SEC Adopts Rules for the Registration & Regulation of Security-Based Swap Execution Facilities

The Securities & Exchange Commission today adopted new Regulation SE under the Securities Exchange Act of 1934 to create a regime for the registration & regulation of security-based swap execution facilities (SBSEFs). The new regulatory framework was required under Title VII of the Dodd-Frank Wall Street Reform & Consumer Protection Act relating to the over-the-counter derivatives market.

“Adopting Regulation SE fulfills Congress’s mandate & increases the transparency & integrity of the security-based swap market,” said SEC Chair Gary Gensler. “In taking up these matters in 2021, we heard from many market participants suggesting that we should look to the Commodity Futures Trading Commission’s (CFTC) rules for swap execution facilities as our template. I believe aligning the SEC’s regime closely with the CFTC’s garners many of the same benefits – bringing together buyers & sellers with transparent, pre-trade pricing. That lowers risk in the marketplace & protects investors.”

Today’s adoption addresses the Exchange Act’s trade execution requirement for security-based swaps & the cross-border application of that requirement, implements Section 765 of the Dodd-Frank Act to mitigate conflicts of interest at SBSEFs & national securities exchanges that trade security-based swaps, & promotes consistency between Regulation SE & existing rules under the Exchange Act.

In adopting Regulation SE, the Commission has sought to harmonize as closely as practicable with parallel rules of the CFTC that govern swap execution facilities (SEFs) & swap execution generally.

The adopted rules will become effective 60 days following the date of publication in the Federal Register. Any entity that meets the definition of SBSEF may file an application to register with the Commission on Form SBSEF at any time after the effective date, & would need to do so within 180 days of the effective date & have its application on Form SBSEF be complete within 240 days of the effective date in order to continue to operate as an SBSEF while its application is pending.