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55 WATER STREET
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TEL: 212-855-3240
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April 29, 2015
The Honorable Scott Garrett
Chairman, House Financial Services Subcommittee
on Capital Markets and Government Sponsored Enterprises
2129 Rayburn House Office Building
Washington, DC 20515
The Honorable Carolyn B. Maloney
Ranking Member, House Financial Services Subcommittee
on Capital Markets and Government Sponsored Enterprises
2129 Rayburn House Office Building
Washington, DC 20515
Dear Chairman Garrett and Ranking Member Maloney,
On behalf of The Depository Trust & Clearing Corporation (“DTCC”), I applaud the recent
introduction of H.R. 1847, the Swap Data Repository and Clearinghouse Indemnification
Correction Act by Representative Rick Crawford (R-AR), and the Subcommittee’s consideration
of the legislation today.
H.R. 1847 is a bipartisan piece of legislation that would eliminate the Dodd-Frank Wall Street
Reform and Consumer Protection Act’s (“Dodd-Frank”) requirement for swap data repositories
(“SDRs”) to obtain indemnification agreements before sharing information with regulators. A
legislative remedy is the only way to remove these provisions that threaten global information
sharing and systemic risk oversight.
The indemnification requirements in Section 21(d) of the Commodity Exchange Act (“CEA”)
and Section 13(n)(5)(H) of the Securities Exchange Act of 1934, as amended by Dodd-Frank,
require—prior to sharing information with various regulatory authorities1—that (i) registered
SDRs receive a written agreement from each entity stating that the entity shall abide by certain
confidentiality requirements relating to the information on swap transactions that is provided,
and (ii) each entity must agree to indemnify the SDR and the Commodity Futures Trading
Commission (“CFTC”) or Securities and Exchange Commission (“SEC”), respectively, for any
expenses arising from litigation relating to the information provided.
1
Such regulatory authorities include U.S. prudential regulators, the Financial Stability Oversight Council, the
Department of Justice, foreign financial supervisors (including foreign futures authorities), foreign central banks,
and foreign ministries.
In practice, these provisions have proven to be unworkable. These requirements run counter to
policies and procedures adopted by regulatory bodies globally to safeguard and share
information, pose a significant barrier to the ability of regulators globally and within the U.S. to
effectively utilize the transparency offered by SDRs, and may have the effect of precluding U.S.
regulators from seeing data housed at non-U.S. repositories. It is important to note that these
provisions also limit access to and sharing of data among U.S. authorities such as the CFTC,
SEC, the Federal Reserve Bank, and the Office of Financial Research.
Concerns regarding global information sharing have been echoed by regulatory officials and
policymakers globally. In an August 2013 report, the Committee on Payment and Settlement
Systems and the Board of the International Organization of Securities Commissions highlighted
that legal obstacles may preclude trade repositories from providing critical market data and
encouraged the removal of legal obstacles or restrictions to enable effective and practical access
to data.2 During a February hearing this year before the House Agriculture Committee, CFTC
Chairman Timothy Massad stated that removal of the indemnification provisions would facilitate
the sharing of information and collaboration among regulators to monitor risk.3 CFTC
Commissioner J. Christopher Giancarlo and Commissioner Mark Wetjen also identified
indemnification as a priority issue and expressed support for a legislative fix during an April
hearing before the House Agriculture Subcommittee on Commodity Exchanges, Energy and
Credit.4 In addition, SEC Commissioner Michael Piwowar recently voiced his concern and called
for removal of the indemnification provisions.5
DTCC strongly supports legislation that would fix this problem and encourages the Committee
to support H.R. 1847. This non-controversial, technical amendment would help to ensure
regulators and the public obtain a consolidated and accurate view of the global over-the-counter
(“OTC”) derivatives marketplace.
Ongoing Support for Legislative Fix
Legislation such as H.R. 1847 is the only viable solution to address the unintended consequences
of the indemnification provisions. As you know, legislation similar to H.R. 1847 was introduced
in the 113th Congress and passed the House in a 420-2 recorded vote. The Swap Data Repository
2
See CPSS-IOSCO, Authorities’ access to trade repository data (Aug. 2013).
3
For example, Chairman Massad stated that if legislation “did remove [the indemnification] provision, then it would
facilitate . . . the sharing of information.” See 2015 Agenda for CFTC: Hearing Before the H. Comm. On Ag., 114th
Cong. (2015) (colloquy between Chairman Massad and Congressman Eric Crawford).
4
See Testimony of CFTC Commissioner J. Christopher Giancarlo Before the U.S. House of Representatives,
Committee on Agriculture, Subcommittee on Commodity Exchanges, Energy, and Credit (April 14, 2015); available
at http://agriculture.house.gov/sites/republicans.agriculture.house.gov/files/images/Giancarlo%20Testimony.pdf; see
also Testimony of Mark Wetjen, Commissioner, CFTC, Before the U.S. House Committee on Agriculture,
Subcommittee on Commodity Exchanges, Energy, and Credit (April 14, 2015); available at
http://agriculture.house.gov/sites/republicans.agriculture.house.gov/files/images/Wetjen%20Testimony.pdf.
Commissioner Michael Piwowar, Secs. and Exch. Comm’n, Remarks at the International Swaps and Derivatives
Association 30th Annual General Meeting (Apr. 22, 2015).
