As the big day fast approaches, all market participants are furiously testing and making final tweaks to their internal reporting functionality to ensure they meet their compliance commitments. The last thing the market wanted is any last-minute curve balls. On Friday, the Securities and Exchange Commission (SEC) decided to throw that curve ball and release a set of FAQs which could see many fall short in their ability to report their Price Dissemination data on time. Of the nine questions presented, it was Question One which proved contentious. The SEC confirmed the following: 

• Firms are not allowed to use a combination of both the No-Action Relief (NAR) and the 24-hour timeframe for following public dissemination protocols 
• If a firm decides to enact the NAR (aligning to CFTC reporting requirements), the reporting of publicly disseminated information must follow CFTC timelines (i.e. ASATP) 
• If a firm intends to make use of the 24-hour period to submit their Public Price Dissemination (PPD) report, they must submit the SEC data set (rules 901c and 901d) 

 

It’s like running the London marathon and finding out that when you get to Buckingham Palace you need to go back to mile 13 and still hit the time you originally had in mind.   

This clarification gives rise to a number of issues and implicates both reporting firms and Swap Data Repositories (SDRs): 

• The 24-hour period is critical for firms given the SEC has not finalised block size rules for large notional delays 
• SDRs are not setup to receive the SEC data set. It’s been assumed that all firms would follow CFTC reporting and any change now would require significant time and investment to incorporate SEC reporting requirements into their existing repositories. If preparing for the forthcoming changes off the back of the CFTC rewrite wasn’t enough, this is a headache all SDRs could do without 

• Firms will not have the time to change their existing reporting functionality to report SEC PPD requirements this close to go-live date. Significant investment has gone into change programmes to leverage existing infrastructure. This could all be for nothing should firms have to ‘start again’ and invest more resource into new change programmes. 

 

Based on the emergency industry call held last Friday, reaction to the recent publication is as expected – why would the SEC decide to publish this message so close to the compliance date and without any warning? Furthermore, the SEC have alluded to removing the NAR altogether and given the relief is embedded within the regulation and not just a staff letter, it poses the question as to whether the SEC must provide 12 months’ notice before withdrawing it?  

In response to this, the following two options seem the most reasonable: 

• Remove Question One from the FAQs in its entirety 
• Failing that, change the enforcement date referenced in the FAQ from 8th November 2021 to 14th February 2022 to allow further discussion. Whilst this doesn’t mean they’re accepting the SEC’s latest decision; it does allow for debate and compromise ahead of go-live date of 14th February 2022 to publicly disseminate information 

 

Firms across the marketplace will be waiting nervously for the SEC to make their next move. Will all the good work completed so far be for nothing? Or can a reasonable compromise be reached?