Conformed to Federal Register version

Agency decision

Ask Donna

What actually matters in this document.

Text

SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 200, 201, 232, 240, 242, and 249

[Release No. 34-98845; File No. S7-14-22]

RIN 3235-AK93

Security-Based Swap Execution and Registration and Regulation of Security-Based Swap

Execution Facilities

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

SUMMARY: The Securities and Exchange Commission (“SEC” or “Commission”) is adopting

a set of rules and forms under the Securities Exchange Act of 1934 (“SEA”) that would create a

regime for the registration and regulation of security-based swap execution facilities (“SBSEFs”)

and address other issues relating to security-based swap (“SBS”) execution generally. One of the

rules being adopted implements an element of the Dodd-Frank Act that is intended to mitigate

conflicts of interest at SBSEFs and national securities exchanges that trade SBS (“SBS

exchanges”). Other rules being adopted address the cross-border application of the SEA’s trading

venue registration requirements and the trade execution requirement for SBS. In addition, the

Commission is amending an existing rule to exempt, from the SEA definition of “exchange,”

certain registered clearing agencies, as well as registered SBSEFs that provide a market place

only for SBS. The Commission is also adopting a new rule that, while affirming that an SBSEF

would be a broker under the SEA, exempts a registered SBSEF from certain broker

requirements. Further, the Commission is adopting certain new rules and amendments to its

Rules of Practice to allow persons who are aggrieved by certain actions by an SBSEF to apply

for review by the Commission. Finally, the Commission is delegating new authority to the

Director of the Division of Trading and Markets and to the General Counsel to take actions

necessary to carry out the rules being adopted.

DATES: Effective date: February 13, 2024.

Compliance dates: See section XVI (Compliance Schedule).

FOR FURTHER INFORMATION CONTACT: Michael E. Coe, Assistant Director; David

Liu, Special Counsel; Leah Mesfin, Special Counsel; Michou Nguyen, Special Counsel; or

Geoffrey Pemble, Special Counsel, at (202) 551-5000, Office of Market Supervision, Division of

Trading and Markets, Securities and Exchange Commission, 100 F Street NE, Washington, DC

20549.

SUPPLEMENTARY INFORMATION: The Commission is adopting new 17 CFR 242.800

through 242.835 (“Regulation SE”) to create a regime for the registration and regulation of

SBSEFs and to address other issues relating to SBS execution generally. Regulation SE consists

of 17 CFR 242.800 through 242.835 (Rules 800 through 835). Key rules within Regulation SE

include Rule 803, which establishes a process for SBSEF registration; Rules 804 to 810, which

establish procedures for rule and product filings by SBSEFs; Rule 815, which establishes

permissible execution methods for SBS that are subject to the SEA’s trade execution

requirement; Rule 816, which sets out a procedure for SBSEFs to make an SBS available to trade

and establish certain exemptions from the trade execution requirement; Rules 818 to 831, which

implement the 14 Core Principles for SBSEFs set forth in section 3D(d) of the SEA; Rules 832

to 833, which address cross-border matters; and Rule 834, which imposes requirements

addressing conflicts of interest involving SBSEFs and SBS exchanges, as required by section

765 of the Dodd-Frank Act.

In addition to the rules described above, the Commission is also adopting 17 CFR

249.1701 (Form SBSEF), which is the form that an entity will use to register with the

Commission as an SBSEF; 17 CFR 249.1702 (a submission cover sheet), which will be required

to accompany filings with the Commission made by SBSEFs for rule and rule amendments and

for product listings; adopting amendments to 17 CFR 232.405 (Rule 405 of Regulation S-T) to

require various SBSEF filings to be provided in Inline eXtensible Business Reporting Language

(“Inline XBRL”), a structured data language; adopting amendments to 17 CFR 240.3a1-1 (Rule

3a1-1) to exempt from the SEA definition of “exchange” certain registered clearing agencies, as

well as registered SBSEFs that provide a market place only for SBS; adopting 17 CFR

240.15a-12 (Rule 15a-12), which, while affirming that an SBSEF would also be a broker under

the SEA, exempts a registered SBSEF from certain broker requirements; providing for the sunset

of existing temporary exemptions from the requirement to register as a clearing agency that,

among other things, applies to an entity performing the functions of an SBSEF but that is not yet

registered as such, and from the requirement to register as an SBSEF or a national securities

exchange for entities that meet the statutory definition of SBSEF; adopting certain new rules and

amendments to 17 CFR Part 201 (Rules of Practice) to allow persons who are aggrieved by

certain actions by an SBSEF to apply for review by the Commission; and adopting amendments

to 17 CFR 200.30-3 and 17 CFR 200.30-14 regarding delegations of authority to the Director of

the Division of Trading and Markets and to the General Counsel.

Table of Contents

Background ......................................................................................................................... 8

II.

Introductory Provisions of Regulation SE ........................................................................ 15

Rule 800—Scope .................................................................................................. 15

III.

IV.

Rule 801—Applicable Provisions......................................................................... 15

Rule 802—Definitions .......................................................................................... 16

Registration of SBSEFs .................................................................................................... 18

Rule 803—Requirements and Procedures for Registration .................................. 19

Form SBSEF ......................................................................................................... 32

Rule and Product Filings by SBSEFs ............................................................................... 35

Rule 804—Listing Products for Trading by Certification .................................... 36

Rule 805—Voluntary Submission of New Products for Commission Review

and Approval ......................................................................................................... 46

Rule 806—Voluntary Submission of Rules for Commission Review and

Approval ............................................................................................................... 50

Rule 807—Self-Certification of Rules.................................................................. 53

Submission Cover Sheet and Instructions............................................................. 62

Rule 808—Availability of Public Information ..................................................... 65

Rule 809—Staying of Certification and Tolling of Review Period Pending

Jurisdictional Determination ................................................................................. 67

Rule 810—Product Filings by SBSEFs That Are Not Yet Registered and by

Dormant SBSEFs .................................................................................................. 69

Miscellaneous Requirements ............................................................................................ 69

Rule 811—Information Relating to SBSEF Compliance ..................................... 69

Rule 812—Enforceability ..................................................................................... 73

Rule 813—Prohibited Use of Data Collected for Regulatory Purposes ............... 77

Rule 814—Entity Operating Both a National Securities Exchange and

an SBSEF .............................................................................................................. 77

VI.

VII.

Rule 815—Methods of Execution for Required and Permitted Transactions ...... 79

Rule 816—Trade Execution Requirement and Exemptions Therefrom ............. 119

Rule 817—Trade Execution Compliance Schedule ........................................... 140

Implementation of Core Principles ................................................................................. 144

Rule 818—Core Principle 1—Compliance with Core Principles....................... 145

Rule 819—Core Principle 2—Compliance with Rules ...................................... 145

Rule 820—Core Principle 3—SBS Not Readily Susceptible to Manipulation .. 173

Rule 821—Core Principle 4—Monitoring of Trading and Trade Processing .... 173

Rule 822—Core Principle 5—Ability to Obtain Information ............................ 175

Rule 823—Core Principle 6—Financial Integrity of Transactions .................... 176

Rule 824—Core Principle 7—Emergency Authority ......................................... 181

Rule 825—Core Principle 8—Timely Publication of Trading Information ....... 183

Rule 826—Core Principle 9—Recordkeeping and Reporting ............................ 195

Rule 827—Core Principle 10—Antitrust Considerations................................... 198

Rule 828—Core Principle 11—Conflicts of Interest .......................................... 199

Rule 829—Core Principle 12—Financial Resources ......................................... 200

Rule 830—Core Principle 13—System Safeguards ........................................... 207

Rule 831—Core Principle 14—Designation of Chief Compliance Officer ....... 210

Cross-Border Rules ......................................................................................................... 213

Rule 832—Cross-border Mandatory Trade Execution ....................................... 213

Rule 833—Cross-border Exemptions for Foreign Trading Venues and

Relating to the Trade Execution Requirement .................................................... 228

VIII.

Rule 834—Implementation of Section 765 of the Dodd-Frank Act and Governance

of SBSEFs and SBS Exchanges ...................................................................................... 242

IX.

Rule 834(a).......................................................................................................... 244

Rule 834(b) ......................................................................................................... 244

Rule 834(c).......................................................................................................... 252

Rule 834(d) ......................................................................................................... 253

Rule 834(e).......................................................................................................... 254

Rule 834(f) .......................................................................................................... 255

Rule 834(g) ......................................................................................................... 255

Rule 834(h) ......................................................................................................... 257

Rule 835—Notice to Commission by SBSEF of Final Disciplinary Action, Denial or

Conditioning of Membership, or Denial or Limitation of Access .................................. 257

Amendments to Existing Rule 3a1-1 under the SEA-Exemptions from the Definition

of “Exchange” ................................................................................................................. 260

XI.

Rule 15a-12—SBSEFs as Registered Brokers; Relief from Certain Broker

Requirements .................................................................................................................. 265

XII.

Termination of Temporary Exemptions.......................................................................... 269

XIII.

Electronic Filings under Regulation SE.......................................................................... 273

Use of Electronic Filing Systems and Structured Data ....................................... 273

Use of Identifiers................................................................................................. 282

XIV. Amendments to Commission’s Rules of Practice for Appeals of SBSEF Actions ........ 285

XV.

Amendment to Rule 101 ..................................................................................... 286

Amendment to Rule 202 ..................................................................................... 286

Amendment to Rule 210 ..................................................................................... 287

Amendment to Rule 401 ..................................................................................... 288

Rule 442—Right to Appeal ................................................................................ 289

Rule 443—Sua sponte Review by Commission ................................................. 291

Amendment to Rule 450 ..................................................................................... 292

Amendment to Rule 460 ..................................................................................... 292

Amendments to Delegations of Authority in Rule 30-3 and Rule 30-14 ....................... 293

Delegated Authority Related to SBSEF Registration and Form SBSEF ............ 295

Delegated Authority Related to New Products Proposed by an SBSEF ............ 296

Delegated Authority Related to New Rules or Rule Amendments Proposed

by an SBSEF ....................................................................................................... 297

Delegated Authority Related to Request for Joint Interpretation ....................... 298

Delegated Authority Related to SBSEF Submissions Contemplated by

Rule 811 .............................................................................................................. 298

Delegated Authority Related to Information Sharing ......................................... 299

Delegated Authority Related to Commission Review Proceedings ................... 300

XVI. Compliance Schedule...................................................................................................... 300

XVII. Economic Analysis ......................................................................................................... 305

Introduction ......................................................................................................... 305

Economic Baseline.............................................................................................. 307

Benefits and Costs............................................................................................... 335

Effects on Efficiency, Competition, and Capital Formation............................... 381

Reasonable Alternatives...................................................................................... 386

XVIII. Paperwork Reduction Act ............................................................................................... 401

Summary of collection of information................................................................ 402

Proposed use of information ............................................................................... 409

Respondents ........................................................................................................ 413

Total Annual Reporting and Recordkeeping Burden.......................................... 415

Collection of Information is Mandatory ............................................................. 436

Responses to Collection of Information Will Not Be Confidential .................... 436

Retention Period of Recordkeeping Requirements ............................................. 437

XIX. Regulatory Flexibility Certification ................................................................................ 437

SBSEFs ............................................................................................................... 438

Persons Requesting an Exemption Order Pursuant to Rule 833 ......................... 439

SBS Exchanges ................................................................................................... 440

Certification ........................................................................................................ 441

XX.

Other Matters .................................................................................................................. 441

BACKGROUND

The Commission is adopting Regulation SE,1 which governs the registration and

regulation of SBSEFs, as required by section 3D of the SEA. 2 Section 3D was enacted as part of

The Commission proposed Regulation SE on Apr. 6, 2022. See Rules Relating to Security-Based Swap

Execution and Registration and Regulation of Security-Based Swap Execution Facilities (Proposed Rule),

SEA Release No. 94615 (Apr. 6, 2022), 87 FR 28872 (May 11, 2022) (“Proposing Release”).

15 U.S.C. 78c-4. In this release, the Commission is defining the Securities Exchange Act as the “SEA” to

distinguish it from the Commodity Exchange Act (“CEA”).

Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank

Act”). 3 The Dodd-Frank Act was enacted, among other reasons, to promote the financial stability

of the United States by improving accountability and transparency in the financial system. 4 The

2008 financial crisis highlighted significant issues in the over-the-counter (“OTC”) derivatives

markets, which experienced dramatic growth in the years leading up to the financial crisis and

are capable of affecting significant sectors of the U.S. economy.

Section 3D(a)(1) of the SEA provides that no person may operate a facility for the trading

or processing of SBS unless the facility is registered as an SBSEF or as a national securities

exchange. Section 3D(d) enumerates 14 Core Principles with which SBSEFs must comply. 5 And

section 3D(f) requires the Commission to prescribe rules governing the regulation of SBSEFs. In

addition, section 765 of the Dodd-Frank Act directs the Commission to adopt rules to mitigate

conflicts of interest with respect to clearing agencies that clear SBS (“SBS clearing agencies”),

SBSEFs, and national securities exchanges that post or make available for trading SBS (“SBS

exchanges”).

On April 6, 2022, the Commission proposed Regulation SE, relating to the registration

and regulation of SBSEFs and to SBS execution generally. 6 As discussed in the Proposing

Release, the proposed rules superseded previous Commission proposals on these subjects. 7

Pub. L. No. 111-203, H.R. 4173, sec. 763(c).

See Pub. L. No. 111-203 Preamble.

See infra section VI (listing the Core Principles).

See Proposing Release, supra note 1. In 2011, the Commission published for comment proposed

Regulation SBSEF relating to, among other things, the registration and regulation of SBSEFs. Registration

and Regulation of Security-Based Swap Execution Facilities, SEA Release No. 63825 (Feb. 2, 2011), 76

FR 10948 (Feb. 28, 2011) (“2011 SBSEF Proposal”). The Proposing Release, which contains a more

detailed discussion of that and related proposals, withdrew the 2011 SBSEF Proposal. See Proposing

Release, 87 FR at 28874.

See Proposing Release, supra note 1, 87 FR at 28874. However, Rule 834 of proposed Regulation SE

would implement section 765 only with respect to SBSEFs and SBS exchanges. See infra section VIII.

The SBS market is closely related to the swaps market, which is regulated by the

Commodity Futures Trading Commission (“CFTC”). 8 In June 2013, the CFTC adopted rules (in

17 CFR chapter I) under Title VII of the Dodd-Frank Act for swap execution facilities

(“SEFs”). 9 The swaps market has grown and matured within the framework established by the

CFTC’s rules. 10 As discussed in the Proposing Release, the SBS market is a small fraction of the

overall swaps market, and the swaps market provides greater opportunities for revenue capture

from swap execution as compared to SBS execution. 11 For example, as of November 25, 2022,

the gross notional amount outstanding in the SBS market was approximately $8.5 trillion across

the credit, equity, and interest rate asset classes, 12 while the gross notional amount outstanding in

the swaps market was approximately $352 trillion across the interest rate, credit, and foreign-

In adopting Regulation SE, the Commission has consulted and coordinated with the CFTC and the

prudential regulators, in accordance with the consultation mandate of the Dodd-Frank Act. Section

712(a)(2) of the Dodd-Frank Act provides in relevant part that the Commission shall “consult and

coordinate to the extent possible with the Commodity Futures Trading Commission and the prudential

regulators for the purposes of assuring regulatory consistency and comparability, to the extent possible.” In

addition, section 752(a) of the Dodd-Frank Act provides in relevant part that “[i]n order to promote

effective and consistent global regulation of swaps and security-based swaps, the Commodity Futures

Trading Commission, the Securities and Exchange Commission, and the prudential regulators … as

appropriate, shall consult and coordinate with foreign regulatory authorities on the establishment of

consistent international standards with respect to the regulation (including fees) of swaps.” The term

“prudential regulator” is defined in section 1a(39) of the CEA, 7 U.S.C. 1a(39), and that definition is

incorporated by reference in section 3(a)(74) of the SEA, 15 U.S.C. 78c(a)(74).

See CFTC, Core Principles and Other Requirements for Swap Execution Facilities, 78 FR 33476 (June 4,

2013) (“2013 CFTC Final SEF Rules Release”); CFTC, Process for a Designated Contract Market or Swap

Execution Facility To Make a Swap Available to Trade, Swap Transaction Compliance and

Implementation Schedule, and Trade Execution Requirement Under the Commodity Exchange Act, 78 FR

33606 (June 4, 2013) (“2013 CFTC Final MAT Rules Release”).

