SEC Proposes Rules for Security-Based Swap Dealers and Major Security-Based Swap Participants

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The Securities and Exchange Commission has proposed rules regarding capital, margin, and segregation requirements for security-based swap dealers and major security-based swap participants.

The proposed rules are required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which authorizes the SEC and other regulators to put in place a comprehensive framework for regulating the over-the-counter swaps markets.

Under the Dodd-Frank Act, the SEC must impose margin and capital requirements to help ensure the safety and soundness of security-based swap dealers and major security-based swap participants. The margin rules are required to be appropriate for the risk associated with security-based swaps that are not “cleared” by a security-based swap clearing agency. The proposed segregation rules are intended to facilitate the prompt return of customer property to customers before or during a liquidation proceeding if a security-based swap dealer fails.

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