Capital, Margin & Segregation Requirements for SBS Dealers & MSBS Participants & Capital Requirements for BDs
Summary
SIFMA provides comments to the SEC on Capital, Margin and Segregation Requirements for Security-Based Swap Dealers (SBSDs) and Major Security-Based Swap (MSBS) Participants and Capital Requirements for Broker-Dealers (BDs), Release No. 34-68071; File No. S7-08-12. SIFMA recognizes that, in implementing capital, margin and segregation requirements for nonbank SBSDs, the Commission has largely drawn from its existing broker-dealer financial responsibility rules and sought to adapt those rules for SBSDs. Nevertheless, we are concerned that this approach, without further modification, does not adequately address or conform to the statutory principles.
Excerpt
Elizabeth M. Murphy
Secretary
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Re: Capital, Margin and Segregation Requirements for Security-Based Swap Dealers and Major Security-Based Swap Participants and Capital Requirements for Broker-Dealers (Release No. 34-68071; File No. S7-08-12)
Dear Ms. Murphy:
The Securities Industry and Financial Markets Association (“SIFMA”)1 welcomes the opportunity to provide the Securities and Exchange Commission (the “SEC” or “Commission”) with comments on the Commission’s proposed capital, margin and segregation requirements (the “Proposal”) 2 for security-based swap dealers (“SBSDs”) and major security-based swap participants (“MSBSPs”) pursuant to Sections 3E and 15F of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended by Sections 763 and 764 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). SIFMA appreciates the Commission’s careful and comprehensive approach to this complex and consequential rulemaking.
EXECUTIVE SUMMARY
SIFMA greatly appreciates the Commission’s thoughtful effort to reconcile the many difficult and, in some cases, conflicting objectives that must be addressed in fashioning capital, margin and segregation requirements for nonbank SBSDs and MSBSPs. These objectives include the mandate in Section 15F(e) of the Exchange Act for the Commission’s capital and margin requirements to “help ensure the safety and soundness” of nonbank SBSDs and MBSPs and “be appropriate for the risk associated with” uncleared security-based swaps (“SBS”). Section 15F(e) also requires the Commission, together with the Commodity Futures Trading Commission (the “CFTC”) and the Prudential Regulators,3 to the maximum extent practicable, to stablish and maintain comparable capital and margin requirements for bank and nonbank swap dealers (“SDs”), SBSDs, major swap participants (“MSPs”) and MSBSPs. Section 752 of Dodd-Frank similarly requires the Commission to consult and coordinate with foreign regulatory authorities on the establishment of consistent international standards with respect to SBS.
Finally, Section 3(f) of the Exchange Act generally requires the Commission to consider whether its rules “will promote efficiency, competition, and capital formation,” and Section 23(a)(2)
prohibits the Commission from adopting any rule that “would impose a burden on competition not necessary or appropriate in furtherance of the purposes” of the Exchange Act.