The SEC announced on December 18, 2020 that it is creating a new collaborative venture called the Security-Based Swaps (SBS) Joint Venture. This venture joins several SEC divisions and offices and will be responsible for coordinating functions related to the regulation of security-based swaps and oversight of certain entities that will be required to register with the SEC (SBS entities). The SBS Joint Venture will be an important part of the SEC’s efforts to oversee the SBS market and better monitor SBS transaction data.
Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act established a comprehensive framework for regulating the over-the-counter swaps markets. Authority for this oversight is divided between the SEC and the Commodity Futures Trading Commission (CFTC). While the CFTC oversees other types of swaps (e.g., commodities, currency, interest rates, etc.), the SEC is charged with regulating the SBS market. In December 2019, the SEC adopted final rule changes to the its broad SBS regulatory regime and set the compliance date for SBS entities to register with the SEC.
That compliance date is soon in coming. SBS entities must register with the SEC beginning in November 2021. They will also become subject to various requirements, including capital, margin and segregation rules, among other rules. Additionally, SBS entities must report their SBS transaction data. Multiple regulatory purposes, including monitoring the build-up and concentration of risk exposures, preventing fraud, systemic risk supervision, and resolving issues and positions after an institution fails, require such data to be successful.
The SBS Joint Venture will be co-led by Vivi Mazarakis, an Acting Assistant Director in the Division of Examinations, and Carol McGee, the Assistant Director for the Office of Derivatives Policy in the Division of Trading and Markets. In addition, the joint venture will include participants from across the SEC, bringing together staff from the Division of Enforcement, the Division of Economic Risk and Analysis, the Office of International Affairs, and the Office of the Chief Data Officer.