At a Securities Industry and Financial Markets Association conference last month, the Securities and Exchange Commission’s Division of Trading and Markets acting director John Ramsay said that the regulator will likely consider reworking a 2012 proposal that would establish margin requirements on specific swap trades now that international financial supervisors have established new margin requirements. It was The International Organization of Securities Commissions and the Basel Committee on Banking Supervision that issued the document setting up a final framework for margin requirements related to non-centrally cleared derivatives.
Ramsey said that in the wake of this document, the proposed rules that the SEC might withdraw are the ones that affect margin requirements as they pertain to certain swaps. The structure set up by the Basel-IOSCO document partially puts into place specific margin requirements on financial firms and the systematically integral non-financial entities that take part in non-centrally cleared derivatives transactions.
The regulator’s earlier proposal would have established margin requirements for security-based swap dealers and major swap participants while upping the minimum net capital requirements for brokerage firms allowed to implement the alternative internal model-based method to compute net capital. Now, however, said Ramsey, the agency could propose a new rule to make sure there is comment on a “full range of initiatives,” including the ones addressed in the Basel-IOSCO document.
Ramsay also spoke about a likely rulemaking sequence the SEC could use to put into place sections of the Dodd-Frank Wall Street Reform and Consumer Protection Act’s Title VII, which was in part responsible for introducing swaps market regulation. He stated that the agency could assess Title VII rules that were finalized or proposed by the Commodity Futures Trading Commission to identify possible differences between CFTC rules and SEC rules. However, said Ramsey, even though the SEC is concerned that registrants might feel burdened from having to deal with two compliance regimes, this did not mean the agency would only issue rules that are in complete alignment with CFTC rules.
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International Organization of Securities Commissions
Securities and Exchange Commission’s Division of Trading and Markets
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