Security-Based Swap Transactions: SEC Proposes New Rule

  • Date: January 27, 2011
  • Source: Admin

On Jan 14, 2011, the Securities & Exchange Commission (SEC) voted to propose a rule to define how certain security-based swap transactions are acknowledged and verified by the parties thereto. Under the rule, SBS entities should furnish to their counterparties a trade acknowledgement detailing transaction-specific information. It is another step by the SEC to raise the transparency associated with the security-based swap market. SBS entities should provide their counterparties with an electronic record containing the security-based swap transaction-specific information.

Specifically, the SBS entity would:

  • Provide a trade acknowledgment to its counterparty in a security-based swap transaction within 15 minutes, 30 minutes or 24 hours of execution, depending on whether the transaction is executed or processed electronically.
  • Electronically process security-based swap transactions if the SBS entity has the ability to do so.
  • Have written policies and procedures in place that are reasonably designed to obtain verification of the terms outlined in the trade acknowledgment.

Additionally, it would:

  • Specify which SBS entity is responsible for providing the trade acknowledgment.
  • Permit an SBS entity to satisfy the requirements of the proposed rule by processing the transaction through the facilities of a registered clearing agency.
  • Identify the transaction details that must be included in the trade acknowledgement.
  • Provide limited exemption from the requirements of Rule 10b-10 under the Exchange Act for SBS entities that are also brokers.


The new rule, Rule 15Fi-1, is being proposed under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The Act generally authorizes the SEC to regulate security-based swaps. Among other things, the new law gives the SEC the authority to establish standards for the confirmation and documentation of security-based swap transactions entered into by SBS entities.



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