In 2018, the CFTC proposed to make fundamental changes to the SEF regulatory structure. See CFTC,

Swap Execution Facilities and Trade Execution Requirement, 83 FR 61946 (Nov. 30, 2018) (“2018 SEF

Proposal”). In 2021, the CFTC ultimately declined to finalize the 2018 SEF Proposal and elected instead

“to improve the SEF framework through targeted rulemakings that address distinct issues.” Accordingly,

the CFTC withdrew the unadopted portions of its 2018 proposal. See CFTC, Swap Execution Facilities and

Trade Execution Requirement – Proposed rule; partial withdrawal, 86 FR 9304, 9304 (Feb. 12, 2021).

See Proposing Release, supra note 1, 87 FR at 28874–76.

See Report on Security-Based Swaps (Mar. 20, 2023), available at https://www.sec.gov/files/reportsecurity-based-swaps-032023.pdf. See also infra note 815 and accompanying text (discussing securitybased swap transactions data in the credit, equity, and interest rate derivatives asset classes reported by

registered SBSDRs).

exchange asset classes. 13 The Commission was sensitive in the Proposing Release to the

economic impact its proposed SBSEF rules could have. 14

In addition, the Commission recognized that the entities that are most likely to register

with the Commission as SBSEFs are existing, CFTC-registered SEFs, which have already made

substantial investments in systems, policies, and procedures to comply with and adapt to the

regulatory system developed by the CFTC. Harmonization between the Commission’s SBSEF

rules and the CFTC’s SEF rules could facilitate the ability of entities to dually register and

minimize costs by allowing incumbent SEFs to use their existing systems, policies, and

procedures to comply with the Commission’s SBSEF rules. 15

Thus, in proposing Regulation SE, the Commission took the general approach of

harmonizing closely with analogous CFTC SEF rules, except where differences in the SEC’s

statutory authority relative to the CFTC’s statutory authority, or differences in the SBS market

relative to the swaps market, necessitated differences between the Commission’s rules and the

CFTC’s, or where the benefits of deviating from the CFTC’s rules would otherwise justify the

burdens and costs associated with imposing different or additional requirements than the

corresponding CFTC rule. And the Commission sought public comment on this approach. 16

One commenter opposes this harmonization approach, and argues that it does not make

sense to harmonize with the “looser” rules of SEFs, which he believes would allow “more fraud

See CFTC Swaps Report, available at

https://www.cftc.gov/MarketReports/SwapsReports/L3Grossexp.html (accessed on Sept. 27, 2023).

See Proposing Release, supra note 1, 87 FR at 28875.

The comment letters are available at https://www.sec.gov/comments/s7-14-22/s71422.htm. The

Commission also received comments on topics outside the scope of the proposal that are not addressed in

this release. See, e.g., Letter from Anonymous (Apr. 27, 2022) (discussing CFTC oversight and

transparency); Letter from Anonymous (Apr. 20, 2022) (discussing securities financial transactions).

and false narratives to creep into the market,” and instead advocates that the Commission start

from scratch with new rules. 17 Many other commenters, however, generally support this

harmonization approach. 18 Many of these commenters echo the Commission’s rationale for

harmonizing with the CFTC’s SEF rules, and state that such harmonization would minimize the

compliance burden for dually registered entities. 19 Two of these commenters also state that the

CFTC’s regulatory framework has been in place for almost a decade and has functioned well. 20

See Letter from Robert McLaughlin (Apr. 7, 2022).

See, e.g., Letter from Robert Laorno, General Counsel, ICE Swap Trade, LLC, to Vanessa A. Countryman,

Secretary, Commission, at 1–2 (June 20, 2022) (“ICE Letter”); Letter from Stephen W. Hall, Legal

Director and Securities Specialist, and Jason Grimes, Senior Counsel, Better Markets, Inc., to Vanessa A.

Countryman, Secretary, Commission, at 9–11 (June 10, 2022) (“Better Markets Letter”); Letter from Derek

J. Kleinbauer, Vice-President, Bloomberg SEF LLC, and Benjamin MacDonald, Global Head Enterprise

Products, Bloomberg L.P., to Vanessa A. Countryman, Secretary, Commission, at 1–2 (June 10, 2022)

(“Bloomberg Letter”); Letter from Bella Rosenberg, Senior Counsel and Head of Legal and Regulatory

Practice Group, International Swaps and Derivatives Association, Inc., and Kyla Brandon, Managing

Director, Head of Derivatives Policy, Securities Industry and Financial Markets Association, to Vanessa

Countryman, Secretary, Commission, at 1–2 (June 10, 2022) (“ISDA-SIFMA Letter”); Letter from Sarah

A. Bessin Associate General Counsel, and Nicholas Valderrama, Counsel, Investment Company Institute,

at 1–2 (June 10, 2022) (“ICI Letter”); Letter from Elizabeth Kirby, Head of U.S. Market Structure,

Tradeweb Markets Inc., to Vanessa A. Countryman, Secretary, Commission, at 1–2 (June 10, 2022)

(“Tradeweb Letter”); Letter from Williams Shields, Chairman, Wholesale Markets Brokers’ Association,

Americas, to Vanessa A. Countryman, Secretary, Commission, at 1–2 (June 10, 2022) (“WMBAA Letter”);

Letter from Lindsey Weber Keljo, Head of SIFMA Asset Management Group, and William Thun,

Associate General Counsel, SIFMA Asset Management Group, to Vanessa A. Countryman, Secretary,

Commission, at 1–2 (June 10, 2022) (“SIFMA AMG Letter”); Letter from Jennifer W. Han, Chief Counsel

& Head of Regulatory Affairs, Managed Funds Association, at 1–2 (June 10, 2022) (“MFA Letter”); Letter

from Stephen John Berger, Global Head of Government & Regulatory Policy, Citadel and Citadel

Securities (June 10, 2022) (“Citadel Letter”). While these commenters support the Commission’s general

harmonization approach, they also provide specific recommendations on changes to the Commission’s

Regulation SE proposal that they believe would improve the rules, as described in detail below in the

sections discussing these individual rules. See infra sections II through XVII.

See, e.g., ICE Letter, supra note 18, at 1–2; ISDA-SIFMA Letter, supra note 18, at 1–2; ICI Letter, supra

note 18, at 1–2; Tradeweb Letter, supra note 18, at 1–2; WMBAA Letter, supra note 18, at 1–2; MFA

Letter, supra note 18, at 1.

See, e.g., ISDA-SIFMA Letter, supra note 18, at 1–2; SIFMA AMG Letter, supra note 18, at 1–2.

One commenter also supports the Commission’s decision and rationale in withdrawing proposed

Regulation MC 21 and the Commission’s 2011 SBSEF Proposal. 22

The Commission disagrees with the comment that harmonizing with the CFTC approach

would allow for more fraud and false narratives in the SBS markets. Standing up a formal

regulatory framework for SBSEFs where none yet exists will provide greater accountability and

oversight for the SBS market and should, contrary to this commenter’s views, serve to detect and

deter abusive and manipulative trading practices by providing for a set of Commission rules that

SBSEFs must adhere to in operating their platforms and by requiring SBSEFs to make filings

with the Commission regarding the operation of their platforms and to make their rules publicly

available, as described in detail in sections II through XVII below.

Given the relative size of the SBS market as compared to the swaps market, the fact that

the CFTC’s SEF regulation has been in place for many years now, and the cost efficiencies and

reduced burdens that would result from harmonized rules for dually registered SEFs/SBSEFs, it

is appropriate to generally harmonize the Commission’s SBSEF regulatory framework with the

CFTC’s SEF regulatory framework. At the same time, where appropriate, adopted Regulation SE

differs in certain targeted respects from the CFTC’s regulatory framework for SEFs. This

includes areas where differences in the Commission’s statutory authority relative to the CFTC’s

statutory authority or differences in the SBS market relative to the swaps market necessitate

differences between the Commission’s rules and the CFTC’s, or where the benefits of deviating

from the CFTC’s rules would otherwise justify the burdens and costs associated with imposing

Ownership Limitations and Governance Requirements for Security-Based Swap Clearing Agencies,

Security-Based Swap Execution Facilities, and National Securities Exchanges With Respect to SecurityBased Swaps Under Regulation MC, SEA Release No. 63107 (Oct. 14, 2010), 75 FR 65882 (Oct. 26, 2010)

(“Regulation MC Proposal”).

See Bloomberg Letter, supra note 18, at 2.

different or additional requirements than the corresponding CFTC rule. The specific approach to

harmonization that the Commission has pursued, along with differences from CFTC’s regime for

SEFs, are described in detail in sections II through XVII below.

As discussed below, the Commission is modifying the proposed provisions of Regulation

SE regarding the definition of “block trade,” 23 the treatment of package transactions, 24 the

treatment of SBS transactions that are intended to be cleared but are not accepted for clearing by

a registered clearing agency, 25 permitting SBSEFs to contract with designated contract markets

(“DCMs”) to provide services to assist in complying with the SEA and Commission rules

thereunder, 26 the content and timing of the Daily Market Data Report, 27 an exception to

ownership and voting restrictions for SBSEFs, 28 the application of deadlines and standard of

review for Commission review of SBSEF actions, 29 and the applicability of electronic filing and

structured-data requirements with respect to specific SBSEF filings. 30 Otherwise, the rules of

Regulation SE are generally being adopted as proposed, in some instances with minor or

technical modifications, which are described in more detail below. 31

See infra section V.E.1(c).

See infra section V.E.4.

See infra section V.E.7.

See infra section VI.B.5.

See infra section VI.H.

See infra section VIII.B.

See infra section XIV.E.

See infra section XIII.

See infra note 32.

II.

INTRODUCTORY PROVISIONS OF REGULATION SE

Rule 800—Scope

Proposed Rule 800 is based on 17 CFR 37.1, which provides that part 37 of the CFTC’s

regulations applies to every SEF that is registered or applying to become registered as a SEF

under section 5h of the CEA. Proposed Rule 800 would provide that the provisions of Regulation

SE apply to every SBSEF that is registered or is applying to become registered as an SBSEF

under section 3D of the SEA.

The Commission received no comments on Proposed Rule 800 and is adopting Rule 800

as proposed, with minor technical modifications, 32 for the reasons stated in the Proposing

Release.

Rule 801—Applicable Provisions

Proposed Rule 801 is based on § 37.2 of the CFTC’s rules, which provides that a SEF

shall comply with the requirements of part 37 and all other applicable CFTC regulations,

including 17 CFR 1.60 and part 9, and including any related definitions and cross-referenced

sections. Proposed Rule 801 would require an SBSEF to comply with the requirements of

Regulation SE and all other applicable Commission rules, including any related definitions and

cross-referenced sections.

The Commission did not receive any comments on Proposed Rule 801 and is adopting

Rule 801 as proposed, with minor technical modifications. 33

In several instances, here and as noted below, the Commission has made technical modifications to the

proposed regulatory text to conform cross-references in the regulatory text to the CFR to the required style,

as well as to correct simple typographical errors. Here, the Commission has modified Rule 800 to change a

reference from “[t]he provisions of this section” to “[t]he provisions of §§ 242.800 through 242.835.” In

other instances, the Commission has added the words “of this section” to a CFR cross-reference to conform

to the required form of citation. Other types of technical modifications, and any substantive modifications,

are described below with respect to specific instances.

See id.

Rule 802—Definitions

Proposed Rule 802 would set forth the definitions of terms that are used in multiple rules

in proposed Regulation SE. The majority of these terms were adapted from the CFTC’s swaps

rules. Other terms were taken from section 3 of the SEA 34 or from a Commission rule under the

SEA. In particular, Proposed Rule 802 would define the term “security-based swap execution

facility” by cross-referencing the definition of that term provided in section 3(a)(77) of the

SEA, 35 but with one carve-out. An entity that is registered with the Commission as a clearing

agency pursuant to section 17A of the SEA 36 and limits its SBSEF functions to operation of a

trading session that is designed to further the accuracy of end-of-day valuations—i.e., a “forced

trading session”—would be exempt from the definition of “security-based swap execution

facility.” 37

Although the Commission received comments regarding the proper application of the

proposed definitions with respect to registration requirements, discussed below in section III.A.2,

15 U.S.C. 78c.

15 U.S.C. 78c(a)(77).

15 U.S.C. 78q-1.

See Proposing Release, supra note 1, 87 FR at 28878. This provision codifies a series of exemptions

granted by the Commission to SBS clearing agencies that operate “forced trading” sessions. See, e.g., Order

Granting Temporary Exemptions Under the Securities Exchange Act of 1934 in Connection With Request

on Behalf of ICE U.S. Trust LLC Related to Central Clearing of Credit Default Swaps, and Request for

Comments, SEA Release No. 59527 (Mar. 6, 2009), 74 FR 10791, 10796 (Mar. 12, 2009) (providing,

among other things, an exemption from sections 5 and 6 of the SEA because “ICE Trust will periodically

require ICE Trust Participants to execute certain CDS trades at the applicable end-of-day settlement price.

Requiring ICE Trust Participants to trade CDS periodically in this manner is designed to help ensure that

such submitted prices reflect each ICE Trust Participant’s best assessment of the value of each of its open

positions in Cleared CDS on a daily basis, thereby reducing risk by allowing ICE Trust to impose

appropriate margin requirements”); Order Extending and Modifying Temporary Exemptions Under the

Securities Exchange Act of 1934 in Connection With Request of Chicago Mercantile Exchange Inc.

Related to Central Clearing of Credit Default Swaps, and Request for Comments, SEA Release No. 61164

(Dec. 14, 2009), 74 FR 67258, 67262 (Dec. 18, 2009) (providing, among other things, an exemption from

sections 5 and 6 of the SEA because, “[a]s part of the CDS clearing process, CME will periodically require

CDS clearing members to trade at prices generated by their indicative settlement prices where those

indicative settlement prices generate crossed bids and offers, pursuant to CME’s price quality auction

methodology”).

and the proposed amendments to Rule 3a1-1, discussed below in section X, the Commission did

not receive comments suggesting a modification of the definitions themselves. The term

“security-based swap execution facility” is defined directly in section 3(a)(77) of the SEA as “a

trading system or platform in which multiple participants have the ability to execute or trade

security-based swaps by accepting bids and offers made by multiple participants in the facility or

system…,” 38 and it is appropriate to adopt the same definition in Rule 802, with a narrow

exception to address certain activities of registered clearing agencies in furthering the accuracy

of end-of-day valuations. 39

Specifically, it is necessary or appropriate in the public interest, and is consistent with the

protection of investors, to exempt a registered clearing agency that utilizes a forced trading

functionality for SBS from the definition of “security-based swap execution facility.” Such an

entity will continue to be registered as a clearing agency and subject to the requirements of

section 17A of the SEA. Furthermore, a registered clearing agency is a self-regulatory

organization (“SRO”); therefore, all of its rules—including those governing the forced trading

session—have to be submitted to the Commission pursuant to section 19 of the SEA. Therefore,

codification of the exemption from the definitions of “exchange” and “security-based swap

execution facility” preserves the status quo and eliminates a largely duplicative and unnecessary

set of regulatory requirements. This exemption covers only the forced-trading functionality of an

SBS clearing agency; any other exchange or SBSEF activity in which a clearing agency might

15 U.S.C. 78c(a)(77).

Because this exception for certain clearing agencies specifies “an entity that is registered with the

Commission as a clearing agency pursuant to section 17A of the [SEA]” and meets other specified

conditions, the exception would not be available to any exempt clearing agency.

engage could subject the clearing agency to the SEA provisions and the Commission’s rules

thereunder applying to exchanges or SBSEFs.

Proposed Rule 802 would have defined the term “block trade” to be an SBS transaction

that, among other requirements, is an SBS based on a single credit instrument (or issuer of credit

instruments) or a narrow-based index of credit instruments (or issuers of credit instruments)

having a notional size of $5 million or greater. 40 The Commission received a number of

comments on the proposed definition of “block trade.” These comments are discussed below in

section V.E.1(c) relating to Rule 815(a), which specifies mandatory methods of execution for a

Required Transaction that is not a block trade. As discussed in detail below in section V.E.1(c),

the Commission is not adopting the proposed definition of “block trade.” 41

Therefore, the Commission is adopting Rule 802 as proposed, except for the definition of

“block trade,” which it is reserving, and minor technical modifications. 42

III.

