SEC Final Rules: Security-Based Swap Data Repositories

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Gavel.png FINAL RULES: Approved January 14, 2015. Entered Federal Register March 19, 2015. Effective May 18, 2015.
Dodd-Frank Timeline, Real Time Public Reporting of Swap Transaction and Pricing Data, SEC
Final Rule Issue/New Proposal Proposal Comment Deadline Effective Date, Final Rule
March 19, 2015 May 4, 2015 May 18, 2015
Dodd-Frank Timeline, Swap Data Repository Registration, Duties and Core Principles Regulation, SEC
Reopened Comment Period Deadline Final Rule Issue Effective Date
July 22, 2013 March 19, 2015 May 18, 2015

Among the mandates of the Dodd-Frank Act are requirements that regulatory agencies such as the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) create a framework for the transmission, submission, and storage of swap data. As of June 2012, the CFTC had finalized four swap data rulemakings - Registration and Regulation of Swap Data Repositories, Swap Data Recordkeeping and Reporting Requirements and Real-Time Public Reporting of Swap Transaction Data, and Swap Data Recordkeeping and Reporting Requirements: Pre-Enactment and Transition Swaps.

On January 14, 2015, the SEC approved a set of final rules Regulation SBSR. The first rule establishes registration, duties and core principles of security-based swap data repositories and the second, Regulation SBSR, outlines the reporting and dissemination procedures for security-based swap information.

The rules entered the Federal Register on March 19, 2015 and become effective May 18, 2015. Security-based swap data repositories will be required to comply with the new rules on registration, duties and core principles by March 18, 2016. For certain aspects of Regulation SBSR, the compliance dates are being proposed in a separate release.

Background

On November 19, 2010, the SEC held an open meeting concerning rules entailing how security-based swap transactions should be reported and publicly disseminated under the Dodd-Frank Act. Among the topics at this meeting were the parties responsible for reporting security-based swap information, the specific information to be reported, and the destination of the reported information.[1] Proposed rules were added to the Federal Register on December 2, 2010.

Regulation SBSR was re-proposed in May 2013 in conjunction with the agency's rules on cross-border activities. The cross-border rules were finalized in June 2014.

Rule Summaries

Duties and Core Principles

Under the final rules, SDRs must:

  • register with the SEC.
  • designate a Chief Compliance Officer (CCO) responsible for preparing, certifying and filing with the SEC, a periodic compliance report.
  • establish governanace arrangements with "effective" internal controls, fair representation of market participants, an inclusive process for the election of the SDR's directors, and implement written policies and procedures to ensure that the leadership of the SDR have appropriate skills and expertise.[2]

The rules also provide an exemption from registration for certain non-U.S. SDRs when specific conditions are met.

Regulation SBSR

Reg. SBSR applies to transactions involving U.S. persons and registered broker-dealers and designed to "promote transparency" in the dissemination of swap data. Under the final rules, security-based swap information must be reported to an SDR within 24 hours of execution, with data accessible by the commission. The regulation also requires SDRs to publicly disseminate a report of any transaction they receive, immediately upon receipt.

Reg. SBSR also mandates a global legal entity identifier system to facilitate reporting and analysis across multiple swap data repositories. The LEI system calls for unique trader identification to allow the SEC and other regulators to monitor swap activity for systemic risks.

July 2016 Amendments

In July 2016, the SEC adopted amendments and guidance related to rules regarding the regulatory reporting and public dissemination of security-based swap transactions (Regulation SBSR). The new rules do things such as:

  • 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, and
  • 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. [3]


Related Documents: Final 2015 Rules - Registration, Duties and Core Principles; Reg. SBSR - Dissemination of Swap Information

References

  1. Press Release - SEC Proposes Rules on Security-Based Swap Reporting. SEC. Retrieved on November 19, 2010.
  2. SEC Adopts New Rules. Cahill. Retrieved on March 6, 2015.
  3. SEC Adopts Additional Rules Related to Security-Based Swap Transaction Reporting. The Securities and Exchange Commission. Retrieved on July 25, 2016.

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