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OTC Derivatives

SEC Proposes Regulatory Changes for Cross-Border Security-Based Swap Transactions

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On May 10, 2019, the U.S. Securities and Exchange Commission (SEC) proposed rule changes and interpretive guidance (the Proposal) related to the treatment of security-based swaps (SB swaps) that have certain cross-border characteristics.1 Most important, the SEC is reconsidering the treatment of SB swaps that are “arranged, negotiated or executed” by U.S.-based personnel of non-U.S. dealers. The SEC had addressed that subject through rulemaking in February 2016.2

Under the Proposal:

  • New guidance would exclude certain market-facing activity that is U.S. based from being considered “arranging” or “negotiating” if certain conditions were met.
  • The SEC’s existing “de minimis exception” to SB swap dealer registration requirements would be modified to permit a non-U.S. SB swap dealer to exclude certain SB swaps from its de minimis calculations.
  • Certain SB swap dealer requirements would be subject to conditional exceptions.
  • Additional new guidance and modifications would apply in the case of a limited number of other rules that relate to non-U.S. SB swap dealers.

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