REGISTRATION OF SBSEFS

Section 3D(a)(1) of the SEA 43 provides that no person may operate a facility for the

trading or processing of SBS 44 unless the facility is registered as an SBSEF or as a national

securities exchange. After issuing the 2011 SBSEF Proposal, the Commission granted temporary

See Proposing Release, supra note 1, 87 FR at 28896, 28975.

Additionally, as discussed below, the Commission is removing the term “block trade” from the text of

certain rules other than Rule 815(a), see infra sections VI.B.1 (Rule 819(a)(3)), V.B (Rule 812(b)), VI.B.4

(Rule 819(d)(1)), VI.H (Rule 825(c)(1)(i) and (ii)), and is adding language regarding future definition of

“block trade” in Rule 825(c)(1)(iii). See infra section VI.H.

See supra note 32. The Commission has also replaced the term “SBSEF” with “security-based swap

execution facility,” defined “SBS exchange” when the term is first used, added the words “of this definition

of trading facility” to paragraph (2)(C)(ii) of the definition of “trading facility,” and moved the definition of

“dormant security-based swap execution facility” so that it appears in alphabetical order.

15 U.S.C. 78c-4(a)(1).

The term “security-based swap” is defined in section 3(a)(68) of the SEA, 15 U.S.C. 78c(a)(68), to include,

among other things, a swap that is based on a single security or loan, including any interest therein or on

the value thereof. A single security could include, for example, a cash equity, a crypto/digital asset security,

or a security option.

exemptions pursuant to section 36(a)(1) of the SEA 45 to entities that meet the definition of

“security-based swap execution facility” from having to register with the Commission as an

SBSEF or national securities exchange (“Temporary SBSEF Exemptions”). 46 According to their

terms, the Temporary SBSEF Exemptions expire upon the earliest compliance date for the

Commission’s final rules regarding SBSEF registration. 47

Rule 803—Requirements and Procedures for Registration

Summary of Proposed Rule 803

Proposed Rule 803 of Regulation SE is closely modeled on § 37.3 of the CFTC’s rules

and would set forth a process for registration with the Commission as an SBSEF.

Paragraph (a)(1) of Proposed Rule 803 would track the language of § 37.3(a)(1) closely,

and would provide that any person operating a facility that offers a trading system or platform in

which more than one market participant has the ability to execute or trade security-based swaps

15 U.S.C. 78mm(a)(1).

See SEA Release No. 64678 (June 15, 2011), 76 FR 36287 (June 22, 2011) (temporarily exempting entities

that meet the definition of “security-based swap execution facility” from the requirement to register with

the Commission as an SBSEF) (“June 2011 Exemptive Order”); SEA Release No. 64795 (July 1, 2011), 76

FR 39927 (July 7, 2011) (temporarily exempting entities that meet the definition of “security-based swap

execution facility” from the restrictions and requirements of sections 5 and 6 of the SEA) (“July 2011

Exemptive Order”). An entity that meets the definition of “security-based swap execution facility” is

required to register as an SBSEF under section 3D of the SEA or as an exchange under section 6 of the

SEA. But because the Commission has not previously adopted final rules relating to SBSEFs, such entities

have been unable to register with the Commission as SBSEFs. The Temporary SBSEF Exemptions have

allowed such entities to continue trading SBS without needing to register either as SBSEFs or national

securities exchanges before the compliance date of the SBSEF registration rules.

See June 2011 Exemptive Order, supra note 46, 76 FR at 36293, 36306; July 2011 Exemptive Order, supra

note 46, 76 FR at 39934, 39939. The July 2011 Exemptive Order also provided an exemption from the

broker registration requirements of section 15(a)(1) of the SEA, 15 U.S.C. 78o(a)(1), and other

requirements of the SEA and the Commission’s rules thereunder that apply to a broker, solely in connection

with broker activities involving SBS (“Broker Exemptions”). The Broker Exemptions generally expired on

Oct. 6, 2021; however, because an entity that meets the definition of “security-based swap execution

facility” also would also meet the definition of “broker” in section 3(a)(4) of the SEA, 15 U.S.C. 78c(a)(4),

the Commission extended the Broker Exemptions solely for persons acting as an SBSEF until the

expiration of the Temporary SBSEF Exemptions (i.e., the earliest compliance date set forth in any of the

Commission’s final rules regarding registration of SBSEFs). See SEA Release No. 87005 (Sept. 19, 2019),

84 FR 68550, 68602 (Dec. 16, 2019).

with more than one other market participant on the system or platform shall register the facility

as a security-based swap execution facility under this section or as a national securities exchange

pursuant to section 6 of the SEA. 48

Paragraph (a)(2) of Rule 803, like § 37.3(a)(2), would require an SBSEF, at a minimum,

to offer an order book, which would be defined in Rule 802 to mean an electronic trading

facility, a trading facility, or a trading system or platform in which all market participants in the

trading system or platform have the ability to enter multiple bids and offers, observe or receive

bids and offers entered by other market participants, and transact on such bids and offers. 49

Paragraph (a)(3) of Rule 803 is closely modeled on § 37.3(a)(4) and would provide a

narrow exception to the requirement to provide an order book for a Required Transaction 50 to

allow an SBSEF not to offer an order book for the SBS component(s) of a package transaction

that contains a mix of products, with some parts of the package being subject to a trade execution

requirement and some not.

A person that registers with the Commission as a national securities exchange pursuant to section 6 of the

SEA does not fall within the statutory definition of “security-based swap execution facility,” see sec.

3(a)(77) of the SEA, 15 U.S.C. 78c(a)(77), and thus does not need to register as an SBSEF under Rule 803.

Furthermore, as discussed below, see infra section X (discussing proposed paragraph (a)(4) of SEA Rule

3a1-1), a person that registers as an SBSEF under Rule 803 and provides a market place for no securities

other than SBS is exempt from the definition of “exchange” and does not need to register as such pursuant

to section 6 of the SEA. 15 U.S.C. 78c(a)(1) (defining “exchange” as “any organization, association, or

group of persons, whether incorporated or unincorporated, which constitutes, maintains, or provides a

market place or facilities for bringing together purchasers and sellers of securities or for otherwise

performing with respect to securities the functions commonly performed by a stock exchange as that term

is generally understood, and includes the market place and the market facilities maintained by such

exchange”).

Section 37.3(a)(3) defines “trading facility” and “electronic trading facility” by cross-referencing

definitions of those terms in the CEA. Rather than cross-referencing the CEA, the Commission adapted the

CEA definitions of those terms directly into Rule 802. See Proposed Rule 802 (defining “trading facility”

and “electronic trading facility”).

As discussed below in section V.E.1(a), the Commission is incorporating into Regulation SE the concepts

of “Required Transaction” and “Permitted Transaction” in a manner closely modeled on the CFTC’s use of

those terms. A Required Transaction would be a transaction involving an SBS that is subject to the trade

execution requirement. Section 37.3 of the CFTC’s rules requires an order book as a minimum trading

functionality for all SEFs and is not limited to provision of an order book only for Required Transactions.

Paragraph (b) of Proposed Rule 803 is closely modeled on § 37.3(b) and would set out

procedures for full registration of an SBSEF. Paragraph (b)(1), like § 37.3(b)(1), would provide

that an applicant requesting registration must file electronically a complete Form SBSEF or any

successor forms, and all information and documentation described in such forms with the

Commission using the Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) system as

an Interactive Data File in accordance with Rule 405 of Regulation S-T, and must provide to the

Commission, upon the Commission’s request, any additional information and documentation

necessary to review an application.

Paragraph (b)(2) of Proposed Rule 803, like § 37.3(b)(2), would provide that an applicant

requesting registration as an SBSEF must identify with particularity any information in the

application that will be subject to a request for confidential treatment pursuant to Rule 24b-2

under the SEA. 51 Paragraph (b)(2) would also provide that, as set forth in Rule 808, certain

information provided in an application shall be made publicly available.

Paragraph (b)(3) of Proposed Rule 803 would address amendments to the SBSEF

registration application. Like § 37.3(b)(3), Rule 803(b)(3) would provide that an applicant

amending a pending application or requesting an amendment to an order of registration shall file

an amended application electronically with the Commission using the EDGAR system as an

Interactive Data File in accordance with Rule 405 of Regulation S-T. Subsequent to being

registered, an SBSEF would be required to submit rule and product filings under Rule 806 or

See 17 CFR 240.24b-2 (setting forth the procedures for identifying and redacting the portion of a

submission under the SEA for which confidential treatment is requested). As the Commission stated in the

Proposing Release, it is not necessary or appropriate to establish and utilize one set of procedures to handle

confidential treatment requests made by SBSEFs while utilizing a different set of procedures for other

persons who request confidential treatment from the Commission under the SEA. See Proposing Release,

supra note 1, 87 FR at 28880 n.50.

Rule 807, as well as provide other updates as may be required pursuant to other rules for

SBSEFs.

Paragraph (b)(4) of Proposed Rule 803 would address the effect of an incomplete

application. Like § 37.3(b)(4), Proposed Rule 803(b)(4) would provide that, if an application is

incomplete, the Commission shall notify the applicant that its application will not be deemed to

have been submitted for purposes of the Commission’s review.

Paragraph (b)(5) of Proposed Rule 803 would establish the Commission review period

for an application to register as an SBSEF. Proposed Rule 803(b)(5) is closely modeled on

§ 37.3(b)(5) and would require the Commission to approve or deny an application for

registration as an SBSEF within 180 days of the filing of the application. Proposed Rule

803(b)(5) would further provide that, if the Commission notifies the person that its application is

materially incomplete and specifies the deficiencies in the application, the running of the 180day period would be stayed from the time of that notification until the application is resubmitted

in completed form. In such a case, the Commission would have not less than 60 days to approve

or deny the application from the time the application is resubmitted in completed form.

Paragraph (b)(6)(i) of Proposed Rule 803, like § 37.3(b)(6)(i), would provide that the

Commission shall issue an order granting registration upon a Commission determination, in its

discretion, that the applicant has demonstrated compliance with the SEA and the Commission’s

rules applicable to SBSEFs. Paragraph (b)(6)(i) would allow the Commission to issue an order

granting registration, subject to conditions. Paragraph (b)(6)(ii) of Proposed Rule 803, modeled

on § 37.3(b)(6)(ii), would provide that the Commission may issue an order denying registration

upon a Commission determination, in its own discretion, that the applicant has not demonstrated

compliance with the SEA and the Commission’s rules applicable to SBSEFs. If the Commission

denies an application under Rule 803(b)(6)(ii), it would be required to specify the grounds for the

denial.

Paragraph (c) of Proposed Rule 803, like § 37.3(d), would address reinstatement of a

dormant registration. Proposed Rule 803(c) would provide that a dormant SBSEF 52 may reinstate

its registration under the procedures of Rule 803(b). Proposed Rule 803(c) would further provide

that the applicant may rely upon previously submitted materials if such materials accurately

describe the dormant SBSEF’s conditions at the time that it applies for reinstatement of its

registration.

Paragraph (d) of Proposed Rule 803, like § 37.3(e), would set out procedures for an

SBSEF to request a transfer of registration. Paragraph (d)(1), which is closely modeled on

§ 37.3(e)(1), would provide that an SBSEF seeking to transfer its registration from its current

legal entity to a new legal entity as a result of a corporate change shall file a request for approval

to transfer such registration with the Commission in the form and manner specified by the

Commission. Paragraph (d)(2), modeled on § 37.3(e)(2), would provide that a request for

transfer of registration shall be filed no later than three months prior to the anticipated corporate

change; or in the event that the SBSEF could not have known of the anticipated change three

months prior to the anticipated change, as soon as it knows of that change.

Paragraph (d)(3) of Proposed Rule 803, like § 37.3(e)(3), would require an SBSEF’s

request for a transfer of registration to include the underlying agreement governing the corporate

change, a description of the corporate change, a discussion of the transferee’s ability to comply

See Proposed Rule 802 (defining “dormant security-based swap execution facility” to mean “a securitybased swap execution facility on which no trading has occurred for the previous 12 consecutive calendar

months; provided, however, that no security-based swap execution facility shall be considered to be a

dormant security-based swap execution facility if its initial and original Commission order of registration

was issued within the preceding 36 consecutive calendar months”). This definition is modeled on the

definition of “dormant swap execution facility” found in § 40.1(f).

with the SEA, the governing documents of the transferee, the transferee’s rules marked to show

changes from the rules of the SBSEF, and specified representations by the transferee. 53

Paragraph (d)(4) of Proposed Rule 803, modeled on § 37.3(e)(4), would provide that,

upon review of a request for transfer of registration, the Commission, as soon as practicable,

shall issue an order either approving or denying the request.

Paragraph (e) of Proposed Rule 803, like § 37.3(f), would provide that an applicant for

registration as an SBSEF may withdraw its application by filing a withdrawal request

electronically with the Commission using the EDGAR system as an Interactive Data File in

accordance with Rule 405 of Regulation S-T. 54 Proposed Rule 803(e) would further provide that

withdrawal of an application for registration shall not affect any action taken or to be taken by

the Commission based upon actions, activities, or events occurring during the time that the

application was pending with the Commission.

Paragraph (f) of Proposed Rule 803, like § 37.3(g), would provide that an SBSEF may

request that its registration be vacated by filing a vacation request electronically with the

Commission using the EDGAR system and must be provided as an Interactive Data File in

accordance with Rule 405 of Regulation S-T at least 90 days prior to the date that the vacation is

requested to take effect.

See Proposing Release, supra note 1, 87 FR at 28880–81.

17 CFR 232.405. The proposed electronic filing requirement discussed above does not appear in the CFTC

version of this provision. The Commission is adding this specification to implement the Inline XBRL and

EDGAR electronic filing requirements for certain documents required by Regulation SE. See infra section

XIII.A.

Comments and Analysis

(a)

Registration Requirements, Generally

Two commenters support the proposed SBSEF registration requirements under Rule 803

being modeled on the CFTC’s rules and state that, as market participants are familiar with

CFTC’s requirements, they appreciate the Commission’s attempts to minimize registration

burdens and expedite the establishment of the SBSEF regime. 55

One commenter states that the Commission should ensure that all multilateral trading

venues for SBS are required to register as an SBSEF, regardless of the specific trading protocol

used. 56 Another commenter argues that section 3D(a)(1) of the SEA requires the registration of

any “facility for the trading or processing of SBS,” not just those that meet the statutory

definition of SBSEF, which includes multiple-to-multiple trading. 57 Accordingly, this

commenter states that single-dealer platforms should be required to register as SBSEFs and to

change their operations to offer multiple-to-multiple trading, consistent with the definition of

SBSEF. 58

One commenter asks the Commission to “make clear that the SBSEF registration

requirement applies only to these types of platforms that are within the statutory and proposed

regulatory definition and does not include any broader CFTC staff interpretations purporting to

See SIFMA AMG Letter, supra note 18, at 5; see also Bloomberg Letter, supra note 18, at 11.

See Citadel Letter, supra note 18, at 9 (“[A] security-based swap transaction executed via a fully electronic

multilateral RFQ protocol should be subject to the same regulations as one executed by voice with the

assistance of a voice broker (who may or may not be employed by the SBSEF)”).

As discussed above, see supra note 38 and accompanying text, the statutory definition of SBSEF provides

in relevant part that an SBSEF is “a trading system platform in which multiple participants have the ability

to execute or trade security-based swaps by accepting bids and offers made by multiple participants….”

SEA section 3(a)(77), 15 U.S.C. 78c(a)(77) (emphasis added). This is sometimes referred to as “multipleto-multiple trading.”

See Better Markets Letter, supra note 18, at 11–13.

expand the SEF definition.” 59 This commenter states that CFTC Staff Letter 21-19 60 maintains

that platforms can be required to register as SEFs “(i) even where multiple participants cannot

simultaneously request, make, or accept bids and offers from market participants; or (ii) where

multiple participants can initiate a one-to-many communication.” 61 The commenter states that

extending the definition of SBSEF to include “facilities offering one-to-many or bilateral

communications if more than one participant is able to submit an RFQ on the platform” would

“contradict Congress’ express intent” to limit the scope of SBSEF registration requirements to

multiple-to-multiple platforms; that the Commission should make clear that the CFTC staff

guidance is inapplicable to SBSEFs; and that the Commission should confirm that it is not

adopting or incorporating, explicitly or implicitly, similar guidance. 62

The Commission agrees with the comment that the definition of SBSEF applies to

multilateral trading facilities regardless of the specific trading protocol used. As the statutory

definition of SBSEF makes clear, a trading facility would fall under the definition of SBSEF if it

offers “multiple participants the ability to execute or trade security-based swaps by accepting

bids and offers made by multiple participants in the facility or system, through any means of

interstate commerce….” 63 Whether a specific instance or practice of brokering in fact offers

multiple participants the ability to accept the bids or offers made by multiple participants,

though, will depend on the attendant facts and circumstances of that instance or practice. The

See MFA Letter, supra note 18, at 3.

