The Securities and Exchange Commission took another significant step toward establishing the regulatory regime for security-based swap dealers today by adopting a package of rules and rule amendments under Title VII of the Dodd-Frank Act.  These and other rules previously adopted by the Commission are designed to enhance the risk mitigation practices of firms that stand at the center of our security-based swap market, thereby protecting their counterparties and reducing risk to the market as a whole. 

"I once again would like to thank Commissioner Peirce for her excellent leadership on our efforts to stand up the Dodd-Frank Title VII regulatory regime.  Today's rules reflect another important step in this effort.  These rules help ensure that the firms who are at the center of the security-based swap market manage counterparty risk appropriately and in so doing protect investors and the market more generally," said SEC Chairman Jay Clayton.  "Our colleagues at the SEC, including our teams in the Division of Trading and Markets and the Division of Economic and Risk Analysis, brought their extensive knowledge and expertise to bear in crafting these rules.  Commissioner Peirce and I are grateful for their efforts and we also want to thank CFTC Chairman Giancarlo, CFTC Commissioner Quintenz, and their colleagues for their efforts and commitments to inter-agency cooperation."

"These final rules are designed to ensure the financial integrity of dealers at the center of the critically important security-based swap market and represent an enormous effort on the part of our staff, particularly in the Divisions of Trading and Markets and Economic and Risk Analysis," said Commissioner Hester Peirce.  "In addition, working with Commissioner Quintenz and the CFTC on this important rule has been a wonderful opportunity to cooperate in a way that serves the American people.  Throughout the process, our two staffs have drawn on one another's experiences, expertise, and insights in an effort to build effective rules.  I am grateful to Chairman Giancarlo and Chairman Clayton for their work on this rule and our broader cooperation efforts."

Today's rules address four key areas:

The accompanying fact sheet describes the rules in more detail.

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FACT SHEET



Final Rules and Amendments

June 21, 2019

The Commission adopted a package of new rules and rule amendments to establish capital, margin, and segregation requirements under Title VII of the Dodd-Frank Act. 

Capital Rules for Nonbank SBSDs and Broker-Dealers       

The Rules

Minimum Capital Requirements

Type of Registrant

Rule

Tentative Net Capital

(Net capital before haircuts)

Net Capital

Fixed-Dollar

Financial Ratio

Stand-alone SBSD (not using internal models)

18a-1

N/A

$20 million

2% margin factor

Stand-alone SBSD (using internal models)1

18a-1

$100 million

$20 million

2% margin factor

Broker-dealer SBSD

(not using internal models)

15c3-1

N/A

$20 million

2% margin factor  + Rule 15c3-1 ratio

Broker-dealer SBSD (using internal models)

15c3-1

$5 billion

$1 billion

2% margin factor  + Rule 15c3-1 ratio

1 Includes a stand-alone SBSD that also is an OTC derivatives dealer.

Computing Net Capital

Internal Risk Management Controls

Capital Rules for Nonbank MSBSPs

Margin Requirements for Nonbank SBSDs

Calculation

Collecting Collateral

Exceptions

Exception

Status of Exceptions to Collecting Margin

Status of Exceptions to  Delivering VM

VM

IM

Commercial End User

Need Not Collect

Need Not Collect

Need Not Deliver

BIS or European Stability Mechanism

Need Not Collect

Need Not Collect

Need Not Deliver

Multilateral Development Bank

Need Not Collect

Need Not Collect

Need Not Deliver

Financial Market Intermediary

Must Collect

Need Not Collect

Must Deliver

Affiliate

Must Collect

Need Not Collect

Must Deliver

Sovereign with Minimal Credit Risk

Must Collect

Need Not Collect

Must Deliver

Legacy Account

Need Not Collect

Need Not Collect

Need Not Deliver

IM Below $50 Million Threshold

Must Collect

Need Not Collect

Must Deliver

Minimum Transfer Amount

Need Not Collect

Need Not Collect

Need Not Deliver

Margin Requirements for Nonbank MSBSPs

Segregation Requirements for Broker-Dealers and SBSDs

The Rules

Omnibus Segregation Requirements

Exemption from the Segregation Requirements

Alternative Compliance Mechanism

Cross-Border Application

What's Next?

The rules will become effective 60 days after publication in the Federal Register.  The compliance date for the rule amendments and new rules is 18 months after the later of: (1) the effective date of the final rules establishing recordkeeping and reporting requirements for SBSDs and MSBSPs; or (2) the effective date of the final rules addressing the cross-border application of certain security-based swap requirements.