April 6, 2022 —The Securities and Exchange Commission today proposed new Regulation SE under the Securities Exchange Act of 1934 (the Exchange Act). The Regulation will create a regime for the registration and regulation of security-based swap execution facilities (SBSEFs). The new regulatory framework was one of the major reforms required under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) relating to the over-the-counter derivatives market.
“This proposal would increase the transparency and integrity of the traditionally opaque over-the-counter security-based swap market, fulfilling a mandate under the Dodd-Frank Act of 2010 to register and regulate the platforms that trade these instruments,” said SEC Chair Gary Gensler. “Among other things, today’s proposal would create a framework for the registration of security-based swap execution facilities, based upon the 14 core principles for these entities spelled out in the Dodd-Frank Act. This framework would harmonize with the swap execution facility framework promulgated by our sibling agency, the Commodity Futures Trading Commission.”
If adopted, today’s proposal would implement the Exchange Act’s trade execution requirement for security-based swaps and address the cross-border application of that requirement; implement Section 765 of the Dodd-Frank Act to mitigate conflicts of interest at SBSEFs and national securities exchanges that trade security-based swaps; and promote consistency between proposed Regulation SE and existing rules under the Exchange Act.
In developing this proposal, the Commission sought to harmonize as closely as practicable with parallel rules of the Commodity Futures Trading Commission (CFTC) that govern swap execution facilities (SEFs) and swap execution generally. The Commission seeks to obtain regulatory benefits comparable to those under the CFTC regime while minimizing costs imposed on SBSEFs and their members.
The Commission previously proposed rules regarding SBSEFs in three separate releases between 2010 and 2013. Given the length of time that has passed since they were issued and the significant market changes that have taken place in the interim, the Commission is withdrawing all previously proposed rules, rule amendments, and interpretations regarding SBSEFs.
The proposing release will be published on SEC.gov and in the Federal Register. The public comment period will remain open for 60 days following publication of the proposing release on the SEC’s website or 30 days following publication of the proposing release in the Federal Register, whichever period is longer.
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Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.