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U.S. Securities and Exchange Commission

Speech by SEC Commissioner:
Statement at Open Meeting to Propose Rules Regarding the Registration and Regulation of Security-Based Swap Execution Facilities (Regulation SB SEF)


Commissioner Troy A. Paredes

U.S. Securities and Exchange Commission

Washington, D.C.
February 2, 2011

Thank you, Chairman Schapiro.

Section 763 of the Dodd-Frank Act amends the Exchange Act to authorize the Commission to adopt rules regarding the registration and regulation of security-based swap execution facilities ("SB SEFs"). Pursuant to this authority, the Commission is proposing these rules.

I support the recommendation before us. The proposing release solicits comment on a range of topics and asks a number of specific questions. As always, I look forward to considering the comments we will receive. I am particularly interested in comments that address the following:

  1. What are the practical consequences of the Commission's proposed interpretation of the definition of SB SEF? In particular, how might trading in security-based swaps be affected if the definition of SB SEF were interpreted more expansively? More narrowly? How might the proposed interpretation of SB SEF influence where a participant chooses to trade — in the U.S. or in another jurisdiction?

  2. What is the effect of permitting a participant to choose to send an RFQ to one liquidity provider on an SB SEF so long as the participant has the ability to send its RFQ to more than one liquidity provider on the SB SEF? How might affording a participant such choice benefit the participant?

  3. Are specific core principles as proposed to be applied to SB SEFs unduly burdensome? What specific refinements to the core principles could reduce any such burdens but without appreciably frustrating the policy goals animating the regulation?

  4. To what extent and in what ways might it be appropriate to phase-in certain of the core principles? For example, should the regulatory demands to which an SB SEF is subject be eased when volumes on the SB SEF are low and then increased as volumes rise — akin to the regulatory approach at work in Regulation ATS where regulatory obligations were scaled so as to encourage entry and competition?

I'd like to join my colleagues in thanking the staff — particularly those from the Division of Trading and Markets and the Division of Risk, Strategy, and Financial Innovation — for your hard work on this proposal and your thoughtful approach.


Modified: 02/02/2011