Market Participants Provide Input on SEC SBSEF Proposal

Commentary by Nihal Patel

Industry and trade groups weighed in on an SEC proposal to establish a regulatory scheme for security-based swap execution facilities ("SBSEFs") (see previous coverage). The comment period closed on June 10, 2022.

Commenters included (i) SIFMA and ISDA, (ii) SIFMA AMG, (iii) Investment Company Institute, (iv) Managed Funds Association, (v) Citadel Securities, (vi) Tradeweb Markets Inc. and (viii) Bloomberg L.P.

Among other things, commenters urged the SEC to:

  • prohibit post-trade name give-up for anonymously traded cleared SBS;

  • harmonize trading and trade processing with the CFTC's approach;

  • identify trades that are rejected from clearing and deeming them void ab initio;

  • establish rules for granting exemptions for foreign SBS trading venues and requiring trade execution of cross-border SBS transactions; and

  • provide for notice-and-comment rulemaking for "made available to trade" determinations.

Commentary

A recurring theme of many of the comment letters is the trickiness of aligning a regulatory regime adopted through rulemaking to the CFTC's regime for SEFs. The CFTC adopted many significant aspects of its swap trading regime through ad hoc actions such as staff guidance, no-action letters and statements in rulemakings not reflected in the adopted text of the relevant rules.

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