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SEC adopts rules to increase transparency in security-based swap market

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The SEC has adopted two sets of rules requiring security-based swap data repositories (SDRs) to register with the SEC and prescribe reporting and public dissemination requirements for security-based swap transaction data.  

The SEC also proposed certain additional rules, rule amendments and guidance related to the reporting and public dissemination of security-based swap transaction data.  The new rules are designed to increase transparency in the security-based swap market and to ensure that SDRs maintain complete records of security-based swap transactions that can be accessed by regulators.

The rules implement mandates under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

“These rules go to the core of derivatives reform by establishing a strong foundation for transparency and efficiency in the market,” says SEC Chair Mary Jo White.  “They provide a powerful framework for trade reporting and the public dissemination of information that addresses blind spots exposed by the financial crisis.”

The rules require an SDR to register with the SEC and set forth other requirements with which SDRs must comply.  The rules also provide an exemption from registration for certain non-U.S. SDRs when specific conditions are met. 

The rules addressing security-based swap data reporting and public dissemination, known as Regulation SBSR, outline the information that must be reported and publicly disseminated for each security-based swap transaction.  In addition, the rules assign reporting duties for many security-based swap transactions and require SDRs registered with the SEC to establish and maintain policies and procedures for carrying out their duties under Regulation SBSR.  Under the rules, the Commission is recognising the Global Legal Entity Identifier System as the system from which security-based swap counterparties must obtain codes to identify themselves when reporting security-based swap data.  The rules also address the application of Regulation SBSR to cross-border security-based swap activity and include provisions to permit market participants to satisfy their obligations under Regulation SBSR through compliance with the comparable regulation of a foreign jurisdiction. 

The proposed rule amendments would assign reporting duties for certain security-based swaps not addressed by the adopted rules, prohibit registered SDRs from charging fees to or imposing usage restrictions on the users of publicly disseminated security-based swap transaction data, and provide a compliance schedule for certain provisions of Regulation SBSR.

“We carefully considered comments received and the workability of the rules and rule proposal in the context of the existing CFTC regimes for swap data repositories, swap data reporting and public dissemination,” says Steve Luparello, Director of the SEC’s Division of Trading and Markets. “Today’s measures are robust and appropriately tailored to the security-based swap market.”

The new rules will become effective 60 days after they are published in the Federal Register.  Persons subject to the new rules governing the registration of SDRs must comply with them by 365 days after they are published in the Federal Register. The compliance date for certain provisions of Regulation SBSR is the effective date, and the Commission is proposing compliance dates for the remaining provisions of Regulation SBSR in the proposed amendments release.

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