SEC Open Meeting on Reg SBSR
Securities and Exchange Commission
Open Meeting
Wednesday, July 13, 2016
Key Topics & Takeaways
- Approval of Reg. SBSR Guidance and Amendments: The SEC unanimously approved amendments and guidance related to rules regarding the regulatory reporting and public dissemination of security-based swap transactions (Reg. SBSR).
- Amendments to Reg. SBSR: The amendments included revisions to the compliance date schedule, detailing that transaction reporting will not begin until after security-based swap (SBS) dealers and major SBS participants have registered with the Commission.
- Next Steps: White stated that the Commission will next move towards finalizing its outstanding Title VII rulemakings, including capital, margin and segregation requirements, recordkeeping and statutory disqualifications, which she hopes to accomplish “by the end of the year”.
Participants
- Mary Jo White, Chair
- Kara Stein, Commissioner
- Michael Piwowar, Commissioner
- Stephen Luparello, Director, Division of Trading and Markets
- Michael Gaw, Assistant Director, Division of Trading and Markets
- Jennifer Marietta-Westberg, Deputy Director and Deputy Chief Economist, Division of Economic Risk and Analysis
Opening Remarks
SEC Chair Mary Jo White
In her opening remarks, Chair White highlighted the Commission’s recent efforts in finalizing certain Title VII security-based swap (SBS) rules, including those relating to cross-border requirements, business conduct and trade acknowledgement and verification. White noted that with the finalization of the recommendations to adopt amendments and guidance for Regulation SBSR, the Commission will have taken the “last significant step” as it relates to SBS transparency.
White went on to state that the Commission will next move towards finalizing its outstanding Title VII rulemakings, including capital, margin and segregation requirements, recordkeeping and statutory disqualifications, which she hopes to accomplish “by the end of the year”.
In regards to Reg. SBSR, White highlighted that the proposed amendments and guidance seek to address a few key issues: clarification of reporting obligations, prohibitions on the imposition of user fees and usage restrictions by swap data repositories (SDRs) and addressing and expanding cross-border reporting duties. Further, she noted that the staff’s revised compliance schedule “aligns dealer registration, SDR registration, and transaction reporting in a sensible, cost-efficient way, and should create the best foundation for reporting data that is reliable and useful for both regulators and market participants.”
Staff Presentation
Stephen Luparello, Director, Division of Trading and Markets
Luparello introduced the staff responsible for the amendments and guidance up for consideration. He further noted that staff considered the Commodity Futures Trading Commission’s (CFTC) analogous reporting requirements, and coordinated as it drafted the amendments and guidance.
Jennifer Marietta-Westberg, Deputy Director and Deputy Chief Economist, Division of Economic Risk and Analysis
Marietta-Westberg explained that staff carefully considered the economic effects of Reg. SBSR and the guidance and amendments being considered, acknowledging that certain costs will be required in order to develop appropriate reporting infrastructures. She further noted concerns regarding the possibility of market fragmentation in the event unregistered foreign dealing entities seek to restructure to avoid requirements, though she expressed that such impact is difficult to quantify. She expressed that these concerns were balanced against the significant benefits of market transparency, price discovery and competition when considering the amendments and guidance.
Michael Gaw, Assistant Director, Division of Trading and Markets
Gaw provided an overview of the staff recommendation, noting that staff gave specific focus to issues regarding the cross-border application of Reg. SBSR and its compliance schedule. He explained that any SBS transaction connected with a non-U.S. person’s SBS dealing activity that is “arranged, negotiated or executed” by personnel of such non-US person located in a US branch or office (or personnel of its agent located in a US branch or office) is required to be reported and publicly disseminated.
Gaw next discussed concerns raised by market participants regarding the Commission’s original compliance schedule, which would have based the start of reporting requirements in certain asset classes on the registration of SDRs, regardless of whether they were registered SBS dealers, thus resulting in the development of “interim” reporting systems which would ultimately be superseded. In response, Gaw explained that staff revised the compliance schedule for portions of Reg. SBSR to begin on the first Monday of the later of: six months after the date on which the first SDR that can accept transaction reports in an asset class registers with the Commission; or one month after SBS dealers and major SBS participants are required to register with the Commission. He went on to explain that “Compliance Date 2”, covering public dissemination requirements, would be phased in starting 3 months thereafter, and “Compliance Date 3”, covering the historical SBS transactions would begin 2 months from “Compliance Date 2”.
Commissioner Comments
Commissioner Kara Stein
In her comments, Stein supported efforts to amend Reg. SBSR to improve pricing for customers and provide for better regulatory oversight. She went on to express her desire for the Commission to move forward in finishing the rest of its Title VII regime, noting “six years should have been more than enough time for the Commission’s rules to have been completed.”
Commissioner Michael Piwowar
In his comments, Piwowar expressed support for the final rule, praising staff for “developing a deep understanding of how the security-based swap market operates and to tailoring our rules so that they will most effectively achieve their purposes under Title VII.” He specifically highlighted the Commission’s responsiveness to concerns regarding the “excessive costs and burdens that would fall on market participants if the Commission initiated the Title VII reporting regime before requiring dealers to register,” resulting in the altering of the compliance schedule “so that security-based swap reporting will not be required until after the compliance date for dealer registration.”
The Commission voted unanimously to approve amendments and guidance related to Reg. SBSR.