See CFTC Staff Advisory on Swap Execution Facility Registration Requirement, Letter No. 21-19

(Sept. 29, 2021), available at https://www.cftc.gov/node/238336.

See MFA Letter, supra note 18, at 3 (quoting CFTC Staff Letter No. 21-19, supra note 60 (emphasis in

original)).

MFA Letter, supra note 18, at 3–4 (internal quotations omitted).

SEA section 3(a)(77), 15 U.S.C. 78c(a)(77) (emphasis added).

Commission does not, however, agree with the comment that the language of SEA section

3D(a)(1) means that single-dealer platforms for trading SBS must register as SBSEFs and,

consistent with the statutory definition of SBSEF, change their operations to provide multiple-tomultiple trading. SEA section 3D is titled “Security-based swap execution facilities,” and section

3D(a)(1) states, in full, “No person may operate a facility for the trading or processing of

security-based swaps, unless the facility is registered as a security-based swap execution facility

or as a national securities exchange under this section.” 64 The Commission is not persuaded that

the phrase “facility for the trading or processing of security-based swaps” in this context can

reasonably be read to apply more broadly to encompass anything other than an SBSEF or an

SBS exchange. Since the definitions of both SBSEF and exchange include the concept of

multiple-to-multiple trading, 65 single-dealer “one-to-many” trading platforms that do not offer

multiple-to-multiple trading are outside the scope of the provisions of section 3D(a)(1).

It is not necessary to incorporate the guidance in CFTC Staff Letter 21-19 into this

release, because the CFTC staff letter in large part refers to fact-specific circumstances that the

Commission has yet to encounter since Reg SE is not yet effective and the application of the

SBSEF definition depends on the particular facts and circumstances of a platform’s structure and

operations. For the same reason, it would be premature to reject the possibility of taking a

position similar to that of the CFTC guidance with regard to SBSEFs, as one commenter

SEA section 3D(a)(1), 15 U.S.C. 78c-4(a)(1).

See SEA section 3(a)(77), 15 U.S.C. 78c(a)(77) (defining SBSEF in relevant part as “a trading system or

platform in which multiple participants have the ability to execute or trade security-based swaps by

accepting bids and offers made by multiple participants in the facility or system…”); SEA section 3(a)(1),

15 U.S.C. 78c(a)(1) (defining an exchange in relevant part as “any organization, association, or group of

persons, whether incorporated or unincorporated, which constitutes, maintains, or provides a market place

or facilities for bringing together purchasers and sellers of securities”) (emphasis added).

suggested. 66 Moreover, because the statutory definition of SBSEF does not include the word

“simultaneous,” the Commission declines to issue its own guidance to reflect a requirement for

simultaneity here. Where operators of SBS trading platforms have questions about the facts and

circumstances particular to their situations, they can discuss their particular circumstances with

Commission staff.

(b)

Abbreviated Registration Procedures for CFTC-Registered SEFs

Several commenters state that the Commission should use its exemptive authority to

provide a streamlined registration process for SBSEFs that are already registered with the CFTC

as SEFs. 67 One commenter states that, because many entities will likely be registering with both

the Commission and the CFTC, a streamlined SBSEF registration process will ease the burden of

new requirements imposed on potential dual-registrants. 68 This commenter further states that

allowing currently registered CFTC SEFs to become SEC-registered SBSEFs would be more

efficient and would more quickly kick-start the Commission’s SBS regime. This commenter thus

supports the use of exemptive authority for SEFs that are currently registered, provided that the

Commission’s approach to exemptive authority does not disrupt the existing market structure and

the relationships between venues and participants. Another commenter states that a streamlined

registration process for SEFs currently registered and in good standing with the CFTC would

have the potential to lower the costs of registration and encourage the entry of market

participants. 69

See supra notes 59–62 and accompanying text.

See SIFMA AMG Letter, supra note 18, at 5; Bloomberg Letter, supra note 18, at 11; WMBAA Letter,

supra note 18, at 3; ICE Letter, supra note 18, at 5.

See SIFMA AMG Letter, supra note 18, at 5.

See Bloomberg Letter, supra note 18, at 11.

One commenter that supports a streamlined SBSEF registration process for SEFs states

that a prolonged registration process, particularly for venues already registered with the CFTC,

only further delays the introduction of regulated price discovery, liquidity formation, and trade

execution for SBS. 70 This commenter also states that SBSEF registration also further expedites

SBS data reporting to the extent SBSEFs will report trades to an SBS swap data repository under

the Commission’s Regulation SBSR, as this service cannot be provided until SBSEFs are

registered and operational. If the Commission were not to retain the exemptive authority within

Rule 803, this commenter supports a process that gives deference to existing CFTC SEFs and

provides a more streamlined process for such registrants. The commenter states that, as the

Commission observed in the proposing release, most of the SBS liquidity will likely be

centralized around a few facilities, with most (if not all) of them already operating CFTCregulated SEFs. 71

Another commenter states that SEFs that are currently registered and in good standing

with the CFTC should be permitted to register with the Commission utilizing their current

documentation filed pursuant to the requirements of Form SEF. 72 This commenter states that

CFTC registered SEFs are required to keep their Form SEF and its exhibits current through postregistration amendments and that, as the Commission is modeling proposed Form SBSEF on the

CFTC’s Form SEF, substituting the forms should not be problematic for the Commission to

review. The commenter states that the Commission should permit registered SEFs seeking to

See WMBAA Letter, supra note 18, at 3.

See WMBAA Letter, supra note 18, at 3–4.

See ICE Letter, supra note 18, at 5.

reflecting only those changes necessary to fulfill the specific requirements of proposed

Regulation SE, in lieu of filing a new Form SBSEF.

One commenter, however, stated that “relaxing or eliminating any registration

requirements would be highly inappropriate,” and argued that the Commission must be “rigorous

in reviewing and approving SBSEFs applicants while upholding complete impartiality.” 73 This

commenter further states that both active SEFs and non-SEFs seeking to register SBSEFs “must

be held under the same standard to avoid any conflict of interests.” 74 Therefore, this commenter

states that the Commission should not use exemptive authority under SEA section 36(a)(1) to

adopt an abbreviated procedure for SEFs seeking to register as SBSEFs, because doing so would

rely on the “CFTC’s biased judgment” and would not permit an “unprejudiced determination” by

the Commission.75

In the Proposing Release, the Commission stated that it was considering that, after

adopting final rules establishing a registration process for SBSEFs, it could exercise its

exemptive authority under section 36(a)(1) of the SEA 76 to relax or eliminate entirely certain of

the registration requirements for entities that are already registered as SEFs with the CFTC. 77

The Commission recognizes that many of the entities that will seek registration with the

Commission as SBSEFs are already registered with the CFTC as SEFs. Entities that seek dual

registration presumably see efficiencies in utilizing the same systems, policies, and procedures to

trade both swaps and SBS. As noted throughout this release, the Commission has sought to

Letter from J. T. at 1 (May 26, 2022).

Id.

15 U.S.C. 78mm(a)(1).

See Proposing Release, supra note 1, 87 FR at 28882.

harmonize the SBSEF regulatory regime as closely as practicable with the CFTC’s SEF

regulatory regime, achieving similar regulatory benefits as the CFTC regime while minimizing

costs so as to impose only marginal costs on dually registered SEF/SBSEFs and their members.

As a result of these harmonized regimes, SEFs that seek dual registration with the SEC would

likely need to make only minor adjustments to their rules and trading procedures to support

trading of SBS in addition to the trading of swaps.

While one commenter states that it would be inappropriate to relax or eliminate any

SBSEF registration requirements for CFTC-registered SEFs, 78 an entity’s status as a registered

SEF in good standing with the CFTC is relevant when considering its application to register as

an SBSEF and that reducing the registration burden for CFTC-registered SEFs, where possible,

is appropriate. However, granting exemptive relief under section 36(a)(1), which this commenter

opposes, or providing for a formally abbreviated SBSEF registration regime for CFTC-registered

SEFs is not necessary to accomplish expedited registration and reduced registration burdens. 79

Requiring all applicants to submit Form SBSEF will support consistency in the review by the

Commission and its staff of applications for registration of SBSEFs, which will include a review

of the proposed rules for the SBSEFs. The Commission expects that prospective SBSEFs will be

able to use the information in their SEF applications to complete their SBSEF applications, as

discussed below.

See supra note 75 and accompanying text.

In the Proposing Release, the Commission stated that it was “preliminarily considering” that it would

exercise exemptive authority under section 36(a)(1) of the Act, 15 U.S.C. 78mm(a)(1), “to relax or

eliminate entirely certain of the registration requirements for entities that are already registered as SEFs

with the CFTC.” Proposing Release, supra note 1, 87 FR at 28882.

For the reasons discussed above, the Commission is adopting Rule 803 as proposed, with

minor technical modifications. 80

Form SBSEF

The Commission proposed new § 249.2001 to require that entities use Form SBSEF to

updates, corrections, or supplemental information to a pending application for registration. Form

SBSEF is closely modeled on the CFTC’s Form SEF for entities that seek to register with the

CFTC as SEFs, with only minor changes to remove from the form the concept of postregistration amendments, as the proposed rule would not require any amendments to Form

SBSEF post-registration. The exhibits that were proposed along with Form SBSEF are very

similar to the exhibits in Form SEF. As with Form SEF, each applicant submitting a Form

SBSEF would be required to provide the Commission with documents and descriptions

pertaining to its business organization, financial resources, and compliance program, including

various documents describing the applicant’s legal and financial status. An applicant would be

required to disclose any affiliates, provide a brief description of the nature of the affiliation, and

submit copies of any agreements between the SBSEF and third parties that would assist the

applicant in complying with its duties under the SEA. In addition, an applicant would be required

to demonstrate operational capability through documentation, including technical manuals and

third-party service provider agreements.

See supra note 32. The Commission is also deleting the header text “Minimum trading functionality” from

paragraph (a)(3), and is adding the header text “Request to register” to paragraph (b)(1), in order to

maintain consistency of style in the regulatory text. Additionally, the Commission is removing the

requirement to use an Interactive Data File for filing requests to withdraw or vacate an application for

registration pursuant to Rules 803(e) and 803(f). See infra section XIII.A.

Under Rule 803(b)(1), an applicant for SBSEF registration would be required to complete

Form SBSEF and provide, upon the Commission’s request, any additional necessary information

and documentation in order review the application. The determination as to when an application

submission is complete would be at the sole discretion of the Commission. The Commission

would review Form SBSEF and, at the conclusion of its review, by order either: (i) grant

registration; (ii) deny the application for registration; or (iii) grant registration subject to certain

conditions. After an applicant is granted registration, any updates or amendments to the

information contained in its Form SBSEF by an active SBSEF would be required to be submitted

as rules or rule amendments under Rule 806 or Rule 807 or as may be required by other rules in

Regulation SE.

One commenter states that the Commission should closely harmonize the rules for

SBSEF registration with the CFTC’s rules, with the exception of Exhibits D and H of Form

SBSEF, which require: (a) a list of all affiliates and a description of any material pending legal

proceedings of such affiliates, and (b) the financial statements of the affiliates. This commenter

states that the information required by these exhibits is “burdensome and not fit for purpose” and

should not be required unless the affiliate provides support services to the SBSEF or the legal

proceedings are expected to have a material effect on the applicant or the operation of its

proposed SBSEF. 81 As discussed above, several commenters expressed support for the

Commission providing an expedited process for CFTC-registered SEFs that wish to register as

SBSEFs.

See Bloomberg Letter, supra note 18, at 11.

The CFTC adopted rules for the registration and regulation of SEFs in 2013, 82 and the

CFTC’s process for registering SEFs appears to be well understood by the industry and well

designed for being adapted to the SBS market. Therefore, the Commission has used the CFTC’s

process as a basis for its own process for registering SBSEFs, and information about SBSEF

affiliates is relevant to the Commission’s oversight of SBSEFs and, in particular, oversight of

SBSEF compliance with Rule 828 (conflicts of interest). 83 In addition, we assume that most if

not all SBSEFs will be dually registered as SEFs.

However, while the content and exhibits of Form SBSEF closely match the form and

content of Form SEF, exhibits to Form SEF are provided to the CFTC as unstructured

documents, whereas most exhibits to Form SBSEF will be provided to the Commission as

structured, machine-readable documents. Permitting SBSEFs to provide copies of Form SEF

exhibits in lieu of Form SBSEF exhibits, while likely resulting in an expedited registration

process for most SBSEFs, would also potentially result in a much higher volume of unstructured

data, making the Form SBSEF disclosures more difficult for market participants and the

Commission to analyze in an efficient manner. Thus, notwithstanding some commenters’ support

for an expedited registration process, the final rules do not permit SBSEFs to provide copies of

Form SEF exhibits in lieu of Form SBSEF exhibits. The Commission is therefore adopting 17

CFR 249.2001 as proposed, but is renumbering it as 17 CFR 249.1701 under new subpart R

(“Forms for Registration of, and Filings by, Security-Based Swap Execution Facilities”) and is

making a minor technical correction. 84

See 2013 CFTC Final SEF Rules Release, supra note 9.

See infra section VI.K.

The Commission is correcting the text in Instruction 20 to Form SBSEF to read “a list with the name(s) of

the clearing agency(ies)” instead of “a list of the name of the clearing organization(s).”

IV.

RULE AND PRODUCT FILINGS BY SBSEFS

Unlike section 19(b) of the SEA, 85 which sets out a process whereby national securities

exchanges and other SROs submit filings to the Commission to add, delete, or amend rules

(including rules to list products), section 3D of the SEA 86 does not set out an equivalent process

for SBSEFs, which are not SROs. It can be expected, however, that an SBSEF will seek to

change its rules over time in order, for example, to implement new trading methodologies and to

expand its product offerings to make its market more attractive to participants, and adopting

rules for filings related to these changes will promote public transparency regarding the changes,

as well as consistent handling of those filings by the Commission.

An appropriate review process is necessary to assess whether changes to an SBSEF’s

rules and product offerings are consistent with section 3D of the SEA and the Commission’s

rules thereunder, and the CFTC’s filing procedures are an appropriate model on which to base

the Commission’s own filing procedures. Furthermore, because of the likelihood that most if not

all SBSEFs will be dually registered with the CFTC as SEFs, and that many rule changes for a

dual registrant will affect both its SBS and swap trading businesses, close harmonization with the

CFTC’s filing procedures would allow a dual registrant to make a similar filing to each agency,

allowing each agency to carry out its oversight functions while minimizing the burdens on dual

registrants.

Parts 37 and 40 of the CFTC’s rules set out processes whereby SEFs may establish or

amend rules and list products. These processes allow a SEF to voluntarily submit a rule, rule

amendment, or new product for CFTC review and approval, or to “self-certify” that a rule, rule

15 U.S.C. 78s(b).

15 U.S.C. 78c-4.

amendment, or new product meets applicable standards under the CEA and the CFTC’s rules

thereunder without obtaining CFTC approval, although the CFTC retains the ability, in certain

circumstances, to stay the self-certification for further review before it may become effective.

Using its general authority to impose any requirement on SBSEFs and to prescribe rules

governing the regulation of SBSEFs, 87 the Commission proposed to establish similar filing

processes for registered SBSEFs in Rules 804 to 810 of Regulation SE. 88

Rule 804—Listing Products for Trading by Certification

Summary of the Proposed Rule

Proposed Rule 804 is modeled on 17 CFR 40.2 of the CFTC’s rules and would set forth

procedures by which an SBSEF may list a product via certification. Paragraph (a)(1) of Proposed

Rule 804 would require an SBSEF to file its submission electronically with the Commission

using the EDGAR system as an Interactive Data File in accordance with Rule 405 of Regulation

S-T.

Paragraph (a)(2) of Proposed Rule 804 would provide that the Commission must receive

the submission by the open of business on the business day that is 10 business days preceding the

product’s listing. 89

See 15 U.S.C. 78c-4(d)(1)(A)(ii) (requiring an SBSEF, in order to be registered and to maintain

registration, to comply with any requirement that the Commission may impose by rule or regulation); 15

U.S.C. 78c-4(f) (directing the Commission to prescribe rules governing the regulation of SBSEFs).

