OTC Derivatives

Derivatives play an important role in the capital markets and the broader economy by allowing companies to manage and hedge risk. Companies in every state and across diverse industries utilize derivatives as a key tool to protect against risks that are inherent to their businesses.

Title VII of the Dodd Frank Act established a broad new regulatory regime for over-the-counter (OTC) derivatives, or swaps, which is profoundly affecting the financial markets and market participants.

SIFMA believes that the Dodd-Frank Act took several important steps towards improving oversight and transparency in the swaps markets and supports the implementation of appropriate regulations that do not create undue costs or unduly limit the availability of these valuable risk management tools. In October 2021, an important step was achieved when the SEC’s security-based swap dealer (SBSD) regime went live and the first SBSD registrations were reported soon thereafter. SIFMA will continue to engage closely with the SEC as it works to complete Title VII rulemaking in 2022.

Looking forward, policymakers should continue to harmonize regulations between the SEC and CFTC; avoid overly broad application of Title VII in cross-border situations, including expanding the availability of bilateral regulatory recognition (substituted compliance); and continuously review and evaluate the impact of regulations on the swap markets and market participants, including end users such as asset managers and their clients.