SEC proposed a rule that would require the application of specific risk-mitigation techniques to portfolios of security-based swaps (SBS) that are not submitted for clearing. Comments should be received on or before April 16, 2019.
The proposal would establish requirements for each registered SBS dealer and each registered major SBS participant with respect to the following:
- Reconciling outstanding SBS with applicable counterparties on a periodic basis
- Engaging in certain forms of portfolio compression exercises, as appropriate
- Executing written SBS trading relationship documentation with each of its counterparties prior to, or contemporaneously with, executing a SBS transaction
In addition, SEC proposed an interpretation to address the application of the portfolio reconciliation, portfolio compression, and trading relationship documentation requirements to cross-border SBS activities. SEC also proposed to amend Rule 3a71-6 to address the potential availability of substituted compliance in connection with those requirements. Moreover, the proposed rules would make corresponding changes to the recordkeeping, reporting, and notification requirements applicable to SBS entities. Finally, SEC requested comments on the way certain aspects of the proposed rules address how an SBS data repository could potentially satisfy its obligation to verify the terms of each SBS with both counterparties to the transaction.
SEC had previously adopted rules requiring SBS entities to provide trade acknowledgments and to verify those trade acknowledgments with their counterparties to security-based swap transactions; however, it had not proposed rules concerning portfolio reconciliation, portfolio compression, or trading relationship documentation. By contrast, CFTC has implemented rules setting forth standards for the timely and accurate confirmation of swaps, addressing the reconciliation and compression of swap portfolios, and setting forth requirements for documenting the swap trading relationship between swap dealers or major swap participants and their counterparties. Accordingly, SEC has now proposed the requirements applicable to SBS entities.
Related Link: Federal Register Notice
Comment Due Date: April 16, 2019
Keywords: Americas, US, Banking, Securities, Security-based Swaps, Swap Participants, Dodd Frank Act, Risk Mitigation, Reporting, CFTC, SEC
Previous ArticleHKMA Revises Guideline on Application of Banking Disclosure Rules
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.
The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.
The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).
The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.