On July 31, 2025, the CFTC’s Division of Market Oversight (“DMO”) issued a letter in response to a request from the International Swaps and Derivatives Association and the Securities Industry and Financial Markets Association[1] regarding the CFTC’s regulations requiring swap reporting counterparties to notify the CFTC of their failure to timely correct errors in data submitted to swap data repositories.[2]
The CFTC’s error correction rules specifically provide that a reporting counterparty must correct any swap reporting error as soon as technologically practicable after discovery and that, in all cases, errors must be corrected within seven business days of discovery.[3] If a reporting counterparty determines that it will fail to timely correct an error, it must notify the Directors of DMO and the Division of Data (“DOD”)—or other designated CFTC employee—within 12 hours of such determination.[4] The notification must be in the form and manner specified by DMO and DOD, and must include an initial assessment of the scope of the error(s) and an initial remediation plan, if one exists.[5]
Consistent with the Associations’ reasoning, DMO stated its understanding that “submitting swap reporting error notifications imposes an unreasonable burden on reporting counterparties, given that the notifications have not been utilized as originally intended.”[6] Accordingly, the letter sets out the following no-action position:
- Five Percent Threshold: DMO will not recommend the CFTC take an enforcement action against a reporting counterparty that fails to submit a swap data error correction notification with respect to an error if, at the time the reporting counterparty initially discovers and assesses the impact of an error, the reporting counterparty makes a reasonable determination that the number of reportable trades affected by the error does not exceed five percent of the reporting counterparty’s open swaps for the relevant asset class in swaps for which it was the reporting counterparty.
- Calculating the Threshold: The relevant five percent threshold per asset class must be calculated by the reporting counterparty based on open swaps for purposes of the verification process required under CFTC Regulation 45.14.[7]
Reporting counterparties are not restricted from voluntarily contacting CFTC staff about errors.[8] Furthermore, reporting counterparties remain subject to their record retention obligations, which records the CFTC can access upon request.[9]
[1] CFTC Letter No. 25-25, Request for a No-Action Position Concerning the Commission’s Swap Data Error Correction Notification Regulations (July 31, 2025), available at https://www.cftc.gov/csl/25-25/download. Sullivan & Cromwell LLP represented the Associations in this request for a no-action position.
[2] 17 C.F.R. §§ 43.3(e)(1), 45.14(a)(1)(ii).
[3] 17 C.F.R. §§ 43.3(e)(1)(i), 45.14(a)(1)(i).
[4] 17 C.F.R. §§ 43.3(e)(1)(ii), 45.14(a)(1)(ii).
[6] The letter notes that DOD receives approximately 150 notifications per month from reporting counterparties, DCMs and SEFs.
[7] 17 C.F.R. § 45.14(b). For example, if the reporting counterparty is a swap dealer, the threshold will be calculated once every 30 calendar days based on the number of open swaps at the time the swap dealer performs the verification.
[8] The letter provides the following example: “[I]f a reporting counterparty identifies an error that does not exceed the relevant five percent threshold but that the reporting counterparty believes may significantly impact data quality for the [CFTC] or for users of publicly disseminated swap transaction and pricing data, staff welcome outreach or a swap reporting error notification to alert the [CFTC] of such an error.”
[9] See, e.g., 17 C.F.R. § 45.2(h).