Wednesday, February 2, 2011
The SEC today voted unanimously to propose rules defining security-based swap execution facilities (SEFs) and establishing their registration requirements, as well as their duties and core principles.
Dodd-Frank authorized the SEC to implement a regulatory framework for security-based swaps, which currently trade exclusively in the over-the-counter markets with little transparency or oversight. The Dodd-Frank Act sought to move the trading of security-based swaps onto regulated trading markets, and therefore created security-based SEFs as a new category of market intended to provide more transparency and reduce systemic risk.
The Commission's proposed rules:
Interpret the definition of "security-based SEFs" as set forth in Dodd-Frank.
Set out the registration requirements for security-based SEFs.
Implement the 14 core principles for security-based SEFs that the legislation outlined.
Establish the process for security-based SEFs to file rule changes and new products with the SEC.
Exempt security-based SEFs from the definition of "exchange" and from most regulation as a broker.
Public comments on the rule proposal should be received by the Commission by April 4, 2011.