SEC Unveils New Rules to Boost Security-Based Swap Market Transparency

<p>The Securities and Exchange Commission (SEC) has introduced
new regulations governing the registration of security-based swap execution
facilities (SBSEFs). This development is a response to the regulatory
requirements designed to address concerns in the over-the-counter derivatives
market. </p><p>SEC's Chair Gary Gensler, while endorsing the new
regulations, emphasized their role in enhancing transparency and market integrity.
The objective of the new rules is to bring greater transparency and
integrity to the security-based swap market, the US securities watchdog said. </p><p>Harmonization with CFTC Rules</p><p>By adopting the new regulations, the SEC seeks to align its
regulatory framework closely with the Commodity Futures Trading Commission
(CFTC) to enhance market efficiency and protect investors. The regulator's
approach closely mirrors the rules established by the CFTC for swap <a href="https://www.financemagnates.com/terms/e/execution/">execution</a>
facilities. </p><p>Gensler said: "Adopting Regulation
SE fulfills Congress’ mandate and increases the transparency and integrity of
the security-based <a href="https://www.financemagnates.com/terms/s/swaps/" target="_blank" rel="follow">swap</a> market. In taking up these matters in 2021, we heard
from many market participants suggesting we should look to the <a href="https://www.financemagnates.com/terms/c/cftc/">CFTC</a> rules for
swap execution facilities as our template."</p><p>The newly adopted rules will take effect 60 days
after publication in the federal register. Entities that qualify as SBSEFs must
apply for registration with the SEC starting from the effective date.</p><blockquote><p lang="en" dir="ltr">The Securities and Exchange Commission today adopted rules to create a regime for the registration and regulation of security-based swap execution facilities. The new regulatory framework was required under the Dodd-Frank Act relating to the over-the-counter derivatives market.</p>— U.S. Securities and Exchange Commission (@SECGov) <a href="https://twitter.com/SECGov/status/1720118709417632201?ref_src=twsrc%5Etfw">November 2, 2023</a></blockquote><p>Recently, the SEC introduced a new proposal to
<a href="https://www.financemagnates.com/forex/sec-to-prohibit-volume-based-transaction-pricing-among-stock-brokers/" target="_blank" rel="follow">eliminate volume-based transaction pricing</a> and rebates offered by national
securities exchanges, all in pursuing a fairer marketplace. Gensler underlined
the urgency of leveling the playing field, as the current system imposes
disproportionately high fees on mid-sized and smaller broker-dealers compared
to their larger counterparts.</p><p>SEC's Focus on Securities Lending</p><p>According to the SEC, there is unequal competition
between broker-dealers due to volume-based transaction pricing. This practice
effectively results in mid-sized and smaller firms paying more to trade on most
exchanges compared to their larger counterparts. The SEC's new rule is poised
to address this long-standing disparity.</p><p>The SEC's regulatory changes include a rule
that mandates lenders of securities to report loans and changes to existing
ones daily. This rule, intended to enhance transparency in securities lending,
plays a crucial role in short selling, a strategy often employed by hedge
funds.</p><p>The SEC is taking significant <a href="https://www.financemagnates.com/forex/sec-seeks-changes-to-protect-customers-against-broker-dealers-failure/" target="_blank" rel="follow">steps to protect customers</a> in the securities trading industry. In a new proposal, the regulator is
pushing for a change in the rules governing broker-dealers, requiring them to
calculate the net cash owed to customers and other broker-dealers daily rather
than weekly. </p>

This article was written by Jared Kirui at www.financemagnates.com.