by third 
parties for the purpose of providing a centralized recordkeeping 
facility for security-based swaps.'' 15 U.S.C. 78c(a)(75).
    \4\ DDR filed its Form SDR, including the exhibits thereto, 
electronically with the Commission. The descriptions set forth in 
this notice regarding the structure and operations of DDR have been 
derived, excerpted, and/or summarized from information in DDR's Form 
SDR application, and principally from DDR's Rulebook (Exhibit HH.2), 
which outlines the applicant's policies and procedures designed to 
address its statutory and regulatory obligations as an SDR 
registered with the Commission. DDR's Form SDR application and non-
confidential exhibits thereto are available on [appropriate EDGAR 
reference to be inserted]. In addition, the public may access copies 
of these materials on the Commission's Web site at: [appropriate Web 
site address to be inserted].
    \5\ DDR's Form SDR application also constitutes an application 
for registration as a securities information processor. See Exchange 
Act Release No. 74246 (Feb. 11, 2015), 80 FR 14438, 14458 (Mar. 19, 
2015) (``SDR Adopting Release'').
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II. Background

A. SDR Registration, Duties and Core Principles, and Regulation SBSR

    Section 763(i) of the Dodd-Frank Act added Section 13(n) to the 
Exchange Act, which requires an SDR to register with the Commission and 
provides that, to be registered and maintain registration as an SDR, an 
SDR must comply with certain requirements and ``core principles'' 
described in Section 13(n) and any requirement that the Commission may 
impose by rule or regulation.\6\
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    \6\ 15 U.S.C. 78m(n).
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    The Commission adopted Exchange Act Rules 13n-1 through 13n-12 
(``SDR rules''), which require an SDR to register with the Commission 
and comply with certain ``duties and core principles.'' \7\ Among other 
requirements, the SDR rules require an SDR to collect and maintain 
accurate SBS data and make such data available to the Commission and 
other authorities so that relevant authorities will be better able to 
monitor the buildup and concentration of risk exposure in the SBS 
market.\8\
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    \7\ See SDR Adopting Release, 80 FR 14438.
    \8\ See SDR Adopting Release, 80 FR at 14450.
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    Concurrent with the Commission's adoption of the SDR rules, the 
Commission adopted Regulation SBSR,\9\ which, among other things, 
provides for the reporting of SBS information to registered SDRs, and 
the public dissemination of SBS transaction, volume, and pricing 
information by registered SDRs. In addition, Regulation SBSR requires 
each registered SDR to register with the Commission as a securities 
information processor.\10\
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    \9\ See Exchange Act Release No. 74244 (Feb. 11, 2015), 80 FR 
14563 (Mar. 19, 2015) (``Regulation SBSR Adopting Release'').
    \10\ See Regulation SBSR Adopting Release, 80 FR at 14567.
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B. Standard for Granting SDR Registration

    To be registered with the Commission as an SDR and maintain such

[[Page 44380]]

registration, an SDR is required (absent an exemption) to comply with 
the requirements and core principles described in Exchange Act Section 
13(n), as well as with any requirements that the Commission adopts by 
rule or regulation.\11\ Exchange Act Rule 13n-1(c)(3) provides that the 
Commission shall grant the registration of an SDR if it finds that the 
SDR is so organized, and has the capacity, to be able to (i) assure the 
prompt, accurate, and reliable performance of its functions as an SDR; 
(ii) comply with any applicable provisions of the securities laws and 
the rules and regulations thereunder; and (iii) carry out its functions 
in a manner consistent with the purposes of Section 13(n) of the 
Exchange Act and the rules and regulations thereunder.\12\ The 
Commission must deny registration of an SDR if it does not make such a 
finding.\13\
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    \11\ See Exchange Act Section 13(n)(3), 15 U.S.C. 78m(n)(3).
    \12\ See 17 CFR 240.13n-1(c)(3).
    \13\ See id.
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    In determining whether an applicant meets the criteria set forth in 
Rule 13n-1(c), the Commission will consider the information reflected 
by the applicant on its Form SDR, as well as any additional information 
obtained from the applicant. For example, Form SDR requires an 
applicant to provide, among other things, contact information, a list 
of the asset class(es) for which the applicant is collecting and 
maintaining data or for which it proposes to collect and maintain data, 
a description of the functions that it performs or proposes to perform, 
and general information regarding its business organization.\14\ This, 
and other information reflected on the Form SDR, will assist the 
Commission in understanding the basis for registration as well as the 
SDR applicant's overall business structure, financial condition, track 
record in providing access to its services and data, technological 
reliability, and policies and procedures to comply with its statutory 
and regulatory obligations.\15\ Furthermore, the information requested 
in Form SDR will enable the Commission to assess whether the SDR 
applicant would be able to comply with the federal securities laws and 
the rules and regulations thereunder, and ultimately whether to grant 
or deny an application for registration.\16\
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    \14\ See SDR Adopting Release, 80 FR at 14458.
    \15\ See id.
    \16\ See SDR Adopting Release, 80 FR at 14458-59.
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III. DDR Application for Registration

    DDR currently operates as a trade repository under the regulatory 
framework of other authorities. Specifically, DDR is a swap data 
repository regulated and provisionally registered by the Commodity 
Futures Trading Commission (``CFTC'').\17\ In that capacity, DDR has 
been accepting derivatives data for the commodity, foreign exchange, 
interest rate, and credit asset classes in the United States since 
December 2012.\18\ Additionally, in 2014, DDR was approved by the 
Ontario Securities Commission,\19\ the Autorit[eacute] des 
march[eacute]s financiers,\20\ and the Manitoba Securities Commission 
\21\ as a Canadian Trade Repository to serve the commodity, credit, 
equity, interest rate, and foreign exchange asset classes.\22\
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    \17\ See Order of Provisional Registration, In the Matter of the 
Request of DTCC Data Repository (U.S.), LLC for Provisional 
Registration as a Swap Data Repository Pursuant to Section 21 of the 
Commodity Exchange Act and Part 49 of the Commodity Futures Trading 
Commission's Regulations (Sept. 19, 2012), available at http://www.cftc.gov/stellent/groups/public/@otherif/documents/ifdocs/dtccbodsonletter091912.pdf; Order Adding Asset Class, In the Matter 
of the Request of DTCC Data Repository (U.S.) LLC to Amend Its Form 
SDR to Add the Other Commodity Asset Class Pursuant to Part 49 of 
the Commission's Regulations (Dec. 3, 2012), available at http://www.cftc.gov/stellent/groups/public/@otherif/documents/ifdocs/dtccsdrbodsonltr120312.pdf.
    \18\ See Press Release, DTCC, DTCC Swap Data Repository Real-
Time Reporting Now Live (Jan. 03, 2013), available at http://www.dtcc.com/news/2013/january/03/swap-data-repository-real-time.
    \19\ See Ontario Securities Commission, Order (Section 21.2.2 of 
the Securities Act), in the Matter of the Securities Act, R.S.O. 
1990, Chapter S.5, as amended, and in the Matter of DTCC Data 
Repository (U.S.) LLC (Sept. 19, 2014), available at http://www.osc.gov.on.ca/en/SecuritiesLaw_ord_20140923_dtcc-data-repository.htm.
    \20\ See Autorit[eacute] des march[eacute]s financiers, Decision 
2014-PDG-0110, Bulletin 2014-09-25, Vol. 11, n[deg]38 (Sept. 23, 
2014), available at https://www.lautorite.qc.ca/files/pdf/bulletin/2014/vol11no38/vol11no38_7.pdf.
    \21\ See Manitoba Securities Commission, Order No. 7013 (Oct. 
23, 2014), available at http://docs.mbsecurities.ca/msc/oe/en/105125/1/document.do.
    \22\ Other trade repository subsidiaries of the Depository Trust 
& Clearing Corporation (``DTCC'') operate in Europe, Japan, Hong 
Kong, Singapore, and Australia. See generally http://dtcc.com/derivatives-services/global-trade-repository.
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A. Corporate Structure and Governance Arrangements

    DDR is a New York limited liability company, and is a wholly owned 
subsidiary of DTCC Deriv/SERV LLC, which, in turn, is a wholly owned 
subsidiary of The Depository Trust & Clearing Corporation 
(``DTCC'').\23\ DDR is managed by a Board of Directors (``Board'') 
responsible for overseeing its operations.\24\ The Board (directly or 
by delegating certain responsibilities to its committees) fulfills its 
responsibilities under its charter and DDR's mission statement by: (i) 
Overseeing management's activities in managing, operating, and 
developing DDR as a firm and evaluating management's performance of its 
responsibilities; (ii) ratifying management's selection of the CEO and 
providing advice and counsel to the CEO; (iii) providing oversight of 
the performance of the CEO and of DDR to evaluate whether the business 
is being appropriately managed; (iv) setting expectations about DDR's 
tone and ethical culture and reviewing management efforts to instill an 
appropriate tone and culture; (v) reviewing and approving DDR's 
financial objectives and major corporate plans and actions; (vi) 
providing guidance to the CEO and to management in formulating 
corporate strategy and approving strategic plans; (vii) providing 
oversight of risk assessment and risk management monitoring processes; 
(viii) providing input and direction to governance structures and 
practices to position the Board to fulfill its duties effectively and 
efficiently consistent with DDR's principles of governance; (ix) 
providing oversight and guidance regarding the design of informational 
reporting to the Board and relevant regulators; (x) adopting principles 
governing new initiative approval processes and overseeing DDR's 
processes relating to new business selection and development of new 
businesses and new or expanded products and services, including 
guidelines for the analyses supporting any material operational or risk 
management changes that are proposed by management; (xi) providing 
oversight of DDR's internal and external audit processes, financial 
reporting, and disclosure controls and procedures, including approving 
major changes in auditing and accounting principles and practices; 
(xii) fostering DDR's ability to ensure compliance with applicable laws 
and regulations including derivatives, securities, and corporation laws 
and other applicable regulatory guidance and international standards; 
(xiii) ensuring that in DDR's decision-making process an Independent 
Perspective as defined in Section 49.2 of the CFTC's regulations, is 
considered; \25\ and (xiv)

[[Page 44381]]

performing such other functions as the Board believes appropriate or 
necessary, or as otherwise prescribed by rules or regulations.\26\
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    \23\ See Exhibit HH.2, Section 2.1. DTCC is the parent company 
of a variety of entities, including three clearing agencies 
registered under Section 17A of the Exchange Act and that have been 
designated as systemically important by the Financial Stability 
Oversight Council under Title VIII of the Dodd-Frank Act (i.e., the 
National Securities Clearing Corporation, the Fixed Income Clearing 
Corporation, and the Depository Trust Company).
    \24\ See id.
    \25\ The CFTC has defined the term ``Independent Perspective'' 
to mean ``a viewpoint that is impartial regarding competitive, 
commercial, or industry concerns and contemplates the effect of a 
decision on all constituencies involved.'' 17 CFR 49.2(a)(6).
    \26\ See Exhibit D.2 (DDR Mission Statement and Board Charter).
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    According to DDR, the number of directors on the Board is 
determined by DTCC Deriv/SERV LLC (``DTCC Deriv/SERV'') as the sole LLC 
member of DDR.\27\ DDR represents that DTCC Deriv/SERV will strive to 
include on the Board an equal number of representatives of U.S. and 
non-U.S. domiciled firms.\28\ DDR represents that the Board is composed 
of individuals from the following groups: Employees of DDR's users 
(either fees-paying users or end users) with derivatives industry 
experience, buy-side representatives, independents, and members of 
DTCC's senior management or DTCC's Board of Directors, with the 
understanding that at least two Board members will be DTCC senior 
management or DTCC Board members.\29\ DDR represents that DTCC Deriv/
SERV's Nominating Committee shall periodically review the Board's 
composition to assure that the DDR directors possess the skills 
required to direct and oversee management in the best interests of its 
shareholders and other stakeholders, with these skills including 
derivatives industry experience, risk management experience, business 
specialization, technical skills, industry stature, and seniority and 
experience at their own organizations.\30\
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    \27\ See Exhibits D (governance narrative), D.2, and HH.2, 
Section 2.2.
    \28\ See Exhibits D and D.2.
    \29\ See id.; see also Exhibit HH.2, Section 2.2. DDR states 
that the Board will include appropriate representation by 
individuals who are independent as specified by applicable 
regulations. See id.
    \30\ See Exhibit D.
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    Additionally, DDR represents that it welcomes suggestions from 
market participants of proposed or alternative candidates to serve on 
the DDR Board, which may be submitted through the notices procedures 
described in the Operating Procedures of DDR's Rulebook.\31\
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    \31\ See Exhibit HH.2, Section 2.2 and attached Operating 
Procedures.
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    DDR's Rulebook provides that its Chief Compliance Officer (``CCO'') 
is appointed by the Board and reports directly to the chief executive 
officer of DDR.\32\ The Board is responsible for the appointment and 
removal of the CCO and approval of CCO compensation, which is at the 
discretion of the Board and effected by majority vote.\33\ In addition, 
the Board shall meet with the CCO at least annually.\34\ According to 
DDR, the CCO also works directly with the Board in certain instances, 
for example, when resolving conflicts of interest.\35\ DDR represents 
that the CCO's responsibilities include, but are not limited to, the 
following items: (i) Oversee and review DDR's compliance with the 
applicable regulations; (ii) establish and administer written policies 
and procedures reasonably designed to prevent violation of the 
applicable regulations; (iii) take reasonable steps to ensure 
compliance with applicable regulations relating to agreements, 
contracts or transactions; (iv) establish procedures for the 
remediation of non-compliance issues identified by the CCO through a 
compliance office review, look-back, internal or external audit 
finding, self-reported error, or validated complaint; (v) notify the 
Board as soon as practicable upon becoming aware of a circumstance 
indicating that DDR, or an individual acting on its behalf, is in non-
compliance with the applicable laws of a jurisdiction in which it 
operates and either: (a) The non-compliance creates a risk to a DDR 
User; \36\ (b) the non-compliance creates a risk of harm to the capital 
markets in which it operates; (c) the non-compliance is part of a 
pattern of non-compliance; or (d) the non-compliance may have an impact 
on DDR's ability to carry on business as a trade repository in 
compliance with applicable law; (vi) establish and follow appropriate 
procedures for the handling, management response, remediation, 
retesting and closing of noncompliance issues; (vii) establish and 
administer a written code of ethics; and (viii) prepare and sign an 
annual compliance report in accordance with applicable regulations and 
associated recordkeeping.\37\
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    \32\ See Exhibit HH.2, Section 2.3.
    \33\ See id.
    \34\ See id.
    \35\ See id.
    \36\ DDR defines the term ``User'' to mean an entity that has 
executed a DDR User Agreement, which allows for participation in one 
or more DDR services or systems. See Exhibit HH.2, Section 12.
    \37\ See Exhibit HH.2, Section 2.3.
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    DDR directors must comply with DDR's Board Code of Ethics and 
Conflicts of Interest Policy (the ``Code''), which is intended to focus 
directors on their duties as fiduciaries and provide guidance to 
directors to help them recognize and deal with ethical issues, provide 
mechanisms to report unethical conduct, help foster a culture of 
honesty and accountability, and address actual and potential conflicts 
of interest.\38\ In addition, each director is required to complete a 
certificate attesting to compliance with DDR's Code upon becoming a 
director, and, thereafter, on an annual basis. According to DDR's Code, 
key responsibilities for directors include: (i) Acting honestly, in 
good faith and in the best interests of DDR and all of the users of 
DDR; (ii) using best efforts to avoid conflicts between personal and 
professional interests as they relate to DDR where possible; (iii) 
disclosing any conflicts and otherwise pursuing the ethical handling of 
conflicts (whether actual or apparent) when conflicts or the appearance 
of conflicts are unavoidable; (iv) complying with all applicable laws, 
regulations and DDR policies; (v) promptly reporting any violations of 
the Code to the Chairman of DDR's Board or to DDR's counsel and DDR's 
CCO; (vi) seeking guidance where necessary; and (vii) being accountable 
personally for adherence to the Code.\39\
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    \38\ See Exhibit D.4 (DDR Board Code of Ethics).
    \39\ See id.
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B. Description of DDR's SDR Service

    DDR has applied to register as an SDR with the Commission to accept 
data in respect of all SBS transactions in the credit, equity, and 
interest rates derivatives asset classes.\40\
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    \40\ See DDR Form SDR, Item 6; see also Exhibit HH.2, Section 
3.1.
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    DDR represents that, if registered with the Commission, it would, 
among other things: (i) Perform all of the required functions of an SDR 
under the Commission's Rules 13n-1 through 13n-11; (ii) accept, from or 
on behalf of Users, transaction and life-cycle data for SBS as 
specified in the Commission's Regulation SBSR, as and when required to 
be reported to an SDR thereunder; (iii) verify and maintain swap and 
SBS data as required by such regulations; (iv) publicly disseminate SBS 
data as and when required under the Commission's Regulation SBSR, 
either directly or through one or more third parties; (v) provide 
access to swap and SBS data to appropriate regulators; and (vi) 
generate reports with respect to transaction data maintained in DDR, in 
each case as specified in further detail in DDR's Operating Procedures 
and applicable publications.\41\
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    \41\ See Exhibit HH.2, SDR Appendix to the DDR Operating 
Procedures.
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C. Access

