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U.S. Securities and Exchange Commission

Speech by SEC Chairman:
Opening Statement at the SEC Open Meeting
Item 1 — Security-Based Swaps Reporting


Chairman Mary L. Schapiro

U.S. Securities and Exchange Commission

SEC Open Meeting
Washington, D.C.
October 13, 2010

Good morning. This is an open meeting of the U.S. Securities and Exchange Commission on October 13, 2010.

Today, the Commission will consider three sets of rules related to the Dodd-Frank Wall Street Reform and Consumer Protection Act.

First, the Commission will consider issuing an interim final temporary rule requiring swap dealers and other parties to report certain pre-enactment security-based swaps to a registered security-based swap data repository or to the Commission.

Second, the Commission will consider proposed rules which are intended to mitigate conflicts of interest for security-based swap clearing agencies, security-based swap execution facilities, and national securities exchanges that post or make available for trading, security-based swaps.

And, finally, the Commission will consider a proposal designed to enhance disclosure to investors in the asset-backed securities market.

The first two items concern the over-the-counter derivatives market which, prior to the Dodd-Frank Act, was largely unregulated. The new law changes that by filling a number of significant regulatory gaps, bringing greater transparency and accountability to the financial system in an effort to reduce systemic risk, and giving the Commission important tools to better protect investors.

Title VII of the Act vests the Commission with authority to regulate security-based swaps and to take steps to encourage centralized clearing, and fair competition and transparency in the trading of security-based swaps.

Today’s actions are among the first steps toward creating a regulatory framework that fulfills the mandate of the new law and advances our agency’s investor protection mission.

In preparing the rules proposed today, our rulemaking teams have been working very closely with the CFTC, the agency responsible for regulating all non-security-based swaps. The teams have also been coordinating efforts with other financial regulators as required under the Act.
The staff has worked, and continues to work, countless hours and has consulted extensively, with the other regulatory agencies, as well as receiving input from market participants and the public on all of the rulemakings required pursuant to the Dodd-Frank Act.

I would like to thank the staff for the tremendous efforts that they have put forth thus far, on the proposals before us today and, on those yet to come.

Reporting of Security-Based Swaps

The first proposed rule would require the reporting of any security-based swap that was entered into prior to the July 21 passage of the Dodd-Frank Act. This rule would only apply to those swaps whose terms had not expired as of that date.

This interim rule, which must be adopted within 90 days of the law’s enactment, implements, in part, Section 766 of Dodd-Frank.

Until such time as final rules are adopted, this interim rule would clarify who needs to do the reporting, what needs to be reported, and when such reporting needs to occur.

In addition, the interim rule also would require parties to report to the Commission, upon request, security-based swap information during the period in which the rule is in effect. And, it would require the parties to preserve data pertaining to the terms of pre-enactment security-based swaps in support of the reporting requirements.

The interim final rule, if adopted, would provide a means for the Commission to gain a better understanding of the security-based swap markets, including the size and scope of that market. This knowledge will help inform the Commission’s later rulemakings under the Dodd-Frank Act.

Before I ask Robert Cook, Director of the Division of Trading and Markets, to discuss the proposed rules, I would like to thank Robert as well as Heather Seidel, Tom Eady, David Michehl, Sarah Albertson, Natasha Cowen, Yvonne Fraticelli, Geoff Pemble, Brian Trackman, Mia Zur and Kathleen Gray from the Division of Trading and Markets for their hard work on this rulemaking.

Thank as well to David Blass, Uzma Wahhab and Hope Jarkowski from the Office of the General Counsel; Adam Glass, Scott Bauguess and Emre Carr from the Division of Risk, Strategy, and Financial Innovation; and Amy Starr from the Division of Corporation Finance.

Finally, I would like to thank the other Commissioners and all of our counsels for their work and comments on the proposed rule.

Now I’ll turn the meeting over to Robert Cook to hear more about the Division’s recommendations.



Modified: 10/13/2010