Washington D.C., Dec. 18, 2019 — The Securities and Exchange Commission today adopted a package of rule amendments, guidance, and a related order to expand and improve the framework for regulating cross-border security-based swaps, including single-name credit default swaps. The adoption of this package also stands up the Commission’s broad security-based swap regulatory regime as it triggers the compliance date for security-based swap entities to register with the Commission and the implementation period for previously adopted rules under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. These rules establish a coherent approach to the regulation of margin, capital, segregation, recordkeeping and reporting and business conduct for security-based swaps.
The final rule amendments and guidance adopted today build upon the Commission’s experience with the multi-faceted, multi-jurisdictional security-based swap market, and prior Commission actions, in four key areas:
the use of transactions that have been “arranged, negotiated, or executed” by personnel located in the United States as a trigger for enhanced U.S. regulation of security-based swaps and market participants;
the requirement that nonresident security-based swap dealers and major security-based swap participants (collectively known as “SBS Entities”) provide a certification and opinion of counsel regarding the ability of the Commission to access information and conduct onsite examinations;
the cross-border application of statutory disqualification provisions; and
questionnaires or employment applications that registered SBS Entities must maintain with regard to their foreign associated persons.
The rule amendments are intended to improve the regulatory framework by pragmatically addressing implementation issues and efficiency concerns, including jurisdiction-specific data privacy requirements and broader issues of international comity. In addition, the rule amendments and guidance reflect consultation with the Commodity Futures Trading Commission (CFTC). Many market participants are active in markets regulated by both the Commission and the CFTC, as such participants may use instruments regulated by the Commission to hedge risks in products regulated by the CFTC, and vice versa.
Jay Clayton, SEC Chairman
“The rules adopted today are the culmination of many years of effort on the part of the staff and the Commission to put in place OTC derivatives reforms for the global security-based swap market,” said SEC Chairman Jay Clayton. “Our Division of Trading and Markets and our Office of International Affairs have worked tirelessly to construct a rule set that effectively implements our Title VII regime in a manner that is consistent with a vast array of international requirements. Our counterparts in many jurisdictions also worked diligently and constructively with us with a focus on improving regulation globally.”
“More broadly, today’s action represents a significant milestone in standing up the security-based swap regime under Title VII, as it starts the clock on compliance and implementation,” added the Chairman. “I once again would like to thank my colleague Commissioner Peirce for her extraordinary efforts in leading these initiatives.”
“These rules represent the Commission’s efforts to stand up an effective regulatory regime for security-based swaps that recognizes the importance of these markets,” said Commissioner Hester Peirce.“Today’s measures will allow foreign dealers a realistic path to register with the Commission, maintain an active presence in U.S. markets, and use U.S. personnel to serve their clients here and abroad.”
“I have particularly enjoyed working closely with our staff, who have put enormous effort into grappling with these complex issues,” added Commissioner Peirce. “I am also thankful for Chairman Clayton’s determination to complete this long-delayed rulemaking and for the opportunity to play a significant role in this effort.I look forward to further engagement with other regulators and market participants, including through substituted compliance applications, as we move toward the registration compliance date.”
The accompanying fact sheet describes the amendments and guidance in more detail.
Filed 19 December 2019, 21:34 GMT.
The Industry Spread
Editorial Team
Wire copy, announcements and unsigned notes filed by the desk.
Washington D.C., Dec. 18, 2019 — The Securities and Exchange Commission today adopted a package of rule amendments, guidance, and a related order to expand and improve the framework for regulating cross-border security-based swaps, including single-name credit default swaps. The adoption of this package also stands up the Commission’s broad security-based swap regulatory regime as it triggers the compliance date for security-based swap entities to register with the Commission and the implementation period for previously adopted rules under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. These rules establish a coherent approach to the regulation of margin, capital, segregation, recordkeeping and reporting and business conduct for security-based swaps.