    DDR represents that it would provide access to its SDR service on a 
fair, open and equal basis.\42\ According to DDR, access to and usage 
of its SDR service would be available to all market participants that 
engage in SBS transactions, and DDR does not and would not bundle or 
tie its SDR services

[[Page 44382]]

with any other services.\43\ DDR represents that to participate in its 
SDR services, each User would be required to (i) enter into a User 
Agreement in one of the forms provided by DDR and (ii) agree to be 
bound by the terms of the User Agreement and DDR's Operating 
Procedures.\44\ According to DDR, an entity would be permitted to view 
the records relating to an individual transaction if it is: (i) A 
counterparty or an authorized agent of a counterparty to the 
transaction; (ii) a regulator and the transaction is reportable to that 
regulator; or (iii) a third-party agent submitter of the transaction, 
provided that agents who are submitters will not be able to view the 
current positions, unless authorized by a counterparty to the 
transaction, but will be able to see the submission report only for the 
purpose of viewing the success or failure of messages submitted by such 
agents.\45\ DDR represents that it shall retain exclusive control over 
the system through which its SDR services are provided.\46\
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    \42\ See Exhibits U, V, Y, and HH.2, Section 1.1.
    \43\ See Exhibit HH.2, Section 1.1.
    \44\ See Exhibit HH.2, Section 1.2.
    \45\ See Exhibit HH.2, Section 1.3.
    \46\ See id.
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    DDR represents that it may summarily terminate a User's account and 
access to SDR services when the Board determines that: (a) The User has 
materially breached its User Agreement, DDR's Operating Procedures, or 
the rules contained in its Rulebook, which threatens or may cause 
immediate harm to the normal operation of DDR's system, or any 
applicable law including those relating to the regulations administered 
and enforced by the U.S. Department of Treasury's Office of Foreign 
Assets Control or the Canadian Government Office of the Superintendent 
of Financial Institutions; or (b) the User's account or User's IT 
system is causing material harm to the normal operation of DDR's 
system.\47\ According to DDR, the following actions must take place 
before DDR staff initiates any actions which may result in a User's 
termination of access to the DDR system and, specifically, SDR 
services: (i) DDR senior management, as well as DDR's counsel and CCO, 
must be involved in any decision to involuntarily terminate a User; and 
(ii) the Chairman of the Board of DDR must be notified in advance of 
any involuntary termination.\48\ DDR represents that, upon a summary 
termination of a User's access pursuant to its rulebook, DDR shall, as 
soon as possible, notify the impacted User of the termination in 
writing or via email, with such notice stating, to the extent 
practicable, in general terms how pending transaction submissions and 
other pending matters will be affected and what steps are to be taken 
in connection therewith.\49\
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    \47\ See Exhibit HH.2, Section 10.3.1.
    \48\ See id.
    \49\ See id. Because persons applying to be SDRs are also 
applying to be SIPs with the Commission, the procedures for 
notifying the Commission of any prohibitions or limitations of 
access to services as provided in Section 11A(b)(5)(A) would apply. 
See SDR Adopting Release, 80 FR at 14482 (``Rule 909 of Regulation 
SBSR, which the Commission is concurrently adopting in a separate 
release, requires each registered SDR to register as a SIP, and, as 
such, Exchange Act Section 11A(b)(5) governs denials of access to 
services by an SDR. This section provides that `[i]f any registered 
securities information processor prohibits or limits any person in 
respect of access to services offered, directly or indirectly, by 
such securities information processor, the registered securities 
information processor shall promptly file notice thereof with the 
Commission.' Accordingly, an SDR must promptly notify the Commission 
if it prohibits or limits access to any of its services to any 
person.'').
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D. Use of Data

    DDR represents that its services would be available to all market 
participants on a fair, open and equal basis. DDR represents that a 
market participant must be on-boarded as a DDR User to be granted 
access to the DDR system, receive trade information, confirm or verify 
transactions, submit messages, or receive reports.\50\ For those market 
participants that on-board, DDR would provide a mechanism for Users to 
access the DDR system to confirm and verify transactions and provide 
Unique Identification Code (``UIC'') information as required under its 
procedures. Additionally, DDR represents that access to U.S. swap or 
SBS data maintained by DDR to market participants is generally 
prohibited except to: (i) Either counterparty to that particular swap 
or SBS; (ii) authorized third-party service providers or other parties 
specifically authorized by the User or counterparty pursuant to DDR's 
Rulebook; (iii) or to appropriate domestic or foreign regulators in 
accordance with applicable regulation and DDR's Rulebook.\51\
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    \50\ See Exhibit HH.2, Section1.1.
    \51\ See Exhibit HH.2, Section 6.3. With respect to regulator 
access, DDR also represents that pursuant to applicable law, the 
designated regulators (which is defined to include regulators which 
supervise DDR, including the Commission and CFTC) shall be provided 
with direct electronic access to DDR data reported to DDR in 
satisfaction of such regulator's regulatory mandate to satisfy their 
legal and regulatory obligations. See id., Sections 6.2 and 12.
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E. Asset Classes Accepted; Submission Requirements; Validation

    DDR has represented that it would accept data in respect of all SBS 
trades in the credit equity, and interest rate \52\ derivatives asset 
classes.\53\ DDR has represented that Users would be required to submit 
trade information in the data format required by DDR. DDR would accept 
data using the following open-source structured data formats: Financial 
Products Markup Language (``FpML'') and Comma-separated Value (``CSV'') 
file.\54\
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    \52\ See n.3 supra.
    \53\ See Form SDR and Exhibit HH.2, Section 3.1.
    \54\ See Exhibit GG.3.
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    Exhibits GG.2 (for credit derivatives), GG.4 (for equity 
derivatives), and GG.6 (for interest rates) to DDR's application 
enumerate the required fields and acceptable values for the submission 
of trade information into the DDR system. Upon submission of a 
transaction, DDR will perform validation checks to ensure that each 
submitted record is in the proper format and will also perform 
validation and consistency checks against certain data elements, 
including, for example, sequencing of time and date fields (e.g., the 
termination date must be greater than the trade date).\55\ These 
validation types include:
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    \55\ See Exhibit HH.2, Section 10.1.1.
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     Schema validations--check that a submission is consistent 
with the accepted format (i.e., CSV is valid, the fields are formatted 
correctly);
     Core validations--the basic checks that ensure the 
submission can be accepted into the SDR (i.e., Permission, USI/UTI 
lock, transaction and action type consistency validations);
     Business validation--applied at the point of in-bound 
submission processing to ensure integrity and logical consistency. 
These validations will ensure that the messages are well formed and 
provide a logical and complete description of the core trade economics 
and ensure that DDR does not degrade the quality of the information 
held within the repository by allowing incomplete or illogical trade 
descriptions to be accepted and stored; and
     Regulatory validations--regulatory-specific validations 
applied following the normal business validations. (For example, if the 
same field is required by one jurisdiction and is optional for another, 
the jurisdiction requiring the field would have a regulatory validation 
to check for the field.) \56\
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    \56\ See Exhibit GG.3.
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DDR further represents that it would accept or reject transactions 
based on its validation process.\57\ DDR's policies and procedures 
state that acceptance messages are called ACKs (acceptance) and 
rejection messages are called

[[Page 44383]]

NACKs (negative acceptance).\58\ Where a transaction is accepted, both 
the submitting party and its on-boarded counterparty would receive 
electronic ACK messages. Where a transaction was not accepted, the 
submitting party would receive an electronic NACK message along with an 
associated error code so that they can correct the transaction and 
retransmit to DDR. Where a transaction is accepted but fails one of the 
jurisdictional (i.e., regulatory) validations, the submitting party 
will receive an electronic notification along with the associated error 
code so it can correct the transaction and retransmit to DDR.\59\
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    \57\ See Exhibit GG.3.
    \58\ See id.
    \59\ See id.
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    DDR represents that DDR may reject a transaction record submitted 
due to the submission failing to meet DDR validations, including but 
not limited to the submission failing to be in a format that can be 
ingested by DDR, failing to meet jurisdictional (i.e., regulatory) 
requirements or failing to provide required data elements.\60\ DDR 
further represents that a rejected submission is deemed not to have 
been submitted at all with respect to reporting to the jurisdiction for 
which it was rejected, and that it is possible that one transmission is 
submitted to comply with reporting in more than one jurisdiction and 
may be acceptable for one jurisdiction, but rejected for the other.\61\
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    \60\ See id.
    \61\ See Exhibit HH.2, Section 1.2 and Exhibit GG.3.
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    In connection with the reporting of ``pre-enactment and 
transitional SBS,'' DDR represents that it will accept the following 
types of historical trades: (i) ``Historical Expired,'' which are pre-
enactment SBS executed before July 21, 2010 but expired or terminated 
before the compliance date for Regulation SBSR, (ii) ``Historical,'' 
which are transitional SBS executed after July 21, 2010 but expired or 
terminated before the compliance date for Regulation SBSR, and (iii) 
``Backload,'' which are pre-enactment SBS or transitional SBS in 
existence on or after the compliance date for Regulation SBSR.\62\ DDR 
states that it does not validate whether or not the historical expired 
trade satisfies the Commission's definition of an expired pre-enactment 
or transitional swap, and that the Historical and Historical Expired 
trades will be subject to a minimal set of validations in order for the 
submission to be accepted by DDR, which will focus on core fields 
necessary for the system to ingest the trade (including a valid Unique 
Transaction Identifier).\63\ DDR further states that Backload trades 
will have the standard validations that are applied on all SBS 
submissions and must meet the requirements in order for the submission 
to be ingested and reported to the Commission.\64\
---------------------------------------------------------------------------

    \62\ See Exhibit GG.3.
    \63\ See id.
    \64\ See id.
---------------------------------------------------------------------------

F. Verification of Transaction Data

    DDR represents that its SDR services verification processes are 
designed to reasonably establish that the transaction data that has 
been submitted to DDR is complete and accurate.\65\ Once a position is 
established either through a snapshot or DDR's own calculation of 
events from transaction records, the terms of the position are 
designated as either verified, disputed, pending verification, or 
deemed verified.\66\
---------------------------------------------------------------------------

    \65\ See Exhibit HH.2, Section 3.3.4.
    \66\ See id. A ``snapshot'' refers to a message that reflects 
the current state of the trade, which DDR refers to as the trade's 
position.
---------------------------------------------------------------------------

    According to DDR, a transaction record is verified if it (i) is 
submitted by a Trusted Source (which is defined as an entity, which has 
entered into a User agreement, been recognized as a Trusted Source by 
DDR and provides the definitive report of a given position),\67\ (ii) 
is a trade between affiliated parties, (iii) is submitted from an 
affirmation or confirmation platform, or (iv) was executed on an 
electronic trading facility.\68\ In addition, the non-reporting User is 
responsible for verifying the accuracy of the information that has been 
submitted by the reporting party User. DDR represents that a non-
reporting User can verify the accuracy of such information by sending a 
verification message indicating that it verifies or disputes each 
position where it is identified as the counterparty.\69\
---------------------------------------------------------------------------

    \67\ See Exhibit HH.2, Section 12.
    \68\ See Exhibit HH.2. Sections 3.3.4 and 3.3.2.1 and Exhibit 
GG.3.
    \69\ See id.
---------------------------------------------------------------------------

    DDR represents that it would attempt to contact counterparties to a 
trade reported to DDR who are not Users (a ``Non-User''), where such 
party's LEI is provided and there is email contact information 
available to DDR in the information or static data maintained by the 
DTCC trade repositories \70\ about their Users, to notify the non-User 
that a trade has been reported on which it might have been named a 
counterparty and it must on-board to DDR to verify the accuracy of the 
information submitted and provide any missing information such as UICs, 
if applicable.\71\ DDR represents that, if no LEI is provided or if the 
email information is not available (for example, under local privacy 
laws or contractual obligations between the counterparty and the trade 
repository with which it has contracted as a User), it would take no 
further action.\72\ In addition, DDR will not verify the accuracy of 
the email, nor follow up if an email bounces back.\73\ DDR represents 
that it will provide the Commission and CFTC with a monthly status of 
the outreach to Non-Users.\74\
---------------------------------------------------------------------------

    \70\ DTCC operates trade repositories in a number of other 
jurisdictions. See n.22 supra.
    \71\ See Exhibit HH.2. Sections 3.3.4 and 3.3.2.1 and Exhibit 
GG.3.
    \72\ See id.
    \73\ See id.
    \74\ See Exhibit HH.2, Section 3.3.4.1.
---------------------------------------------------------------------------

    The DDR system will provide trade detail reports that will enable 
Users to view all transaction records, which will allow Users to 
reconcile the transaction records in the SDR services to their own risk 
systems.\75\ DDR's policies and procedures provide that, in the event 
that both counterparties to a trade agree that data submitted to DDR 
contains erroneous information (e.g., through a mutual mistake of 
fact), such Users may each submit a cancel record, effectively 
cancelling the incorrect transaction record.\76\ If a trade record has 
been submitted by only one counterparty and it is determined by the 
submitting User that it is erroneous, the submitting User may submit a 
cancel record.\77\ A User may cancel only its own submitted record and 
cannot cancel a record where it is not the submitting party of the 
record.\78\ DDR shall maintain a record of all corrected errors 
pursuant to applicable regulations and such records shall be available 
upon request to the applicable designated regulator.\79\
---------------------------------------------------------------------------

    \75\ See Exhibit HH.2, Section 10.1.2.
    \76\ See Exhibit HH.2, Section 10.1.1.
    \77\ See id.
    \78\ See Exhibit HH.2, Section 10.1.1.
    \79\ See id.
---------------------------------------------------------------------------

G. Disputed Trade Data

    Under DDR's policies and procedures, Users are responsible for 
resolving any disputes between themselves uncovered during any 
reconciliation process and, as appropriate, for submitting correct 
information.\80\ If a User disputes a transaction record alleged to 
apply to it by the counterparty, or disputes any of the terms within 
the alleged transaction, the User shall register such dispute by 
submitting a ``dispute'' message.\81\ If such User fails to register 
such dispute within 48 hours of the relevant trade detail report being 
issued, the record will be marked as ``deemed verified'' in

[[Page 44384]]

the DDR system.\82\ All reports and trade records provided to 
regulators will include the status of these transaction records, 
including dispute and verification status.\83\ Where DDR has received 
conflicting or inconsistent records from more than one submitter in 
respect of a particular transaction (such as from a security-based swap 
execution facility and a reporting party User), DDR would maintain all 
such records (unless cancelled or modified in accordance with the terms 
of the Rulebook) and make such records available to designated 
regulators in accordance with the terms of the User Agreement and 
applicable law.\84\
---------------------------------------------------------------------------

    \80\ See Exhibit HH.2, Section 10.1.2.
    \81\ See id.
    \82\ See id.
    \83\ See id.
    \84\ See id.
---------------------------------------------------------------------------

H. Application and Dissemination of Condition Flags

    DDR represents that, with respect to flags that are applied to 
publicly disseminated reports to help prevent a distorted view of the 
market, DDR has established the following flags that indicate that 
additional information is needed to understand the publicly 
disseminated price: Inter-affiliate, Nonstandard flag, Off market flag, 
Pricing context, and Compressed trade.\85\ DDR also states that further 
information regarding the flags is available in its matrices under the 
narrative column.\86\
---------------------------------------------------------------------------

    \85\ See Exhibit GG.1.
    \86\ See id.; see also Exhibits GG.2, GG.4, and GG.6, which are 
the matrices that enumerate the required fields and acceptable 
values for the submission of trade information into the DDR system.
---------------------------------------------------------------------------

I. Calculation and Maintenance of Positions

    DDR's SDR service would allow DDR to calculate open positions for 
persons with open SBS for which DDR maintains records. DDR's policies 
and procedures relating to its calculation of positions are provided in 
Exhibit DD.

