From the SEC: New Capital and Margin Rules on Swaps Expected Today


The Securities and Exchange Commission (SEC) is expected to make public today its proposed rules concerning capital and margin requirements for security-based swap dealers and major security-based swap participants.

The SEC is mandated by Dodd-Frank to coordinate its new rules with the Commodity Futures Trading Commission (CFTC). The agency’s new rules for swap dealers and swap participants comes as the CFTC has implemented or pursued controversial new regulation, such as rules that place position limits or require dealers to tally trades against a threshold.

While the specifics of the SECs forthcoming rules are unclear, most commentators believe that the agency will require large swap dealers to hold more capital, post collateral against riskier trades and install greater protections for customer funds.

“The capital and margin provisions of today’s proposal will affect the economics of entering into security-based swaps that are not cleared,” said SEC Commissioner Luis Aguilar.

SEC, CFTC, and Other Regulators

The SEC currently lags behind its regulatory counterparts in establishing rules required by the Dodd-Frank Act, which mandates that the agency coordinate with the CFTC in establishing capital and margin requirements. Other regulators – including the Federal Reserve and the Federal Deposit Insurance Corp – proposed versions of the capital and margin rules in 2011.

The new rules are expected to distinguish between registered and non-registered swap dealers. They are also expected to reflect current rules on capital requirements for securities broker-dealers.

The agency is also likely to exempt “end-users” that use swaps to hedge risks incurred with posting margin.

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About the Author

Felix Shipkevich
Mr. Shipkevich’s practice focuses on regulatory, transactional, and enforcement matters in the fields of futures, commodities, and derivatives. He works with Futures Commission Merchants (FCMs), Retail Forex Exchange Dealers (RFEDs), Introducing Brokers (IBs), Commodity Pool Operators (CPOs), Commodity Trading Advisors (CTAs), Swap Dealers (SDs), Swap Execution Facilities (SEFs), and domestic and offshore hedge funds. Mr. Shipkevich guides clients on procedures related to registration with the U.S. Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), as well as domestic and international regulators in local jurisdictions. Mr. Shipkevich prepares and helps implement compliance, anti-money laundering (AML), and Electronic Trading Systems (ETS) procedures for clients in the commodities and derivatives fields.