SEC finalizes rules for reviewing swap clearing

WASHINGTON (Reuters) - U.S. securities regulators finalized new rules on Thursday that will help the agency determine whether certain swaps should be cleared, a process that protects against default.

The Securities and Exchange Commission's rules lay out how clearing agencies, such as IntercontinentalExchange's ICE Credit Clear, will provide information to regulators about the swaps they plan to accept for clearing.

The regulations are required by the 2010 Dodd-Frank Wall Street reform law, which gave the SEC and Commodity Futures Trading Commission joint oversight of the $708 trillion over-the-counter derivatives market.

One key pillar of the new derivatives regulations would require many of these derivatives, known as "swaps," to be routed through clearinghouses. Clearinghouses stand in between two parties to guarantee trades.

In addition to the rules laying out clearing submissions, the SEC also approved another set of rules that define and describe when clearinghouses deemed to be "systemically important" need to file certain advanced notices to regulators.

Systemically important clearinghouses are clearing agencies who are large and interconnected to the financial system.

The Financial Stability Oversight Council, created by the Dodd-Frank law, has the authority to decide which large clearing agencies should be designated.

Most of the large ones, such as the Depository Trust & Clearing Corp. and the Options Clearing Corp., are expected to be tagged with the title.

Under the SEC's new rules, those systemically important clearing agencies will need to let regulators know if they plan to make changes to their risk management processes, or changes that affect their core clearing and settlement functions.

Some possible changes that may be captured by the rule include issues affecting products or companies eligible to use the clearing agency, daily or intraday settlement procedures, default procedures, system safeguards, governance or financial resources.

CFTC ALSO PROPOSES DERIVATIVES RULES THURSDAY

In addition to the SEC's final rules governing clearing issues, the Commodity Futures Trading Commission on Thursday separately issued a different derivatives proposal to assist the agency with policing the marketplace.

The proposal represents a revised approach that had previously been considered by the agency that entails collecting ownership and control data for trading accounts to help the agency better track market activities.

By getting more granular data on trading accounts in both futures and swaps, the CFTC said it will be able to improve how it detects market manipulation and also better understand the relationships between various trading accounts.

(Reporting By Sarah N. Lynch; Editing by Andrew Hay)