J. Assignment of Unique Identification Codes

    DDR's policies and procedures state that pursuant to Commission 
regulation (e.g., Regulation SBSR), all registered SDRs must have a 
systemic means of identifying and tracking all products and persons 
involved in a SBS transaction, and that Commission regulation (e.g., 
Regulation SBSR) has prescribed 10 identifiers where a UIC shall be 
used.\87\ Further, DDR represents that it requires all Users to obtain 
a valid LEI where it exists, from an internationally recognized 
standards-setting system (``IRSS'') that is recognized by the 
Commission, and that, where LEIs are populated, DDR performs a digit 
check on the LEI.\88\
---------------------------------------------------------------------------

    \87\ See Exhibit GG.3; see also Exhibit HH.2, Section 4.1.
    \88\ See Exhibit GG.3. DDR also notes that the Commission has 
recognized the global Legal Entity Identifier (``LEI'') as an 
internationally recognized standards-setting system (``IRSS'').
---------------------------------------------------------------------------

    DDR has proposed that its Users will be required to provide Legal 
Entity Identifiers for the following fields: Platform ID, ultimate 
parent ID, counterparty ID, broker ID, and execution agent ID.\89\ For 
other UICs (transaction ID, branch ID, trading desk ID, trader ID, and 
product ID) as discussed further below, DDR has further proposed that 
each User will be required to create the identifiers in prescribed 
formats, and that it shall be each User's responsibility to maintain 
such identifiers (including, but not limited to, any internal mapping 
of static data) and to ensure their continued accuracy.\90\
---------------------------------------------------------------------------

    \89\ See id. For counterparty IDs for entities that do not have 
an LEI (such as a natural person), DDR has proposed alternative 
methods for providing a counterparty ID.
    \90\ See id.
---------------------------------------------------------------------------

K. Transaction ID Methodology

    DDR represents that it accepts transaction IDs in the UTI 
field.\91\ To validate the uniqueness of each transaction ID, DDR would 
apply a methodology, which it refers to as ``Locks,'' that prevents the 
transaction ID from being used for another trade in the same or another 
jurisdiction.\92\ However, DDR also represents that it is the 
responsibility of the reporting party User to create and provide the 
transaction ID on each transaction.\93\
---------------------------------------------------------------------------

    \91\ See Exhibit GG.3.
    \92\ See id.
    \93\ See id.
---------------------------------------------------------------------------

K. Ultimate Parent and Affiliate Information

    DDR represents that it captures the UIC for ultimate parent ID in 
DDR's system at the time a User on-boards to DDR as this is static 
information that does not vary by trade. DDR requires that each User 
provide the LEI of the ultimate parent for each account that is 
registered with DDR, with the exception of (1) natural persons who are 
not required to provide an LEI for ultimate parent and (2) asset 
managers and the funds they manage (for asset managers, if the ultimate 
parent LEI of the fund is unavailable, DDR will accept the LEI for the 
fund).\94\
---------------------------------------------------------------------------

    \94\ See id.; see also Exhibit HH.2.
---------------------------------------------------------------------------

M. Branch, Trading Desk, and Trader ID

    DDR represents that each User is required to create, among other 
identifiers, the branch ID, trading desk ID, and trader ID. With 
respect to branch ID, DDR represents that it requires the User to 
provide the two digit ISO alpha country code and the two digit 
subdivision (city) code where the branch or other unincorporated office 
is located. DDR represents that if the User has more than one branch in 
the same subdivision (city), the branch ID will also include a single 
digit following the country and city code referencing the specific 
branch, such as 1 or 2, for example.\95\ DDR represents that it 
requires that Users populate the trading desk ID and trader ID fields 
using an alphanumeric code with ten characters or less.\96\
---------------------------------------------------------------------------

    \95\ See Exhibit GG.3.
    \96\ See id.
---------------------------------------------------------------------------

N. Product ID

    DDR represents that each User is required to create the product ID. 
DDR represents that the product ID for all asset classes will be the 
ISDA taxonomy.\97\
---------------------------------------------------------------------------

    \97\ See id.
---------------------------------------------------------------------------

O. Missing UIC Information

    Rule 906(a) of Regulation SBSR requires a registered SDR to 
identify any SBS reported to it for which the registered SDR does not 
have the counterparty ID and (if applicable) the broker ID, branch ID, 
execution agent ID, trading desk ID, and trader ID of each direct 
counterparty. Once a day, the registered SDR must send a report to each 
participant of the registered SDR (or, if applicable, an execution 
agent) identifying, for each SBS to which that participant is a 
counterparty, the SBS(s) for which the registered SDR lacks the 
counterparty ID and (if applicable) broker ID, branch ID, execution 
agent ID, trading desk ID, or trader ID.
    DDR's policies and procedures provide that to assist each User in 
identifying and supplying missing UIC information, the User's position 
report, which shall be made available each day to all Users, can be 
used to identify each SBS transaction for which DDR lacks any of the 
required UICs.\98\ DDR further represents that it will utilize a 
procedure similar to its process for contacting non-Users to confirm 
transactions to attempt to obtain missing UIC information.\99\
---------------------------------------------------------------------------

    \98\ See Exhibit HH.2, Section 4.2.3.3.
    \99\ See id.
---------------------------------------------------------------------------

P. Public Dissemination

    According to DDR, its public price dissemination (``PPD'') solution 
provides Users with a way to report prices publicly pursuant to the

[[Page 44385]]

Commission regulations for SBS (e.g., Regulation SBSR). DDR's policies 
and procedures state that reporting sides are provided with a specific 
message (the ``PPD Message''), with which to provide information 
required to be disseminated. The PPD Message is available for 
dissemination if the fields ``Reporting Obligation Party 1'' or 
``Reporting Obligation Party 2'' are populated with ``SEC'' and the 
message passes validations.\100\ According to DDR, the PPD platform 
will perform validations on every PPD Message submitted, and based on 
the result of that validation, it will issue a response to the relevant 
parties indicating a positive or negative validation result (i.e., the 
``ACK'' or ``NACK'' messages discussed in Section III.E).
---------------------------------------------------------------------------

    \100\ See Exhibit GG.3.
---------------------------------------------------------------------------

    DDR's policies and procedures state that DDR requires a separate 
message for public dissemination and for updating the position 
record.\101\ DDR's policies and procedures also state that DDR requires 
that PPD Messages be sent at the same time as position messages (i.e., 
Primary Economic Terms (``PET''), Confirmation, and/or Snapshot 
messages).\102\ Further, DDR's policies and procedures provide that DDR 
does not determine whether a PPD Message should be disseminated 
publicly, and that any such PPD Message received is disseminated 
publicly if it passes validations and is directed to the Commission, as 
discussed above.\103\ Further, DDR states that it requires that the 
reporting party User provide only PPD Messages that are required to be 
disseminated under the regulations.\104\
---------------------------------------------------------------------------

    \101\ See Exhibit GG.3.
    \102\ See id. DDR's User Guide (Exhibit GG.3) also provides 
descriptions of each of these types of messages. For example, a PET 
message is used to report the full details of the economic terms for 
trade and lifecycle events prior to confirmation.
    \103\ See id. and Exhibit HH.2, Section 5.1.2.
    \104\ See id.
---------------------------------------------------------------------------

    DDR represents that the PPD will receive messages with the 
following potential entries in the ``Action'' field for a UTI: New, 
Modify, and Cancel.\105\ A New message will be the first report for a 
trade event submission, and only one UTI with an action of New will be 
allowed.\106\ A Modify message will be a valid modification or 
correction to an existing trade event that has previously been reported 
by a submitting party, and the Modify action will be displayed to the 
public as a Cancel of the original submission and a Correction 
representing the Modify submission.\107\ A cancel message will instruct 
the PPD Platform to cancel the last submission on a particular UTI, 
and, if the previous submission has been disseminated, the PPD Platform 
will disseminate the cancel with the original dissemination ID 
link.\108\
---------------------------------------------------------------------------

    \105\ See Exhibit GG.3.
    \106\ See id.
    \107\ See id.
    \108\ See id. The dissemination ID is a DDR-generated identifier 
used to uniquely identify a message without exposing the UTI and 
will be used to manage cancellations and corrections.
---------------------------------------------------------------------------

Q. Safeguarding Data, Operational Reliability, and Emergency Authority

    DDR represents that the DDR system is supported by DTCC and relies 
on the disaster recovery program maintained by DTCC.\109\ DDR's 
policies and procedures provide the key principles below for business 
continuity and disaster recovery that DDR follows to enable DDR to 
provide timely resumption of critical services should there be any 
disruption to DDR business: (i) Achieve recovery of critical services 
within a four-hour window with faster recovery time in less extreme 
situations; (ii) disperse staff across geographically diverse operating 
facilities; (iii) operate multiple back-up data centers linked by a 
highly resilient network technology; (iv) maintain emergency command 
and out-of-region operating control; (v) utilize new technology which 
provides high-volume, high-speed, asynchronous data transfer over 
distances of 1,000 miles or more; (vi) maintain processes that mitigate 
marketplace, operational and cyber-attack risks; (vii) test continuity 
plan readiness and connectivity on a regular basis, ensuring that Users 
and third-party vendors/service providers can connect to DDR's primary 
and back-up sites; (viii) communicate on an emergency basis with the 
market, Users, and government agency decision-makers; and (ix) 
evaluate, test, and utilize best business continuity and resiliency 
practices.\110\
---------------------------------------------------------------------------

    \109\ See Exhibit HH.2, Section 8.1.
    \110\ See id.
---------------------------------------------------------------------------

    DDR represents that it retains the right to exercise emergency 
authority in the event of circumstances determined by DDR to require 
such response or upon request by the designated regulators as 
applicable, and that any exercise of DDR's emergency authority shall be 
adequate to address the nature and scope of any such emergency.\111\ 
DDR further represents that its CEO shall have the authority to 
exercise emergency authority, and that in his/her absence, any other 
officer of DDR shall have such authority.\112\ DDR has stated that 
circumstances requiring the invocation of emergency authority include, 
but are not limited to, occurrences or circumstances: (a) Determined by 
DDR to constitute an emergency; (b) which threaten the proper 
functioning of the DDR system and the SDR services; or (c) which 
materially and adversely affect the performance of the DDR system and 
the SDR services.\113\ DDR states that emergencies include, but are not 
limited to, natural, man-made and information technology 
emergencies.\114\
---------------------------------------------------------------------------

    \111\ See Exhibit HH.2, Section 7.3.
    \112\ See id.
    \113\ See id.
    \114\ See id.
---------------------------------------------------------------------------

    Pursuant to its policies and procedures, DDR shall notify the 
designated regulators, as soon as reasonably practicable, of an 
invocation of emergency authority or a material system outage is 
detected by DDR.\115\ Such notification shall be provided in accordance 
with applicable regulations and will include the reasons for taking 
such emergency action, how potential conflicts of interest were 
minimized and documentation of the decision-making process.\116\ 
Documentation underlying the emergency shall be made available to the 
designated regulators upon request.\117\ DDR also represents that it 
shall issue an ``Important Notice'' as to all Users as soon as 
reasonably practicable in the event such emergency authority is 
exercised.\118\
---------------------------------------------------------------------------

    \115\ See Exhibit HH.2, Section 7.3.
    \116\ See id.
    \117\ See id.
    \118\ See id. An ``Important Notice'' is a formal notice sent to 
Users describing significant changes to DDR Rules, DDR Systems or 
other processes. See id., Section 12.
---------------------------------------------------------------------------

    DDR represents that it shall avoid conflicts of interest in 
decision-making with respect to emergency authority taken.\119\ If a 
potential conflict of interest arises, the CCO shall be notified and 
consulted for the purpose of resolving the potential conflict.\120\
---------------------------------------------------------------------------

    \119\ See Exhibit HH.2, Section 7.3.
    \120\ See id.
---------------------------------------------------------------------------

    DDR represents that any emergency actions taken by DDR may be 
terminated by the CEO and in his/her absence, any other officer of DDR, 
and that any such termination of an emergency action will be followed 
by the issuance of an Important Notice as soon as reasonably 
practicable.\121\
---------------------------------------------------------------------------

    \121\ See id.
---------------------------------------------------------------------------

R. Data Confidentiality; Sensitive Information and Security

    DDR represents that DTCC has established a Technology Risk 
Management Team, whose role is to manage information security risk and 
ensure the availability, integrity, and confidentiality of the 
organization's information assets, but that DDR will be

[[Page 44386]]

responsible for monitoring the performance of DTCC with regard to 
implementation and maintenance of information security within its 
infrastructure.\122\ DDR further represents that various policies have 
been developed to provide the framework for both physical and 
information security and are routinely refreshed. The Technology Risk 
Management Team carries out a series of processes to endeavor to ensure 
DDR is protected in a cost-effective and comprehensive manner. This 
includes preventative controls such as firewalls, appropriate 
encryption technology, and authentication methods. Vulnerability 
scanning is used to identify high risks to be mitigated and managed and 
to measure conformance against the policies and standards.\123\
---------------------------------------------------------------------------

    \122\ See Exhibit HH.2, Section 9.1.
    \123\ See Exhibit HH.2, Section 9.
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning DDR's Form SDR, including whether DDR has 
satisfied the requirements for registration as an SDR. To the extent 
possible, commenters are requested to provide empirical data and other 
factual support for their views. In addition, the Commission seeks 
comment on the following issues:
    1. Please provide your views as to whether DDR's application for 
registration as an SDR demonstrates that DDR is so organized, and has 
the capacity, to be able to assure the prompt, accurate, and reliable 
performance of its functions as an SDR, comply with any applicable 
provisions of the securities laws and the rules and regulations 
thereunder, and carry out its functions in a manner consistent with the 
purposes of Section 13(n) of the Exchange Act and Commission's SDR 
rules.
    2. Exchange Act Rule 13n-5(b)(1)(iii) requires every SDR to 
establish, maintain, and enforce written policies and procedures 
reasonably designed to satisfy itself that the transaction data that 
has been submitted to the SDR is complete and accurate. Please provide 
your views as to whether DDR's policies and procedures concerning 
verification of trade data are sufficiently detailed and reasonably 
designed to satisfy DDR that the transaction data that has been 
submitted to DDR is complete and accurate, as required by Exchange Act 
Rule 13n-5(b)(1)(iii).
    3. Please provide your views as to whether DDR's policies and 
procedures to address confirmation of data accuracy and completeness 
for bespoke, bilateral SBS transactions (i.e., DDR will attempt to 
contact a non-User counterparty to verify the accuracy of a trade if 
DDR has been provided with the non-User counterparty's LEI and can 
access email contact information for the non-User counterparty in the 
static data maintained by the DTCC trade repositories about their 
Users) are appropriate and reasonably designed to meet its obligations 
under Exchange Act Rule 13n-5(b)(1)(iii).
    4. Please provide your views as to whether DDR's policies and 
procedures are sufficiently detailed and reasonably designed to ensure 
that the transaction data and positions that it maintains are complete 
and accurate, as required by Exchange Act Rule 13n-5(b)(3).
    5. Please provide your views as to whether DDR's policies and 
procedures are sufficiently detailed and reasonably designed to ensure 
that it has the ability to protect the privacy of SBS transaction 
information that it receives, as required by Exchange Act Rule 13n-9.
    6. Please provide your views as to whether DDR's policies and 
procedures are sufficiently detailed and reasonably designed to ensure 
that it has the ability to calculate positions, as required by Exchange 
Act Rule 13n-5(b)(2).
    7. Please provide your views as to whether DDR's policies and 
procedures are sufficiently detailed and reasonably designed to provide 
a mechanism for Users and their counterparties to effectively resolve 
disputes over the accuracy of SBS data that DDR would maintain, as 
required by Exchange Act Rule 13n-5(b)(6). Are DDR's policies and 
procedures, including with respect to the specified timeframe, relating 
to dispute resolution adequate? Why or why not?
    8. Please provide your views as to whether DDR's policies and 
procedures are sufficiently detailed and reasonably designed to ensure 
that its systems that support or are integrally related to the 
performance of its activities provides adequate levels of capacity, 
integrity, resiliency, availability, and security, as required by 
Exchange Act Rule 13n-6.
    9. Please provide your views as to whether DDR's policies and 
procedures are sufficiently detailed and reasonably designed for the 
CCO's handling, management response, remediation, retesting, and 
closing of noncompliance issues, as required by Exchange Act Rule 13n-
11(c)(7).
    10. Please provide your views as to whether DDR's policies or 
procedures could result in an unreasonable restraint of trade or impose 
any material anticompetitive burden on the trading, clearing, or 
reporting of transactions.
    11. Please provide your views as to whether DDR's proposed dues, 
fees, or other charges, discounts or rebates and the process for 
setting dues, fees, or other charges, discounts or rebates are fair and 
reasonable and not unreasonably discriminatory. Please address whether 
such proposed dues, fees, other charges, discounts, or rebates are 
applied consistently across all similarly situated users of DDR's 
services, including, but not limited to, Users, market infrastructures 
(including central counterparties), venues from which data can be 
submitted to DDR (including exchanges, SBS execution facilities, 
electronic trading venues, and matching and confirmation platforms), 
and third party service providers.
    12. Exchange Act Rule 13n-4(c)(2)(i)-(iii) provides that each SDR 
(i) shall establish governance arrangements that are well defined and 
include a clear organizational structure with effective internal 
controls; (ii) must establish governance arrangements that provide for 
fair representation of market participants; and (iii) must provide 
representatives of market participants, including end-users, with the 
opportunity to participate in the process for nominating directors and 
with the right to petition for alternative candidates. Please provide 
your views as to whether DDR's governance arrangements are appropriate 
in light of the requirements of Rule 13n-4(c)(2)(i)-(iii).
    13. Exchange Act Rule 13n-4(c)(3)(i)-(ii) provides that each SDR 
must establish, maintain, and enforce written policies and procedures 
reasonably designed to identify and mitigate potential and existing 
conflicts of interest in the SDR's decision-making process on an 
ongoing basis, and, with respect to the decision-making process for 
resolving any conflicts of interest, each SDR shall require the recusal 
of any person involved in such conflict from such decision-making. 
Please provide your views as to whether DDR's policies and procedures 
are appropriate in light of the requirements of Exchange Act Rule 
Exchange Act Rule 13n-4(c)(3)(i)-(ii).
    14. Rule 903(a) of Regulation SBSR provides, in relevant part, that 
if no system has been recognized by the Commission, or a recognized 
system has not assigned a UIC to a particular person, unit of a person, 
or product, the registered SDR shall assign a UIC to that person, unit 
of person, or product using its own methodology. Is the methodology 
that DDR proposes to use with respect to UICs as described in its 
application materials appropriate in light of the requirements under 
Rule

[[Page 44387]]

