SEC Adopts Additional Rules Related to Security-Based Swap Transaction Reporting

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

“This action ensures the public’s accessibility to transaction information, extends the scope of Regulation SBSR to additional entities and transactions and completes an important mandate under Title VII of the Dodd-Frank Act,” said SEC Chair Mary Jo White.  “By providing for the regulatory reporting and public dissemination of security-based swap transactions, Regulation SBSR will bring much-needed transparency to the security-based swap market.”

Among other things, the final rules:

• Assign the reporting duties for platform-executed security-based swaps that will be submitted to clearing and for security-based swaps resulting from the clearing process

• Establish regulatory reporting and public dissemination requirements for certain cross-border security-based swaps

• Prohibit registered swap data repositories (SDRs) from imposing fees or usage restrictions on the security-based swap transaction data that Regulation SBSR requires them to publicly disseminate. 

The Commission also is issuing guidance with respect to the application of Regulation SBSR to security-based swaps resulting from prime broker arrangements and from the allocation of cleared security-based swaps.

The rules also establish a new compliance schedule for the portions of Regulation SBSR for which the Commission has not previously specified compliance dates.  Compliance for these portions of Regulation SBSR will be phased in over a period of months, beginning on the first Monday that is the later of: six months after the date on which the first SDR that can accept transaction reports in an asset class registers with the Commission; or one month after security-based swap dealers and major security-based swap participants are required to register with the Commission.

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FACT SHEET

Regulation SBSR – Reporting and Dissemination of Security-Based Swap Information

SEC Open Meeting

July 13, 2016

Action

The Commission will consider whether to adopt rules and guidance related to the reporting and public dissemination of security-based swap transaction data designed to enhance transparency in the security-based swap market and ensure that swap data repositories (SDRs) maintain complete and accurate records that can be accessed by regulators.  The rules and guidance would also provide market participants with more comprehensive information with which to make trading and valuation decisions.

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

Highlights

The final rules and guidance addressing security-based swap data reporting and public dissemination, known as Regulation SBSR, would:

• Require a national securities exchange or security-based swap execution facility to report a security-based swap executed on the platform that will be submitted to clearing
• Require a registered clearing agency to report any security-based swap to which it is a direct counterparty, as well as whether or not the clearing agency accepts a transaction for clearing
• Prohibit a registered SDR from imposing fees or usage restrictions on the security-based swap transaction data that it is required by Regulation SBSR to publicly disseminate
• Require any security-based swap transaction connected with a non-U.S. person’s security-based swap dealing activity that is arranged, negotiated, or executed by personnel of such non-U.S. person located in a U.S. branch or office—or by personnel of its agent located in a U.S. branch or office—to be reported and publicly disseminated
• Provide guidance regarding the application of Regulation SBSR to security-based swaps resulting from prime brokerage arrangements and from the allocation of cleared security-based swaps
• Establish a compliance schedule for the portions of Regulation SBSR for which the Commission has not previously specified compliance dates.  Under the new compliance schedule, transaction reporting will not begin until after security-based swap dealers and major security-based swap participants have registered with the Commission. 

Other Regulators

In June 2016, the U.S. Commodity Futures Trading Commission (CFTC) adopted rules that amended the CFTC’s existing swap reporting requirements to provide additional clarity with respect to the reporting of cleared swap transactions.  The Commission staff consulted with the staff of the CFTC during this rulemaking.

Background

Dodd-Frank Act—The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act established a comprehensive framework for regulating the over-the-counter derivatives market.  Title VII of the Dodd-Frank Act gave the Commission regulatory authority over security-based swaps and certain key players in that market, including security-based swap dealers and major security-based swap participants.  Title VII, among other things, amends the Securities Exchange Act of 1934 to address the registration, regulation, and business conduct standards of security-based swap dealers; the registration and duties of security-based swap data repositories; the reporting and public dissemination of security-based swaps; and the mandatory clearing and trade execution of certain security-based swaps.

Final Regulation SBSR and Related Proposed Rules—The Commission adopted Regulation SBSR in February 2015.  Among other things, Regulation SBSR set forth the information that must be reported and publicly disseminated for each security-based swap transaction, assigned the reporting duties for many security-based swap transactions, required SDRs registered with the SEC to establish and maintain policies and procedures for carrying out their duties under Regulation SBSR, and addressed the application of Regulation SBSR to certain cross-border transactions.  At the same, the Commission issued a companion release proposing additional provisions of Regulation SBSR to address issues not covered in the first adoption.  The companion proposing release included new provisions for the reporting of platform-executed security-based swaps that will be submitted to clearing and for security-based swaps resulting from the clearing process.  In April 2015, the Commission proposed rules that, among other things, addressed the application of Regulation SBSR to security-based swap activity of non-U.S. persons within the United States.  The rules and guidance being considered today would address these open issues.

What’s Next?

If approved for publication by the Commission, the rules will be published on the Commission’s website and in the Federal Register.  They will become effective 60 days after publication in the Federal Register.  The rules also would establish a compliance schedule for the portions of Regulation SBSR for which the Commission has not previously specified compliance dates.  Compliance with these portions of Regulation SBSR will be phased in over a period of months, beginning on the first Monday that is the later of:  six months after the date on which the first SDR that can accept transaction reports in an asset class registers with the Commission; or one month after security-based swap dealers and major security-based swap participants are required to register with the Commission.