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SEC Staff Provides Additional Economic Analysis on Proposed Derivatives Rule


Washington D.C., Nov. 1, 2016 —

Securities and Exchange Commission staff today made available additional economic analysis related to the Commission’s proposed rule regarding the use of derivatives by registered funds and business development companies.

The analysis is posted on the SEC’s website as part of the comment file for a rule proposed by the Commission in December 2015 that is designed to enhance the regulation of the use of derivatives by registered investment companies, including mutual funds, exchange-traded funds (ETFs) and closed-end funds, as well as business development companies. The proposed rule would limit funds’ use of derivatives and require them to put risk management measures in place, which would result in better investor protections.

The staff believes that the analysis will be informative for evaluating comments on the proposed rule that suggests its portfolio limitations should be based on risk-adjusted gross notional exposure, and that its asset segregation requirement should permit certain liquid assets other than cash or cash equivalents to be segregated against a fund’s derivatives exposures, subject to appropriate haircuts. 

Commenters suggest using risk-adjustment and haircut schedules that were originally developed for other regulatory purposes. The analysis evaluates the internal consistency of these schedules across asset classes and categories for purposes of risk-adjustment and risk-weighting with respect to the rule. The staff is making the analysis available to allow the public to consider this supplemental information.

Interested parties may provide comments. Comments may be submitted to the comment file (File No. S7-24-15) for the proposed rule.


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