903(a) of Regulation SBSR? Why or why not?
    15. Rule 907(c) of Regulation SBSR requires a registered SDR to 
make its Regulation SBSR policies and procedures publicly available on 
its Web site. The Commission has stated that this public availability 
requirement will allow all interested parties to understand how the 
registered SDR is utilizing the flexibility it has in operating the 
transaction reporting and dissemination system, and will provide an 
opportunity for market participants to make suggestions to the 
registered SDR for altering and improving those policies and 
procedures, in light of the new products or circumstances, consistent 
with the principles set out in Regulation SBSR.\124\ DDR has proposed 
to satisfy its obligation under Rule 907(c) of Regulation SBSR by 
making the policies and procedures contained in Exhibit GG (including 
GG.1 through GG.6) and Exhibit HH.2, and the other application exhibits 
referenced therein available on its public Web site. Is the information 
that is included in or referenced in GG (including GG.1 through GG.6) 
and Exhibit HH.2 appropriate in light of the requirements of Rule 
907(c)?
---------------------------------------------------------------------------

    \124\ See Regulation SBSR Adopting Release, 80 FR at 14648.
---------------------------------------------------------------------------

    16. Regulation SBSR imposes duties on various market participants 
to report SBS transaction information to a registered SDR. Please 
provide your views as to whether the DDR application and the associated 
policies and procedures (including technical specifications for 
submission of data) provide sufficient information to potential 
participants of DDR about how they would discharge these regulatory 
duties when reporting to DDR. In particular, please provide your views 
as to whether DDR's technical specifications for submission of data are 
sufficiently detailed, especially with regard to historical SBSs 
(including pre-enactment and transitional SBS) and bespoke SBS. Please 
describe in detail what additional information you believe is necessary 
to allow you to satisfy any reporting obligation you may incur under 
Regulation SBSR.
    17. Rule 906(a) of Regulation SBSR provides, in relevant part, that 
a participant of a registered SDR must provide the missing information 
with respect to its side of each SBS referenced in the report to the 
registered SDR within 24 hours. DDR represents that in order to be 
granted access to the DDR system, receive trade information, confirm or 
verify transactions, submit messages, or receive reports, a market 
participant must be on-boarded as a DDR User. Please provide your views 
as to whether this form of access afforded to the non-reporting-side is 
fair, open, and not unreasonably discriminatory.
    18. Please provide your views as to whether DDR's policies and 
procedures relating to Rule 906(a) are sufficiently detailed, 
appropriate and reasonably designed to ensure data accuracy and 
completeness, including with respect to the requirement that once a 
day, a registered SDR shall send a report to each participant 
identifying, for each SBS to which that participant is a counterparty, 
the SBS for which the registered SDR lacks counterparty ID and (if 
applicable) broker ID, branch ID, execution agent ID, desk ID, and 
trader ID.
    19. Please provide your views as to whether DDR's policies and 
procedures relating to Rule 905(b) are sufficiently detailed, 
appropriate and reasonably designed to ensure data accuracy and 
completeness.
    20. Please provide your views as to whether DDR has provided 
sufficient information to explain the SBS transaction information that 
it would publicly disseminate to discharge its duties under Rule 902 of 
Regulation SBSR. Please describe any additional information that you 
feel is necessary. Please offer any suggestions generally for how the 
publicly disseminated information could be made more useful.
    21. Please provide your views as to whether DDR has provided 
sufficient information to explain how Users would be required to report 
life cycle events under Rule 901(e). Please describe any additional 
information that you feel is necessary. In particular, please indicate 
whether you believe DDR's specifications are reasonably designed to 
identify the specific data element(s) that change and thus that trigger 
the report of the life cycle event.
    22. Please provide your views as to whether DDR has provided 
sufficient information about how an agent could report SBS transaction 
information to DDR on behalf of a principal (i.e., a person who has a 
duty under Regulation SBSR to report). Please describe any additional 
information that is necessary. In particular, please provide your views 
as to whether DDR should differentiate between agents who are Users of 
DDR because they themselves at times are principals (i.e., they are 
counterparties to one or more SBSs that are reported to DDR on a 
mandatory basis) and agents who are never principals (e.g., a vendor).
    23. Please provide your views as to whether DDR's policies and 
procedures for the use of condition flags for transactions having 
special characteristics under Rule 907(a)(4) of Regulation SBSR are 
consistent with the goal of preventing market participants without 
knowledge of these characteristics receiving a distorted view of the 
market. Are there additional condition flags that you believe DDR 
should utilize? If so, please describe them and why you believe they 
are appropriate.
    24. Exchange Act Rule 13n-10 requires that, before accepting any 
SBS data from a market participant or upon a market participant's 
request, an SDR shall furnish to the market participant a disclosure 
document that contains certain written information, which must 
reasonably enable the market participant to identify and evaluate 
accurately the risks and costs associated with using the SDR's 
services. This written information includes the SDR's criteria for 
providing others with access to its services and data it maintains, its 
criteria for those seeking to connect to or link with it, its 
description of its policies and procedures regarding its noncommercial 
and/or commercial use of the SBS transaction information that it 
receives from a participant, any registered entity, or any other 
person, its description of all the SDR's services, including any 
ancillary services, and its description of its governance arrangements. 
Based on the materials provided in DDR's Form SDR application, please 
provide your views as to whether the disclosures provided by the 
application are sufficiently detailed to meet the objectives of 
Exchange Act Rule 13n-10.
    25. In addition to serving as an SDR for the credit and equity 
derivatives asset classes, DDR has applied to serve as an SDR for what 
it describes as SBS transactions in the interest rates derivatives 
asset class. Please provide your views about DDR's description of this 
asset class. Please also provide your views as to whether DDR has 
provided sufficient information about how a User reports SBS 
transaction information in this asset class. Is this information 
provided sufficient? Why or why not? Please describe any additional 
information that you believe should be provided.
    26. Exchange Act Rule 13n-4(b)(5) requires that an SDR shall 
provide direct electronic access to the Commission (or any designee of 
the Commission, including another registered entity). Based on the 
materials provided in DDR's Form SDR application, please provide your 
views as to whether DDR's policies and procedures are sufficient to 
meet the

[[Page 44388]]

objectives of Exchange Act Rule 13n-4(b)(5).
    27. Rule 901(i) of Regulation SBSR provides that a person must 
report information about a pre-enactment SBS or transitional SBS ``to 
the extent that information about such transaction is available.'' Is 
it clear that DDR's policies and procedures, including regarding 
validations, will allow parties to submit transaction records for pre-
enactment SBS and transitional SBS with data elements missing, pursuant 
to Rule 901(i)?
    28. Please provide your views as to whether DDR's policies and 
procedures relating to how it would conduct validations of transaction 
records for historic and newly executed SBS are sufficiently detailed 
to meet the objectives of Exchange Act Rule 13n-5(b)(1)(iii), and what 
further clarifications, if any, you believe would be appropriate.
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/proposed.shtml); or
     Send an email to [email protected]. Please include 
File Number SBSDR-2016-02 on the subject line.

Paper Comments

     Send paper comments to Brent J. Fields, Secretary, 
Securities and Exchange Commission, 100 F Street NE., Washington, DC 
20549-1090. All submissions should refer to File Number SBSDR-2016-02.
    To help the Commission process and review your comments more 
efficiently, please use only one method of submission. The Commission 
will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/other.shtml).
    Copies of the Form SDR, all subsequent amendments, all written 
statements with respect to the Form SDR that are filed with the 
Commission, and all written communications relating to the Form SDR 
between the Commission and any person, other than those that may be 
withheld from the public in accordance with the provisions of 5 U.S.C. 
552, will be available for Web site viewing and printing in the 
Commission's Public Reference Section, 100 F Street NE., Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m.
    All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SBSDR-2016-02 and 
should be submitted on or before August 8, 2016.

Brent J. Fields,
Secretary.
[FR Doc. 2016-16112 Filed 7-6-16; 8:45 am]
 BILLING CODE 8011-01-P



                                                                                   Federal Register / Vol. 81, No. 130 / Thursday, July 7, 2016 / Notices                                                      44379

                                                   At any time within 60 days of the                        information from submissions. You                        consider any comments it receives in
                                                filing of such proposed rule change, the                    should submit only information that                      making its determination whether to
                                                Commission summarily may                                    you wish to make available publicly. All                 grant DDR registration as an SDR.5
                                                temporarily suspend such rule change if                     submissions should refer to File
                                                                                                                                                                     II. Background
                                                it appears to the Commission that such                      Number SR–ISE Mercury–2016–12 and
                                                action is necessary or appropriate in the                   should be submitted by July 28, 2016.                    A. SDR Registration, Duties and Core
                                                public interest, for the protection of                        For the Commission, by the Division of                 Principles, and Regulation SBSR
                                                investors, or otherwise in furtherance of                   Trading and Markets, pursuant to delegated                  Section 763(i) of the Dodd-Frank Act
                                                the purposes of the Act. If the                             authority.13                                             added Section 13(n) to the Exchange
                                                Commission takes such action, the                           Robert W. Errett,                                        Act, which requires an SDR to register
                                                Commission shall institute proceedings                      Deputy Secretary.                                        with the Commission and provides that,
                                                under Section 19(b)(2)(B) 12 of the Act to                  [FR Doc. 2016–16029 Filed 7–6–16; 8:45 am]               to be registered and maintain
                                                determine whether the proposed rule                         BILLING CODE 8011–01–P                                   registration as an SDR, an SDR must
                                                change should be approved or                                                                                         comply with certain requirements and
                                                disapproved.                                                                                                         ‘‘core principles’’ described in Section
                                                IV. Solicitation of Comments                                SECURITIES AND EXCHANGE                                  13(n) and any requirement that the
                                                                                                            COMMISSION                                               Commission may impose by rule or
                                                  Interested persons are invited to
                                                                                                                                                                     regulation.6
                                                submit written data, views, and                             [Release No. 34–78216; File No. SBSDR–
                                                                                                                                                                        The Commission adopted Exchange
                                                arguments concerning the foregoing,                         2016–02]
                                                                                                                                                                     Act Rules 13n–1 through 13n–12 (‘‘SDR
                                                including whether the proposed rule                                                                                  rules’’), which require an SDR to register
                                                change is consistent with the Act.                          Security-Based Swap Data
                                                                                                            Repositories; DTCC Data Repository                       with the Commission and comply with
                                                Comments may be submitted by any of                                                                                  certain ‘‘duties and core principles.’’ 7
                                                the following methods:                                      (U.S.) LLC; Notice of Filing of
                                                                                                            Application for Registration as a                        Among other requirements, the SDR
                                                Electronic Comments                                         Security-Based Swap Data Repository                      rules require an SDR to collect and
                                                  • Use the Commission’s Internet                                                                                    maintain accurate SBS data and make
                                                                                                            June 30, 2016.                                           such data available to the Commission
                                                comment form http://www.sec.gov/
                                                rules/sro.shtml); or                                        I. Introduction                                          and other authorities so that relevant
                                                  • Send an Email to rule-comments@                                                                                  authorities will be better able to monitor
                                                                                                               On April 6, 2016 and as amended on                    the buildup and concentration of risk
                                                sec.gov. Please include File No. SR–ISE                     April 25, 2016, DTCC Data Repository
                                                Mercury–2016–12 on the subject line.                                                                                 exposure in the SBS market.8
                                                                                                            (U.S.) LLC (‘‘DDR’’) filed with the                         Concurrent with the Commission’s
                                                Paper Comments                                              Securities and Exchange Commission                       adoption of the SDR rules, the
                                                                                                            (‘‘Commission’’) a Form SDR seeking                      Commission adopted Regulation SBSR,9
                                                   • Send paper comments in triplicate                      registration as a security-based swap
                                                to Secretary, Securities and Exchange                                                                                which, among other things, provides for
                                                                                                            data repository (‘‘SDR’’) under Section                  the reporting of SBS information to
                                                Commission, 100 F Street NE.,                               13(n) of the Securities Exchange Act of
                                                Washington, DC 20549–1090.                                                                                           registered SDRs, and the public
                                                                                                            1934 (‘‘Exchange Act’’) 1 and the                        dissemination of SBS transaction,
                                                All submissions should refer to File                        Commission’s rules promulgated
                                                Number SR–ISE Mercury–2016–12. This                                                                                  volume, and pricing information by
                                                                                                            thereunder.2 DDR states that it proposes                 registered SDRs. In addition, Regulation
                                                file number should be included on the                       to operate as a registered SDR for                       SBSR requires each registered SDR to
                                                subject line if email is used. To help the                  security-based swap (‘‘SBS’’)                            register with the Commission as a
                                                Commission process and review your                          transactions in the credit, equity, and                  securities information processor.10
                                                comments more efficiently, please use                       interest rates 3 derivatives asset classes.
                                                only one method. The Commission will                        The Commission is publishing this                        B. Standard for Granting SDR
                                                post all comments on the Commission’s                       notice to solicit comments from                          Registration
                                                Internet Web site (http://www.sec.gov/                      interested persons regarding DDR’s                         To be registered with the Commission
                                                rules/sro.shtml). Copies of the                             Form SDR,4 and the Commission will                       as an SDR and maintain such
                                                submission, all subsequent
                                                amendments, all written statements                               13 17
                                                                                                                     CFR 200.30–3(a)(12).                            DDR’s Form SDR application, and principally from
                                                with respect to the proposed rule                                1 15
                                                                                                                    U.S.C. 78m(n)(3).                                DDR’s Rulebook (Exhibit HH.2), which outlines the
                                                change that are filed with the                                 2 17 CFR 240.13n–1 through 240.13n–12.                applicant’s policies and procedures designed to
                                                                                                               3 DDR seeks to include in its application the         address its statutory and regulatory obligations as
                                                Commission, and all written                                                                                          an SDR registered with the Commission. DDR’s
                                                                                                            ‘‘rates’’ asset class based on feedback from potential
                                                communications relating to the                              DDR participants who have identified certain types       Form SDR application and non-confidential
                                                proposed rule change between the                            of transactions which will be reported through the       exhibits thereto are available on [appropriate
                                                Commission and any person, other than                       interest rate infrastructure within the industry and     EDGAR reference to be inserted]. In addition, the
                                                                                                                                                                     public may access copies of these materials on the
                                                those that may be withheld from the                         that the industry participants have identified as
                                                                                                                                                                     Commission’s Web site at: [appropriate Web site
                                                                                                            falling under the definition of a SBS. The
                                                public in accordance with the                               Commission notes that DDR’s application is for
                                                                                                                                                                     address to be inserted].
                                                provisions of 5 U.S.C. 552, will be                         registration as a SBS data repository, which the
                                                                                                                                                                        5 DDR’s Form SDR application also constitutes an

                                                available for inspection and copying in                     Exchange Act defines as a ‘‘person that collects and     application for registration as a securities
                                                                                                            maintains information or records with respect to         information processor. See Exchange Act Release
                                                the Commission’s Public Reference                                                                                    No. 74246 (Feb. 11, 2015), 80 FR 14438, 14458
                                                                                                            transactions or positions in, or the terms and
                                                Room. Copies of such filing also will be
srobinson on DSK5SPTVN1PROD with NOTICES




                                                                                                            conditions of, security-based swaps entered into by      (Mar. 19, 2015) (‘‘SDR Adopting Release’’).
                                                available for inspection and copying at                     third parties for the purpose of providing a
                                                                                                                                                                        6 15 U.S.C. 78m(n).

                                                the principal office of ISE Mercury. All                    centralized recordkeeping facility for security-based       7 See SDR Adopting Release, 80 FR 14438.
                                                                                                                                                                        8 See SDR Adopting Release, 80 FR at 14450.
                                                comments received will be posted                            swaps.’’ 15 U.S.C. 78c(a)(75).
                                                                                                               4 DDR filed its Form SDR, including the exhibits         9 See Exchange Act Release No. 74244 (Feb. 11,
                                                without change; the Commission does
                                                                                                            thereto, electronically with the Commission. The         2015), 80 FR 14563 (Mar. 19, 2015) (‘‘Regulation
                                                not edit personal identifying                               descriptions set forth in this notice regarding the      SBSR Adopting Release’’).
                                                                                                            structure and operations of DDR have been derived,          10 See Regulation SBSR Adopting Release, 80 FR
                                                  12 15   U.S.C. 78s(b)(2)(B).                              excerpted, and/or summarized from information in         at 14567.



