mixed swaps

SEC Rules for Derivative Regulation

The SEC, on July 6, and the CFTC, on July 10, approved rules and interpretations for key definitions of certain derivatives products. The SEC rules and interpretations further define the terms “swap” and “security-based swap” and whether a particular instrument is a “swap” regulated by the CFTC or a “security-based swap” regulated by the SEC. The action also addresses “mixed swaps,” which are regulated by both agencies, and “security-based swap agreements,” which are regulated by the CFTC but over which the SEC has antifraud and other authority. The rules will be effective 60 days after publication in the Federal Register. However, solely for the purposes of certain interim relief granted and exemptions adopted under the Securities Act of 1933, the Securities and Exchange Act of 1934, and the Trust Indenture Act of 1939, the compliance date for the final rules further defining the term “security-based swap” will be 180 days after the publication in the Federal Register. SEC Release. CFTC Meeting Notice.

CFTC and SEC Proposed Rules and Guidance for Swap Definitions

On April 27, pursuant to Sections 712 and 721 of the Dodd-Frank Act, the CFTC and SEC issued proposed rules that would further define the terms swap, security-based swap, and security-based swap agreement. The proposed rules also would adopt regulations regarding mixed swaps as well as books and records for security-based swap agreements. During the April 27 Open Meeting in which the CFTC approved the proposed rules, the Commissioners observed four different approaches between the SEC and CFTC: (i) the inclusion of anti-evasion provisions in the proposed rules; (ii) the treatment of insurance on swaps as a securities-based swap; (iii) treatment of swaps linked to futures for foreign sovereign debt securities; and (iv) the jurisdiction and applicable regulatory requirements of the CFTC over indexed credit default swaps. Comments must be submitted within 60 days after publication in the Federal Register. SEC Release. CFTC Fact Sheet. CFTC Open Meeting Webcast.