The SEC has proposed new rules entailing how security-based swap transactions should be reported and publicly disseminated. The rules are proposed under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which generally authorizes the SEC to regulate security-based swaps. The proposed rules represent an important step in the SEC’s continuing effort to increase the transparency of the security-based swap market and fulfill mandates under the Dodd-Frank Act.

Under the proposed rules, known as Regulation SBSR (proposed Rules 900 through 911):

  • Parties to a security-based swap transaction would be required to report information about each transaction to a registered security-based swap data repository.
  • The registered security-based swap repository would be required to publicly disseminate certain of that information in a timely fashion.

More specifically, the proposed rules would:

  • Specify the categories of information to be reported to a repository in real time and publicly disseminated. Among other things, this would generally include information about the asset class of the security-based swap, information about the underlying security, the price, the notional amount, the time of execution, the effective date and the scheduled termination date.
  • Specify certain additional categories of information to be reported to a repository for regulatory purposes, but not publicly disseminated. Among other things, this would generally include the counterparty; the broker, trader and desk ID; the amounts of any up-front payments and description of the terms of the payment streams; the title of any master agreement governing the transaction; and, the data elements needed to determine the market value of the transaction.
  • Require the reporting of certain events that result in changes to previously reported information about a security-based swap transaction.
  • Identify which counterparty to a security-based swap transaction would be required to report information to a repository.

To facilitate the reporting and dissemination of the information, the rules would require that registered security-based swap data repositories:

  • Establish and maintain policies and procedures regarding security-based swap transaction data that would be reported and disseminated.
  • Register with the SEC as securities information processors.

Parties who report to the registered repositories, and who are registered as security-based swap dealers or major security-based swap participants, would be required to establish and maintain policies and procedures designed to ensure that they comply with applicable reporting obligations.

With respect to block trades, the SEC will propose and solicit comment on general criteria that would be used to determine block trade thresholds, without proposing actual thresholds at this time. At a later date, the SEC expects to consider a recommendation that would propose and solicit comment on specific block trade thresholds.

Finally, as required by the Dodd-Frank Act, the rules would exempt security-based swaps from the calculation of fees under Section 31 of the Exchange Act.

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