The Securities and Exchange Commission (SEC) approved new regulations for security-based swap execution facilities, part of the agency’s steady progress in implementing languishing rules from the Dodd-Frank Act of 2010.
Security-based swap execution facilities will be required to register with the SEC and submit to a regulation regime, the agency announced Thursday in a press release. The new regulatory regime will mitigate conflicts of interest in the security-based swap market and make it more transparent, said SEC Chair Gary Gensler.
It will also require those entities to hire chief compliance officers to oversee compliance with the new rules.
In addition to hiring CCOs, registered security-based swap execution facilities must submit filings with the SEC on new rules, rule amendments, and products; establish and enforce compliance with the agency’s rules; monitor trading to prevent manipulation; make public timely information on price, trading volume, and other data; maintain records of all activities, including a complete audit trail; and establish and maintain a program of automated systems and risk analysis, according to an SEC fact sheet.
The final rule will take effect 60 days after publication in the Federal Register.
The agency first proposed implementing Section 765 of the Dodd-Frank Act in 2022 and noted the rule aligns with the Commodity Futures Trading Commission’s (CFTC) mandates for swap execution facilities.
After Gensler took over at the SEC in April 2021, there were still 11 provisions of Dodd-Frank that remained unpassed more than a decade after Congress enacted the law. Completing implementation of Dodd-Frank was one of Gensler’s stated goals.
The SEC adopted a Dodd-Frank rule providing more transparency in short sale data in October, as well as a pair of rules passed in June aimed at curbing misconduct in the security-based swaps market.
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