The US Securities and Exchange Commission (SEC) has created a regime for the registration and regulation of security-based swap execution facilities (SBSEFs).
The new regulatory framework – Regulation SE – was mandated under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to the over-the-counter derivatives market. In adopting Regulation SE, the Commission has sought to harmonise with parallel rules of the CFTC that govern swap execution facilities (SEFs) and swap execution generally.
SEC chair, Gary Gensler, said, “Adopting Regulation SE fulfils Congress’s mandate and increases the transparency and integrity of the security-based swap market.”
“In taking up these matters in 2021, we heard from many market participants suggesting that we should look to the Commodity Futures Trading Commission’s (CFTC) rules for swap execution facilities as our template. I believe aligning the SEC’s regime closely with the CFTC’s garners many of the same benefits – bringing together buyers and sellers with transparent, pre-trade pricing. That lowers risk in the marketplace and protects investors,” Gensler added.
Regulation SE addresses the Exchange Act’s trade execution requirement for security-based swaps and the cross-border application of that requirement, implements Section 765 of the Dodd-Frank Act to mitigate conflicts of interest at SBSEFs and national securities exchanges that trade security-based swaps, and promotes consistency between Regulation SE and existing rules under the Exchange Act.
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