Statement on Re-Opening the Comment Period for Capital, Margin, and Segregation Requirements for Security-Based Swap Dealers and Major Security-Based Swap Participants and Capital Requirements for Broker-Dealers

Thank you, Chairman Clayton. I am proud to support this sensible recommendation at my first open meeting as an SEC Commissioner.

In a week’s time, it will have been six years since the Commission first proposed rules to govern capital, margin, and segregation requirements for security-based swap dealers and major security-based swap participants.[1] Finalizing these rules is critical to effectuating our Title VII regime, as registration and other security-based swap compliance requirements depend on their completion.[2]

During this time, other regulators have established comprehensive regulations to govern swaps. The prudential regulators have implemented capital and margin requirements for bank swap dealers, bank security-based swap dealers, bank swap participants, and bank major security-based swap participants. The CFTC has established margin requirements for nonbank swap dealers and nonbank major swap participants, as well as proposed and re-proposed capital requirements for these entities. And, of course, market participants have spent millions of dollars and thousands of hours developing systems and processes to comply with these rules.

The SEC’s regulatory approach to the security-based swap market will influence how it develops. On the one hand, our presence as a regulator could bring certainty, encourage participation, and generate liquidity. On the other hand, new burdens our rules create could generate high costs, friction, and increased complexity in both the security-based swap market and the swap market more broadly. The recommendation before us sends the important message that we will be thoughtful and tailor our requirements to today’s regulatory environment.

Under the leadership of Chairman Clayton and Chairman Giancarlo, the SEC and CFTC have been working together to ensure our approaches further the missions of our agencies without being inconsistent or duplicative. Re-opening the comment period on our previously proposed rules will allow us to hear from market participants how these proposed requirements will affect the markets and their current operations, particularly as they have developed to fulfill other regulatory mandates. I hope, as we move forward, that commenters will continue to engage with us so that we can refine our rules to leverage existing compliance resources, minimize disruption, and promote market integrity.

I would like to thank the Division of Trading and Markets and all the SEC staff, who worked on this recommendation. Thank you to Chairman Clayton and my fellow Commissioners for prioritizing Title VII matters on the Commission’s busy rulemaking agenda. Thank you also to Commissioner Peirce and her team, who have taken an important and active role in the Commission’s effort to develop our Title VII regime.