SEC Enhances Standards for Critical Market Infrastructure

The Securities and Exchange Commission today adopted amendments to its rules for securities clearing agencies to apply enhanced standards to all SEC-registered central counterparties and central securities depositories. The rule amendments build on rules adopted by the Commission in 2016 pursuant to the Dodd-Frank Act to establish enhanced standards for the operation and governance of securities clearing agencies deemed systemically important and those that are central counterparties for security-based swaps.

“These amendments both enhance and clarify the definition of a covered clearing agency, which is an important step in the regulation of the U.S. financial system’s critical market infrastructure,” said Brett Redfearn, Director of the Division of Trading and Markets.

Securities clearing agencies perform a range of services critical to the effective operation of the securities markets following the execution of a trade, helping to ensure that funds and securities are transferred between parties. When acting as a central counterparty, a securities clearing agency interposes itself between the counterparties to a securities transaction, serving functionally as the buyer to every seller and the seller to every buyer. When acting as a central securities depository, a clearing agency may perform a range of depository functions designed to facilitate the settlement of a transaction.

Securities clearing agencies subject to the SEC’s enhanced standards must adhere to requirements regarding, among other things, their policies and procedures for financial risk management, governance, recovery planning, operations, and disclosures to market participants and the public. Prior to these amendments, only certain systemically important clearing agencies and clearing agencies for security-based swaps were subject to these enhanced standards. The rules adopted today apply these enhanced standards to all SEC-registered central counterparties and central securities depositories.

The adopted rules will become effective 60 days after publication in the Federal Register.