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SEC Adopts Trade Acknowledgment and Verification Rules for Security-Based Swap Transactions

Rules Enhance Efficiency of the Securities-Based Swaps Market


Washington D.C., June 8, 2016 —

The Securities and Exchange Commission today announced that it has adopted rules that will establish timely and accurate trade acknowledgment and verification requirements for security-based swap (SBS) entities that enter into SBS transactions.  The rules are designed to promote the efficient and effective operation of the SBS market.
“These rules will result in more accurate and timely documentation for security-based swap transactions, which is a cornerstone of effective risk management,” said SEC Chair Mary Jo White.  “They mark another significant step in completing the comprehensive regulatory framework for security-based swaps required by the Dodd-Frank Act.” 
Under the new rules, SBS entities must provide a trade acknowledgment that contains all of the terms of the transaction.  Specifically, the rules require an SBS entity to: 
  • Provide a trade acknowledgment electronically to its transaction counterparty promptly, and no later than the end of the first business day following the day of execution
  • Promptly verify or dispute with its counterparty the terms of a trade acknowledgment it receives
  • Have written policies and procedures in place that are reasonably designed to obtain verification of the terms outlined in any trade acknowledgment that it provides
Recognizing the role of certain market infrastructures in the SBS market, the final rules exempt certain transactions that are processed through a registered clearing agency, or executed on a SBS execution facility or national securities exchange.  
The final rules also provide an exemption from the requirements of Exchange Act Rule 10b-10 for broker-dealers who are SBS entities and who satisfy the trade acknowledgment and verification requirements in the final rules.  In addition, the final rules address the potential availability of substituted compliance in connection with these requirements.  
The final rules are effective 60 days after publication in the Federal Register. These rules also establish a separate compliance date, which is based on the compliance date of the registration rules for SBS entities previously adopted by the Commission.


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