U.S. securities regulators are proposing new rules to enhance the regulation of a particular aspect of critical market infrastructure, clearing agencies, that are considered crucial to financial markets.
The U.S. Securities and Exchange Commission (SEC) voted to propose new rules Wednesday that would bolster oversight of clearing agencies that are deemed to be systemically important, or that are involved in complex transactions, such as security-based swaps. In a bid to address systemic risk in the wake of the financial crisis, U.S. regulatory reforms known as the Dodd-Frank Act call for enhancing the regulatory framework for certain clearing agencies.
The SEC’s proposal — which would apply to registered clearing agencies that have been designated as systemically important by the Financial Stability Oversight Council (FSOC) or that take part in complex transactions — would be subject to new requirements regarding their financial risk management, operations, governance, and disclosure. It would also establish procedures for the commission to apply the new requirements to additional clearing agencies.
The new rules would effectively create two tiers of oversight, one for these designated agencies, and the current, less stringent requirements for other clearing firms. The SEC says the two-tier approach would provide flexibility for new entrants that might seek to operate as registered clearing agencies while applying enhanced requirements to clearing agencies that raise systemic risk concerns due to their size, systemic importance, global reach, or the risks inherent in the products they clear.
“Clearing agencies that have been designated as systemically important or that clear security-based swaps are a backbone of the U.S. financial markets,” said SEC chair, Mary Jo White. “The enhanced regulatory regime proposed today reflects the importance of effective regulation of these entities.”
The proposals are out for a 60-day comment period.