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                                                44380                           Federal Register / Vol. 81, No. 130 / Thursday, July 7, 2016 / Notices

                                                registration, an SDR is required (absent                 Specifically, DDR is a swap data                        (‘‘Board’’) responsible for overseeing its
                                                an exemption) to comply with the                         repository regulated and provisionally                  operations.24 The Board (directly or by
                                                requirements and core principles                         registered by the Commodity Futures                     delegating certain responsibilities to its
                                                described in Exchange Act Section                        Trading Commission (‘‘CFTC’’).17 In                     committees) fulfills its responsibilities
                                                13(n), as well as with any requirements                  that capacity, DDR has been accepting                   under its charter and DDR’s mission
                                                that the Commission adopts by rule or                    derivatives data for the commodity,                     statement by: (i) Overseeing
                                                regulation.11 Exchange Act Rule 13n–                     foreign exchange, interest rate, and                    management’s activities in managing,
                                                1(c)(3) provides that the Commission                     credit asset classes in the United States               operating, and developing DDR as a firm
                                                shall grant the registration of an SDR if                since December 2012.18 Additionally, in                 and evaluating management’s
                                                it finds that the SDR is so organized,                   2014, DDR was approved by the Ontario                   performance of its responsibilities; (ii)
                                                and has the capacity, to be able to (i)                  Securities Commission,19 the Autorité                  ratifying management’s selection of the
                                                assure the prompt, accurate, and reliable                des marchés financiers,20 and the                      CEO and providing advice and counsel
                                                performance of its functions as an SDR;                  Manitoba Securities Commission 21 as a                  to the CEO; (iii) providing oversight of
                                                (ii) comply with any applicable                          Canadian Trade Repository to serve the                  the performance of the CEO and of DDR
                                                provisions of the securities laws and the                commodity, credit, equity, interest rate,               to evaluate whether the business is
                                                rules and regulations thereunder; and                    and foreign exchange asset classes.22                   being appropriately managed; (iv)
                                                (iii) carry out its functions in a manner                                                                        setting expectations about DDR’s tone
                                                                                                         A. Corporate Structure and Governance
                                                consistent with the purposes of Section                                                                          and ethical culture and reviewing
                                                                                                         Arrangements
                                                13(n) of the Exchange Act and the rules                                                                          management efforts to instill an
                                                and regulations thereunder.12 The                           DDR is a New York limited liability                  appropriate tone and culture; (v)
                                                Commission must deny registration of                     company, and is a wholly owned                          reviewing and approving DDR’s
                                                an SDR if it does not make such a                        subsidiary of DTCC Deriv/SERV LLC,                      financial objectives and major corporate
                                                finding.13                                               which, in turn, is a wholly owned                       plans and actions; (vi) providing
                                                   In determining whether an applicant                   subsidiary of The Depository Trust &                    guidance to the CEO and to management
                                                meets the criteria set forth in Rule 13n–                Clearing Corporation (‘‘DTCC’’).23 DDR                  in formulating corporate strategy and
                                                1(c), the Commission will consider the                   is managed by a Board of Directors                      approving strategic plans; (vii)
                                                information reflected by the applicant                                                                           providing oversight of risk assessment
                                                on its Form SDR, as well as any                            17 See Order of Provisional Registration, In the
                                                                                                                                                                 and risk management monitoring
                                                additional information obtained from                     Matter of the Request of DTCC Data Repository
                                                                                                         (U.S.), LLC for Provisional Registration as a Swap      processes; (viii) providing input and
                                                the applicant. For example, Form SDR                     Data Repository Pursuant to Section 21 of the           direction to governance structures and
                                                requires an applicant to provide, among                  Commodity Exchange Act and Part 49 of the               practices to position the Board to fulfill
                                                other things, contact information, a list                Commodity Futures Trading Commission’s
                                                                                                                                                                 its duties effectively and efficiently
                                                of the asset class(es) for which the                     Regulations (Sept. 19, 2012), available at http://
                                                                                                         www.cftc.gov/stellent/groups/public/@otherif/           consistent with DDR’s principles of
                                                applicant is collecting and maintaining                  documents/ifdocs/dtccbodsonletter091912.pdf;            governance; (ix) providing oversight and
                                                data or for which it proposes to collect                 Order Adding Asset Class, In the Matter of the          guidance regarding the design of
                                                and maintain data, a description of the                  Request of DTCC Data Repository (U.S.) LLC to
                                                                                                                                                                 informational reporting to the Board and
                                                functions that it performs or proposes to                Amend Its Form SDR to Add the Other Commodity
                                                                                                         Asset Class Pursuant to Part 49 of the Commission’s     relevant regulators; (x) adopting
                                                perform, and general information                         Regulations (Dec. 3, 2012), available at http://        principles governing new initiative
                                                regarding its business organization.14                   www.cftc.gov/stellent/groups/public/@otherif/           approval processes and overseeing
                                                This, and other information reflected on                 documents/ifdocs/dtccsdrbodsonltr120312.pdf.
                                                                                                                                                                 DDR’s processes relating to new
                                                the Form SDR, will assist the                              18 See Press Release, DTCC, DTCC Swap Data

                                                                                                         Repository Real-Time Reporting Now Live (Jan. 03,       business selection and development of
                                                Commission in understanding the basis
                                                                                                         2013), available at http://www.dtcc.com/news/           new businesses and new or expanded
                                                for registration as well as the SDR                      2013/january/03/swap-data-repository-real-time.         products and services, including
                                                applicant’s overall business structure,                    19 See Ontario Securities Commission, Order
                                                                                                                                                                 guidelines for the analyses supporting
                                                financial condition, track record in                     (Section 21.2.2 of the Securities Act), in the Matter
                                                                                                                                                                 any material operational or risk
                                                providing access to its services and data,               of the Securities Act, R.S.O. 1990, Chapter S.5, as
                                                                                                         amended, and in the Matter of DTCC Data                 management changes that are proposed
                                                technological reliability, and policies
                                                                                                         Repository (U.S.) LLC (Sept. 19, 2014), available at    by management; (xi) providing oversight
                                                and procedures to comply with its                        http://www.osc.gov.on.ca/en/SecuritiesLaw_ord_          of DDR’s internal and external audit
                                                statutory and regulatory obligations.15                  20140923_dtcc-data-repository.htm.
                                                Furthermore, the information requested                     20 See Autorité des marchés financiers, Decision
                                                                                                                                                                 processes, financial reporting, and
                                                in Form SDR will enable the                              2014–PDG–0110, Bulletin 2014–09–25, Vol. 11,            disclosure controls and procedures,
                                                Commission to assess whether the SDR                     n°38 (Sept. 23, 2014), available at https://            including approving major changes in
                                                applicant would be able to comply with
                                                                                                         www.lautorite.qc.ca/files/pdf/bulletin/2014/            auditing and accounting principles and
                                                                                                         vol11no38/vol11no38_7.pdf.                              practices; (xii) fostering DDR’s ability to
                                                the federal securities laws and the rules                  21 See Manitoba Securities Commission, Order

                                                and regulations thereunder, and                          No. 7013 (Oct. 23, 2014), available at http://
                                                                                                                                                                 ensure compliance with applicable laws
                                                ultimately whether to grant or deny an                   docs.mbsecurities.ca/msc/oe/en/105125/1/                and regulations including derivatives,
                                                application for registration.16                          document.do.                                            securities, and corporation laws and
                                                                                                           22 Other trade repository subsidiaries of the
                                                                                                                                                                 other applicable regulatory guidance
                                                III. DDR Application for Registration                    Depository Trust & Clearing Corporation (‘‘DTCC’’)      and international standards; (xiii)
                                                                                                         operate in Europe, Japan, Hong Kong, Singapore,
                                                   DDR currently operates as a trade                     and Australia. See generally http://dtcc.com/           ensuring that in DDR’s decision-making
                                                repository under the regulatory                          derivatives-services/global-trade-repository.           process an Independent Perspective as
                                                framework of other authorities.                            23 See Exhibit HH.2, Section 2.1. DTCC is the         defined in Section 49.2 of the CFTC’s
srobinson on DSK5SPTVN1PROD with NOTICES




                                                                                                         parent company of a variety of entities, including      regulations, is considered; 25 and (xiv)
                                                  11 See Exchange Act Section 13(n)(3), 15 U.S.C.
                                                                                                         three clearing agencies registered under Section
                                                                                                         17A of the Exchange Act and that have been
                                                78m(n)(3).                                                                                                         24 See id.
                                                  12 See 17 CFR 240.13n–1(c)(3).
                                                                                                         designated as systemically important by the
                                                                                                         Financial Stability Oversight Council under Title         25 The  CFTC has defined the term ‘‘Independent
                                                  13 See id.
                                                                                                         VIII of the Dodd-Frank Act (i.e., the National          Perspective’’ to mean ‘‘a viewpoint that is impartial
                                                  14 See SDR Adopting Release, 80 FR at 14458.
                                                                                                         Securities Clearing Corporation, the Fixed Income       regarding competitive, commercial, or industry
                                                  15 See id.
                                                                                                         Clearing Corporation, and the Depository Trust          concerns and contemplates the effect of a decision
                                                  16 See SDR Adopting Release, 80 FR at 14458–59.        Company).                                               on all constituencies involved.’’ 17 CFR 49.2(a)(6).



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                                                                                Federal Register / Vol. 81, No. 130 / Thursday, July 7, 2016 / Notices                                                    44381

                                                performing such other functions as the                   CCO at least annually.34 According to                   becoming a director, and, thereafter, on
                                                Board believes appropriate or necessary,                 DDR, the CCO also works directly with                   an annual basis. According to DDR’s
                                                or as otherwise prescribed by rules or                   the Board in certain instances, for                     Code, key responsibilities for directors
                                                regulations.26                                           example, when resolving conflicts of                    include: (i) Acting honestly, in good
                                                   According to DDR, the number of                       interest.35 DDR represents that the                     faith and in the best interests of DDR
                                                directors on the Board is determined by                  CCO’s responsibilities include, but are                 and all of the users of DDR; (ii) using
                                                DTCC Deriv/SERV LLC (‘‘DTCC Deriv/                       not limited to, the following items: (i)                best efforts to avoid conflicts between
                                                SERV’’) as the sole LLC member of                        Oversee and review DDR’s compliance                     personal and professional interests as
                                                DDR.27 DDR represents that DTCC                          with the applicable regulations; (ii)                   they relate to DDR where possible; (iii)
                                                Deriv/SERV will strive to include on the                 establish and administer written                        disclosing any conflicts and otherwise
                                                Board an equal number of                                 policies and procedures reasonably                      pursuing the ethical handling of
                                                representatives of U.S. and non-U.S.                     designed to prevent violation of the                    conflicts (whether actual or apparent)
                                                domiciled firms.28 DDR represents that                   applicable regulations; (iii) take                      when conflicts or the appearance of
                                                the Board is composed of individuals                     reasonable steps to ensure compliance                   conflicts are unavoidable; (iv)
                                                from the following groups: Employees of                  with applicable regulations relating to                 complying with all applicable laws,
                                                DDR’s users (either fees-paying users or                 agreements, contracts or transactions;                  regulations and DDR policies; (v)
                                                end users) with derivatives industry                     (iv) establish procedures for the                       promptly reporting any violations of the
                                                experience, buy-side representatives,                    remediation of non-compliance issues                    Code to the Chairman of DDR’s Board or
                                                independents, and members of DTCC’s                      identified by the CCO through a                         to DDR’s counsel and DDR’s CCO; (vi)
                                                senior management or DTCC’s Board of                     compliance office review, look-back,                    seeking guidance where necessary; and
                                                Directors, with the understanding that at                internal or external audit finding, self-               (vii) being accountable personally for
                                                least two Board members will be DTCC                     reported error, or validated complaint;                 adherence to the Code.39
                                                senior management or DTCC Board                          (v) notify the Board as soon as
                                                                                                         practicable upon becoming aware of a                    B. Description of DDR’s SDR Service
                                                members.29 DDR represents that DTCC
                                                Deriv/SERV’s Nominating Committee                        circumstance indicating that DDR, or an                    DDR has applied to register as an SDR
                                                shall periodically review the Board’s                    individual acting on its behalf, is in                  with the Commission to accept data in
                                                composition to assure that the DDR                       non-compliance with the applicable                      respect of all SBS transactions in the
                                                directors possess the skills required to                 laws of a jurisdiction in which it                      credit, equity, and interest rates
                                                direct and oversee management in the                     operates and either: (a) The non-                       derivatives asset classes.40
                                                best interests of its shareholders and                   compliance creates a risk to a DDR                         DDR represents that, if registered with
                                                other stakeholders, with these skills                    User; 36 (b) the non-compliance creates a               the Commission, it would, among other
                                                including derivatives industry                           risk of harm to the capital markets in                  things: (i) Perform all of the required
                                                experience, risk management                              which it operates; (c) the non-                         functions of an SDR under the
                                                experience, business specialization,                     compliance is part of a pattern of non-                 Commission’s Rules 13n–1 through
                                                technical skills, industry stature, and                  compliance; or (d) the non-compliance                   13n–11; (ii) accept, from or on behalf of
                                                seniority and experience at their own                    may have an impact on DDR’s ability to                  Users, transaction and life-cycle data for
                                                organizations.30                                         carry on business as a trade repository                 SBS as specified in the Commission’s
                                                   Additionally, DDR represents that it                  in compliance with applicable law; (vi)                 Regulation SBSR, as and when required
                                                welcomes suggestions from market                         establish and follow appropriate                        to be reported to an SDR thereunder;
                                                participants of proposed or alternative                  procedures for the handling,                            (iii) verify and maintain swap and SBS
                                                candidates to serve on the DDR Board,                    management response, remediation,                       data as required by such regulations; (iv)
                                                which may be submitted through the                       retesting and closing of noncompliance                  publicly disseminate SBS data as and
                                                notices procedures described in the                      issues; (vii) establish and administer a                when required under the Commission’s
                                                Operating Procedures of DDR’s                            written code of ethics; and (viii) prepare              Regulation SBSR, either directly or
                                                Rulebook.31                                              and sign an annual compliance report in                 through one or more third parties; (v)
                                                   DDR’s Rulebook provides that its                      accordance with applicable regulations                  provide access to swap and SBS data to
                                                                                                         and associated recordkeeping.37                         appropriate regulators; and (vi) generate
                                                Chief Compliance Officer (‘‘CCO’’) is
                                                                                                            DDR directors must comply with                       reports with respect to transaction data
                                                appointed by the Board and reports
                                                                                                         DDR’s Board Code of Ethics and                          maintained in DDR, in each case as
                                                directly to the chief executive officer of               Conflicts of Interest Policy (the ‘‘Code’’),
                                                DDR.32 The Board is responsible for the                                                                          specified in further detail in DDR’s
                                                                                                         which is intended to focus directors on
                                                appointment and removal of the CCO                                                                               Operating Procedures and applicable
                                                                                                         their duties as fiduciaries and provide
                                                and approval of CCO compensation,                                                                                publications.41
                                                                                                         guidance to directors to help them
                                                which is at the discretion of the Board                  recognize and deal with ethical issues,                 C. Access
                                                and effected by majority vote.33 In                      provide mechanisms to report unethical
                                                addition, the Board shall meet with the                                                                             DDR represents that it would provide
                                                                                                         conduct, help foster a culture of honesty               access to its SDR service on a fair, open
                                                                                                         and accountability, and address actual                  and equal basis.42 According to DDR,
                                                  26 See Exhibit D.2 (DDR Mission Statement and
                                                                                                         and potential conflicts of interest.38 In               access to and usage of its SDR service
                                                Board Charter).
                                                  27 See Exhibits D (governance narrative), D.2, and
                                                                                                         addition, each director is required to                  would be available to all market
                                                HH.2, Section 2.2.                                       complete a certificate attesting to
                                                                                                                                                                 participants that engage in SBS
                                                  28 See Exhibits D and D.2.                             compliance with DDR’s Code upon
                                                                                                                                                                 transactions, and DDR does not and
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                                                  29 See id.; see also Exhibit HH.2, Section 2.2. DDR

                                                states that the Board will include appropriate                34 See
                                                                                                                                                                 would not bundle or tie its SDR services
                                                                                                                   id.
                                                representation by individuals who are independent             35 See
                                                                                                                   id.
                                                as specified by applicable regulations. See id.             36 DDR defines the term ‘‘User’’ to mean an entity     39 Seeid.
                                                  30 See Exhibit D.                                                                                                40 See
                                                                                                         that has executed a DDR User Agreement, which                   DDR Form SDR, Item 6; see also Exhibit
                                                  31 See Exhibit HH.2, Section 2.2 and attached          allows for participation in one or more DDR             HH.2, Section 3.1.
                                                Operating Procedures.                                    services or systems. See Exhibit HH.2, Section 12.       41 See Exhibit HH.2, SDR Appendix to the DDR
                                                  32 See Exhibit HH.2, Section 2.3.                         37 See Exhibit HH.2, Section 2.3.                    Operating Procedures.
                                                  33 See id.                                                38 See Exhibit D.4 (DDR Board Code of Ethics).        42 See Exhibits U, V, Y, and HH.2, Section 1.1.