The CFTC has proposed to amend the rules that govern how CFTC-registered entities submit selfcertifications and requests for approval of their rules, rule amendments, and new products for trading and

clearing, as well as the CFTC’s review and processing of such submissions. See CFTC, Provisions

Common to Registered Entities (Notice of Proposed Rulemaking), 88 FR 61432 (Sept. 9, 2023).The

CFTC’s proposing release states that the proposed amendments “are intended to clarify, simplify and

enhance the utility of those regulations for market participants and the [CFTC].” Id. at 61432. The CFTC

has not yet taken action on this proposal.

By contrast, the parallel provision in § 40.2(a) provides that a DCM or SEF must file the self-certification

only one business day before listing the product. See § 40.2(a)(2) (one of the conditions for a valid selfcertification of a product is that the CFTC has received the submission by the open of business on the

business day preceding the product’s listing).

Paragraph (a)(3) of Proposed Rule 804 would require a self-certification to include a

copy of the submission cover sheet; 90 a copy of the product’s rules, including all rules related to

its terms and conditions; the intended listing date; a certification by the SBSEF that the product

to be listed complies with the SEA and the Commission’s rules thereunder; a concise explanation

and analysis of the product and its compliance with applicable provisions of the SEA, including

the Core Principles, and the Commission’s rules thereunder; a certification that the SBSEF

posted a notice of pending product certification with the Commission and a copy of the

submission, concurrent with the filing of a submission with the Commission, on the SBSEF’s

website; 91 and a request for confidential treatment, if appropriate, as permitted pursuant to SEA

Rule 24b-2. 92

Paragraph (b) of Proposed Rule 804, modeled on § 40.2(b), would provide that, if

requested by Commission staff, an SBSEF shall provide any additional evidence, information, or

data that demonstrates that the SBS meets, initially or on a continuing basis, the requirements of

the SEA or the Commission’s rules or policies thereunder.

Paragraph (c)(1) of Proposed Rule 804 would provide that the Commission may stay the

certification of a new product by issuing a notification informing the SBSEF that the

Commission is staying the certification on the grounds that the product presents novel or

complex issues that require additional time to analyze, is accompanied by an inadequate

The Commission proposed, in new § 249.2002, a submission cover sheet (with instructions) that is closely

modeled on the CFTC’s submission cover sheet.

Under Rule 804(a)(3)(vi), information that the SBSEF seeks to keep confidential can be redacted from the

documents published on the SBSEF’s website but would have to be republished consistent with any

determination made pursuant to SEA Rule 24b-2.

Section 40.2(a)(3) instructs filers to make any request for confidential treatment pursuant to § 40.8 of the

CFTC’s rules, which in turn cross-references 17 CFR 145.9. The Commission proposed instead to direct

filers to make any request for confidential treatment pursuant to existing SEA Rule 24b-2. See supra

note 51.

explanation, or is potentially inconsistent with the SEA or the Commission’s rules thereunder. 93

Under paragraph (c)(1), the Commission would have an additional 90 days from the date of the

notification to conduct the review.

Paragraph (c)(2) would require the Commission to provide a 30-day comment period

during that 90-day period, and to publish a notice of the 30-day comment period on the

Commission’s website. Comments from the public could be submitted as specified in that notice.

Paragraph (c)(3) would provide that the product that had been stayed would become

effective, pursuant to the certification, at the expiration of the 90-day review period, unless the

Commission withdraws the stay prior to that time, or the Commission notifies the SBSEF during

the 90-day time period that it objects to the proposed certification on the grounds that the

proposed product is inconsistent with the SEA or the Commission’s rules.

Comments and Analysis

One commenter states that, while the proposed self-certification process does include

improvements to the CFTC’s self-certification process, including extending the initial review

period from one business day to 10 business days and expanding the scope of reasons for staying

the self-certification, it is still fundamentally flawed. This commenter states that the CFTC’s

self-certification process is mandated by statute and that, in the absence of any statutory mandate

Rule 807(c) is based on § 40.2(c), which provides that the CFTC may stay the listing of a contract pursuant

to paragraph (a) of this section during the pendency of CFTC proceedings for filing a false certification or

during the pendency of a petition to alter or amend the contract terms and conditions pursuant to section

8a(7) of the CEA. The SEA does not include the CEA’s provisions regarding altering or amending the

terms and conditions of an SBS listed by an SBSEF like the authority granted to the CFTC with respect to

products listed by SEFs, such that the Commission would be able to stay the listing of an SBS that it

believes may be inconsistent with the SEA, pending proceedings to exercise that authority. Nor are

proceedings for false certification of an SBS contemplated by the SEA. For this reason, in lieu of

harmonizing with § 40.2(c), the Commission proposed, in Rule 804(c), a provision that would allow the

Commission to stay the certification of a new product in the same manner that Rule 807(c) would allow the

Commission to stay the self-certification of a new rule or rule amendment.

analogous to that applicable to the CFTC, the Commission must, at the very least, provide a

coherent policy justification for its proposed self-certification process. 94

This commenter states that it is not clear why it is necessary or desirable for SBSEFs to

be able to bring new products to the market “speedily” and that self-certification turns the

regulatory process on its head, creating in effect a presumption of regulatory compliance and

putting the onus on the agency, under a predetermined timeline, to fully evaluate a proposed

product that may threaten significant harm to investors and market stability. 95 This is especially

the case, the commenter states, considering the context in which the SEC was given

comprehensive authority to regulate and oversee the SBS market, i.e., a financial crisis caused in

large part by SBS and other novel financial products whose risks regulators and market

participants thought were well understood, but in fact were not. Given this context, the

commenter states, it “makes little policy sense to establish a regime whereby an SBSEF could

introduce a new potentially dangerous product to the financial system without an affirmative,

independent SEC determination that such product not only complies with the SBSEF Core

Principles and other requirements, but also that it does not pose an unwarranted danger to

investors, the financial system, and the broader economy.” 96

For several reasons the Commission does not agree with the objections raised by this

commenter. First, the Commission does not agree that the self-certification process of Rule 804

See Better Markets Letter, supra note 18, at 13.

See Better Markets Letter, supra note 18, at 13–14; see also Letter from Bryce Keeney (Apr. 27, 2022)

(“Keeney Letter”) (stating that “[d]erivatives are not the purpose of the market” and that the Commission

should “align rules to focus on the primary purpose, not to support tertiary aspects that result in systemic

risk and systemic abuse”); Letter from Kevin (Apr. 20, 2023) (“Kevin Letter”) (stating that the proposed

rules do not protect retail investors and that “[c]reating a self governing regime, allowing easier swaps

trading across borders, exemption exchanges and registered brokers … sound like a terrible recipe for

disaster in a multi-trillion marketplace”).

Better Markets Letter, supra note 18, at 13–14.

either “turns the regulatory process on its head” or would deny the Commission the opportunity

to “fully evaluate a proposed product that may threaten significant harm to investors and market

stability.” 97 The ability of the Commission to stay the effectiveness of any product selfcertification, to seek public comment on that self-certification, and to object to (i.e., effectively

disapprove) the proposed certification on the grounds that the product is inconsistent with the

SEA or the Commission’s rules will provide the Commission with sufficient opportunity

(including the opportunity to seek public comment) to consider the self-certified rules and take

steps to protect investors and maintain fair, orderly, and efficient markets. Further, the selfcertification process does not create a “presumption of compliance,” because: (a) Rule 804(b)

requires an SBSEF to provide, at Commission request, any “additional evidence, information, or

data that demonstrates that the SBS meets, initially or on a continuing basis, the requirements of

the SEA or the Commission’s rules or policies thereunder”; (b) Rule 804(c)(1) permits the

Commission to suspend a new product certification because “the product presents novel or

complex issues that require additional time to analyze, is accompanied by an inadequate

explanation, or is potentially inconsistent with the SEA or the Commission’s rules thereunder”

(emphasis added); and (c) Rule 804(c)(3) does not create a presumption of compliance but

instead provides the Commission a mechanism by which to object to a proposed certification “on

the grounds that the proposed product is inconsistent with the SEA or the Commission’s rules.” 98

Second, given the relationship between the swaps market and the SBS market, as well as

the likelihood that most or all entities seeking to register as SBSEFs will be CFTC-registered

See supra note 96 and accompanying text.

Section IV.D, infra, discusses the process for self-certification of rule changes, including the Commission’s

ability to stay the effectiveness of such a filing, which would lead to a public comment period and the

opportunity for the Commission to object to the certification.

SEFs, harmonization with the CFTC filing procedures for new products should facilitate the

ability of entities to dually register and minimize costs by allowing incumbent SEFs to use their

existing systems, policies, and procedures to comply with the Commission’s SBSEF rules. The

aim of the rule is, however, not merely to allow SBSEFs to bring products to market “speedily,”

or at minimal cost, and, as discussed below in this section, it is appropriate for its rules to

provide for a longer review period than the CFTC’s rules.

And third, the Commission disagrees with this commenter’s view that the selfcertification process “would pose an unwarranted danger to investors, the financial system, and

the broader economy.” The new-product provisions of Regulation SE must be read in the context

of the other relevant provisions of Title VII of the Dodd-Frank Act and the Commission’s rules

thereunder, which include, among other things, rules governing the registration and regulation of

Security-Based Swap Dealers (“SBSDs”) and Major Security-Based Swap Participants

(“MSBSPs”) 99; capital, margin, and segregation requirements for SBSDs and MSBSPs 100;

business conduct standards and chief compliance officer requirements for SBSDs and

MSBSPs 101; and post-trade reporting and public dissemination of SBS transactions. 102 Because

of the significant role these other rules play in addressing potential risks posed by SBS, the

Commission’s ability to require SBSEFs to provide any evidence, information, or data

See Registration Process for Security-Based Swap Dealers and Major Security-Based Swap Participants,

SEA Release No. 75611 (Aug. 5, 2015), 80 FR 48963 (Aug. 14, 2015) (“SBSD and MSBSP Registration

Release”).

100

See Capital, Margin, and Segregation Requirements for Security-Based Swap Dealers and Major SecurityBased Swap Participants and Capital and Segregation Requirements for Broker-Dealers, SEA Release No.

86175 (June 21, 2019), 84 FR 43872 (Aug. 22, 2019) (“Capital, Margin, and Segregation Release”).

101

See Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap

Participants, SEA Release No. 77617 (Apr. 14, 2016), 81 FR 29959 (May 13, 2016) (“Business Conduct

Standards Release”).

102

See Regulation SBSR—Reporting and Dissemination of Security-Based Swap Information, SEA Release

No, 78321 (July 14, 2016), 81 FR 53546 (Aug. 12, 2016) (“Regulation SBSR Release”).

demonstrating that the SBS meets, initially or on a continuing basis, the requirements of the SEA

or the Commission’s rules or policies thereunder, and the Commission’s ability to suspend and

ultimately object to SBSEF self-certifications, are appropriate to protect investors, the financial

system, and the broader economy with respect to new SBSEF products and rules. 103 Thus, the

self-certification process in this context is appropriate for the underlying aims of the Dodd-Frank

Act.

Two commenters state that the relatively low volume of SBS products expected to be

self-certified supports a shorter review period than the proposed ten-business-day Commission

review period. 104 Both commenters recommend a shorter review period of one day to harmonize

with the CFTC’s approach. 105 Alternatively, one of the commenters suggests a two-day review

period. 106 This commenter suggests that a shorter review period would be beneficial to allow

market operators to meet participants’ demands to transact on regulated platforms in a reasonable

period of time. 107 The commenter also states that a shorter review period would accommodate

participants’ needs to hedge risk in a timely manner. 108 The other commenter states that a longer

review period would reduce the competitive benefit to SBSEFs that develop new products

because a 10-day review period would enable competitors to list similar products. 109 This

103

The Commission’s rules for SBSEFs do not directly affect retail investors. Only eligible contract

participants (“ECPs”) are eligible to trade on an SBSEF, see section 6(l) of the SEA, 15 U.S.C. 78f(l), and

retail investors would have access to an SBS only after an SBS exchange has filed a proposed rule change

with the Commission under Rule 19b-4, 17 CFR 240.19b-4, to amend its rules to permit the listing of a

registered SBS, with that proposed rule change being published for public comment.

104

See WMBAA Letter, supra note 18, at 4; ICE Letter, supra note 18, at 2.

105

See WMBAA Letter, supra note 18, at 4; ICE Letter, supra note 18, at 2.

106

See WMBAA Letter, supra note 18, at 4.

107

See id.

108

See id.

109

See ICE Letter, supra note 18, at 3.

commenter also suggests varying from the one-day review period in certain limited

circumstances, such as when an SBSEF submits an SBS for a made-available-to-trade

determination. 110

While a ten-day review period differs from the CFTC’s one-day review period, one

business day would not provide the SEC staff sufficient time to review a new product filing for

error or incompleteness, let alone review a new product for compliance with the SEA or

Regulation SE. Further, if a product does warrant a stay, the Commission would also need

sufficient time to go through the administrative steps of formally issuing the stay. 111 The

proposed ten-business-day review period for self-certified products also accords with the

CFTC’s ten-business-day review period for self-certified rules, 112 which the Commission is

replicating in Rule 807(a)(3). 113

Further, while a shorter review period may allow SBS to trade on an SBSEF more

quickly, failing to provide the Commission with a meaningful period for review of a new product

would hamper the Commission’s ability to protect market participants and maintain fair, orderly,

and efficient SBS markets. A ten-day review period would still permit market participants to

trade SBS on regulated platforms within a “reasonable period” and would provide the

Commission the time it needs to review submissions. The Commission also disagrees with the

comment that a shorter review period is necessary to accommodate market participants’ need to

110

See id.

111

See infra sections XV.D and XV.E (delegating authority to the Director of the Division of Trading and

Markets to stay the effectiveness of a self-certification and to extend the period for consideration of a new

product).

112

See § 40.6(a)(3) (one of the conditions for a valid self-certification of a rule or rule amendment is that the

CFTC has received the submission not later than the open of business on the business day that is 10

business days prior to the registered entity’s implementation of the rule or rule amendment).

113

See infra section IV.D.

hedge risk in a timely manner. During the relatively brief and time-limited period for

Commission review of an SBSEF new-product filings, market participants would remain able to

hedge that risk in other ways, such as in the OTC SBS market or other related securities markets,

depending on the risk to be managed. Finally, while the 10-day review period might reduce the

first-to-market competitive advantage of an SBSEF that first lists a given SBS, 114 the extent of

such an advantage may vary considerably based on other factors in the SBSEF market, and that,

in any event, the need for the Commission to have sufficient time to review a new product before

it is listed justifies the potential competitive effect.

Thus, a ten-business-day review period strikes an appropriate balance between allowing

SBSEFs to list new products quickly and affording Commission staff a sufficient time period in

which to assess those products prior to listing.

One commenter asks the Commission to confirm that it does not expect SBSEFs to selfcertify for every security for which there may exist a related SBS. 115 This commenter states that,

for example, while an SBSEF may publish “terms and conditions” relevant for an instrument

(like a single-name total return SBS) under Rule 804, the Commission might receive thousands

of underlying national market system equity stocks from each SBSEF, exponentially increasing

the number of products the Commission would need to review. The commenter also states that,

given the potential 10-day review period (compared to the CFTC’s shorter timeframe), SBSEFs

will be forced to proactively self-certify every potential SBS in an attempt to meet all potential

participant demand without a two-week delay, only increasing the volume of self-certifications

the Commission may receive. This commenter states that listing the instrument, and not each

114

Cf. ICI Letter, supra note 18, at 9 n.29 (discussing “first mover” advantage in the context of an SBSEF that

has made an SBS available to trade).

115

See WMBAA Letter, supra note 18, at 4.

equity that may be linked to the instrument, is an appropriate approach to balance the SBSEFs

and the Commission’s resources with respect to product self-certification.

The Commission is conscious of the large number of individual SBS that may constitute

a “class” of SBS, such as single-name, total return SBS given as an example by the commenter.

