security-based swaps

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On April 13, the Financial Industry Regulatory Authority (FINRA) issued answers to several Frequently Asked Questions to aid members with their reporting obligations under FINRA Rule 4521(d) (the Rule).

The Rule provides that each member carrying margin accounts for customers must submit, on a settlement date basis, as of the last business day of the month: 1) the total of all debit balances in securities margin accounts; and 2) the total of all free credit balances in all cash accounts and all securities margin accounts.
Continue Reading FINRA Publishes Answer to Frequently Asked Questions Under Rule 4521(d) on Margin Balance Reporting

On April 5, the Securities and Exchange Commission voted to take two actions in the implementation of security-based swap regulation under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).
Continue Reading SEC Issues Notice of Substituted Compliance Application and Proposed Substituted Compliance Order for United Kingdom and Reopens Comment Period for Notice and Proposed Substituted Compliance Order for France

On December 16, the Securities and Exchange Commission announced that it adopted a rule to limit the potential for overlapping or duplicative regulation within its security-based swap regulatory regime. Specifically, the rule exempts certain activities of security-based swap execution facilities (SEFs) and security-based swap dealers from triggering the requirement also to register as a clearing agency. The adopted rule is in line with similar exemptions for broker-dealers and national securities exchanges.
Continue Reading SEC Adopts Clearing Agency Rule to Limit Potential for Overlapping or Duplicative Regulation

On October 22, the Commodity Futures Trading Commission and the Securities and Exchange Commission, at their first-ever joint open meeting, approved (1) a joint final rule to lower the margin requirement for an unhedged security futures position from 20 percent to 15 percent, which was approved over the dissents of Commissioners Lee and Crenshaw of…

On July 22, the Commodity Futures Trading Commission adopted rules (Final Rules) that set minimum financial capital requirements for swap dealers (SDs) and major swap participants (MSPs) that are not subject to prudential regulation (each, a “Covered Swap Entity” or CSE). The capital requirements were originally proposed in 2016, as explained in more detail here.

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Continue Reading CFTC Adopts Final Capital Requirements for Swap Dealers

On December 18, the Securities and Exchange Commission adopted some amendments to its rules concerning the cross-border application of certain security-based swap requirements under the Securities Exchange Act of 1934 and issued a statement that it will be allowing some time-limited relief for reporting parties when security-based swap reporting goes into effect.
Continue Reading SEC Adopts Final SBS Cross-Border Rule Amendments and Sets Compliance Date for SBS Dealer Registration

On October 11, the Securities and Exchange Commission demonstrated renewed interest in completing the regulatory regime for security-based swaps (SBS) by re-opening the comment periods for a number of SBS rules that were previously proposed but never adopted. Specifically, the SEC is requesting further comment on the following proposals:
Continue Reading SEC Reopens Comment Period for Unfinished Security-Based Swap Rules

On January 3, the Financial Industry Regulatory Authority proposed a rule change to extend the expiration date of FINRA Rule 0180 (Application of Rules to Security-Based Swaps) to February 12, 2019. FINRA Rule 0180 temporarily limits the application of certain FINRA rules with regard to security-based swaps. The rule was originally designed to avoid disruptions…

As part of a global regulatory initiative, the United States, European Union, Canada, Switzerland, Japan, Hong Kong, Singapore and Australia have all adopted, or are in the process of adopting, rules (Margin Rules) that impose mandatory variation margin requirements on non-cleared swaps and, in some cases, non-cleared security-based swaps and FX derivatives (collectively, “Covered Trades”). Starting March 1, any entity that is a financial end user (FEU) will only be able to execute a Covered Trade with a US swap dealer if it has amended its swap documentation to comply with the requirements applicable to the dealer under the Margin Rules.
Continue Reading 40 Days Left Until Compliance Date for Variation Margin Rules for Uncleared Swaps

On August 23, the Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight and Division of Clearing and Risk (the Divisions) issued a response to the International Swaps and Derivatives Association (ISDA), which had requested the CFTC to clarify whether a covered swap entity (CSE) is permitted to include security-based swaps within the same product set as swaps for the purpose of calculating initial margin for uncleared swaps.
Continue Reading CFTC Issues No-Action Letter Regarding Use of Security-Based Swaps in Initial Margin Calculations for Uncleared Swaps