New SEC Proposed Rules for the Regestration and Regulation of Security-Based Swap Facilities

Press release here: https://www.sec.gov/news/press-release/2022-59

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Full rule proposal here: https://www.sec.gov/rules/proposed/2022/34-94615.pdf

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Fact Sheet here: https://www.sec.gov/files/34-94615-fact-sheet.pdf

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Any other wrinklies want to dig into these with me? Seems like the SEC wants to continue incorporating SBS into their jurisdiction. A step in the right direction for sure, especially after the earlier releases regarding Manipulation surrounding SBS positions

Mods pls let me know/remove if this has already been posted or is flaired incorrectly. Appreciate y'all!

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edit:

From the Fact Sheet:

The Securities and Exchange Commission proposed rules that would:

● Create a regime for the registration and regulation of security-based swap execution facilities (SBSEFs);

● Implement the “trade execution requirement” for security-based swaps (SBS) and address various issues relating to the requirement, including its cross-border application;

● Address conflicts of interest at SBSEFs and national securities exchanges that trade SBS; and

● Promote consistency between the proposed rules governing SBSEFs and existing rules under the Securities Exchange Act of 1934 (Exchange Act).

Why This Matters To enhance transparency and oversight of the over-the-counter derivatives market, Title VII of the Dodd-Frank Act requires the Commission to implement a regulatory framework for SBS that requires the registration and regulation of SBSEFs and mitigates conflicts of interest on SBSEFs and SBS exchanges. The Commission proposed Regulation SE, which would implement these statutory requirements and represent an important step in the SEC’s efforts to finalize its regulatory regime for the SBS market

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From Rules Pg 13, looks like the SEC wants some guidance and is asking for comment. Anything we can help them out with? Quote: "In particular, the Commission seeks comment on the following:

1. How many CFTC-registered SEFs do you believe will seek to register with the Commission as SBSEFs? Please explain.
2. Are there any entities that will seek to register with the Commission as SBSEFs but not register with the CFTC as SEFs? If so, please explain and estimate how many.
3. For SEFs that will likely seek registration with the Commission as SBSEFs, please estimate the size of their swaps business versus the anticipated size of their SBS business, using any metric(s) that you believe would be illustrative (e.g., number of products listed, trade count, aggregate notional size traded, number of counterparties trading swaps versus SBS, etc.).
4. Please provide any information or market data that you believe would be illustrative regarding current SBS trading activity on entities that are not likely to register with the Commission as SBSEFs, and thus would have to cease SBS trading upon the compliance date of the Commission’s SBSEF rules. Do you believe that this activity would migrate to registered SBSEFs or would it migrate instead to the bilateral OTC market?
5. What types of products do you anticipate could be listed by registered SBSEFs (e.g., CDS on individual corporate bonds, CDS on individual sovereign bonds, CDS on individual securitized bonds, swaps on securities options, swaps on narrow-based securities indexes, total return swaps on individual cash equities or crypto/digital asset securities, etc.)? In the remainder of this release, the Commission describes its proposed registration and 16 regulation regime for SBSEFs and SBS execution generally, and seeks comment on all aspects of its proposal. You are invited in particular to provide data and analysis regarding the economic and Paperwork Reduction Act (“PRA”) implications of this proposal. For example, the Commission seeks comment on the following:
6. If, in a particular area, the Commission were to harmonize closely with a CFTC rule, to what extent would this reduce, or perhaps eliminate entirely, any incremental costs or burdens on dually registered SEF/SBSEFs and their members?
7. Should the Commission impose any different or additive requirements? For example, are there any statutory or market differences that would create benefits from different or additive requirements? If the Commission imposes different or additive requirements, what would be the impact on dually registered SEF/SBSEFs and their members?
8. Are there provisions of the CFTC’s rules the Commission should not incorporate, even if the Commission were to opt for harmonization with the CFTC’s rules in other areas? In other words, are there areas where not harmonizing with a CFTC rule would reduce burdens on SBSEFs and/or their members? If so, please explain, with particular regard to the economic impacts and/or PRA burdens.
9. Do you believe that the Commission should adopt different or additive requirements for SBSEFs, even if there is no analog to such provisions in the CFTC’s SEF rules? If so, please explain, with particular regards to the economic impacts and/or PRA burdens. For example, do you believe that the SEC-specific provision would impose additional costs or burdens on SBSEFs and/or their members that are nevertheless appropriate in view of new and additional benefits? Or do you believe that an SEC- 17 specific provision would be appropriate because it would relieve costs or burdens that are imposed on the swap business by a CFTC rule that is unnecessary or inappropriate in the SBS market?
10. If the Commission ultimately adopts SBSEF rules that are closely harmonized with the CFTC’s SEF rules, do you believe this could result in ambiguities or potential conflicts between the SEC’s SBSEF rules and the other SEC rules (pertaining, for example, to exchanges or alternative trading systems)? If so, please indicate where this might occur and suggest ways that the Commission could reduce these ambiguities or potential conflicts."

There are additional questions spruced throughout the document