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SEC Finalizes Cross-Border Swap Rule Amendments, Establishes Registration Timeline's picture
Commentary by Nihal Patel

The SEC finalized rules governing security-based swap ("SBS") activity in a cross-border context.

The final amendments will, among other things:

  • provide guidance as to when security-based swap transactions are considered to have been "arranged" or "negotiated" by U.S. personnel (including as to what it means to provide "market color"), while requiring that such transactions be reported (other than for certain inter-dealer SBSs);

  • provide two alternative amendments to SEA Rule 3a71-3 to add an exception from "arranged, negotiated or executed" ("ANE") requirements where the U.S. personnel are employees of (i) a registered security-based swap dealer ("SBSD") or (ii) a registered broker-dealer;

  • establish a cap on certain inter-dealer ANE activities of $50 billion;

  • amend the certification and opinion of counsel requirements in SEA Rule 15Fb2-4 and extend the filing time for SBSDs to submit certification and opinion of counsel;

  • amend SEC Rule of Practice 194 to exclude certain non-U.S. employees involved only in soliciting business from non-U.S. persons from the application of statutory disqualification provisions; and

  • modify recordkeeping requirements for SBSDs relating to questionnaires or applications for employment under proposed SEA Rule 18a-5 to provide that (1) SBSDs are not required to maintain a questionnaire for a person excluded from the prohibition in SEA Section 15F(b)(6), and (2) certain information that may not be available under applicable law need not be obtained.

Compliance Dates:

  • The final rules are effective on March 1, 2020, or 60 days following publication of the rules in the Federal Register (the "Effective Date").

  • The compliance date for registration of SBSDs will be 18 months thereafter (i.e., it is likely to be September 1, 2021) (the "Registration Compliance Date").

  • The compliance date for amendments to Rule 3a71-3 will be two months prior to the Registration Compliance Date.

  • The compliance date for amendments to Rules 18a-5 and 15Fb2-1 will be the Registration Compliance Date.

  • The compliance date for amendments to Rule 0-13 and Rule of Practice 194 will be the Effective Date.

  • The compliance date for a number of other SBS rules will be the Registration Compliance Date, including (i) segregation, capital and margin, (ii) SBSD recordkeeping and reporting, (iii) business conduct standards, and (iv) trade acknowledgment and verification requirements.

  • Reporting: The release provides that, for four years after a compliance date for Regulation SBSR ("Reporting and Dissemination of Security-Based Swap Information") for an asset class, certain reporting rules will not provide a basis for enforcement action. (A full list may be found beginning on p. 282 of the release.)

Dissent: Commissioner Allison Herren Lee dissented from the rule adoption, particularly taking issue with the changed treatment for ANE transactions and the amendments to Rule 194.


There is a lot going on here. Every firm involved in dealing security-based swaps (in particular those operating outside of the United States) will want to closely review these final rules.

ANE Transactions: The relief is largely good news for non-U.S. entities, though it is clearly not a full exemption. Among other things, these transactions: (i) will be subject to reporting requirements; (ii) will need to be "ANE'd" by a registered SBSD or BD; (iii) will be subject to business conduct requirements; and (iv) will be subject to an interdealer cap of $50 billion. Further, reliance on the exception is only permitted for entities based in certain "listed jurisdictions," which so far includes Australia, Canada, France, Germany, Japan, Singapore, Switzerland, and the UK.

Certification/Opinion of Counsel: The final rules permit conditional registration upon provision of a certification and provision of "adequate assurances" to the SEC.

Registration: It appears that, more than 10 years after the adoption of Dodd-Frank, registration will finally (probably) be required for entities acting as dealers in security-based swaps. 


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