In the U.S., the Dodd-Frank Act was implemented in 2013 with the Commodities Futures Trading Commission (CFTC) mandated to enforce new trade reporting rules. The CFTC derivatives regulations differ substantially from EMIR rules that followed later in Europe.
Under CFTC regulations, counterparties to a derivative trade have the obligation to report the trade to an approved Swap Data Repository (SDR, the American name for a Trade Repository). In the U.S. normally only a single party must report the trade to a SDR, and that party is designated before or at the inception of the trade (normally the bigger, more technologically advanced party). Both counterparties MAY report the trade to an SDR, but this is very unusual.
This single-sided reporting under Dodd-Frank where the ‘Reporting Party’ reports one version of the transaction for both counterparties differs from the dual-sided approach adopted in Europe, where under EMIR both counterparties are required to report their side of the transaction. (Although in practice delegated reporting is permitted and often one counterparty will report both sides of the transaction on behalf of themselves and the counterparty).
The CFTC regulator also requires ‘Real Time’ price discovery reporting (RT) which must be done on an intraday basis “as soon as technically practical” (ASATP) with further details of the transaction to be reported intraday as they become available. EMIR by contrast does not have the RT reporting component and requires reporting no later than end of day on T+1.
The RT reporting is often referred to as ‘Part 43’ reporting, with reference to the act within Dodd-Frank that mandates the price discovery element. The reporting of the further details of the transaction are referred to as ‘Part 45’ reporting.
Further, CFTC trade reporting regulations generally apply only to the largest financial institutions with significant trade volume and notional risk. This generally covers sell-side banks with more than $50 billion in assets and “Major Swap Participants” (MSPs) on the buy side, such as mutual funds and institutional investment fund groups. Hedge funds typically utilize Prime Brokers / FCMs for their derivatives trade reporting. Large Asset Management firms with captive broker-dealers must report their derivatives trades to an SDR.
Under CFTC / Dodd-Frank rules, vanilla derivatives products such as IRS and CDS must be traded on approved Swap Execution Facilities (SEFs). Both the SEF and Designated Clearing Organization (DCO aka Clearing House if the trade is cleared) must report derivatives trades to an SDR.
CFTC derivatives trade reporting regulations cover nearly all derivative products except single security-based derivatives such as equity swaps and bond swaps. Whilst such single security-based derivatives are caught by the Dodd-Frank regulation the jurisdiction for these sits with the Securities and Exchange Commission (SEC) and not the CFTC. The SEC reporting rules (Security Based Swap Reporting – or SBSR) has yet to be implemented in the US.
Dodd-Frank also excludes the reporting of Exchange Traded Derivatives (ETDs) with the reasoning being that the exchanges are already heavily regulated and the data is available from the exchanges. This also differs with EMIR where the reporting firms are also required to report details of ETDs.
Since late 2015 the CFTC has engaged the market with a series of publications and consultations regarding rewriting the reporting rules. This work is ongoing with finalized revised reporting rules expected to come into force in late 2020 at the time of writing.