The SEC on Wednesday voted to extend its cross-border securities-based swap rules to include transactions executed by foreign divisions of U.S. banks when an affiliate’s trades are legally guaranteed by the parent company.
The Securities and Exchange Commission’s previous cross-border rules had exempted U.S. banks’ overseas affiliates.
The SEC also adopted a procedural rule on submitting “substituted compliance” requests, which the agency in a news release said was “a first step in the SEC’s efforts to establish a framework to address the possibility that market participants may be subject to more than one set of comparable regulations across different jurisdictions as a result of their cross-border swaps activity.”
“The rules we adopted today have been strengthened to the extent feasible under existing law while increasing their clarity and workability for market participants,” said Mary Jo White, SEC chairwoman, at the commissioners’ meeting in Washington. “The rules lay the foundation for an expansive, robust approach to the potential risk to U.S. market participants and the U.S. financial system from security-based swap activities.”
Steve Luparello, director of the SEC’s division of trading and markets, said the rules “balance the regulatory goals” of the Dodd-Frank Wall Street Reform and Consumer Protection Act, “the practical needs of market participants and workability with the existing CFTC regime. The rules and guidance are appropriately tailored to our markets and regulatory structure.”
Dodd-Frank gave the SEC authority over equity and some credit-default swaps trading, while the Commodity Futures Trading Commission would oversee the vast majority of swaps — on interest rates, currencies and credit indexes.