September 28, 2017

VIA: www.cftc.gov/projectkiss

Christopher Kirkpatrick
Secretary of the Commission
U.S. Commodity Futures Trading Commission
Three Lafayette Center
1155 21st St. NW
Washington, DC 20581

Re: Commodity Futures Trading Commission Request for Information: Project KISS – Recordkeeping (RIN 3038-AE55)

Dear Mr. Kirkpatrick:

The Securities Industry and Financial Markets Association (“SIFMA”)1 appreciates the opportunity to comment on the Request for Information (“RFI”) issued by the Commodity Futures Trading Commission (“CFTC” or “Commission”) as a part of the Project KISS initiative.2 SIFMA supports the Commission’s effort to review its rules, regulations, and practices and to identify those areas that can be simplified, thereby reducing burdens and costs.3 As further outlined below, certain recordkeeping requirements implemented pursuant to Title VII under the Dodd-Frank Act should be included in this review and changed accordingly.

We note that amending Rule 1.31 in May 2017 was an important first step in modernizing and simplifying the CFTC recordkeeping requirements. We believe, however, that additional changes could be made that would further simplify recordkeeping requirements without harming investors. We have outlined a summary of each suggestion below along with an appendix for your reference.

A. Voice Recording

In the wake of Dodd-Frank implementation, the CFTC adopted rules requiring swap dealers and major swap participants (“MSPs”) to retain voice recordings that lead to the execution of swap or related cash or forward transaction for a period of one year from the date of creation.4 To comply with these rules, many firms implemented complex vendor systems for recording landlines and some mobile phones at great expense. SIFMA believes that the costs and many compliances challenges of this rule outweigh the benefits. Such challenges include privacy restrictions, data exporting, cross border transfer issues, and state and foreign legal requirements to notify all individuals on the call.

SIFMA recommends that the Commission issue no-action relief that clearly states that registered swap dealers and MSPs do not have an affirmative obligation to record telephone conversations; however, if voice communications are recorded pursuant to other U.S. rules or requirements, then Rule 23.202 retention requirements would apply.5 Such a standard would comply with the language in Section 4s(g)(1) of the Commodity Exchange Act (“CEA”) and would align with the Securities and Exchange Commission’s (“SEC”) voice recording retention requirements. 6

B. Identifiability and Searchability

Commission rules require firms to maintain transaction records that are identifiable and searchable by transaction and counterparty.7 Firms continue to face compliance challenges with this rule, particularly with voice records. Although firms can use phone numbers to identify transaction counterparties, systems cannot process numbers that are blocked or shared.

SIFMA recommends that the Commission amend Rule 23.201(a)(1) by removing the “identifiable and searchable” requirement, which would harmonize part 23 with the recent amendments to Rule 1.31. The Commission would still be able to compel firms to produce information under the production requirements in Rule 1.31.

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1 SIFMA represents these broker-dealers, banks and asset managers whose nearly one million employees provide access to the capital markets, raising over $2.5 trillion for businesses and municipalities in the U.S., serving clients with over $20 trillion in assets and managing more than $67 trillion in assets for individual and institutional clients including mutual funds and retirement plans. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).

2 Project KISS, 82 Fed. Reg. 21,494 (May 9, 2017).

3 See Press Release, available at: http://www.cftc.gov/PressRoom/PressReleases/pr7555-17.

4 17 CFR §§ 1.35, 23.202(a), & 23.202(b).

6 17 CFR § 240.17a-4(b)(4) (“Rule 17a-4(b)(4)”); see also Recordkeeping and Reporting Requirements for Security-Based Swap Dealers, Major Security-Based Swap Participants, and Broker-Dealers; Capital Rule for Certain Security-Based Swap Dealers, 79 Fed. Reg. 25,194, 25,214 (May 2, 2014), https://www.gpo.gov/fdsys/pkg/FR-2014-05-02/pdf/2014-09108.pdf (“[Though the SEC] has not previously interpreted the term communications to include telephonic communication…this proposed requirement…[would require a broker-dealer] to preserve for three years telephone calls that it chooses to record to the extent the calls are required to be maintained pursuant to section 15F(g)(1) of the Exchange Act.”) (emphasis in original)(citations omitted).

7 17 CFR §§ 1.31, 23.201(a)(1) & 23.202(a)-(b).