| WASHINGTON, June 25
WASHINGTON, June 25 U.S. securities regulators
were poised on Wednesday to adopt part of a long-awaited rule
that spells out which foreign banks that deal in derivatives
will be required to comply with new U.S. rules.
The Securities and Exchange Commission's rule marks the
first important step toward implementing a series of regulations
for over-the-counter derivatives required by the 2010 Dodd-Frank
Wall Street reform law.
The measure does not address all of the outstanding
questions about when swap trades that cross the U.S. border will
be captured by U.S. rules or the rules of a foreign regulator.
Rather, Wednesday's final rule only implements a few
components from the SEC's original May 2013 draft proposal.
Most notably, it will help banks such as Goldman Sachs
or Morgan Stanley determine whether certain trades
will count toward meeting the definition of being a
"security-based swap dealer."
That definition is crucial, because any firm dubbed a swap
dealer must comply with numerous U.S. regulations, including
registration, central clearing of certain swaps and rules that
route trades onto regulated platforms.
In addition, the rule defines the scope of the SEC's
anti-fraud powers and spells out the process that banks and
others must follow if they wish to comply with the rules of a
foreign regulator, rather than U.S. regulators.
"The rules we are adopting today will ensure that our
security-based swap dealer and major security-based swap
participant regulatory regimes are applied to cross-border
security-based swap activities in a clear, consistent, and
reasonable way," said Republican SEC Commissioner Michael
Piwowar in a prepared statement.
The SEC's rule only applies to a small sliver of the
over-the-counter market it regulates, which includes equity
swaps and certain credit derivatives.
Completing rules to address how cross-border swap trades
should be treated by U.S. regulators has been a sore spot for
Wall Street and foreign regulators for the past few years.
Most of the tension has been directed at the SEC's sister
regulator, the Commodity Futures Trading Commission, which
oversees the bulk of the $710 trillion over-the-counter
The CFTC had previously taken a more aggressive stance than
the SEC in efforts to capture foreign trades in its new
In 2013 the CFTC issued cross-border guidance, instead of a
more formal rule-making like the SEC's, in a maneuver that
allowed the agency to avoid conducting an economic analysis of
how its rules could impact the industry.
Late last year, three Wall Street trade groups filed a
lawsuit seeking to rescind the CFTC's guidance, saying it is
illegally circumventing federal laws that require more rigorous
That lawsuit is still pending.
(Reporting by Sarah N. Lynch; Editing by Meredith Mazzilli)