SEC Open Meeting, April 18, 2012
| FINAL RULE: CFTC/SEC Joint Final Rule on Swap Entity Definitions |
|Proposal Date||Comment Deadline||Final Rule Issue|
|December 21, 2010||February 22, 2011||April 2012|
The U.S. Securities and Exchange Commission (SEC) public meeting focused on finalizing rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act concerning the further definition of "swap dealer," "security-based swap dealer," "major swap participant," "major security-based swap participant" and "eligible contract participant," and is also a joint proposal with the Commodity Futures Trading Commission (CFTC).
Topics of Discussion
- Further defining "swap dealer," "security-based swap dealer," "major swap participant," "major security-based swap participant" and "eligible contract participant";
- Setting the de minimis threshold for these security-based swaps at $150 million and the phase-in level at $400 million;
- Identifying security-based swap dealer entities that specifically engage in dealing activity in this market; and
- Regulating only those market participants who engage in dealing activity above a de minimis amount.
CFTC/SEC Joint Final Rule on Swap Entity Definitions
Chairman Mary Schapiro, whose statements include:
- An introduction to Title VII, which includes mandates that dealers and major market participants register and be subject to regulation, and also defines "swap dealer," "security-based swap dealer," "major swap participant," and "major security-based swap participant";
- An overview of work done by the staff of the SEC's Division of Risk, Strategy and Financial Innovation; and
- A reminder that rules under Title VII are continuing, and that adopting definitions of these entities is "a foundational step in the establishment of the new regime to regulate trading in this significant market."
Commissioner Luis A. Aguilar, whose statements include:
- An explanation of the challenges surrounding the definition of "de minimis" in relation to swap dealer registration;
- Initial concerns that the $3 billion de minimis amount was set too high;
- A discussion of the phase-in period, during which staff will conduct a study to examine how the security-based swap market develops as a result of new regulation;
- A reminder that the SEC should be concerned with how these rules affect all market participants, and not just the entities defined by this rule; and
- Support for the rule.
Commissioner Troy A. Paredes, whose statements include:
- Support for the rule, which is supported by cost-benefit analysis;
- An explanation of the difficulties that surfaced in finding supporting data for where to draw the de minimis line; and
- A call for evaluation of actual consequences of the enforced rule, instead of relying solely on the anticipated potential consequences that traditional cost-benefit analysis uses.
Commissioner Daniel M. Gallagher, whose statements include:
- An introduction and an emphasis on the need for careful, thoughtful, data-driven rules; and
- "To me, this process has illustrated the benefits of the Commission structure and the deliberative Commission process. This is a difficult rulemaking, both substantively and, because it is a joint rulemaking, procedurally, and I applaud the engagement of my fellow Commissioners at both Commissions. That engagement has markedly improved the final product, and it has been a true pleasure to work directly with my colleagues on both Commissions."
- Opening Statement at SEC Open Meeting: Defining Swaps-Related Terms. SEC. Retrieved on April 18, 2012.
- Defining Security-Based Swap Dealers and Major Security-Based Swap Participants. SEC. Retrieved on April 18, 2012.
- Statement at Open Meeting to Adopt the Joint Final Rule, Joint Interim Final Rule, and Final Interpretations Regarding the Further Definition of “Swap Dealer,” “Security-Based Swap Dealer,” “Major Swap Participant,” “Major Security-Based Swap Participant,” and “Eligible Contract Participant”. SEC. Retrieved on April 18, 2012.
- Statement at Open Meeting to Adopt the Joint Final Rule, Joint Interim Final Rule, and Final Interpretations Regarding the Further Definition of "Swap Dealer," "Security-Based Swap Dealer," "Major Swap Participant," "Major Security-Based Swap Participant," and "Eligible Contract Participant". SEC. Retrieved on April 18, 2012.