Commissioners pledge action on remaining Dodd-Frank requirements in near future
The U.S. Securities and Exchange Commission has scheduled an open meeting Oct. 11 to discuss one of several outstanding rulemakings necessary to complete the Dodd-Frank requirements for credit default swaps and other security-based derivatives.
At that meeting, the five SEC commissioners will discuss whether to reopen the comment period on proposals related to capital, margin and segregation requirements for security-based swap dealers and major swap market participants.
The meeting comes amid a recent focus on coordination with the Commodity Futures Trading Commission on swap regulations mandated by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The SEC has jurisdiction over credit default swaps based on individual companies, while the CFTC has jurisdiction over CDS based on indices.
On Oct. 4, the head of the SEC's Division of Trading and Markets said that the remaining unfinished Dodd-Frank rulemakings for derivatives are "a very important priority" and that the agency has made coordination with the CFTC a key part of that effort.
The SEC is "moving on all cylinders with several different areas of rulemaking" related to Title VII of Dodd-Frank, Brett Redfearn, director of the agency's Division of Trading and Markets, said at a conference organized by the Security Traders Association in Washington, D.C. "Any areas where there's overlap in the rules we're trying to have regular calls [with the CFTC] so we can coordinate and harmonize to the extent possible, so we don't come out with completely different rule sets [and] completely different reporting requirements."
These comments echo those of SEC Commissioner Hester Peirce, who spoke the same day in New York at a conference organized by the International Swaps and Derivatives Association. Peirce said the SEC is working intensely on Dodd-Frank provisions and that she hoped to see visible results "in the coming weeks and months," according to a report in Risk magazine.
These recent comments from SEC officials are noteworthy because past efforts by the SEC and CFTC have often resulted in different and even conflicting compliance requirements.
The Oct. 11 meeting will address three specific proposals:
- capital, margin, and segregation requirements for security-based swap dealers and major security-based swap participants, and amendments to Rule 15c3-1 for broker-dealers proposed in October 2012;
- amendments proposed in May 2013 that would establish the cross-border treatment of security-based swap capital, margin, and segregation requirements; and
- an amendment proposed in April 2014 that would establish an additional capital requirement for security-based swap dealers that do not have a prudential regulator.
According to the SEC website, there remain eight outstanding Dodd-Frank rulemakings still to be finalized for security-based swaps. They are:
- Section 763(c) - Data collection and reporting rules for security-based swap execution facilities
- Section 763(c) - Rules governing security-based swap execution facilities
- Section 763(g) - Rules regarding fraud in the security-based swap market
- Section 764(a) - Rules, including capital and margin, governing security-based swap dealers and major security-based swap participants that are not banks
- Section 764(a) - Rules regarding daily trading recordkeeping
- Section 764(a) - Reporting and recordkeeping rules applicable to security-based swap dealers and major security-based swap participants
- Section 765(a) - Conflicts of interest
- Section 766(a) - Recordkeeping for certain security-based swaps
