SEC Proposes Rules for Systemically Important and Security-Based Swap Clearing Agencies

Date Published 3/17/2014
Author Marja Hoek-Smit
Theme Housing Finance Policy
Country United States

SEC Proposes Rules for Systemically Important and Security-Based Swap Clearing Agencies 
Date: 2014-03-13 

 The Securities and Exchange Commission voted today to propose new rules to enhance the oversight of clearing agencies that are deemed to be systemically important or that are involved in complex transactions, such as security-based swaps. 

A securities clearing agency generally acts as a middleman between the parties to a securities transaction, performing a range of services important for the effective operation of the securities markets.  These services include, for example, ensuring that funds and securities are correctly transferred between parties and, in some cases, assuming the risks of a party defaulting on a transaction by acting as a “central counterparty.” 

The Dodd-Frank Wall Street Reform and Consumer Protection Act called for an enhanced regulatory framework for certain clearing agencies.  The SEC’s proposal would apply to SEC-registered clearing agencies that have been designated as systemically important by the Financial Stability Oversight Council or that take part in more complex transactions, such as clearing security-based swaps.

Clearing agencies covered by the proposed rules would be required to establish, implement, maintain and enforce policies and procedures reasonably designed to address certain aspects of its risk management and operation:
  • General organization (including legal basis, governance and comprehensive risk management framework)
  • Financial risk management (including credit risk, collateral, margin, and liquidity risk) 
  • Settlement (including settlement finality, money settlements and physical deliveries)
  • Central securities depositories and settlement systems
  • Default management (including default rules and procedures and segregation and portability)
  • Business and operational risk management (including general business risk, custody and investment risks and operational risk)
  • Access (including access and participation requirements, tiered participation arrangements and links) 
  • Efficiency (including efficiency and effectiveness and communication procedures and standards)
  • Transparency
The proposal also would establish procedures for the Commission to apply the new requirements to additional clearing agencies. The public is invited to respond to the proposals.
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