While an SBSEF should not necessarily be required to make an individual filing for each of the

securities underlying a single such class of SBS, a filing for a simple class certification that

merely described the parameters of the SBS covered by the certification would not necessarily

provide sufficient information for the Commission to determine whether all the potential

products covered by the class are consistent with the SEA and the rules thereunder, including

Regulation SE. Therefore, while the Commission is not providing for “class certifications” of

SBS, the Commission will not necessarily require separate submissions for each underlying

security. 116 The Commission will consider submissions for an SBS that might overlie one or

more of a list of securities, provided that those potential underlying securities are specifically

identified and that the submission addresses, as part of the requirement in Rule 804 to submit “a

concise explanation and analysis of the product and its compliance with applicable provisions of

the Act, including core principles, and the Commission’s rules thereunder,” 117 why all included

underlying securities meet the applicable provisions of the SEA and the Commission’s rules

thereunder. 118

116

By contrast, paragraph (d) of § 40.2 provides that a DCM or SEF may submit a class certification of swaps

based on an “excluded commodity,” subject to certain conditions. See section 1a(19) of the CEA, 7 U.S.C.

1a(19) (defining “excluded commodity”).

117

Rule 804(a)(3)(v).

118

For example, a submission might cover a single-name total return SBS on any of the components of a given

index, provided that the submission explains why the minimum criteria for inclusion in that index are

sufficient to ensure that the proposed SBS are consistent with the requirements of the SEA and the rules

thereunder, including Regulation SE.

Accordingly, for the reasons discussed above, the Commission is adopting Rule 804 as

proposed, with the exception of the proposed Inline XBRL and EDGAR filing requirements, and

with minor technical modifications. 119

Rule 805—Voluntary Submission of New Products for Commission Review

and Approval

Proposed Rule 805 is closely modeled on § 40.3 of the CFTC’s rules and would set forth

procedures by which an SBSEF may voluntarily submit new SBS products for Commission

review and approval.

Paragraph (a) of Proposed Rule 805 would adapt these requirements for SBSEFs. 120 First,

an SBSEF would be required to file its submission electronically with the Commission using the

EDGAR system as an Interactive Data File in accordance with Rule 405 of Regulation S-T. The

filing would also have to include a copy of the submission cover sheet, a copy of the rules that

set forth the terms and conditions of the SBS to be listed, and an explanation and analysis of the

product and its compliance with applicable provisions of the SEA, including the Core Principles

and the Commission’s rules thereunder. 121 The submission would also have to describe any

119

See supra note 32. As described in further detail in the discussion of electronic filing systems and

structured data, the Commission will require all rule and product filings required by Rules 804 through 807

and 816 to be filed in unstructured format through EFFS, rather than in Inline XBRL through EDGAR. See

infra section XIII.A.

120

Paragraph (a) of Rule 805 omits two provisions in § 40.3(a). First, § 40.3(a)(6) requires the submitting

entity to include the certifications required in 17 CFR 41.22 for product approval of a commodity that is a

security future or a security futures product, as defined in sections 1a(44) or 1a(45) of the CEA,

respectively. The Commission did not propose to adapt this provision into proposed Regulation SE because

it pertains to security futures and security futures products, not to swaps or SBS. Second, § 40.3(a)(8)

requires the submitting entity to include a filing fee. The Commission is not proposing to charge SBSEFs

filing fees for submitting new product proposals.

121

This explanation and analysis would have to either be accompanied by the documentation relied upon to

establish the basis for compliance with the applicable law, or incorporate information contained in such

documentation, with appropriate citations to data sources.

agreements or contracts entered into with other parties that enable the SBSEF to carry out its

responsibilities.

Furthermore, paragraph (a) of Proposed Rule 805, modeled on § 40.3(a), would require

the SBSEF to include, if requested by Commission staff, additional evidence, information, or

data demonstrating that the SBS meets, initially or on a continuing basis, the requirements of the

SEA, or other requirement for registration under the SEA, or the Commission’s rules or policies

thereunder. The SBSEF would be required to submit the requested information by the open of

business on the date that is two business days from the date of request by Commission staff, or at

the conclusion of such extended period agreed to by Commission staff after timely receipt of a

written request from the SBSEF. Paragraph (a) of Proposed Rule 805, like § 40.3(a), would

permit the submitting SBSEF to include a request for confidential treatment. 122 Finally,

paragraph (a) of Proposed Rule 805, like § 40.3(a), would require the SBSEF to certify that it

posted a notice of its request for Commission approval of the new product and a copy of the

submission, concurrent with the filing of a submission with the Commission, on the SBSEF’s

website. 123

Paragraph (b) of Proposed Rule 805, like § 40.3(b), would provide that the Commission

shall approve a new product unless the terms and conditions of the product violate the SEA or

the Commission’s rules thereunder.

122

Section 40.3(a), like § 40.2(a)(3), instructs filers to make any request for confidential treatment pursuant to

§ 40.8 of the CFTC’s rules, which in turn cross-references § 145.9. As noted previously, the Commission

proposes instead to direct filers to make any request for confidential treatment pursuant to SEA Rule 24b-2.

See supra note 51.

123

Information that the SBSEF seeks to keep confidential could be redacted from the documents published on

the SBSEF’s website but would have to be republished consistent with any determination made pursuant to

SEA Rule 24b-2.

Paragraph (c) of Proposed Rule 805, modeled on § 40.3(c), would provide that a product

submitted for Commission approval under Rule 805 shall be deemed approved by the

Commission 45 days after receipt by the Commission, or at the conclusion of an extended period

as provided under Rule 805(d), unless notified otherwise within the applicable period, if the

submission complies with the requirements of Rule 805(a) and the SBSEF does not amend the

terms or conditions of the product or supplement the request for approval, except as requested by

the Commission or for correction of typographical errors, renumbering, or other non-substantive

revisions, during that period. Paragraph (c) would also provide that any voluntary, substantive

amendment by the SBSEF would be treated as a new submission under Rule 805.

Paragraph (d) of Proposed Rule 805, modeled on § 40.3(d), would provide that the

Commission may extend the 45-day review period in paragraph (c) for an additional 45 days, if

the product raises novel or complex issues that require additional time to analyze, in which case

the Commission shall notify the SBSEF within the initial 45-day review period and briefly

describe the nature of the specific issue(s) for which additional time for review is required.

Paragraph (d) would also provide that the Commission may extend the 45-day review period for

any length of time to which the SBSEF agrees in writing.

Paragraph (e) of Proposed Rule 805 would provide that the Commission may, at any time

during its review, notify the SBSEF that it will not, or is unable to, approve the product. This

notification would have to briefly specify the nature of the issues raised and the specific

provision of the SEA or the Commission’s rules thereunder, including the form or content

requirements of Rule 805(a), that the product violates, appears to violate, or potentially violates

but which cannot be ascertained from the submission.

Paragraph (f) of Proposed Rule 805, like § 40.3(f), would provide that a notification of

the Commission’s determination not to approve a product does not prejudice the SBSEF from

subsequently submitting a revised version of the product for Commission approval, or from

submitting the product as initially proposed pursuant to a supplemented submission.

Furthermore, the notification would be presumptive evidence that the entity may not truthfully

certify under Rule 804 that the same, or substantially the same, product does not violate the SEA

or the Commission’s rules thereunder.

The Commission did not receive any comments on this proposed rule. It is reasonable

and appropriate to supplement the product certification procedures in Rule 804 by also including

in Regulation SE, as Rule 805, procedures for voluntary submission of new products for

Commission review and approval. Providing this approval process, as the CFTC does, can be

valuable to an SBSEF seeking the Commission’s concurrence that a new product does not violate

the SEA or the Commission’s rules thereunder prior to listing it. The CFTC’s procedures in this

regard are well articulated and well understood by SEFs, and that closely harmonizing with these

procedures would yield comparable regulatory benefits while minimizing burdens on SBSEFs. 124

124

As stated in the Proposing Release, the Commission does not discount the possibility that an entity might

elect to register as an SBSEF with the SEC but not as a SEF with the CFTC. In such case, the SEC-only

registrant would not have any familiarity with the CFTC’s rules and filing procedures. Nevertheless,

because most if not all entities that will seek SBSEF registration with the SEC are or will also be registered

as SEFs with the CFTC, such dual registrants would benefit from harmonized rules. Furthermore, because

the Commission is adopting these procedures substantially as proposed, is unnecessary to establish and

apply one set of procedures for dual registrants and a different set for SEC-only SBSEFs. See Proposing

Release, supra note 1, 87 FR at 28956 (stating that if the Commission “establishe[d] different or additive

requirements, dually registered entities and their market participants might need to incur costs and burdens

to modify their systems, policies, and procedures to comply with the SEC-specific rules”). See also

Bloomberg Letter, supra note 18, at 10 (“[A] harmonized framework has the potential to lower compliance

costs by allowing SBSEFs and market participants to integrate with existing operational and compliance

frameworks. Any potential differences would require SBSEF registrants to devote resources toward

assessing the potential gaps and consequences of regulatory divergence.”).

Therefore, the Commission is adopting Rule 805 as proposed, with the exception of the proposed

Inline XBRL and EDGAR filing requirements, and with minor technical modifications. 125

Rule 806—Voluntary Submission of Rules for Commission Review and

Approval

Proposed Rule 806 is closely modeled on § 40.5 of the CFTC’s rules and would set forth

procedures by which an SBSEF may voluntarily submit rules, rule amendments, or dormant rules

for Commission review and approval.

Paragraph (a) of Proposed Rule 806 would provide that an SBSEF may request that the

Commission approve a new rule, rule amendment, or dormant rule prior to implementation of the

rule. First, an SBSEF must file its submission electronically with the Commission using the

EDGAR system as an Interactive Data File in accordance with Rule 405 of Regulation S-T. The

filing would be required to include a copy of the submission cover sheet and to set forth the text

of the rule or rule amendment (in the case of a rule amendment, deletions and additions must be

indicated). Further, the SBSEF would be required to describe the proposed effective date of the

rule or rule amendment and any action taken or anticipated to be taken to adopt the proposed rule

by the SBSEF or by its governing board or by any committee thereof, and to cite the rules of the

SBSEF that authorize the adoption of the proposed rule. The SBSEF would be required to

provide an explanation and analysis of the operation, purpose, and effect of the proposed rule or

rule amendment and its compliance with applicable provisions of the SEA, including the Core

Principles relating to SBSEFs and the Commission’s rules thereunder, and, as applicable, a

description of the anticipated benefits to market participants or others, any potential

125

See supra note 32. As described in further detail in the discussion of electronic filing systems and

structured data, the Commission will require all rule and product filings required by Rules 804 through 807

and 816 to be filed in unstructured format through EFFS, rather than in Inline XBRL through EDGAR. See

infra section XIII.A.

anticompetitive effects on market participants or others, and how the rule fits into the SBSEF’s

framework of regulation.

Additionally, if a proposed rule affects, directly or indirectly, the application of any other

rule of the SBSEF, the pertinent text of any such rule would be required to be set forth and the

anticipated effect described. The SBSEF would also be required to provide a brief explanation of

any substantive opposing views expressed to the SBSEF by governing board or committee

members, members of the SBSEF, or market participants that were not incorporated into the rule,

or a statement that no such opposing views were expressed.

The SBSEF could, as appropriate, include a request for confidential treatment as

permitted under SEA Rule 24b-2. Finally, the SBSEF would be required to certify that it posted a

notice of the pending rule with the Commission and a copy of the submission, concurrent with

the filing of a submission with the Commission, on the SBSEF’s website. 126

Paragraph (b) of Proposed Rule 806, modeled on § 40.5(b), would provide that the

Commission shall approve a new rule or rule amendment unless the rule or rule amendment is

inconsistent with the SEA or the Commission’s rules thereunder. Paragraph (c) of Proposed Rule

806, like § 40.5(c), would provide that a rule or rule amendment submitted for Commission

approval under Rule 806 shall be deemed approved by the Commission 45 days after receipt by

the Commission, or at the conclusion of such extended period as provided under paragraph (d) of

this section, unless the SBSEF is notified otherwise within the applicable period, if the

submission complies with the requirements of Rule 806(a) and the SBSEF does not amend the

proposed rule or supplement the submission, except as requested by the Commission, during the

126

Information that the SBSEF seeks to keep confidential could be redacted from the documents published on

the SBSEF’s website but would have to be republished consistent with any determination made pursuant to

SEA Rule 24b-2.

pendency of the review period, other than for correction of typographical errors, renumbering, or

other non-substantive revisions. Paragraph (c) would also provide that any amendment or

supplementation not requested by the Commission would be treated as the submission of a new

filing under Rule 806.

Paragraph (d) of Proposed Rule 806, modeled on § 40.5(d), would provide that the

Commission may further extend the review period in paragraph (c) for an additional 45 days, if

the proposed rule or rule amendment raises novel or complex issues that require additional time

for review or is of major economic significance, the submission is incomplete, or the requestor

does not respond completely to Commission questions in a timely manner, in which case the

Commission shall notify the submitting SBSEF within the initial 45-day review period and shall

briefly describe the nature of the specific issues for which additional time for review shall be

required. Paragraph (d) would also allow an extension to which the SBSEF agrees in writing.

Paragraph (e) of Proposed Rule 806, like § 40.5(e), would provide that, at any time

during its review, the Commission may notify the SBSEF that it will not, or is unable to, approve

the new rule or rule amendment. This notification would have to briefly specify the nature of the

issues raised and the specific provision of the SEA or the Commission’s rules thereunder,

including the form or content requirements of Proposed Rule 806, with which the new rule or

rule amendment is inconsistent or appears to be inconsistent with the SEA or the Commission’s

rules thereunder.

Paragraph (f) of Proposed Rule 806, like § 40.5(f), would provide that such a notification

to an SBSEF would not prevent the SBSEF from subsequently submitting a revised version of

the proposed rule or rule amendment for Commission review and approval or from submitting

the new rule or rule amendment as initially proposed in a supplemented submission. Paragraph

(f) would further provide that the revised submission would be reviewed without prejudice.

Finally, paragraph (f) would provide that such a notification to an SBSEF of the Commission’s

determination not to approve a proposed rule or rule amendment shall be presumptive evidence

that the SBSEF may not truthfully certify the same, or substantially the same, proposed rule or

rule amendment under Rule 807(a).

Paragraph (g) of Proposed Rule 806, like § 40.5(g), would provide that, notwithstanding

Rule 806(c), changes to a proposed rule or a rule amendment, including changes to terms and

conditions of a product that are consistent with the SEA and the Commission’s rules thereunder,

may be approved by the Commission at such time and under such conditions as the Commission

shall specify in the written notification; provided, however, that the Commission may, at any

time, alter or revoke the applicability of such a notice to any particular product or rule

amendment.

The Commission received no comments on Proposed Rule 806 and the Commission is

adopting Rule 806 as proposed, with the exception of the proposed Inline XBRL and EDGAR

filing requirements, and with minor technical modifications, for the reasons stated in the

Proposing Release. 127

Rule 807—Self-Certification of Rules

Proposed Rule 807 is closely modeled on § 40.6 of the CFTC’s rules and would set forth

procedures by which an SBSEF may self-certify changes to its rules. Paragraph (a) of Proposed

Rule 807, modeled on § 40.6(a), would set forth the conditions that an SBSEF must comply with

before implementing a rule or rule amendment via self-certification. Like § 40.6(a), Proposed

127

See supra note 32. As described in further detail in the discussion of electronic filing systems and

structured data, the Commission will require all rule and product filings required by Rules 804 through 807

and 816 to be filed in unstructured format through EFFS, rather than in Inline XBRL through EDGAR. See

infra section XIII.A.

Rule 807(a) would permit an SBSEF to implement a rule or rule amendment without obtaining

the Commission’s prior approval under Rule 806, but only if it “self-certifies” the rule or rule

amendment in compliance with the conditions set forth in Rule 807. Proposed Rule 807(a) would

also permit an SBSEF to self-certify a rule or rule amendment that the Commission had

previously approved under Rule 806, or that the SBSEF had previously self-certified under Rule

807, but that in the interim had become a dormant rule (i.e., unimplemented for 12 consecutive

calendar months). 128

Paragraph (a)(1) of Proposed Rule 807 would require the SBSEF to file its submission

electronically with the Commission using the EDGAR system as an Interactive Data File in

accordance with Rule 405 of Regulation S-T. Paragraph (a)(2) would require the SBSEF to

provide a certification that the SBSEF posted a notice of the self-certification with the

Commission and a copy of the submission, concurrent with the filing of a submission with the

Commission, on the SBSEF’s website. 129 Paragraph (a)(3) would provide that the Commission

must have received the submission not later than the open of business on the business day that is

10 business days before the SBSEF’s implementation of the rule or rule amendment. Paragraph

(a)(4) would provide that the SBSEF may not implement the rule or rule amendment if the

Commission has stayed it pursuant to Rule 807(c).