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                                                44382                           Federal Register / Vol. 81, No. 130 / Thursday, July 7, 2016 / Notices

                                                with any other services.43 DDR                           impacted User of the termination in                     in the credit equity, and interest rate 52
                                                represents that to participate in its SDR                writing or via email, with such notice                  derivatives asset classes.53 DDR has
                                                services, each User would be required to                 stating, to the extent practicable, in                  represented that Users would be
                                                (i) enter into a User Agreement in one                   general terms how pending transaction                   required to submit trade information in
                                                of the forms provided by DDR and (ii)                    submissions and other pending matters                   the data format required by DDR. DDR
                                                agree to be bound by the terms of the                    will be affected and what steps are to be               would accept data using the following
                                                User Agreement and DDR’s Operating                       taken in connection therewith.49                        open-source structured data formats:
                                                Procedures.44 According to DDR, an                                                                               Financial Products Markup Language
                                                entity would be permitted to view the                    D. Use of Data
                                                                                                                                                                 (‘‘FpML’’) and Comma-separated Value
                                                records relating to an individual                          DDR represents that its services                      (‘‘CSV’’) file.54
                                                transaction if it is: (i) A counterparty or              would be available to all market                           Exhibits GG.2 (for credit derivatives),
                                                an authorized agent of a counterparty to                 participants on a fair, open and equal                  GG.4 (for equity derivatives), and GG.6
                                                the transaction; (ii) a regulator and the                basis. DDR represents that a market                     (for interest rates) to DDR’s application
                                                transaction is reportable to that                        participant must be on-boarded as a                     enumerate the required fields and
                                                regulator; or (iii) a third-party agent                  DDR User to be granted access to the                    acceptable values for the submission of
                                                submitter of the transaction, provided                   DDR system, receive trade information,                  trade information into the DDR system.
                                                that agents who are submitters will not                  confirm or verify transactions, submit                  Upon submission of a transaction, DDR
                                                be able to view the current positions,                   messages, or receive reports.50 For those               will perform validation checks to ensure
                                                unless authorized by a counterparty to                   market participants that on-board, DDR                  that each submitted record is in the
                                                the transaction, but will be able to see                 would provide a mechanism for Users to                  proper format and will also perform
                                                the submission report only for the                       access the DDR system to confirm and                    validation and consistency checks
                                                purpose of viewing the success or                        verify transactions and provide Unique                  against certain data elements, including,
                                                failure of messages submitted by such                    Identification Code (‘‘UIC’’) information               for example, sequencing of time and
                                                agents.45 DDR represents that it shall                   as required under its procedures.                       date fields (e.g., the termination date
                                                retain exclusive control over the system                 Additionally, DDR represents that                       must be greater than the trade date).55
                                                through which its SDR services are                       access to U.S. swap or SBS data                         These validation types include:
                                                provided.46                                              maintained by DDR to market                                • Schema validations—check that a
                                                   DDR represents that it may summarily                  participants is generally prohibited                    submission is consistent with the
                                                terminate a User’s account and access to                 except to: (i) Either counterparty to that              accepted format (i.e., CSV is valid, the
                                                SDR services when the Board                              particular swap or SBS; (ii) authorized                 fields are formatted correctly);
                                                determines that: (a) The User has                        third-party service providers or other                     • Core validations—the basic checks
                                                materially breached its User Agreement,                  parties specifically authorized by the                  that ensure the submission can be
                                                DDR’s Operating Procedures, or the                       User or counterparty pursuant to DDR’s                  accepted into the SDR (i.e., Permission,
                                                rules contained in its Rulebook, which                   Rulebook; (iii) or to appropriate                       USI/UTI lock, transaction and action
                                                threatens or may cause immediate harm                    domestic or foreign regulators in                       type consistency validations);
                                                to the normal operation of DDR’s                         accordance with applicable regulation                      • Business validation—applied at the
                                                system, or any applicable law including                  and DDR’s Rulebook.51                                   point of in-bound submission
                                                those relating to the regulations                                                                                processing to ensure integrity and
                                                administered and enforced by the U.S.                    E. Asset Classes Accepted; Submission                   logical consistency. These validations
                                                Department of Treasury’s Office of                       Requirements; Validation                                will ensure that the messages are well
                                                Foreign Assets Control or the Canadian                     DDR has represented that it would                     formed and provide a logical and
                                                Government Office of the                                 accept data in respect of all SBS trades                complete description of the core trade
                                                Superintendent of Financial                                                                                      economics and ensure that DDR does
                                                Institutions; or (b) the User’s account or                  49 See id. Because persons applying to be SDRs       not degrade the quality of the
                                                User’s IT system is causing material                     are also applying to be SIPs with the Commission,       information held within the repository
                                                harm to the normal operation of DDR’s                    the procedures for notifying the Commission of any      by allowing incomplete or illogical trade
                                                                                                         prohibitions or limitations of access to services as
                                                system.47 According to DDR, the                          provided in Section 11A(b)(5)(A) would apply. See
                                                                                                                                                                 descriptions to be accepted and stored;
                                                following actions must take place before                 SDR Adopting Release, 80 FR at 14482 (‘‘Rule 909        and
                                                DDR staff initiates any actions which                    of Regulation SBSR, which the Commission is                • Regulatory validations—regulatory-
                                                may result in a User’s termination of                    concurrently adopting in a separate release, requires   specific validations applied following
                                                                                                         each registered SDR to register as a SIP, and, as
                                                access to the DDR system and,                            such, Exchange Act Section 11A(b)(5) governs
                                                                                                                                                                 the normal business validations. (For
                                                specifically, SDR services: (i) DDR                      denials of access to services by an SDR. This section   example, if the same field is required by
                                                senior management, as well as DDR’s                      provides that ‘[i]f any registered securities           one jurisdiction and is optional for
                                                counsel and CCO, must be involved in                     information processor prohibits or limits any           another, the jurisdiction requiring the
                                                                                                         person in respect of access to services offered,
                                                any decision to involuntarily terminate                  directly or indirectly, by such securities
                                                                                                                                                                 field would have a regulatory validation
                                                a User; and (ii) the Chairman of the                     information processor, the registered securities        to check for the field.) 56
                                                Board of DDR must be notified in                         information processor shall promptly file notice        DDR further represents that it would
                                                advance of any involuntary                               thereof with the Commission.’ Accordingly, an SDR       accept or reject transactions based on its
                                                                                                         must promptly notify the Commission if it prohibits
                                                termination.48 DDR represents that,                      or limits access to any of its services to any
                                                                                                                                                                 validation process.57 DDR’s policies and
                                                upon a summary termination of a User’s                   person.’’).                                             procedures state that acceptance
                                                access pursuant to its rulebook, DDR                        50 See Exhibit HH.2, Section1.1.                     messages are called ACKs (acceptance)
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                                                shall, as soon as possible, notify the                      51 See Exhibit HH.2, Section 6.3. With respect to    and rejection messages are called
                                                                                                         regulator access, DDR also represents that pursuant
                                                  43 See Exhibit HH.2, Section 1.1.                      to applicable law, the designated regulators (which      52 See n.3 supra.
                                                  44 See                                                 is defined to include regulators which supervise
                                                         Exhibit HH.2, Section 1.2.                                                                               53 See Form SDR and Exhibit HH.2, Section 3.1.
                                                  45 See Exhibit HH.2, Section 1.3.
                                                                                                         DDR, including the Commission and CFTC) shall be         54 See Exhibit GG.3.
                                                                                                         provided with direct electronic access to DDR data
                                                  46 See id.                                                                                                      55 See Exhibit HH.2, Section 10.1.1.
                                                                                                         reported to DDR in satisfaction of such regulator’s
                                                  47 See Exhibit HH.2, Section 10.3.1.                                                                            56 See Exhibit GG.3.
                                                                                                         regulatory mandate to satisfy their legal and
                                                  48 See id.                                             regulatory obligations. See id., Sections 6.2 and 12.    57 See Exhibit GG.3.




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                                                                                Federal Register / Vol. 81, No. 130 / Thursday, July 7, 2016 / Notices                                                      44383

                                                NACKs (negative acceptance).58 Where                     Transaction Identifier).63 DDR further                  applicable.71 DDR represents that, if no
                                                a transaction is accepted, both the                      states that Backload trades will have the               LEI is provided or if the email
                                                submitting party and its on-boarded                      standard validations that are applied on                information is not available (for
                                                counterparty would receive electronic                    all SBS submissions and must meet the                   example, under local privacy laws or
                                                ACK messages. Where a transaction was                    requirements in order for the                           contractual obligations between the
                                                not accepted, the submitting party                       submission to be ingested and reported                  counterparty and the trade repository
                                                would receive an electronic NACK                         to the Commission.64                                    with which it has contracted as a User),
                                                message along with an associated error                                                                           it would take no further action.72 In
                                                code so that they can correct the                        F. Verification of Transaction Data                     addition, DDR will not verify the
                                                transaction and retransmit to DDR.                          DDR represents that its SDR services                 accuracy of the email, nor follow up if
                                                Where a transaction is accepted but fails                verification processes are designed to                  an email bounces back.73 DDR
                                                one of the jurisdictional (i.e., regulatory)             reasonably establish that the transaction               represents that it will provide the
                                                validations, the submitting party will                   data that has been submitted to DDR is                  Commission and CFTC with a monthly
                                                receive an electronic notification along                 complete and accurate.65 Once a                         status of the outreach to Non-Users.74
                                                with the associated error code so it can                 position is established either through a                   The DDR system will provide trade
                                                correct the transaction and retransmit to                snapshot or DDR’s own calculation of                    detail reports that will enable Users to
                                                DDR.59                                                   events from transaction records, the                    view all transaction records, which will
                                                   DDR represents that DDR may reject a                  terms of the position are designated as                 allow Users to reconcile the transaction
                                                transaction record submitted due to the                  either verified, disputed, pending                      records in the SDR services to their own
                                                submission failing to meet DDR                           verification, or deemed verified.66                     risk systems.75 DDR’s policies and
                                                validations, including but not limited to                                                                        procedures provide that, in the event
                                                the submission failing to be in a format                    According to DDR, a transaction                      that both counterparties to a trade agree
                                                that can be ingested by DDR, failing to                  record is verified if it (i) is submitted by            that data submitted to DDR contains
                                                meet jurisdictional (i.e., regulatory)                   a Trusted Source (which is defined as                   erroneous information (e.g., through a
                                                requirements or failing to provide                       an entity, which has entered into a User                mutual mistake of fact), such Users may
                                                required data elements.60 DDR further                    agreement, been recognized as a Trusted                 each submit a cancel record, effectively
                                                represents that a rejected submission is                 Source by DDR and provides the                          cancelling the incorrect transaction
                                                deemed not to have been submitted at                     definitive report of a given position),67               record.76 If a trade record has been
                                                all with respect to reporting to the                     (ii) is a trade between affiliated parties,             submitted by only one counterparty and
                                                jurisdiction for which it was rejected,                  (iii) is submitted from an affirmation or               it is determined by the submitting User
                                                and that it is possible that one                         confirmation platform, or (iv) was                      that it is erroneous, the submitting User
                                                transmission is submitted to comply                      executed on an electronic trading                       may submit a cancel record.77 A User
                                                with reporting in more than one                          facility.68 In addition, the non-reporting              may cancel only its own submitted
                                                jurisdiction and may be acceptable for                   User is responsible for verifying the                   record and cannot cancel a record where
                                                one jurisdiction, but rejected for the                   accuracy of the information that has                    it is not the submitting party of the
                                                other.61                                                 been submitted by the reporting party                   record.78 DDR shall maintain a record of
                                                   In connection with the reporting of                   User. DDR represents that a non-                        all corrected errors pursuant to
                                                ‘‘pre-enactment and transitional SBS,’’                  reporting User can verify the accuracy of               applicable regulations and such records
                                                DDR represents that it will accept the                   such information by sending a                           shall be available upon request to the
                                                following types of historical trades: (i)                verification message indicating that it                 applicable designated regulator.79
                                                ‘‘Historical Expired,’’ which are pre-                   verifies or disputes each position where
                                                                                                         it is identified as the counterparty.69                 G. Disputed Trade Data
                                                enactment SBS executed before July 21,
                                                2010 but expired or terminated before                       DDR represents that it would attempt                    Under DDR’s policies and procedures,
                                                the compliance date for Regulation                       to contact counterparties to a trade                    Users are responsible for resolving any
                                                SBSR, (ii) ‘‘Historical,’’ which are                     reported to DDR who are not Users (a                    disputes between themselves uncovered
                                                transitional SBS executed after July 21,                 ‘‘Non-User’’), where such party’s LEI is                during any reconciliation process and,
                                                2010 but expired or terminated before                    provided and there is email contact                     as appropriate, for submitting correct
                                                the compliance date for Regulation                       information available to DDR in the                     information.80 If a User disputes a
                                                SBSR, and (iii) ‘‘Backload,’’ which are                  information or static data maintained by                transaction record alleged to apply to it
                                                pre-enactment SBS or transitional SBS                    the DTCC trade repositories 70 about                    by the counterparty, or disputes any of
                                                in existence on or after the compliance                  their Users, to notify the non-User that                the terms within the alleged transaction,
                                                date for Regulation SBSR.62 DDR states                   a trade has been reported on which it                   the User shall register such dispute by
                                                that it does not validate whether or not                 might have been named a counterparty                    submitting a ‘‘dispute’’ message.81 If
                                                the historical expired trade satisfies the               and it must on-board to DDR to verify                   such User fails to register such dispute
                                                Commission’s definition of an expired                    the accuracy of the information                         within 48 hours of the relevant trade
                                                pre-enactment or transitional swap, and                  submitted and provide any missing                       detail report being issued, the record
                                                that the Historical and Historical                       information such as UICs, if                            will be marked as ‘‘deemed verified’’ in
                                                Expired trades will be subject to a
                                                                                                                                                                   71 See Exhibit HH.2. Sections 3.3.4 and 3.3.2.1
                                                minimal set of validations in order for                       63 See
                                                                                                                   id.
                                                                                                                                                                 and Exhibit GG.3.
                                                the submission to be accepted by DDR,                         64 See
                                                                                                                   id.                                             72 See id.
                                                                                                           65 See Exhibit HH.2, Section 3.3.4.
                                                which will focus on core fields                                                                                    73 See id.
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                                                                                                           66 See id. A ‘‘snapshot’’ refers to a message that
                                                necessary for the system to ingest the                                                                             74 See Exhibit HH.2, Section 3.3.4.1.
                                                                                                         reflects the current state of the trade, which DDR
                                                trade (including a valid Unique                          refers to as the trade’s position.
                                                                                                                                                                   75 See Exhibit HH.2, Section 10.1.2.

                                                                                                           67 See Exhibit HH.2, Section 12.                        76 See Exhibit HH.2, Section 10.1.1.
                                                  58 See id.                                               68 See Exhibit HH.2. Sections 3.3.4 and 3.3.2.1         77 See id.
                                                  59 See id.                                                                                                       78 See Exhibit HH.2, Section 10.1.1.
                                                                                                         and Exhibit GG.3.
                                                  60 See id.                                               69 See id.                                              79 See id.
                                                  61 See Exhibit HH.2, Section 1.2 and Exhibit GG.3.       70 DTCC operates trade repositories in a number         80 See Exhibit HH.2, Section 10.1.2.
                                                  62 See Exhibit GG.3.                                   of other jurisdictions. See n.22 supra.                   81 See id.




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                                                44384                           Federal Register / Vol. 81, No. 130 / Thursday, July 7, 2016 / Notices

