SEC Issues Final Reporting Rules for Financial Swaps
Enhancing its supervision of financial swaps, the Securities and Exchange Commission (“SEC”) has announced two final reporting rules that address a major weakness in the capital markets. Issued on February 11th, Release No. 34-74246, Security-Based Swap Data Repository Registration, Duties, and Core Principles, establishes registration and governance policies for swaps data warehouses that collect trading information; and Release No. 34-74244, Regulation SBSR—Reporting and Dissemination of Security-Based Swap Information, which outlines rules for communicating trades to the data warehouses.
Per the final rules, data warehouses are required to record swap trades and store the data for five years, estimate brokers’ positions by the asset class and trading partner, allow the SEC to have direct electronic admittance to the data, and have rules for resolving differences over trading information. Furthermore, the data warehouses must maintain financial records of their operations, undergo inspections and exams, and assign a chief compliance officer to file both a compliance report and audited financial report annually with the SEC. With trades required to be reported 24 hours upon execution, the records will assist regulators in monitoring market risk, and counter market manipulation and fraud.
Both rules will be effective 60 days after their publication in the Federal Register. A year after the rules are published in the Federal Register, swaps warehouses must comply. The trade reporting rules will have to be complied with at the rules’ effective date.
For more on the reporting rules for financial swaps, the experienced professionals of our Financial Services Group are available to assist.