128

Also, like § 40.6(a), Proposed Rule 807(a) would include an exception that would allow an SBSEF to

implement a certain kind of rule without having to comply with the full set of conditions set forth in

paragraphs (a)(1) through (8) of Rule 807, the details of which are discussed below. Specifically, the

exception would provide that, when submitting a rule delisting or withdrawing the certification of a product

with no open interest, an SBSEF would only be required to meet the conditions of paragraphs (a)(1), (a)(2),

and (a)(6) of Rule 807. The introductory language in paragraph (a) of Proposed Rule 807 would generally

track the language of § 40.6(a), with slight changes for clarity. However, Proposed Rule 807(a) would not

include an equivalent of the reference in § 40.6(a) to submissions under § 40.10, which concerns only

systemically important derivatives clearing organizations and thus is not relevant to SBSEFs.

129

Information that the SBSEF seeks to keep confidential could be redacted from the documents published on

the SBSEF’s website but must be republished consistent with any determination made pursuant to SEA

Rule 24b-2.

Paragraph (a)(5) of Proposed Rule 807 would set out procedures for emergency rule

certifications. Paragraph (a)(5)(i) would require a new rule or rule amendment that establishes

standards for responding to an emergency 130 to be submitted pursuant to Rule 807(a). Paragraph

(a)(5)(ii) would provide that a rule or rule amendment implemented under procedures of the

governing board to respond to an emergency shall, if practicable, be filed with the Commission

prior to implementation or, if not practicable, be filed with the Commission at the earliest

possible time after implementation, but in no event more than 24 hours after implementation. In

addition, paragraph (a)(5)(ii) would provide that any such submission be subject to the

certification and stay provisions of Rules 807(b) and (c), described below.

Paragraph (a)(6) of Proposed Rule 807, modeled on § 40.6(a)(7), would set out the

required elements for a rule submission under Rule 807. These requirements would include a

copy of the submission cover sheet (in the case of a rule or rule amendment that responds to an

emergency, “Emergency Rule Certification” should be noted in the description section of the

submission cover sheet); the text of the rule (in the case of a rule amendment, deletions and

additions must be indicated); the date of intended implementation; a certification by the SBSEF

that the rule complies with the SEA and the Commission’s rules thereunder; a concise

explanation and analysis of the operation, purpose, and effect of the proposed rule or rule

amendment and its compliance with applicable provisions of the SEA, including the Core

Principles relating to SBSEFs and the Commission’s rules thereunder; and a brief explanation of

130

See § 40.1(h) (defining “emergency” as “any occurrence or circumstance that, in the opinion of the

governing board of a registered entity, or a person or persons duly authorized to issue such an opinion on

behalf of the governing board of a registered entity under circumstances and pursuant to procedures that are

specified by rule, requires immediate action and threatens or may threaten such things as the fair and

orderly trading in, or the liquidation of or delivery pursuant to, any agreements, contracts, swaps or

transactions or the timely collection and payment of funds in connection with clearing and settlement by a

derivatives clearing organization”). The definition goes on to list a series of circumstances that are deemed

emergencies under the definition. The Commission is adopting a definition of “emergency” in Rule 802

that is adapted from § 40.1(h).

any substantive opposing views expressed to the SBSEF by governing board or committee

members, members of the SBSEF, or market participants, that were not incorporated into the

rule, or a statement that no such opposing views were expressed. Paragraph (a)(6)(vii) would

also permit the SBSEF to include, as appropriate, a request for confidential treatment pursuant to

the procedures provided in Rule 240.24b-2. 131

Paragraph (a)(7) of Proposed Rule 807, like § 40.6(a)(8), would require an SBSEF to

provide, if requested by Commission staff, additional evidence, information, or data that may be

beneficial to the Commission in conducting a due diligence assessment of the filing and the

SBSEF’s compliance with any of the requirements of the SEA or the Commission’s rules or

policies thereunder.

Paragraph (b) of Proposed Rule 807, modeled on § 40.6(b), would provide the

Commission 10 business days to review the new rule or rule amendment before it is deemed

certified and can be made effective, unless the Commission notifies the SBSEF during that tenbusiness-day review period that it intends to issue a stay of the certification under Rule 807(c).

Paragraph (c)(1) of Proposed Rule 807, modeled on § 40.6(c)(1), would provide that the

Commission may stay the certification of a new rule or rule amendment by issuing a notification

informing the SBSEF that the Commission is staying the certification on the grounds that it

presents novel or complex issues that require additional time to analyze, is accompanied by an

inadequate explanation, or is potentially inconsistent with the SEA or the Commission’s rules

thereunder. In addition, paragraph (c)(1) affords the Commission an additional 90 days from the

date of the notification to conduct the review.

131

Section 40.6(a)(7)(vii) directs the submitting entity to follow the procedures in § 40.8 when making a

request for confidential treatment, which in turn cross-references § 145.9. As noted previously, the

Commission proposes instead to direct filers to make any request for confidential treatment pursuant to

SEA Rule 24b-2. See supra note 51.

Paragraph (c)(2) of Proposed Rule 807, modeled on § 40.6(c)(2), would require the

Commission to provide a 30-day comment period within the 90-day period in which the stay is in

effect. The Commission would be required to publish a notice of the 30-day comment period on

the Commission’s internet website, and comments from the public could be submitted as

specified in that notice.

Paragraph (c)(3) of Proposed Rule 807, modeled on § 40.6(c)(3), would provide that the

new rule or rule amendment subject to the stay shall become effective, pursuant to the

certification, at the expiration of the 90-day review period, unless the Commission withdraws the

stay prior to that time, or the Commission notifies the SBSEF during the 90-day period that it

objects to the proposed certification on the grounds that the proposed rule or rule amendment is

inconsistent with the SEA or the Commission’s rules thereunder.

Paragraph (d) of Proposed Rule 807, modeled on § 40.6(d), would provide that certain

kinds of rules or rule amendments may be put into effect by an SBSEF without certification to

the Commission if similar enumerated conditions are met. Some would be subject to a Weekly

Notification of Rule Amendments, which is closely modeled on the CFTC notification; others

would not be subject to any notification requirement.

Under paragraph (d)(2) of Proposed Rule 807, the following types of rules could be put

into effect by an SBSEF without self-certification, so long as they are disclosed on the Weekly

Notification of Rule Amendments:

•

Non-substantive revisions. Corrections of typographical errors, renumbering, periodic

routine updates to identifying information about the SBSEF, and other such nonsubstantive revisions of a product’s terms and conditions that have no effect on the

economic characteristics of the product;

•

Fees. Fees or fee changes, other than fees or fee changes associated with market making

or trading incentive programs, that total $1.00 or more per contract, and are established

by an independent third party or are unrelated to delivery, trading, clearing, or dispute

resolution.

•

Survey lists. Changes to lists of banks, brokers, dealers, or other entities that provide price

or cash market information to an independent third party and that are incorporated by

reference as product terms;

•

Approved brands. Changes in lists of approved brands or markings pursuant to previously

certified or Commission approved standards or criteria;

•

Trading months. The initial listing of trading months, which may qualify for

implementation without notice, within the currently established cycle of trading months;

•

Minimum tick. Reductions in the minimum price fluctuation (or “tick”).

Under paragraph (d)(3)(ii) of Rule 807, the following types of rules can be put into effect

by an SBSEF without self-certification and without having to be disclosed on the Weekly

Notification of Rule Amendments:

•

Transfer of membership or ownership. Procedures and forms for the purchase, sale, or

transfer of membership or ownership, but not including qualifications for membership or

ownership, any right or obligation of membership or ownership, or dues or assessments;

•

Administrative procedures. The organization and administrative procedures of governing

bodies such as a governing board, officers, and committees, but not voting requirements,

governing board, or committee composition requirements or procedures, decision-making

procedures, use or disclosure of material non-public information gained through the

performance of official duties, or requirements relating to conflicts of interest;

•

Administration. The routine daily administration, direction, and control of employees,

requirements relating to gratuity and similar funds, but not guaranty, reserves, or similar

funds; declaration of holidays; and changes to facilities housing the market, trading floor,

or trading area;

•

Standards of decorum. Standards of decorum or attire or similar provisions relating to

admission to the floor, badges, or visitors, but not the establishment of penalties for

violations of such rules;

•

Fees. Fees or fee changes, other than fees or fee changes associated with market making

or trading incentive programs that are less than $1.00 or relate to matters such as dues,

badges, telecommunication services, booth space, real-time quotations, historical

information, publications, software licenses, or other matters that are administrative in

nature.

•

Trading months. The initial listing of trading months which are within the currently

established cycle of trading months.

One commenter states that the CFTC’s self-certification process has been relied upon by

CFTC registrants for most submissions, leaving little that is reviewed or capable of challenge by

market participants or the CFTC unless it is inconsistent with the statute or CFTC regulation. 132

This commenter states that rulebook or contractual changes can alter protections within

132

See SIFMA AMG Letter, supra note 18, at 5–6. Another commenter raised questions specifically about

self-certification in the context of a determination by an SBSEF that an SBS has been “made available to

trade.” See MFA Letter, supra note 18, at 6. This comment is discussed below in the context of madeavailable-to-trade determinations under Rule 816(a). See infra sectionV.F.2.

Commission-regulated markets and that the Commission should be able to object to any such

change it deems inconsistent with Commission policy, including considerations of compliance

costs and the impact on consumer protections, all of which would be best informed by a

requirement for public comment prior to certification. Under the CFTC regime, the commenter

states, there is no formal process to allow market participants to object to a submission for

changes that are submitted for certification. Decisions to adopt or modify rules by selfcertification are typically made by the registrant’s board of directors or a board committee, this

commenter states, with market participants only learning of the rule after the registrant has selfcertified the rule or amendment. This commenter supports an alternative approach in which the

Commission can review all material rule and contractual changes by SBSEFs, clearing agencies,

SBS data depositories, and exchanges. This commenter also recommends that the Commission

adopt a requirement for public comment for such changes.

Regulation SE will afford the Commission a sufficient mechanism to assess new SBSEF

rules and rule amendments for consistency with section 3D of the SEA, while also permitting

SBSEFs to submit new rules and rule amendments using a self-certification process closely

aligned with § 40.6. The CFTC’s procedures are well articulated and well understood by SEFs,

and closely harmonizing with these procedures should yield comparable regulatory benefits

while minimizing burdens on SBSEFs. It is likely that certain rules of dually registered

SEF/SBSEFs will apply to member behavior generally—and not to one product market (e.g.,

swaps or SBS) exclusively—and that these rules will thus have to be filed with both the SEC and

CFTC. Adding a default comment period or otherwise altering the standard so that the

Commission reviews all material rule or contractual changes by SBSEFs, as requested by one

commenter, 133 would significantly alter the timing of self-certified SBSEF rules compared to

their SEF equivalents. By contrast, closely harmonizing the SEC’s filing procedures and

standards of review with the CFTC’s would allow dually registered entities to submit the same

(or substantially the same) filing to both agencies for review. Moreover, if the Commission

exercises its authority to stay the effectiveness of a self-certified rule and seek public comment—

i.e., with respect to a rule that is novel, complex, inadequately explained, or potentially

inconsistent with the SEA or the regulations thereunder, including Regulation SE—market

participants would be able to convey their concerns regarding that rule to the Commission.

The specified types of SBSEF rules or rule amendments that may be put into effect under

Rule 807(d) without certification to the Commission are appropriate because they are limited to

the types of rule changes described earlier in this section (e.g., administration), which do not

implicate significant protections to market participants, including compliance costs and customer

protection. Therefore, the Commission has harmonized Rule 807(d) with § 40.6(d) to allow such

filings to be made without self-certification or Commission review.

Thus, it is not necessary to require SBSEFs to make a substantially different type of filing

to the SEC than to the CFTC for the same underlying rule. For the reasons discussed above, the

Commission is adopting Rule 807 as proposed, with the exception of the proposed Inline XBRL

and EDGAR filing requirements, and with minor technical modifications. 134

133

See SIFMA AMG Letter, supra note 18, at 5–6.

134

See supra note 32. The Commission has also moved the word “and” from the end of paragraph (d)(3)(D) to

the end of paragraph (d)(3)(E)(2). As described in further detail in the discussion of electronic filing

systems and structured data, the Commission will require all rule and product filings required by Rules 804

through 807 and 816 to be filed in unstructured format through EFFS, rather than in Inline XBRL through

EDGAR. See infra section XIII.A.

Submission Cover Sheet and Instructions

In proposed new § 249.2002, the Commission proposed to require that an SBSEF use a

submission cover sheet in conjunction with filings submitted pursuant to Rules 804 through 807,

809, and 816. The cover sheet and the instructions therein are modeled on the cover sheet and

instructions used by SEFs in conjunction with their analogous filings with the CFTC. 135

The same cover sheet and instructions would be used for a new rule, rule amendment, or

new product filing, with the SBSEF checking the appropriate box to indicate which of these

types the filing represents. The SBSEF would also be required to check boxes to indicate

whether the submission was seeking approval by the Commission or whether it was being filed

as a certification by the SBSEF; and to identify the specific provision in the Commission’s rules

pursuant to which the filing was being submitted. The submission cover sheet also includes a box

that the SBSEF would check if it intends to submit a request for a joint interpretation from the

Commission and the CFTC regarding whether the product is a swap, an SBS, or mixed swap

pursuant to SEA Rule 3a68-2. 136 Finally, the cover sheet includes a check box by which an

SBSEF can indicate that it is requesting confidential treatment of materials in the submission.

The cover sheet divides the rule and rule amendment filings into two categories: one for

general rules of the SBSEF and the other for rules relating to the terms and conditions of a

product. Additional boxes would need to be checked if a filing under the terms-and-conditions

category concerned specifically a determination by the SBSEF that a particular SBS was now to

135

The CFTC cover sheet and instructions, found in appendix D to part 40 of the CFTC’s rules, are designed

for rule and product filings from a wider range of registered entities than just SEFs, and thus include entries

that are omitted from the Commission’s proposed adaptation.

136

Rule 809 provides that a product filing will be stayed or tolled, as applicable, if such a request for a joint

interpretation is made by the SBSEF, the SEC, or the CFTC. See infra section IV.G.

be considered “made available to trade” (or “MAT”); 137 or if the filing concerned the delisting of

an SBS with no open interest. 138 The cover sheet would need to be used in conjunction with the

weekly notifications that SBSEFs would be required to file pursuant to Rule 807(d) for certain

changes that do not need to be approved or certified, as discussed above.

Paragraph (a) of the submission cover sheet instructions provides that a properly

completed submission cover sheet must accompany all rule and product submissions filed

electronically with the Commission by an SBSEF using the Electronic Form Filing System

(EFFS). 139 Per paragraph (a), a properly completed submission cover sheet would include:

(1) the name and platform ID of the SBSEF 140; (2) the date of the filing; (3) an indication as to

whether the filing is a new rule, rule amendment, or new product; (4) for rule filings, the rule

number(s) being adopted or, in the case of rule amendments, the number of the rule(s) being

modified; and (4) for rule or rule amendment filings, a description of the new rule or rule

137

Rule 809 provides that a product filing will be stayed or tolled, as applicable, if such a request for a joint

interpretation is made by the SBSEF, the SEC, or the CFTC. See infra section IV.G.

138

See supra note 128.

139

The Electronic Form Filing System (EFFS) is a secure, web-based system used for filing Forms 19b-4,

19b-7, and SCI. The system also supports pre-filings of certain types of Form 19b-4 filings. EFFS is used

for form filing by SROs, including national securities exchanges, national securities associations, clearing

agencies, and Systems Compliance Integrity (SCI) entities, including SCI SROs, SCI alternative trading

systems, plan processors, and exempt clearing agencies subject to Automation Review Policy. See

https://www.sec.gov/tm/electronic-form-filing-system-resources.