For more information on this meeting, including other proposals considered, please see the following press releases and fact sheets:
- Amendments and Guidance to Reg. SBSR
- Amendments to Update and Simplify Disclosure Requirements
- Amendments to Rules of Practice for Administrative Proceedings
- Rules to Enhance Order Handling Information Available to Investors
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Securities and Exchange Commission
Open Meeting
Wednesday, July 13, 2016
Key Topics & Takeaways
- Approval of Reg. SBSR Guidance and Amendments: The SEC unanimously approved amendments and guidance related to rules regarding the regulatory reporting and public dissemination of security-based swap transactions (Reg. SBSR).
- Amendments to Reg. SBSR: The amendments included revisions to the compliance date schedule, detailing that transaction reporting will not begin until after security-based swap (SBS) dealers and major SBS participants have registered with the Commission.
- Next Steps: White stated that the Commission will next move towards finalizing its outstanding Title VII rulemakings, including capital, margin and segregation requirements, recordkeeping and statutory disqualifications, which she hopes to accomplish “by the end of the year”.
Participants
- Mary Jo White, Chair
- Kara Stein, Commissioner
- Michael Piwowar, Commissioner
- Stephen Luparello, Director, Division of Trading and Markets
- Michael Gaw, Assistant Director, Division of Trading and Markets
- Jennifer Marietta-Westberg, Deputy Director and Deputy Chief Economist, Division of Economic Risk and Analysis
Opening Remarks
SEC Chair Mary Jo White
In her opening remarks, Chair White highlighted the Commission’s recent efforts in finalizing certain Title VII security-based swap (SBS) rules, including those relating to cross-border requirements, business conduct and trade acknowledgement and verification. White noted that with the finalization of the recommendations to adopt amendments and guidance for Regulation SBSR, the Commission will have taken the “last significant step” as it relates to SBS transparency.
White went on to state that the Commission will next move towards finalizing its outstanding Title VII rulemakings, including capital, margin and segregation requirements, recordkeeping and statutory disqualifications, which she hopes to accomplish “by the end of the year”.
In regards to Reg. SBSR, White highlighted that the proposed amendments and guidance seek to address a few key issues: clarification of reporting obligations, prohibitions on the imposition of user fees and usage restrictions by swap data repositories (SDRs) and addressing and expanding cross-border reporting duties. Further, she noted that the staff’s revised compliance schedule “aligns dealer registration, SDR registration, and transaction reporting in a sensible, cost-efficient way, and should create the best foundation for reporting data that is reliable and useful for both regulators and market participants.”
Staff Presentation
Stephen Luparello, Director, Division of Trading and Markets
Luparello introduced the staff responsible for the amendments and guidance up for consideration. He further noted that staff considered the Commodity Futures Trading Commission’s (CFTC) analogous reporting requirements, and coordinated as it drafted the amendments and guidance.
Jennifer Marietta-Westberg, Deputy Director and Deputy Chief Economist, Division of Economic Risk and Analysis
Marietta-Westberg explained that staff carefully considered the economic effects of Reg. SBSR and the guidance and amendments being considered, acknowledging that certain costs will be required in order to develop appropriate reporting infrastructures. She further noted concerns regarding the possibility of market fragmentation in the event unregistered foreign dealing entities seek to restructure to avoid requirements, though she expressed that such impact is difficult to quantify. She expressed that these concerns were balanced against the significant benefits of market transparency, price discovery and competition when considering the amendments and guidance.
Michael Gaw, Assistant Director, Division of Trading and Markets
Gaw provided an overview of the staff recommendation, noting that staff gave specific focus to issues regarding the cross-border application of Reg. SBSR and its compliance schedule. He explained that any SBS transaction connected with a non-U.S. person’s SBS dealing activity that is “arranged, negotiated or executed” by personnel of such non-US person located in a US branch or office (or personnel of its agent located in a US branch or office) is required to be reported and publicly disseminated.
Gaw next discussed concerns raised by market participants regarding the Commission’s original compliance schedule, which would have based the start of reporting requirements in certain asset classes on the registration of SDRs, regardless of whether they were registered SBS dealers, thus resulting in the development of “interim” reporting systems which would ultimately be superseded. In response, Gaw explained that staff revised the compliance schedule for portions of Reg. SBSR to begin on the first Monday of the later of: six months after the date on which the first SDR that can accept transaction reports in an asset class registers with the Commission; or one month after SBS dealers and major SBS participants are required to register with the Commission. He went on to explain that “Compliance Date 2”, covering public dissemination requirements, would be phased in starting 3 months thereafter, and “Compliance Date 3”, covering the historical SBS transactions would begin 2 months from “Compliance Date 2”.
Commissioner Comments
Commissioner Kara Stein
In her comments, Stein supported efforts to amend Reg. SBSR to improve pricing for customers and provide for better regulatory oversight. She went on to express her desire for the Commission to move forward in finishing the rest of its Title VII regime, noting “six years should have been more than enough time for the Commission’s rules to have been completed.”
Commissioner Michael Piwowar
In his comments, Piwowar expressed support for the final rule, praising staff for “developing a deep understanding of how the security-based swap market operates and to tailoring our rules so that they will most effectively achieve their purposes under Title VII.” He specifically highlighted the Commission’s responsiveness to concerns regarding the “excessive costs and burdens that would fall on market participants if the Commission initiated the Title VII reporting regime before requiring dealers to register,” resulting in the altering of the compliance schedule “so that security-based swap reporting will not be required until after the compliance date for dealer registration.”
The Commission voted unanimously to approve amendments and guidance related to Reg. SBSR.
For more information on this meeting, including other proposals considered, please see the following press releases and fact sheets:
- Amendments and Guidance to Reg. SBSR
- Amendments to Update and Simplify Disclosure Requirements
- Amendments to Rules of Practice for Administrative Proceedings
- Rules to Enhance Order Handling Information Available to Investors