The Commission has been directed by Congress to adopt an interim final rule concerning the reporting of all security-based swaps that were outstanding when the Dodd-Frank Act was adopted. Congress clearly understood the urgent need for regulators to have access to information about such security-based swaps, because Title VII of the Act requires us to do this rulemaking within 90 days. And the statute also provides that such reporting shall take place no later than 30 days after issuance of our rule — or, in the alternative, within “such other period as the Commission determines to be appropriate.” 1
However, the rule we adopt today does not require complete reporting within 30 days. Rather, it requires certain counterparties to a pre-enactment security-based swap to report the transaction at a specified future date and, in the interim, to provide information regarding these swaps to the Commission upon request.2
Why aren’t we requiring reporting of real data in 30 days? The truth of the matter is that the Commission currently lacks the personnel and infrastructure to efficiently receive, organize, and retain what could potentially be a substantial amount of data. Additionally, there is not yet a registered data repository for security-based swaps to receive the information. These practical challenges to setting up a reporting regime must be overcome.
First and foremost, the Commission should be clearly communicating its technology and budgetary challenges to Congress so that we can put in place a multi-year plan to appropriately build the systems to handle the data we need to oversee the markets. I also believe that, as we develop the swaps regulatory regime, we should utilize this rule to make requests to gather appropriate information to guide our rulemaking.
I encourage the staff to be proactive in gathering this information, and I also want to join my colleagues in thanking the staff for their work to date on this project.
1 Sec. 766(a) of the Dodd-Frank Act added new Sec. 13A(a)(2)(A) of the Securities Exchange Act of 1934 (Exchange Act), which provides that “[e]ach security-based swap entered into before the date of enactment of the Wall Street Transparency and Accountability Act of 2010, the terms of which have not expired as of the date of enactment of that Act, shall be reported to a registered security-based swap data repository or the Commission by a date that is not later than—(i) 30 days after issuance of the interim final rule; or (ii) such other period as the Commission determines to be appropriate.” Also added to the Exchange Act was new Section 13A(a)(2)(B), which provides that the Commission shall, within 90 days of enactment, promulgate an interim final rule providing for such reporting.
2 Interim Final Temporary Exchange Act Rule 13Aa-2T requires specified counterparties to a pre-enactment security-based swap transaction to: (1) report certain information relating to pre-enactment security-based swaps to a registered security-based swap data repository or to the Commission by the compliance date established in the security-based swap reporting rules required by Section 3C(e) and 13A(a)(1) of the Exchange Act, or within 60 days after a registered security-based swap data repository commences operations to receive and maintain data concerning such security-based swaps, whichever occurs first; and (2) report information relating to pre-enactment security-based swaps to the Commission upon request during an interim period. In addition, the Commission is issuing an Interpretive Note to Rule 13Aa2-T that reflects what information the Commission believes reporting parties should retain in order to meet the reporting obligation contained in the rule.