                                                the DDR system.82 All reports and trade                  setting system (‘‘IRSS’’) that is                        identifiers, the branch ID, trading desk
                                                records provided to regulators will                      recognized by the Commission, and                        ID, and trader ID. With respect to branch
                                                include the status of these transaction                  that, where LEIs are populated, DDR                      ID, DDR represents that it requires the
                                                records, including dispute and                           performs a digit check on the LEI.88                     User to provide the two digit ISO alpha
                                                verification status.83 Where DDR has                        DDR has proposed that its Users will                  country code and the two digit
                                                received conflicting or inconsistent                     be required to provide Legal Entity                      subdivision (city) code where the
                                                records from more than one submitter in                  Identifiers for the following fields:                    branch or other unincorporated office is
                                                respect of a particular transaction (such                Platform ID, ultimate parent ID,                         located. DDR represents that if the User
                                                as from a security-based swap execution                  counterparty ID, broker ID, and                          has more than one branch in the same
                                                facility and a reporting party User), DDR                execution agent ID.89 For other UICs                     subdivision (city), the branch ID will
                                                would maintain all such records (unless                  (transaction ID, branch ID, trading desk                 also include a single digit following the
                                                cancelled or modified in accordance                      ID, trader ID, and product ID) as                        country and city code referencing the
                                                with the terms of the Rulebook) and                      discussed further below, DDR has                         specific branch, such as 1 or 2, for
                                                make such records available to                           further proposed that each User will be                  example.95 DDR represents that it
                                                designated regulators in accordance                      required to create the identifiers in                    requires that Users populate the trading
                                                with the terms of the User Agreement                     prescribed formats, and that it shall be                 desk ID and trader ID fields using an
                                                and applicable law.84                                    each User’s responsibility to maintain                   alphanumeric code with ten characters
                                                                                                         such identifiers (including, but not                     or less.96
                                                H. Application and Dissemination of                      limited to, any internal mapping of
                                                Condition Flags                                          static data) and to ensure their                         N. Product ID
                                                   DDR represents that, with respect to                  continued accuracy.90                                      DDR represents that each User is
                                                flags that are applied to publicly                       K. Transaction ID Methodology                            required to create the product ID. DDR
                                                disseminated reports to help prevent a                                                                            represents that the product ID for all
                                                distorted view of the market, DDR has                       DDR represents that it accepts                        asset classes will be the ISDA
                                                established the following flags that                     transaction IDs in the UTI field.91 To                   taxonomy.97
                                                indicate that additional information is                  validate the uniqueness of each
                                                needed to understand the publicly                        transaction ID, DDR would apply a                        O. Missing UIC Information
                                                disseminated price: Inter-affiliate,                     methodology, which it refers to as                          Rule 906(a) of Regulation SBSR
                                                Nonstandard flag, Off market flag,                       ‘‘Locks,’’ that prevents the transaction                 requires a registered SDR to identify any
                                                Pricing context, and Compressed                          ID from being used for another trade in                  SBS reported to it for which the
                                                trade.85 DDR also states that further                    the same or another jurisdiction.92                      registered SDR does not have the
                                                information regarding the flags is                       However, DDR also represents that it is                  counterparty ID and (if applicable) the
                                                available in its matrices under the                      the responsibility of the reporting party                broker ID, branch ID, execution agent
                                                narrative column.86                                      User to create and provide the                           ID, trading desk ID, and trader ID of
                                                                                                         transaction ID on each transaction.93                    each direct counterparty. Once a day,
                                                I. Calculation and Maintenance of                                                                                 the registered SDR must send a report to
                                                Positions                                                K. Ultimate Parent and Affiliate
                                                                                                         Information                                              each participant of the registered SDR
                                                   DDR’s SDR service would allow DDR                                                                              (or, if applicable, an execution agent)
                                                                                                            DDR represents that it captures the
                                                to calculate open positions for persons                                                                           identifying, for each SBS to which that
                                                                                                         UIC for ultimate parent ID in DDR’s
                                                with open SBS for which DDR                                                                                       participant is a counterparty, the SBS(s)
                                                                                                         system at the time a User on–boards to
                                                maintains records. DDR’s policies and                                                                             for which the registered SDR lacks the
                                                                                                         DDR as this is static information that
                                                procedures relating to its calculation of                                                                         counterparty ID and (if applicable)
                                                                                                         does not vary by trade. DDR requires
                                                positions are provided in Exhibit DD.                                                                             broker ID, branch ID, execution agent
                                                                                                         that each User provide the LEI of the
                                                J. Assignment of Unique Identification                                                                            ID, trading desk ID, or trader ID.
                                                                                                         ultimate parent for each account that is
                                                Codes                                                                                                                DDR’s policies and procedures
                                                                                                         registered with DDR, with the exception
                                                                                                                                                                  provide that to assist each User in
                                                   DDR’s policies and procedures state                   of (1) natural persons who are not
                                                                                                                                                                  identifying and supplying missing UIC
                                                that pursuant to Commission regulation                   required to provide an LEI for ultimate
                                                                                                                                                                  information, the User’s position report,
                                                (e.g., Regulation SBSR), all registered                  parent and (2) asset managers and the
                                                                                                                                                                  which shall be made available each day
                                                SDRs must have a systemic means of                       funds they manage (for asset managers,
                                                                                                                                                                  to all Users, can be used to identify each
                                                identifying and tracking all products                    if the ultimate parent LEI of the fund is
                                                                                                                                                                  SBS transaction for which DDR lacks
                                                and persons involved in a SBS                            unavailable, DDR will accept the LEI for
                                                                                                                                                                  any of the required UICs.98 DDR further
                                                transaction, and that Commission                         the fund).94
                                                                                                                                                                  represents that it will utilize a
                                                regulation (e.g., Regulation SBSR) has                   M. Branch, Trading Desk, and Trader ID                   procedure similar to its process for
                                                prescribed 10 identifiers where a UIC                                                                             contacting non–Users to confirm
                                                                                                           DDR represents that each User is
                                                shall be used.87 Further, DDR represents                                                                          transactions to attempt to obtain missing
                                                                                                         required to create, among other
                                                that it requires all Users to obtain a                                                                            UIC information.99
                                                valid LEI where it exists, from an                         88 See Exhibit GG.3. DDR also notes that the
                                                internationally recognized standards-                                                                             P. Public Dissemination
                                                                                                         Commission has recognized the global Legal Entity
                                                                                                         Identifier (‘‘LEI’’) as an internationally recognized      According to DDR, its public price
                                                  82 See  id.                                            standards-setting system (‘‘IRSS’’).                     dissemination (‘‘PPD’’) solution
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                                                   83 See id.                                              89 See id. For counterparty IDs for entities that do

                                                   84 See id.                                            not have an LEI (such as a natural person), DDR has
                                                                                                                                                                  provides Users with a way to report
                                                   85 See Exhibit GG.1.                                  proposed alternative methods for providing a             prices publicly pursuant to the
                                                   86 See id.; see also Exhibits GG.2, GG.4, and GG.6,   counterparty ID.
                                                                                                           90 See id.                                              95 See Exhibit GG.3.
                                                which are the matrices that enumerate the required
                                                                                                           91 See Exhibit GG.3.                                    96 See id.
                                                fields and acceptable values for the submission of
                                                                                                           92 See id.                                              97 See id.
                                                trade information into the DDR system.
                                                   87 See Exhibit GG.3; see also Exhibit HH.2,             93 See id.                                              98 See Exhibit HH.2, Section 4.2.3.3.

                                                Section 4.1.                                               94 See id.; see also Exhibit HH.2.                      99 See id.




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                                                                                Federal Register / Vol. 81, No. 130 / Thursday, July 7, 2016 / Notices                                                   44385

                                                Commission regulations for SBS (e.g.,                    Platform to cancel the last submission                include, but are not limited to,
                                                Regulation SBSR). DDR’s policies and                     on a particular UTI, and, if the previous             occurrences or circumstances: (a)
                                                procedures state that reporting sides are                submission has been disseminated, the                 Determined by DDR to constitute an
                                                provided with a specific message (the                    PPD Platform will disseminate the                     emergency; (b) which threaten the
                                                ‘‘PPD Message’’), with which to provide                  cancel with the original dissemination                proper functioning of the DDR system
                                                information required to be                               ID link.108                                           and the SDR services; or (c) which
                                                disseminated. The PPD Message is                                                                               materially and adversely affect the
                                                                                                         Q. Safeguarding Data, Operational
                                                available for dissemination if the fields                                                                      performance of the DDR system and the
                                                                                                         Reliability, and Emergency Authority
                                                ‘‘Reporting Obligation Party 1’’ or                                                                            SDR services.113 DDR states that
                                                ‘‘Reporting Obligation Party 2’’ are                        DDR represents that the DDR system                 emergencies include, but are not limited
                                                populated with ‘‘SEC’’ and the message                   is supported by DTCC and relies on the                to, natural, man-made and information
                                                passes validations.100 According to                      disaster recovery program maintained                  technology emergencies.114
                                                DDR, the PPD platform will perform                       by DTCC.109 DDR’s policies and                           Pursuant to its policies and
                                                validations on every PPD Message                         procedures provide the key principles                 procedures, DDR shall notify the
                                                submitted, and based on the result of                    below for business continuity and                     designated regulators, as soon as
                                                that validation, it will issue a response                disaster recovery that DDR follows to                 reasonably practicable, of an invocation
                                                to the relevant parties indicating a                     enable DDR to provide timely                          of emergency authority or a material
                                                positive or negative validation result                   resumption of critical services should                system outage is detected by DDR.115
                                                (i.e., the ‘‘ACK’’ or ‘‘NACK’’ messages                  there be any disruption to DDR                        Such notification shall be provided in
                                                discussed in Section III.E).                             business: (i) Achieve recovery of critical            accordance with applicable regulations
                                                   DDR’s policies and procedures state                   services within a four-hour window                    and will include the reasons for taking
                                                that DDR requires a separate message for                 with faster recovery time in less extreme             such emergency action, how potential
                                                public dissemination and for updating                    situations; (ii) disperse staff across                conflicts of interest were minimized and
                                                the position record.101 DDR’s policies                   geographically diverse operating                      documentation of the decision-making
                                                and procedures also state that DDR                       facilities; (iii) operate multiple back-up            process.116 Documentation underlying
                                                requires that PPD Messages be sent at                    data centers linked by a highly resilient             the emergency shall be made available
                                                the same time as position messages (i.e.,                network technology; (iv) maintain                     to the designated regulators upon
                                                Primary Economic Terms (‘‘PET’’),                        emergency command and out-of-region                   request.117 DDR also represents that it
                                                Confirmation, and/or Snapshot                            operating control; (v) utilize new                    shall issue an ‘‘Important Notice’’ as to
                                                messages).102 Further, DDR’s policies                    technology which provides high-                       all Users as soon as reasonably
                                                and procedures provide that DDR does                     volume, high-speed, asynchronous data                 practicable in the event such emergency
                                                not determine whether a PPD Message                      transfer over distances of 1,000 miles or             authority is exercised.118
                                                should be disseminated publicly, and                     more; (vi) maintain processes that                       DDR represents that it shall avoid
                                                that any such PPD Message received is                    mitigate marketplace, operational and                 conflicts of interest in decision-making
                                                disseminated publicly if it passes                       cyber-attack risks; (vii) test continuity             with respect to emergency authority
                                                validations and is directed to the                       plan readiness and connectivity on a                  taken.119 If a potential conflict of
                                                Commission, as discussed above.103                       regular basis, ensuring that Users and                interest arises, the CCO shall be notified
                                                Further, DDR states that it requires that                third-party vendors/service providers                 and consulted for the purpose of
                                                the reporting party User provide only                    can connect to DDR’s primary and back-                resolving the potential conflict.120
                                                PPD Messages that are required to be                     up sites; (viii) communicate on an                      DDR represents that any emergency
                                                disseminated under the regulations.104                   emergency basis with the market, Users,               actions taken by DDR may be terminated
                                                   DDR represents that the PPD will                      and government agency decision-                       by the CEO and in his/her absence, any
                                                receive messages with the following                      makers; and (ix) evaluate, test, and                  other officer of DDR, and that any such
                                                potential entries in the ‘‘Action’’ field                utilize best business continuity and                  termination of an emergency action will
                                                for a UTI: New, Modify, and Cancel.105                   resiliency practices.110                              be followed by the issuance of an
                                                A New message will be the first report                      DDR represents that it retains the right
                                                                                                                                                               Important Notice as soon as reasonably
                                                                                                         to exercise emergency authority in the
                                                for a trade event submission, and only                                                                         practicable.121
                                                                                                         event of circumstances determined by
                                                one UTI with an action of New will be
                                                                                                         DDR to require such response or upon                  R. Data Confidentiality; Sensitive
                                                allowed.106 A Modify message will be a
                                                                                                         request by the designated regulators as               Information and Security
                                                valid modification or correction to an
                                                                                                         applicable, and that any exercise of                    DDR represents that DTCC has
                                                existing trade event that has previously
                                                                                                         DDR’s emergency authority shall be                    established a Technology Risk
                                                been reported by a submitting party, and
                                                                                                         adequate to address the nature and                    Management Team, whose role is to
                                                the Modify action will be displayed to
                                                                                                         scope of any such emergency.111 DDR                   manage information security risk and
                                                the public as a Cancel of the original
                                                                                                         further represents that its CEO shall                 ensure the availability, integrity, and
                                                submission and a Correction
                                                                                                         have the authority to exercise                        confidentiality of the organization’s
                                                representing the Modify submission.107
                                                                                                         emergency authority, and that in his/her              information assets, but that DDR will be
                                                A cancel message will instruct the PPD
                                                                                                         absence, any other officer of DDR shall
                                                  100 See  Exhibit GG.3.
                                                                                                         have such authority.112 DDR has stated                  113 See  id.
                                                  101 See  Exhibit GG.3.                                 that circumstances requiring the                        114 See  id.
                                                   102 See id. DDR’s User Guide (Exhibit GG.3) also      invocation of emergency authority                       115 See Exhibit HH.2, Section 7.3.
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                                                provides descriptions of each of these types of                                                                  116 See id.

                                                messages. For example, a PET message is used to            108 See id. The dissemination ID is a DDR-            117 See id.
                                                report the full details of the economic terms for        generated identifier used to uniquely identify a        118 See id. An ‘‘Important Notice’’ is a formal
                                                trade and lifecycle events prior to confirmation.        message without exposing the UTI and will be used     notice sent to Users describing significant changes
                                                   103 See id. and Exhibit HH.2, Section 5.1.2.          to manage cancellations and corrections.              to DDR Rules, DDR Systems or other processes. See
                                                   104 See id.                                             109 See Exhibit HH.2, Section 8.1.                  id., Section 12.
                                                   105 See Exhibit GG.3.                                   110 See id.                                           119 See Exhibit HH.2, Section 7.3.
                                                   106 See id.                                             111 See Exhibit HH.2, Section 7.3.                    120 See id.
                                                   107 See id.                                             112 See id.                                           121 See id.




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                                                44386                             Federal Register / Vol. 81, No. 130 / Thursday, July 7, 2016 / Notices

                                                responsible for monitoring the                              SBS transactions (i.e., DDR will attempt                 11. Please provide your views as to
                                                performance of DTCC with regard to                          to contact a non-User counterparty to                 whether DDR’s proposed dues, fees, or
                                                implementation and maintenance of                           verify the accuracy of a trade if DDR has             other charges, discounts or rebates and
                                                information security within its                             been provided with the non-User                       the process for setting dues, fees, or
                                                infrastructure.122 DDR further represents                   counterparty’s LEI and can access email               other charges, discounts or rebates are
                                                that various policies have been                             contact information for the non-User                  fair and reasonable and not
                                                developed to provide the framework for                      counterparty in the static data                       unreasonably discriminatory. Please
                                                both physical and information security                      maintained by the DTCC trade                          address whether such proposed dues,
                                                and are routinely refreshed. The                            repositories about their Users) are                   fees, other charges, discounts, or rebates
                                                Technology Risk Management Team                             appropriate and reasonably designed to                are applied consistently across all
                                                carries out a series of processes to                        meet its obligations under Exchange Act               similarly situated users of DDR’s
                                                endeavor to ensure DDR is protected in                      Rule 13n–5(b)(1)(iii).                                services, including, but not limited to,
                                                a cost-effective and comprehensive                             4. Please provide your views as to                 Users, market infrastructures (including
                                                manner. This includes preventative                          whether DDR’s policies and procedures                 central counterparties), venues from
                                                controls such as firewalls, appropriate                     are sufficiently detailed and reasonably              which data can be submitted to DDR
                                                encryption technology, and                                  designed to ensure that the transaction               (including exchanges, SBS execution
                                                authentication methods. Vulnerability                       data and positions that it maintains are              facilities, electronic trading venues, and
                                                scanning is used to identify high risks                     complete and accurate, as required by                 matching and confirmation platforms),
                                                to be mitigated and managed and to                          Exchange Act Rule 13n–5(b)(3).                        and third party service providers.
                                                measure conformance against the                                5. Please provide your views as to                    12. Exchange Act Rule 13n–4(c)(2)(i)–
                                                policies and standards.123                                  whether DDR’s policies and procedures                 (iii) provides that each SDR (i) shall
                                                                                                            are sufficiently detailed and reasonably              establish governance arrangements that
                                                IV. Solicitation of Comments                                                                                      are well defined and include a clear
                                                                                                            designed to ensure that it has the ability
                                                  Interested persons are invited to                                                                               organizational structure with effective
                                                                                                            to protect the privacy of SBS transaction
                                                submit written data, views, and                                                                                   internal controls; (ii) must establish
                                                                                                            information that it receives, as required
                                                arguments concerning DDR’s Form SDR,                                                                              governance arrangements that provide
                                                                                                            by Exchange Act Rule 13n–9.
                                                including whether DDR has satisfied the                                                                           for fair representation of market
                                                                                                               6. Please provide your views as to
                                                requirements for registration as an SDR.                                                                          participants; and (iii) must provide
                                                                                                            whether DDR’s policies and procedures
                                                To the extent possible, commenters are                                                                            representatives of market participants,
                                                                                                            are sufficiently detailed and reasonably
                                                requested to provide empirical data and                                                                           including end-users, with the
                                                                                                            designed to ensure that it has the ability
                                                other factual support for their views. In                                                                         opportunity to participate in the process
                                                                                                            to calculate positions, as required by
                                                addition, the Commission seeks                                                                                    for nominating directors and with the
                                                                                                            Exchange Act Rule 13n–5(b)(2).
                                                comment on the following issues:                                                                                  right to petition for alternative
                                                  1. Please provide your views as to                           7. Please provide your views as to
                                                                                                                                                                  candidates. Please provide your views
                                                whether DDR’s application for                               whether DDR’s policies and procedures
                                                                                                                                                                  as to whether DDR’s governance
                                                registration as an SDR demonstrates that                    are sufficiently detailed and reasonably
                                                                                                                                                                  arrangements are appropriate in light of
                                                DDR is so organized, and has the                            designed to provide a mechanism for                   the requirements of Rule 13n–4(c)(2)(i)–
                                                capacity, to be able to assure the                          Users and their counterparties to                     (iii).
                                                prompt, accurate, and reliable                              effectively resolve disputes over the                    13. Exchange Act Rule 13n–4(c)(3)(i)–
                                                performance of its functions as an SDR,                     accuracy of SBS data that DDR would                   (ii) provides that each SDR must
                                                comply with any applicable provisions                       maintain, as required by Exchange Act                 establish, maintain, and enforce written
                                                of the securities laws and the rules and                    Rule 13n–5(b)(6). Are DDR’s policies                  policies and procedures reasonably
                                                regulations thereunder, and carry out its                   and procedures, including with respect                designed to identify and mitigate
                                                functions in a manner consistent with                       to the specified timeframe, relating to               potential and existing conflicts of
                                                the purposes of Section 13(n) of the                        dispute resolution adequate? Why or                   interest in the SDR’s decision-making
                                                Exchange Act and Commission’s SDR                           why not?                                              process on an ongoing basis, and, with
                                                rules.                                                         8. Please provide your views as to                 respect to the decision-making process
                                                  2. Exchange Act Rule 13n–5(b)(1)(iii)                     whether DDR’s policies and procedures                 for resolving any conflicts of interest,
                                                requires every SDR to establish,                            are sufficiently detailed and reasonably              each SDR shall require the recusal of
                                                maintain, and enforce written policies                      designed to ensure that its systems that              any person involved in such conflict
                                                and procedures reasonably designed to                       support or are integrally related to the              from such decision-making. Please
                                                satisfy itself that the transaction data                    performance of its activities provides                provide your views as to whether DDR’s
                                                that has been submitted to the SDR is                       adequate levels of capacity, integrity,               policies and procedures are appropriate
                                                complete and accurate. Please provide                       resiliency, availability, and security, as            in light of the requirements of Exchange
                                                your views as to whether DDR’s policies                     required by Exchange Act Rule 13n–6.                  Act Rule Exchange Act Rule 13n–
                                                and procedures concerning verification                         9. Please provide your views as to                 4(c)(3)(i)–(ii).
                                                of trade data are sufficiently detailed                     whether DDR’s policies and procedures                    14. Rule 903(a) of Regulation SBSR
                                                and reasonably designed to satisfy DDR                      are sufficiently detailed and reasonably              provides, in relevant part, that if no
                                                that the transaction data that has been                     designed for the CCO’s handling,                      system has been recognized by the
                                                submitted to DDR is complete and                            management response, remediation,                     Commission, or a recognized system has
                                                accurate, as required by Exchange Act                       retesting, and closing of noncompliance               not assigned a UIC to a particular
                                                                                                            issues, as required by Exchange Act                   person, unit of a person, or product, the
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                                                Rule 13n–5(b)(1)(iii).
                                                  3. Please provide your views as to                        Rule 13n–11(c)(7).                                    registered SDR shall assign a UIC to that
                                                whether DDR’s policies and procedures                          10. Please provide your views as to                person, unit of person, or product using
                                                to address confirmation of data accuracy                    whether DDR’s policies or procedures                  its own methodology. Is the
                                                and completeness for bespoke, bilateral                     could result in an unreasonable restraint             methodology that DDR proposes to use
                                                                                                            of trade or impose any material                       with respect to UICs as described in its
                                                  122 See   Exhibit HH.2, Section 9.1.                      anticompetitive burden on the trading,                application materials appropriate in
                                                  123 See   Exhibit HH.2, Section 9.                        clearing, or reporting of transactions.               light of the requirements under Rule


