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Volume XIII, Number 30


January 27, 2023

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End-User Recordkeeping and Reporting Requirements under Dodd-Frank

Users of derivatives—even those who only use them to hedge their commercial risks—have recordkeeping and reporting requirements that they should carefully consider.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) applies to all swap users.  If your company is an end-user—not a swap dealer or major swap participant, but a user of swaps to hedge commercial risks—you need to be aware of the recordkeeping and reporting obligations Dodd-Frank imposes on you.  In this On the Subject, we set out these requirements for end-users. 

Recordkeeping Requirements for End-Users

To start with recordkeeping, the requirements depend on when the swap is entered into: (1) Pre-enactment Swaps (entered into before July 21, 2010, and still open as of that date), (2) Transition Swaps (entered into after July 21, 2010, but prior to the effective date (not yet known) of the U.S. Commodity Futures Trading Commission’s (CFTC) final reporting rules), or (3) swaps entered into on or after the effective date of the upcoming Final Rules.  (Pre-enactment and Transition Swaps are collectively referred to as “Historical Swaps”).

  • Historical Swaps that expired before April 25, 2011: End-users must retain all information and documents in their possession that relates to each of these swaps.  For Pre-enactment Swaps, retain all information and documents possessed on October 14, 2010, and for Transition Swaps, retain all information and documents possessed on December 17, 2010.  It is not necessary to create any new information or to change the form or presentation of existing information. 
  • Historical Swaps that were in effect on or after April 25, 2011: End-users must retain the following information and documents with respect to these swaps
    • Identity and value
    • Date and time of execution
    • Price volume and payment provisions
    • Whether the swap was accepted for clearing, and if so by whom
    • Modifications of the terms of the swap
    • Confirmation terms and any amendments
    • Master agreement (and any modifications)
    • Credit support agreement (including modifications)
  • Swaps entered into after the effective date of the Final Rules: Once the compliance date for the Final Rules is published (expected to be in early 2013), end-users must follow these rules with respect to all swaps entered into on or after that date.  The Final Rules were adopted in January 2012, but the effective date was delayed, along with other Dodd-Frank final rules, until final rules for key definitional terms are published in the Federal Register.  The rules require much of the same information that has been required for Historical Swaps, but the characterization, quantity and format of the information to be maintained is much more specific.  In addition, those end-users eligible for the end-user exception from clearing must also retain all records demonstrating that they are entitled to the end-user exemption and the basis for their exemption.  Public company end-users who elect the end-user exception must be able to demonstrate their boards of directors have approved the decision not to clear their swaps.

Retention Requirements

Records must be retained throughout the life of the swap and for at lease five years afterwards.  End-users are allowed to keep their records in paper or electronic form and must be made available, upon request, to the CFTC, the U.S. Department of Justice, the U.S. Securities and Exchange Commission or any other authorized regulator.

Reporting Requirements for End-Users

End-users have some reporting requirements with respect to their swaps as set out in the remainder of this section.

  • Swaps executed on a trading facility: All reporting requirements for trades executed on a trading facility are done by the swap execution facility (SEF) or the designated contract market (DCM).  End-users must report any errors or omissions to the SEF or DCM where the swap was executed.
  • Reporting requirements for over-the-counter swaps: End-users have no reporting obligations for over-the-counter swaps that they enter into with swap dealers (SDs) or major swap participants (MSPs).  End-users that enter into a swap with another end-user, however, must determine which of the two end-users will be the “reporting party.”  The reporting party must report to the Swap Data Repository (SDR) “as soon as technologically practicable” (1) swap transaction and pricing information, which includes the time and date of execution, whether the swap is cleared, effective and end dates, price information and timestamps; (2) swap creation data, which include a swap’s primary economic terms; and (3) confirmation data, which includes swap transaction and pricing information, a number of other terms, and all of the terms agreed to in the confirmation, including the identity of the counterparties.  End-users with reporting obligations can hire third-party service providers to submit required information to SDRs.
    If the swap is not cleared, the reporting party must report valuation data on a daily basis and on the day on which a “life cycle event” occurs.  Life cycle events include assignments, novations, partial terminations, changes in cash flows, changes in the rates originally reported or changes in business structure.  In addition, the reporting party must report the primary economic terms, including all terms of a swap that are matched or affirmed by the counterparties in verifying the swap terms. 
  • Compliance with the new reporting rules: Compliance with the reporting rules will be phased-in by product and reporting entity.  End-users with reporting obligations will need to comply with the reporting rules for all of their swaps transactions 180 days after SDs and MSPs are required to start reporting for their interest rate and credit swaps.  Although final reporting dates have not been set yet, it is likely that the earliest that an end-user would be subject to reporting would be in early 2013.
© 2023 McDermott Will & EmeryNational Law Review, Volume II, Number 220

About this Author

In 1934 E.H. McDermott opened a law practice that focused exclusively on taxes. As chief counsel to the Joint Committee on Taxation of the United States Congress, McDermott observed firsthand how the rapidly expanding federal tax laws were affecting businesses and individuals. He recognized the need for a law firm to assist people and their businesses to understand and comply with their changing tax obligations.

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