Investment Operations

SEC Adopts Capital, Margin and Seg Requirements


The Securities and Exchange Commission has taken another significant step toward establishing the regulatory regime for security-based swap dealers 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.

“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.

The new rules address four key areas:

  • They establish minimum capital requirements for security-based swap dealers and major security-based swap participants for which there is not a prudential regulator (nonbank SBSDs and MSBSPs).  They also increase the minimum net capital requirements for broker-dealers that use internal models to compute net capital (ANC broker-dealers).  In addition, they establish capital requirements tailored to security-based swaps and swaps for broker-dealers that are not registered as an SBSD or MSBSP to the extent they trade these instruments.
  • They establish margin requirements for nonbank SBSDs and MSBSPs with respect to non-cleared security-based swaps.
  • They establish segregation requirements for SBSDs and stand-alone broker-dealers for cleared and non-cleared security-based swaps.
  • They amend the Commission’s existing cross-border rule to provide a means to request substituted compliance with respect to the capital and margin requirements for foreign SBSDs and MSBSPs, and provide guidance discussing how the Commission will evaluate requests for substituted compliance.

“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.