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                                                                                Federal Register / Vol. 81, No. 130 / Thursday, July 7, 2016 / Notices                                            44387

                                                903(a) of Regulation SBSR? Why or why                    participant must be on-boarded as a                   transactions having special
                                                not?                                                     DDR User. Please provide your views as                characteristics under Rule 907(a)(4) of
                                                   15. Rule 907(c) of Regulation SBSR                    to whether this form of access afforded               Regulation SBSR are consistent with the
                                                requires a registered SDR to make its                    to the non-reporting-side is fair, open,              goal of preventing market participants
                                                Regulation SBSR policies and                             and not unreasonably discriminatory.                  without knowledge of these
                                                procedures publicly available on its                        18. Please provide your views as to                characteristics receiving a distorted
                                                Web site. The Commission has stated                      whether DDR’s policies and procedures                 view of the market. Are there additional
                                                that this public availability requirement                relating to Rule 906(a) are sufficiently              condition flags that you believe DDR
                                                will allow all interested parties to                     detailed, appropriate and reasonably                  should utilize? If so, please describe
                                                understand how the registered SDR is                     designed to ensure data accuracy and                  them and why you believe they are
                                                utilizing the flexibility it has in                      completeness, including with respect to               appropriate.
                                                operating the transaction reporting and                  the requirement that once a day, a                       24. Exchange Act Rule 13n–10
                                                dissemination system, and will provide                   registered SDR shall send a report to                 requires that, before accepting any SBS
                                                an opportunity for market participants                   each participant identifying, for each                data from a market participant or upon
                                                to make suggestions to the registered                    SBS to which that participant is a                    a market participant’s request, an SDR
                                                SDR for altering and improving those                     counterparty, the SBS for which the                   shall furnish to the market participant a
                                                policies and procedures, in light of the                 registered SDR lacks counterparty ID                  disclosure document that contains
                                                new products or circumstances,                           and (if applicable) broker ID, branch ID,             certain written information, which must
                                                consistent with the principles set out in                execution agent ID, desk ID, and trader               reasonably enable the market
                                                Regulation SBSR.124 DDR has proposed                     ID.                                                   participant to identify and evaluate
                                                to satisfy its obligation under Rule                        19. Please provide your views as to                accurately the risks and costs associated
                                                907(c) of Regulation SBSR by making                      whether DDR’s policies and procedures                 with using the SDR’s services. This
                                                the policies and procedures contained                    relating to Rule 905(b) are sufficiently              written information includes the SDR’s
                                                in Exhibit GG (including GG.1 through                    detailed, appropriate and reasonably                  criteria for providing others with access
                                                GG.6) and Exhibit HH.2, and the other                    designed to ensure data accuracy and                  to its services and data it maintains, its
                                                application exhibits referenced therein                  completeness.
                                                                                                                                                               criteria for those seeking to connect to
                                                available on its public Web site. Is the                    20. Please provide your views as to
                                                                                                                                                               or link with it, its description of its
                                                information that is included in or                       whether DDR has provided sufficient
                                                                                                         information to explain the SBS                        policies and procedures regarding its
                                                referenced in GG (including GG.1                                                                               noncommercial and/or commercial use
                                                through GG.6) and Exhibit HH.2                           transaction information that it would
                                                                                                         publicly disseminate to discharge its                 of the SBS transaction information that
                                                appropriate in light of the requirements                                                                       it receives from a participant, any
                                                of Rule 907(c)?                                          duties under Rule 902 of Regulation
                                                                                                         SBSR. Please describe any additional                  registered entity, or any other person, its
                                                   16. Regulation SBSR imposes duties
                                                                                                         information that you feel is necessary.               description of all the SDR’s services,
                                                on various market participants to report
                                                                                                         Please offer any suggestions generally                including any ancillary services, and its
                                                SBS transaction information to a
                                                                                                         for how the publicly disseminated                     description of its governance
                                                registered SDR. Please provide your
                                                                                                         information could be made more useful.                arrangements. Based on the materials
                                                views as to whether the DDR
                                                                                                            21. Please provide your views as to                provided in DDR’s Form SDR
                                                application and the associated policies
                                                                                                         whether DDR has provided sufficient                   application, please provide your views
                                                and procedures (including technical
                                                                                                         information to explain how Users would                as to whether the disclosures provided
                                                specifications for submission of data)
                                                                                                         be required to report life cycle events               by the application are sufficiently
                                                provide sufficient information to
                                                                                                         under Rule 901(e). Please describe any                detailed to meet the objectives of
                                                potential participants of DDR about how
                                                                                                         additional information that you feel is               Exchange Act Rule 13n–10.
                                                they would discharge these regulatory
                                                duties when reporting to DDR. In                         necessary. In particular, please indicate                25. In addition to serving as an SDR
                                                particular, please provide your views as                 whether you believe DDR’s                             for the credit and equity derivatives
                                                to whether DDR’s technical                               specifications are reasonably designed                asset classes, DDR has applied to serve
                                                specifications for submission of data are                to identify the specific data element(s)              as an SDR for what it describes as SBS
                                                sufficiently detailed, especially with                   that change and thus that trigger the                 transactions in the interest rates
                                                regard to historical SBSs (including pre-                report of the life cycle event.                       derivatives asset class. Please provide
                                                enactment and transitional SBS) and                         22. Please provide your views as to                your views about DDR’s description of
                                                bespoke SBS. Please describe in detail                   whether DDR has provided sufficient                   this asset class. Please also provide your
                                                what additional information you believe                  information about how an agent could                  views as to whether DDR has provided
                                                is necessary to allow you to satisfy any                 report SBS transaction information to                 sufficient information about how a User
                                                reporting obligation you may incur                       DDR on behalf of a principal (i.e., a                 reports SBS transaction information in
                                                under Regulation SBSR.                                   person who has a duty under Regulation                this asset class. Is this information
                                                   17. Rule 906(a) of Regulation SBSR                    SBSR to report). Please describe any                  provided sufficient? Why or why not?
                                                provides, in relevant part, that a                       additional information that is necessary.             Please describe any additional
                                                participant of a registered SDR must                     In particular, please provide your views              information that you believe should be
                                                provide the missing information with                     as to whether DDR should differentiate                provided.
                                                respect to its side of each SBS                          between agents who are Users of DDR                      26. Exchange Act Rule 13n–4(b)(5)
                                                referenced in the report to the registered               because they themselves at times are                  requires that an SDR shall provide
                                                                                                         principals (i.e., they are counterparties             direct electronic access to the
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                                                SDR within 24 hours. DDR represents
                                                that in order to be granted access to the                to one or more SBSs that are reported                 Commission (or any designee of the
                                                DDR system, receive trade information,                   to DDR on a mandatory basis) and                      Commission, including another
                                                confirm or verify transactions, submit                   agents who are never principals (e.g., a              registered entity). Based on the
                                                messages, or receive reports, a market                   vendor).                                              materials provided in DDR’s Form SDR
                                                                                                            23. Please provide your views as to                application, please provide your views
                                                   124 See Regulation SBSR Adopting Release, 80 FR       whether DDR’s policies and procedures                 as to whether DDR’s policies and
                                                at 14648.                                                for the use of condition flags for                    procedures are sufficient to meet the


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                                                44388                           Federal Register / Vol. 81, No. 130 / Thursday, July 7, 2016 / Notices

                                                objectives of Exchange Act Rule 13n–                     should submit only information that                       throughout the day without requiring
                                                4(b)(5).                                                 you wish to make available publicly. All                  intraday, trade-for-trade settlement on a
                                                   27. Rule 901(i) of Regulation SBSR                    submissions should refer to File                          delivery-versus-payment basis.5 The
                                                provides that a person must report                       Number SBSDR–2016–02 and should be                        service allows dealers to trade GCF
                                                information about a pre-enactment SBS                    submitted on or before August 8, 2016.                    Repos, based on rate and term, with
                                                or transitional SBS ‘‘to the extent that                                                                           inter-dealer broker netting members on
                                                                                                         Brent J. Fields,
                                                information about such transaction is                                                                              a blind basis. Standardized, generic
                                                available.’’ Is it clear that DDR’s policies             Secretary.                                                CUSIP numbers have been established
                                                and procedures, including regarding                      [FR Doc. 2016–16112 Filed 7–6–16; 8:45 am]                exclusively for GCF Repo processing,
                                                validations, will allow parties to submit                BILLING CODE 8011–01–P                                    and are used to specify the type of
                                                transaction records for pre-enactment                                                                              underlying security that is eligible to
                                                SBS and transitional SBS with data                                                                                 serve as collateral for GCF Repos. Only
                                                elements missing, pursuant to Rule                       SECURITIES AND EXCHANGE                                   Fedwire eligible, book-entry securities
                                                901(i)?                                                  COMMISSION                                                may serve as collateral for GCF Repos.
                                                   28. Please provide your views as to                   [Release No. 34–78206; File No. SR–FICC–                  Acceptable collateral for GCF Repos
                                                whether DDR’s policies and procedures                    2016–002]                                                 include most U.S. Treasury securities,
                                                relating to how it would conduct                                                                                   non-mortgage-backed federal agency
                                                validations of transaction records for                   Self-Regulatory Organizations; Fixed                      securities, fixed and adjustable rate
                                                historic and newly executed SBS are                      Income Clearing Corporation; Order                        mortgage-backed securities, Treasury
                                                sufficiently detailed to meet the                        Approving Proposed Rule Change To                         Inflation-Protected Securities and
                                                objectives of Exchange Act Rule 13n–                     Suspend the Interbank Service of the                      separate trading of registered interest
                                                5(b)(1)(iii), and what further                           GCF Repo® Service                                         and principal securities.6
                                                clarifications, if any, you believe would                                                                             The GCF Repo service has operated
                                                                                                         June 30, 2016.                                            on both an ‘‘interbank’’ and ‘‘intrabank’’
                                                be appropriate.
                                                                                                            On May 5, 2016, the Fixed Income                       basis. ‘‘Interbank’’ means that the two
                                                   Comments may be submitted by any
                                                                                                         Clearing Corporation (‘‘FICC’’ or the                     GCF Repo Participants which have been
                                                of the following methods:
                                                                                                         ‘‘Corporation’’) filed with the Securities                matched in a GCF Repo transaction each
                                                Electronic Comments                                      and Exchange Commission                                   clear at a different clearing bank.
                                                  • Use the Commission’s Internet                        (‘‘Commission’’) proposed rule change                     ‘‘Intrabank’’ means that the two GCF
                                                comment form (http://www.sec.gov/                        SR–FICC–2016–002 pursuant to section                      Repo Participants which have been
                                                rules/proposed.shtml); or                                19(b)(1) of the Securities Exchange Act                   matched in a GCF Repo transaction
                                                  • Send an email to rule-comments@                      of 1934 (‘‘Act’’) 1 and Rule 19b–4                        clear at the same clearing bank.
                                                sec.gov. Please include File Number                      thereunder.2 The proposed rule change
                                                SBSDR–2016–02 on the subject line.                       was published for comment in the                          B. Suspension of the Interbank Service
                                                                                                         Federal Register on May 20, 2016.3 The                    of the GCF Repo Service
                                                Paper Comments                                           Commission received no comments on                           Since 2011, FICC has made several
                                                   • Send paper comments to Brent J.                     the proposed rule change. For the                         changes to its GCF Repo service in order
                                                Fields, Secretary, Securities and                        reasons discussed below, the                              to comply with recommendations made
                                                Exchange Commission, 100 F Street NE.,                   Commission is approving the proposed                      by the Tri-Party Repo Infrastructure
                                                Washington, DC 20549–1090. All                           rule change.                                              Reform Task Force (‘‘TPR’’), an industry
                                                submissions should refer to File                                                                                   group formed and sponsored by the
                                                                                                         I. Description of the Proposed Rule
                                                Number SBSDR–2016–02.                                                                                              Federal Reserve Bank of New York. The
                                                                                                         Change
                                                   To help the Commission process and                                                                              main purpose of the TPR was to develop
                                                review your comments more efficiently,                      FICC seeks the Commission’s                            recommendations to address the risk
                                                please use only one method of                            approval to suspend the interbank                         presented by triparty repo transactions
                                                submission. The Commission will post                     service of the GCF Repo® service, as                      due to the morning reversal (commonly
                                                all comments on the Commission’s                         described more fully below. The                           referred to as the ‘‘unwind’’) process, by
                                                Internet Web site (http://www.sec.gov/                   suspension does not require changes to                    replacing it with a process by which
                                                rules/other.shtml).                                      the text of the Government Securities                     transactions are collateralized all day.
                                                   Copies of the Form SDR, all                           Division (‘‘GSD’’) Rulebook (the ‘‘GSD                    The GCF Repo service was originally
                                                subsequent amendments, all written                       Rules’’), however, the suspension                         designed to have transactions ‘‘unwind’’
                                                statements with respect to the Form                      requires changes to FICC’s Real-Time                      every morning in order to mirror the
                                                SDR that are filed with the Commission,                  Trade Matching (‘‘RTTM®’’) system.                        transactions in the triparty repo market.
                                                and all written communications relating                  A. The GCF Repo Service                                   Prior to Triparty Reform, transactions
                                                to the Form SDR between the                                                                                        submitted on ‘‘Day 1’’ unwound on the
                                                Commission and any person, other than                       The GCF Repo service allows dealer                     morning of ‘‘Day 2.’’ To ‘‘unwind’’
                                                those that may be withheld from the                      members of FICC’s Government Services                     means that the securities are returned to
                                                public in accordance with the                            Division to trade general collateral                      the lender of securities in the
                                                provisions of 5 U.S.C. 552, will be                      finance repos (‘‘GCF Repos’’) 4                           transaction and the cash is returned to
                                                available for Web site viewing and                                                                                 the borrower of securities. Because of
                                                                                                              1 15
                                                                                                                 U.S.C. 78s(b)(1).
                                                printing in the Commission’s Public                           2 17
                                                                                                                                                                   certain changes to the way in which the
                                                                                                                 CFR 240.19b–4.
                                                Reference Section, 100 F Street NE.,
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                                                                                                            3 Securities Exchange Act Release No. 34–77840         Triparty Reform effort was to proceed
                                                Washington, DC 20549, on official                        (May 16, 2016), 81 FR 31996 (May 20, 2016) (SR–
                                                business days between the hours of                       FICC–2016–002).                                             5 Delivery-versus-payment is a settlement

                                                10:00 a.m. and 3:00 p.m.                                    4 A GCF Repo is one in which the lender of funds       procedure in which the buyer’s cash payment for
                                                   All comments received will be posted                  is willing to accept any of a class of U.S. Treasuries,   the securities it has purchased is due at the time
                                                                                                         U.S. government agency securities, and certain            the securities are delivered.
                                                without change; the Commission does                      mortgage-backed securities as collateral for the            6 See Securities Exchange Act Release No. 34–
                                                not edit personal identifying                            repurchase obligation. This is in contrast to a           58696 (September 30, 2008), 73 FR 58698, 58699
                                                information from submissions. You                        specific collateral repo.                                 (October 7, 2008) (SR–FICC–2008–04).



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Document Created: 2018-02-08 07:54:16
Document Modified: 2018-02-08 07:54:16
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation81 FR 44379 

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