SEC creates new unit for securities-based swaps oversight

SEC Announces the Creation of the Security-Based Swaps Joint Venture, Led by Division of Examinations and Division of Trading and Markets

The Securities and Exchange Commission today announced the creation of the Security-Based Swaps Joint Venture, a collaborative venture among several SEC divisions and offices that will be responsible for coordinating functions related to the regulation of security-based swaps (SBS) and oversight of certain entities that will be required to register with the SEC (SBS entities).

The co-leads of the SBS Joint Venture will be Vivi Mazarakis, an Acting Assistant Director in the Division of Examinations, and Carol McGee, who is the Assistant Director for the Office of Derivatives Policy in the Division of Trading and Markets. The joint venture will also include participation from staff across the agency, including from the Division of Enforcement, the Division of Economic Risk and Analysis, the Office of International Affairs and the Office of the Chief Data Officer. The SBS Joint Venture will be an important part of the agency’s efforts to regulate and oversee the SBS market, including by positioning the agency to effectively monitor SBS transaction data for regulatory purposes, as the SEC implements the SBS regulatory regime established by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

Title VII of the Dodd-Frank Act established a comprehensive framework for regulating the over-the-counter swaps markets, with authority divided between the SEC and the Commodity Futures Trading Commission (CFTC). The SEC’s role is to regulate and oversee the SBS market, while the CFTC oversees other types of swaps (e.g., commodities, currency, interest rates, etc.). In December 2019, the SEC adopted the final rule amendments that stood up the Commission’s broad SBS regulatory regime and triggered the compliance date for SBS entities to register with the Commission.

Beginning in November 2021, SBS entities will be required to register with the SEC and will be subject to various requirements, which, among others things, include capital, margin and segregation. SBS entities will also be required to report their SBS transaction data, which will be used for various regulatory purposes, such as monitoring the build-up and concentration of risk exposures, preventing fraud, systemic risk supervision and resolving issues and positions after an institution fails.

“The SBS Joint Venture will bring together the divisions and offices most closely tied to the implementation of Dodd Frank’s security-based swap framework,” said SEC Chairman Jay Clayton. “Under the demonstrated leadership and expertise of Vivi and Carol, this cross-agency approach will greatly enhance the agency’s ability to oversee the SBS market and SBS entities, including by enhancing coordination with the CFTC and other regulators.”

“I look forward to collaborating with this talented group to stand up the SBS regime and helping to prepare SBS dealers to fulfill all necessary requirements prior to the November 2021 deadline,” said Peter Driscoll, Director of the Division of Examinations. “The SBS Joint Venture will enable the Commission to identify key risks in the SBS market and provide guidance to assist dealers in managing them for better compliance with our regulatory regime implemented pursuant to Title VII of Dodd Frank.”

“The complexity of regulating the SBS market requires knowledge, commitment, and a multi-division and office approach,” said Brett Redfearn, Director of the Division of Trading and Markets. “This effort demonstrates the Commission’s commitment to the SBS regime and I am confident that Carol and Vivi will do an outstanding job of ensuring that the Commission is prepared for the November 2021 deadline.”

For more information about SBS markets, registration dates and SDRs, visit SEC.gov/tm/security-based-swap-markets.

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