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Security-Based Swap Data Repositories

Dec. 19, 2017

The Dodd-Frank Act established a comprehensive framework for regulating the over-the-counter swaps markets. Title VII of that Act divides regulatory authority over swaps between the SEC and the Commodity Futures Trading Commission (CFTC). Under the law, the SEC has authority over “security-based swaps,” which are broadly defined as swaps based on (1) a single security or (2) a loan or (3) a narrow-based group or index of securities or (4) events relating to a single issuer or issuers of securities in a narrow-based security index. Information about registration, rules, and Security-Based swap entities can be found here.

About Security-Based Swap Data Repositories

Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act") establishes a comprehensive framework for regulating the security-based swap market. In particular, Section 763(i) of the Dodd-Frank Act added Section 13(n) of the Securities Exchange Act of 1934 ("Exchange Act"), which authorizes the Securities and Exchange Commission ("Commission") to adopt rules to govern security-based swap data repositories ("SDRs").

In an effort to enhance transparency in the security-based swap market, Congress established centralized recordkeeping facilities known as SDRs. The purpose of SDRs is to maintain accurate records of security-based swap transactions and the integrity of those records, and to provide these records to relevant authorities. These records may assist relevant authorities in:

  • Monitoring the build-up and concentration of risk exposures in the security-based swap market;
  • Preventing market manipulation, fraud, and other market abuses;
  • Performing prudential supervision and macroprudential (systemic risk) supervision; and
  • Resolving issues and positions after an institution fails.

Section 13(n) of the Exchange Act specifies the requirements and core principles with which SDRs are required to comply, including registering with the Commission.

SDR Registration, Duties and Core Principles, Reporting and Dissemination of Security-Based Swap Information

On February 11, 2015, the Commission adopted 21 new rules that would increase transparency and provide enhanced reporting requirements in the security-based swap market. The rules require SDRs to register with the Commission and establishes a framework for the reporting and public dissemination of security-based swap transactions.

The 12 core SDR rules create a framework for SDRs to register with the Commission by filing a new Form SDR and to update the filing when certain information becomes inaccurate. The rules would also provide a process for the Commission to cancel or revoke the registration of an SDR. The rules include an exemption from registration for certain non-U.S. persons performing the functions of an SDR within the U.S. when specific conditions are met.

Note: Persons interested in registering as an SDR must review applicable provisions of the Exchange Act as well as the applicable rules promulgated by the Commission thereunder before registering as an SDR.

The Commission also adopted Regulation SBSR-Reporting and Dissemination of Security-Based Swap Information ("Regulation SBSR") under the Exchange Act. Regulation SBSR establishes a framework for the reporting and public dissemination of security-based swaps through the adoption of Rules 900 to 909 of the Exchange Act. Registered SDRs are required to establish and maintain certain policies and procedures regarding how transaction data are reported and disseminated. In addition, Regulation SBSR will require a registered SDR to register with the Commission as a securities information processor.

Concurrent with its adoption of Regulation SBSR, the Commission proposed new rules, rule amendments and guidance to Regulation SBSR.

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