SEC Adopts Clearing Agency Rule to Limit Potential for Overlapping or Duplicative Regulation

The Securities and Exchange Commission today announced that it has adopted a rule to limit the potential for overlapping or duplicative regulation within its security-based swap regulatory regime. Specifically, the rule exempts certain activities of security-based swap execution facilities and security-based swap dealers from triggering the requirement also to register as a clearing agency, in line with similar exemptions for broker-dealers and national securities exchanges.

“This rule helps ensure that the various types of regulated security-based swap entities are subject to regulations tailored to their specific functions,” said Brett Redfearn, Director of the Division of Trading and Markets. “In seeking this result, the rule also should help the Commission’s regime for security-based swaps launch smoothly when dealer registration begins next year.”

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 created new regulatory categories of entities for the security-based swap market. The rule adopted today helps ensure that those entities are treated similarly to national securities exchanges and broker-dealers, their counterparts for securities other than security-based swaps. Both the exemptions from and exclusions to the definition of clearing agency are designed to ensure that the entities are subject to appropriate regulation.

The adopted rule will become effective 60 days after publication in the Federal Register.