Cross-Border Security-Based Swaps: SEC Releases Proposed Rules and Guidance on Cross-Border Security-Based Swaps

Sullivan & Cromwell LLP - June 7, 2013
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On May 1, 2013, the Securities and Exchange Commission issued a release proposing rules and guidance on the cross-border application of certain security-based swap provisions under the Securities Exchange Act of 1934. The proposing release was subsequently published in the Federal Register on May 23 and reflects the SEC’s attempt to address cross-border security-based swap activities “holistically” in a single proposing release.

Among other things, the proposing release addresses: 

  • the key definitions of “U.S. person” and “transaction conducted within the United States” to be used to establish the scope of the proposed cross-border security-based swap regime;
  • the application of the proposed cross-border regime to foreign branches, affiliates and subsidiaries of U.S. and non-U.S. persons, and the proposed impact of guarantees in the cross-border context;
  • the proposed impact of cross-border security-based swap transactions on the registration obligations of security-based swap dealers and major security-based swap participants;
  • the proposed aggregation rules to be used in determining security-based swap dealer status generally (and not just in the cross-border context);
  • entity-level and transaction-level requirements that would apply to security-based swap market participants engaged in cross-border security-based swap transactions;
  • the proposed reporting and public dissemination obligations with respect to cross-border security-based swap transactions;
  • the proposed mandatory clearing and trade execution requirements with respect to cross-border security-based swap transactions;
  • the impact of the proposed cross-border security-based swap regime on clearing agencies, execution facilities and swap data repositories; and
  • the proposed framework for “substituted compliance” under which market participants and infrastructure providers may satisfy certain U.S. regulatory requirements by complying with comparable non-U.S. regulatory regimes.