5
and Clearinghouse Indemnification Correction Act of 2013 (H.R. 742) focused on resolving
issues surrounding the indemnification provisions and confidentiality requirements of DoddFrank by removing the provisions from the law. H.R. 742 was supported by the SEC6 and three
CFTC Commissioners.7 Additionally, in a May 2013 letter8 to the Senate Committee on
Agriculture, Nutrition & Forestry, the Americans for Financial Reform (“AFR”) noted that H.R.
742 was a “non-controversial technical correction that could improve regulatory effectiveness.”
Further, in March 2015, AFR stated in testimony before the Senate Committee on Banking,
Housing and Urban Affairs that the organization supported the legislation.9 In the same hearing,
the U.S. Chamber of Commerce also announced its support for removal of the indemnification
provisions.10
In June 2014, the House passed the Customer Protection and End-User Relief Act (H.R. 4413) to
reauthorize the CFTC and amend certain CFTC provisions included in Dodd-Frank. A key
component of H.R. 4413 was the addition of legislation, including H.R. 742, which passed the
House Agriculture Committee and the House of Representatives with overwhelming bipartisan
support.
DTCC is pleased that removing the indemnification provisions from Dodd-Frank remains an
ongoing priority for the current Congress. Earlier this year, the House passed H.R. 37, which also
included indemnification correction provisions.
DTCC encourages swift passage of H.R. 1847, and looks forward to continuing work with the
Subcommittee on strengthening the global financial marketplace.
6
See Chairman Elisse Walter, Secs. and Exch. Comm’n, Remarks at the American Bar Association Spring Meeting,
Regulation of Cross-Border OTC Derivatives Activities: Finding the Middle Ground (Apr. 6, 2013).
7
See Commissioner Jill Sommers and Commissioner Scott O’Malia, Dissenting Statement, Interpretative Statement
Regarding the Confidentiality and Indemnification Provisions of Section 21(d) of the Commodity Exchange Act,
available at http://www.cftc.gov/PressRoom/SpeechesTestimony/sommers_omailadissentstatement; see also DoddFrank Derivatives Reform: Challenges Facing U.S. and International Markets: Hearing Before the H. Comm. on
Agric., 112th Cong. (2012) (Commissioner Bart Chilton expressing support for a legislative solution), transcript
available at http://agriculture.house.gov/sites/republicans.agriculture.house.gov/files/transcripts/112/11235New.pdf.
8
Letter from Americans for Financial Reform (May 3, 2013), available at
http://www.ag.senate.gov/download/?id=90d5a93c-5a4e-458c-9a67-e2135b17aff8.
9
See Testimony of Marcus M Stanley, Policy Director, Americans for Financial Reform, Before the Securities,
Insurance, and Investment Subcommittee, Committee on Banking, Housing, and Urban Affairs (Mar. 24, 2015),
available at http://www.banking.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=a2014b6be08e-49f8-98b8-0d946871bf30.
10
See Statement of the U.S. Chamber of Commerce on Capital Formation and Reducing the Small Business
Burdens, To Senate Subcommittee on Securities, Insurance, and Investments (Mar. 24, 2015), available at
http://www.banking.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=1eed5aaf-18f7-45f0-b3db6e63d1d001d9.
About DTCC
DTCC is a user-owned cooperative that serves as the primary financial market infrastructure
serving the U.S. capital markets across multiple asset classes, including equities, corporate and
municipal bonds, government and mortgage-backed securities, money market instruments,
mutual funds, insurance, alternative investment products and OTC derivatives.
DTCC has operating facilities and data centers around the world and, through its subsidiaries,
automates, centralizes, and standardizes the post-trade processing of financial transactions
enabling thousands of institutions worldwide to issue securities and raise capital to build
businesses. DTCC provides critical infrastructure to serve the financial marketplace and its
constituents, including investors, commercial end-users, broker-dealers, banks, insurance
carriers, and mutual funds.
DTCC has extensive experience operating repositories to support derivatives trade reporting and
enhance market transparency. Through regulated DTCC subsidiaries, DTCC supports regulatory
reporting regimes in the U.S., Europe, Japan, Australia, Singapore, Hong Kong, and Canada.
DTCC’s subsidiary, the DTCC Data Repository (U.S.) LLC (“DDR”), is provisionally registered
as an SDR with the CFTC for credit, equity, interest rate, foreign exchange, and commodity
derivatives in the U.S. DDR began accepting trade data from market participants on October 12,
2012 – the first day that financial institutions began trade reporting under Dodd-Frank. DTCC –
through its Trade Information Warehouse – has been providing public aggregate information for
the credit default swap market on a weekly basis, including both open positions and turnover
data, since January 2009. This information is available, free of charge, on www.dtcc.com.
Additionally, DTCC – in collaboration with SWIFT – operates the Global Markets Entity
Identifier (“GMEI”) utility to assign legal entity identifiers (“LEIs”). The GMEI utility has
assigned LEIs to and maintains reference data corresponding to more than 175,000 legal entities
across more than 140 jurisdictions, representing approximately 50 percent of all global LEIs that
have been assigned.
Sincerely,
Larry E. Thompson
Vice Chairman and General Counsel
Cc:
Honorable Jeb Hensarling
Chairman, House Financial Services Committee
Honorable Maxine Waters
Ranking Member, House Financial Services Committee