140

“Platform ID” is a term utilized in Regulation SBSR, 17 CFR 242.900 et seq., and means the unique

identification code assigned to a platform on which an SBS is executed. See 17 CFR 242.900(w). The term

“platform” includes an SBSEF. See Rule 900(v), 17 CFR 242.900(v). A registered SBSEF is required by

Rule 903(a) of Regulation SBSR, 17 CFR 242.903(a), to use as its platform ID an identifier issued by an

internationally recognized standards-setting system (“IRSS”) if the IRSS meets enumerated criteria and has

therefore been recognized by the Commission pursuant to Rule 903(a). This identification requirement

stems from a registered SBSEF’s status as a “participant” of a registered SBSDR under Rule 900(u), 17

CFR 242.900(u), because the term “participant” includes a “platform,” as defined in Rule 900(v), 17 CFR

242.900(v), that incurs reporting duties under Rule 901(a), 17 CFR 242.901(a). Currently, the Global Legal

Entity Identifier System (“GLEIS”) is the only IRSS that has been recognized by the Commission under

Rule 903(a). See Regulation SBSR—Reporting and Dissemination of Security-Based Swap Information,

SEA Release No. 74244 (Feb. 11, 2015), 80 FR 14563, 14631–32 (Mar. 19, 2015) (“Regulation SBSR

Adopting Release I”). Therefore, Legal Entity Identifiers (“LEIs”) issued through the GLEIS are currently

the only allowable platform IDs that may be used by registered SBSEFs.

amendment, including a discussion of its expected impact on the SBSEF, its members, and the

overall market. The instructions state that the narrative should describe the substance of the

submission with enough specificity to characterize all material aspects of the filing.

Paragraph (b) of the submission cover sheet instructions states that a submission must

comply with all applicable filing requirements for proposed rules, rule amendments, or products,

and that the filing of the submission cover sheet does not obviate the SBSEF’s responsibility to

comply with applicable filing requirements.

Paragraph (c) of the submission cover sheet states that checking the box marked

“confidential treatment requested” does not obviate the submitter’s responsibility to comply with

all applicable requirements for requesting confidential treatment under SEA Rule 24b-2 and does

not substitute for notice or full compliance with such requirements.

One commenter states that the submission cover sheet and instructions for SBSEF filings

should harmonize with those of the CFTC. 141 This commenter states that entities currently

registered with the CFTC as SEFs will be able to seamlessly enact the necessary steps for

required SEC filings because of their familiarity with the CFTC’s filing process. This commenter

also states that any identifiers regarded as necessary should be included on the cover sheet.

The Commission agrees that the use of a submission cover sheet that is harmonized with

that required for CFTC filings by SEFs is likely to facilitate the filing process for SBSEFs that

are also registered as SEFs. For this reason, the proposed submission coversheet is harmonized

with the CFTC’s, with differences only in the details specific to the rules and processes of the

SEC. The Commission contemplates providing for electronic completion (as well as submission)

141

See Letter from J.T. (May 26, 2022). In section XIII.B, infra, the Commission discusses the use of

identifiers, such as the LEI.

of the cover sheet and attachment of the submissions required by Rules 804, 805, 806, 807, and

809, and intends to advise affected persons regarding its use by public announcement in advance

of the effective date of these rules. 142

For the reasons discussed above, the Commission is adopting 17 CFR 249.2002 as

proposed, but is renumbering it as 17 CFR 249.1702 under new subpart R (“Forms for

Registration of, and Filings by, Security-Based Swap Execution Facilities”), and is also adopting

the submission cover sheet and instructions as proposed with the exception of the proposed

Inline XBRL and EDGAR filing requirements. 143

Rule 808—Availability of Public Information

Proposed Rule 808 is closely modeled on § 40.8 of the CFTC’s rules. 144 Proposed Rule

808(a) would provide that certain parts of an application to register as an SBSEF would be made

publicly available on the Commission’s website, unless confidential treatment is obtained

pursuant to SEA Rule 24b-2. Specifically, Proposed Rule 808(a) would make the following parts

of a Form SBSEF publicly available: the (i) transmittal letter and first part of the application

cover sheet; (ii) Exhibit C; (iii) Exhibit G; (iv) Exhibit L; and (v) Exhibit M. 145

142

Below in section XIII.A, the Commission addresses the requirements to use the EDGAR system and Inline

XBRL for submissions.

143

See id.

144

Section 40.8 of the CFTC’s rules is entitled “Availability of public information.”

145

Section 40.8(a) does not provide a list of the exhibits required to be made public, but rather refers to a

general description of items required to be made public. For purposes of clarity and ease of reference,

however, the Commission proposed to list the specific corresponding exhibits in Rule 808 that would be

made publicly available. Exhibit C would require a narrative that sets forth the fitness standards for the

governing board and its composition; Exhibit G would require a copy of the corporate governance

documents for the applicant; Exhibit L would require a narrative and any other form of documentation that

describes the manner in which the applicant is able to comply with each core principle; and Exhibit M

would require a copy of the applicant’s proposed rules and any technical manuals, guides, or other

instructions for members.

Paragraph (b) of Proposed Rule 808, adapted from § 40.8(c), would provide that the

Commission shall make publicly available on its website, unless confidential treatment is

obtained pursuant to SEA Rule 24b-2, 146 an SBSEF’s filing of new products pursuant to the selfcertification procedures of Rule 804, new products for Commission review and approval

pursuant to Rule 805, new rules and rule amendments for Commission review and approval

pursuant to Rule 806, and new rules and rule amendments pursuant to the self-certification

procedures of Rule 807. Paragraph (c), adapted from § 40.8(d), would provide that the terms and

conditions of a product submitted to the Commission pursuant to any of Rules 804 through 807

shall be made publicly available at the time of submission unless confidential treatment is

obtained pursuant to SEA Rule 24b-2.

The Commission received one comment on Proposed Rule 808. This commenter states

that the Commission should not allow requests for confidential treatment and that these requests

are currently abused and result in little information being made available to the public. 147 A

blanket prohibition on requesting confidential treatment would not be appropriate, however,

because each request for confidential treatment should be addressed on its particular facts and

circumstances. Moreover, as the Commission stated in the Proposing Release, “it is not

necessary or appropriate to establish and utilize one set of procedures to handle confidential

treatment requests made by SBSEFs while utilizing a different set of procedures for other

persons who request confidential treatment from the Commission under the SEA.” 148 The

146

An application for confidential treatment shall contain, among other things, a statement of the grounds of

objection referring to, and containing an analysis of, the applicable exemption(s) from disclosure under the

Freedom of Information Act, and a justification of the period of time for which confidential treatment is

sought. See 17 CFR 240.24b-2(b)(2)(ii).

147

See Keeney Letter, supra note 95.

148

Proposing Release, supra note 1, 87 FR at 28880 n.50.

Commission anticipates that while SBSEFs may request confidential treatment for their filings

pursuant to existing SEA Rule 24-2, the items enumerated in Rule 808 are not of the type that

typically would constitute confidential information. Finally, it is appropriate to adopt a rule that

is adapted from § 40.8, because Rule 808 will apply to submissions made under Rules 804–807,

which are, as discussed above, also based on provisions of the CFTC’s rules for SEFs. Therefore,

the Commission is adopting Rule 808 as proposed.

Rule 809—Staying of Certification and Tolling of Review Period Pending

Jurisdictional Determination

Section 718 of the Dodd-Frank Act, entitled “Determining Status of Novel Derivative

Products,” sets forth a mechanism for addressing a situation in which a person wishes to list or

trade a novel derivative product that may have elements of both securities and contracts of sale

of a commodity for future delivery (or options on such contracts or options on commodities)—

i.e., a situation in which it is unclear whether the product in question is a security under the

jurisdiction of the SEC or a future under the jurisdiction of the CFTC. Section 718(a) provides

that the SEC or the CFTC may request that the other agency issue a determination as to the

classification of that product, and section 718(b) provides that the CFTC and SEC may petition

for judicial review of any such determination. 149

As described in the Proposing Release, Proposed Rule 809 is loosely modeled on § 40.12,

but modified to focus on the products and jurisdictional issues that are more likely to be relevant

149

Section 40.12 of the CFTC’s rules is entitled “Staying of certification and tolling of review period pending

jurisdictional determination” and reflects the process described in section 718 of the Dodd-Frank Act.

Section 40.12 provides that if a SEF (among other registered entities) certifies, submits for approval, or

otherwise files a proposal to list or trade such a novel derivative product, the product certification shall be

stayed or the approval review period shall be tolled until a final determination order is issued under section

718.

to SBSEFs. 150 Paragraph (a) of Proposed Rule 809, modeled on § 40.12(b), would provide that a

product certification made by an SBSEF pursuant to Rule 804 shall be stayed, or the review

period for a product that has been submitted for Commission approval by an SBSEF pursuant to

Rule 805 shall be tolled, upon request for a joint interpretation of whether the product is a swap,

SBS, or mixed swap made pursuant to Rule 3a68-2 under the SEA 151 by the SBSEF, the SEC, or

the CFTC. Paragraph (b) is modeled on § 40.12(b)(1) and would require the SEC to provide the

SBSEF with a written notice of the stay or tolling pending issuance of a joint interpretation by

the SEC and CFTC. Paragraph (c) is modeled on § 40.12(b)(2) and would provide that the stay

shall be withdrawn, or the approval review period shall resume, if a joint interpretation finding

that the SEC has jurisdiction over the product is issued.

The Commission did not receive any comments on Proposed Rule 809. While section 718

of the Dodd-Frank Act addresses situations where it is unclear whether a product is a security or

a future, the SEC and the CFTC have adopted separate rules—SEA Rule 3a68-2 and 17 CFR 1.8,

respectively—governing requests for interpretation regarding a product that might be an SBS, a

swap, or a mixed swap. It is appropriate for Regulation SE to include a mechanism for the

staying or tolling of a filing by an SBSEF when it is unclear whether the product is a swap or an

SBS, and it would be appropriate for Rule 809 to reflect the process set forth in SEA Rule

3a68-2. Tailoring, as proposed, the scope of Rule 809, in relation to § 40.12, appropriately

addresses the jurisdictional questions that are likely to arise from a product listed by an

SBSEF. 152 Therefore, the Commission is adopting Rule 809 as proposed.

150

As noted in the Proposing Release, an SBSEF might seek to list a product where it is unclear whether the

product is a swap or an SBS. See Proposing Release, supra note 1, 87 FR at 28890.

151

17 CFR 240.3a68-2.

152

The objective of Rule 809 is consistent with the objective of § 40.12: to provide for a stay or tolling of a

product filing where it is unclear whether the product is under the jurisdiction of the SEC or the CFTC.

Rule 810—Product Filings by SBSEFs That Are Not Yet Registered and by

Dormant SBSEFs

Proposed Rule 810 is closely modeled on § 37.4 of the CFTC’s rules and would provide a

process whereby a not-yet-registered SBSEF or a dormant SBSEF could submit product filings.

Specifically, Proposed Rule 810 would provide that an applicant for registration as an SBSEF

may submit an SBS’s terms and conditions prior to listing the product as part of its application

for registration and that any such terms and conditions or rules submitted as part of an SBSEF’s

application for registration shall be considered for approval by the Commission at the time the

Commission issues the SBSEF’s order of registration. Similarly, any SBS terms and conditions

or rules submitted as part of an application to reinstate the registration of a dormant SBSEF

would be considered for approval by the Commission at the time the Commission approves the

reinstatement of registration of the dormant SBSEF.

The Commission did not receive any comments on Proposed Rule 810 and is adopting

Rule 810 as proposed, for the reasons stated in the Proposing Release.

MISCELLANEOUS REQUIREMENTS

Sections 37.5 to 37.12 of the CFTC’s rules impose miscellaneous requirements on SEFs,

and the Commission proposed to impose similar requirements on SBSEFs in Rules 811 to 817 of

Regulation SE.

Rule 811—Information Relating to SBSEF Compliance

Harmonization with § 37.5

Paragraphs (a) to (c) of Proposed Rule 811 are modeled on § 37.5, which is entitled

“Information regarding swap execution facility compliance.” Paragraph (a) of Proposed Rule 811

is closely modeled on § 37.5(a) and would provide that, upon the Commission’s request, an

SBSEF shall file with the Commission information related to its business as an SBSEF in the

form and manner, and within the timeframe, specified by the Commission. Paragraph (b) is

closely modeled on § 37.5(b) and would provide that, upon the Commission’s request, an SBSEF

shall file with the Commission a written demonstration, containing supporting data, information,

and documents, that it is in compliance with one or more Core Principles or with its other

obligations under the SEA or the Commission’s rules thereunder, as the Commission specifies in

its request. Also, under Proposed Rule 811(b), the SBSEF would be required to file such written

demonstration in the form and manner, and within the timeframe, specified by the Commission.

Paragraph (c)(1) of Proposed Rule 811 is closely modeled on § 37.5(c)(1) and would

provide that an SBSEF shall file with the Commission a notification of any transaction involving

the direct or indirect transfer of 50% or more of the equity interest in the SBSEF. Also, under

Proposed Rule 811(c)(1), the Commission could, upon receiving such a notification, request

supporting documentation of the transaction. Paragraph (c)(2) is closely modeled on § 37.5(c)(2)

and would provide that the equity interest transfer notice shall be filed with the Commission in a

form and manner specified by the Commission at the earliest possible time, but in no event later

than the open of business 10 business days following the date upon which the SBSEF enters into

a firm obligation to transfer the equity Interest. Paragraph (c)(3) is closely modeled on

§ 37.5(c)(3) and would provide that, notwithstanding the foregoing, if any aspect of an equity

interest transfer requires an SBSEF to file a rule, the SBSEF shall comply with the applicable

rule filing requirements of Rule 806 or Rule 807.

Paragraph (c)(4) of Proposed Rule 811 is closely modeled on § 37.5(c)(4) and would

provide that, upon a transfer of an equity interest of 50% or more in an SBSEF, the SBSEF shall

file with the Commission, in a form and manner specified by the Commission, a certification that

the SBSEF meets all of the requirements of section 3D of the SEA and the Commission rules

thereunder, no later than two business days following the date on which the equity interest of

50% or more was acquired.

The Commission did not receive any comments on Rule 811(a) to (c). It is appropriate for

Regulation SE to include provisions requiring an SBSEF to provide the Commission with the

information described above. Information about an SBSEF’s business as an SBSEF and transfers

of 50% or more of its equity would promote understanding of its operations and ownership,

which should facilitate oversight of the SBSEF. Therefore, the Commission is clarifying, as

proposed, that, similar to the CFTC, it may request such information from an SBSEF. In

addition, as anticipated in the Proposing Release, should questions about compliance arise, the

Commission should be able to obtain from an SBSEF supporting data, information, and

documents that the SBSEF is in compliance with relevant obligations under the SEA, and the

rule provides for this. By modeling its proposed requirements on existing CFTC rules, the

Commission seeks to obtain comparable regulatory benefits while imposing only marginal

additional burdens on dually registered entities that are already subject to similar obligations.

The Commission is changing the phrase “a transfer of an equity interest of 50 percent or

more in a security-based swap execution facility” in paragraph (c)(4) to “an equity transfer

described in paragraph (c)(1) of this section” because the text of paragraph (c)(4) should be

modified to parallel the text of paragraphs (c)(2) and (c)(3). For these reasons, the Commission is

adopting Rule 811(a) to (c) as proposed, with the change described to paragraph (c)(4).

Harmonization with § 1.60

Paragraph (d) of Proposed Rule 811 is not modeled on § 37.5, but rather on § 1.60 of the

CFTC’s rules, which is entitled “Pending legal proceedings.” Because it is conceptually similar

to § 37.5 in that it would require another type of information relevant to the regulatory oversight

of a SEF, the Commission proposed to adapt this provision into Rule 811. 153

Paragraph (d)(1) of Proposed Rule 811 is closely modeled on § 1.60(a) and would

provide that an SBSEF shall submit to the Commission a copy of the complaint, any dispositive

or partially dispositive decision, any notice of appeal filed concerning such decision, and such

further documents as the Commission may thereafter request filed in any material legal

proceeding to which the SBSEF is a party or to which its property or assets are subject.

Paragraph (d)(2) is closely modeled on § 1.60(c) and would provide that an SBSEF shall submit

to the Commission a copy of the complaint, any dispositive or partially dispositive decision, any

notice of appeal filed concerning such decision, and such further documents as the Commission

may thereafter request filed in any material legal proceeding instituted against any officer,

director, or other official of the SBSEF from conduct in such person’s capacity as an official of

the SBSEF and alleging violations of the SEA or any rule, regulation, or order thereunder; the

constitution, bylaws, or rules of the SBSEF; or the applicable provisions of state law relating to

the duties of officers, directors, or other officials of business organizations.

Paragraph (d)(3) of Proposed Rule 811 is loosely modeled on § 1.60(e) and would

provide that documents required by Rule 811(d) to be submitted to the Commission shall be

submitted electronically in a form and manner specified by the Commission within 10 days after

the initiation of the legal proceedings to which they relate, after the date of issuance, or after

receipt by the SBSEF of the notice of appeal, as the case may be.

153

Section 1.60 requires a SEF (among other entities) to provide the CFTC wi

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.