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U.S. Securities and Exchange Commission

Speech by SEC Chairman:
Opening Statement at the SEC Open Meeting


Chairman Mary L. Schapiro

U.S. Securities and Exchange Commission

Washington, D.C.
December 3, 2010

Today, the Commission will consider a series of proposed rules and interpretations relating to the oversight of swaps and security-based swaps.

The proposal originates from Title VII of the Dodd-Frank Act, which established a comprehensive framework for regulating the over-the-counter swaps markets. Under the new law, regulatory authority over this market is divided between the SEC and the Commodity Futures Trading Commission — with the SEC regulating those products deemed to be "security-based swaps" and the CFTC regulating all other swaps.

In particular, the new law requires the registration of swap dealers, security-based swap dealers, major swap participants and major security-based swap participants. It also subjects these entities to several statutory requirements — including capital, margin and business conduct requirements.

But while the new law contains definitions for those entities, it also directed us to further define those terms and certain related terms. And, it directed us to develop these definitions jointly with the CFTC, which voted on these proposed rules earlier this week.

Under the joint proposed rules, the definition of "security-based swap dealers" would in large part rely on the dealer-trader distinction that currently is used to determine whether an entity acts as a dealer in other types of securities. The proposal also lays out factors for identifying whether an entity can take advantage of the statutory de minimis exception from the security-based swap dealer definition.

Today's proposed rules also address when an entity would be deemed to be a "major swap participant" or a "major security-based swap participant."

The regulation of such major participants raises challenging issues as to how to define the relevant terms. The proposal before us seeks to do that by using objective criteria focusing on the market impacts and risks associated with an entity's swap or security-based swap positions. The proposed rules also seek to address several related issues, including the identification of "major categories" of swaps and security-based swaps.

Before I ask Robert Cook, Director of the Division of Trading and Markets, to discuss the proposed rules, I would like to express my gratitude to the CFTC staff, Commissioners, and Chairman Gensler, for the tireless effort they have all put into these proposed rules. Undertaking a joint rulemaking of this magnitude can be a challenge, but the CFTC has been an excellent collaborative partner throughout this process.

I would also like to thank Robert, as well as Brian Bussey, Joshua Kans, Gregg Berman, Jack Habert, Peter Curley, Paula Jenson, Jeffrey Dinwoodie, and Richard Grant from the Division of Trading and Markets for their hard work on this rulemaking.

Thanks as well to David Blass and David Dimitrious from the Office of the General Counsel; Paul Beswick, Lisa Watson, Jouky Chang, and Jeffrey Cohan from the Office of the Chief Accountant; Chuck Dale, Jennifer Marietta-Westberg, Tiago Requeijo, and Adam Yonce 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 Commissioners and all of our counsels for their work and comments on the proposed rules.

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


Modified: 12/03/2010