The U.S. Securities and Exchange Commission proposed rules Wednesday that would require and dealers and major players in the security-based swap market to register with the commission.
The move to regulate the over-the-counter swap market is part of major U.S. regulatory reform in response to the financial crisis, which gives the SEC authority over the security-based swap market (including swaps based on single securities, groups or indexes of securities, loans, and events relating to single securities or indexes), and gives the Commodity Futures Trading Commission authority over other sorts of swaps.
In particular, the SEC will require that dealers and security-based swap participants register with the commission, and the proposed rules set out the registration process. The proposed rule would also require swap entities to keep their registration information current, certify the firm’s financial, operational and compliance capabilities, and obtain certain information from employees that are creating security-based swaps.
“Registering the major market participants in the largely unregulated security-based swap markets is a critical step toward better protecting investors,” said SEC chairman, Mary Schapiro. “Today’s proposal draws from our experience with registration rules regarding broker-dealers – rules that are familiar to many market participants.”
Separately, the SEC also voted to propose a rule implementing the so-called “Volcker Rule”, which aims to separate banking from proprietary trading and the private equity business.
“This proposal is intended to curb the proprietary trading of commercial banks and their affiliates in order to protect taxpayers and consumers by prohibiting insured depository institutions from engaging in risky proprietary trading,” said Schapiro.
The Volcker rule requirements are being proposed jointly with the Federal Deposit Insurance Corp., the Federal Reserve Board, and the Office of the Comptroller of the Currency.