SEC/CFTC Adopt Final Swap Rules Exempting Most Swap Users
The SEC, jointly with the CFTC, adopted new rules regulating over-the-counter swaps. Considering industry comments, the rules exempt most industry participants except for large dealers and market participants. The SEC has jurisdiction over security-based swaps including single-name credit default swaps, and the CFTC maintains jurisdiction over other swaps. “Security-Based Swap Dealers” and “Major Security-Based Swap Participants” must register and follow the new rules. However, the definition of SBSD only includes entities regularly engaged in swaps activities and excludes entities that transact less than $8 Billion in CDS notional amount over the prior 12 months. The de minimus threshold to avoid regulation as a MSBSP is $1 Billion in daily average current uncollateralized exposure. The SEC makes clear that it intends to exclude mutual funds and pension funds as well as those engaged in legitimate hedging transactions.