By Silla Brush and Jesse Hamilton
Dec. 3 (Bloomberg) -- The U.S. Securities and Exchange
proposed definitions to determine which firms will
face higher capital and margin requirements under new rules for
the $583 trillion over-the-counter swaps market
commissioners voted 5-0 today to seek comment
s designed to match those endorsed by the Commodity
Futures Trading Commission
in a 3-2 vote
on Dec. 1. The two
-based agencies are charged with revamping oversight
of derivatives markets
under the Dodd-Frank law.
, the financial-regulation overhaul enacted in
July, aims to shift most
swaps to clearinghouses, exchanges
platforms to increase
transparency after largely
complicated efforts to resolve the credit
in 2008. The law gives the SEC authority over securities
based swaps, with the CFTC overseeing the rest of the market.
The SEC proposal
defines security-based swap
firms that are commonly understood to be security-based swaps
dealers, make a market in security-based swaps and regularly
enter such swaps with counterparties. The measure provides an
exclusion for firms that enter into such swaps for their own
accounts on an irregular basis.
“The definitions are the foundation of the regulatory
structure we are building
,” said Commissioner Elisse Walter
Democrat who joined other members
in welcoming industry
on how the proposed standards would affect market participants.
The SEC and CFTC are required to spell out details of a
three-part test for determining whether a firm is a major swap
participant. The proposals
released this week flesh out the
tests for whether a firm has a “substantial position” in a
swaps market, whether it is using swaps to hedge
commercial risk and whether it is highly leveraged.
Designation as a major swap participant would subject a
firm to higher capital, margin and business-conduct standards.
CFTC Chairman Gary Gensler
said in September that 200 global
financial firms might fall
under his agency’s swap-dealer
The SEC estimated that there may be 50 security-based swap
dealers under the definition proposed today. About 10 firms, the
agency estimated, may need to run tests to determine if they
need to register as major security-based swap participants.
SEC Commissioner Troy Paredes
, a Republican, backed the
proposal while expressing concern that the thresholds for
defining swaps dealers and major swaps participants would
include firms that don’t pose systemic risk to markets.
The definitions will be subject to public comment for 60
days, and the proposals won’t become official until they pass
from both the SEC and the CFTC.
, including swaps, are financial instruments
used to hedge risks or for speculation. They’re derived from
, loans, currencies and commodities
, or linked to
specific events like changes in the weather
or interest rates
For Related News and Information:
Today’s Top Stories: TOP
Top financial regulation stories: TNI TOP FINREG
Bloomberg Derivatives Portal: BDRV
--Editors: Gregory Mott
, Maura Reynolds
To contact the reporters on this story:
Silla Brush in Washington at +1-202-654-7325 or
in Washington at +1-202-657-1266 or
To contact the editor responsible for this story:
Lawrence Roberts at +1-202-624-1985 or firstname.lastname@example.org.
-0- Dec/03/2010 17:18 GMT