FACT SHEET

Regulatory Regime 

for Security-Based 

Swap Execution 

Facilities

U.S. SECURITIES AND EXCHANGE COMMISSION PAGE 1 OF 2

Why This Matters

To enhance transparency and oversight of the over-the-counter derivatives market, Title VII of the 

Dodd-Frank Act requires the Commission to implement a regulatory framework for SBS that 

requires the registration and regulation of SBSEFs and mitigates conflicts of interest on SBSEFs 

and SBS exchanges. The Commission proposed Regulation SE, which would implement these 

statutory requirements and represent an important step in the SEC’s efforts to finalize its regulatory 

regime for the SBS market.

How This Rule Applies

Regulation SE would set out the process for an entity to register with the Commission as an SBSEF, 

including by submitting a new Form SBSEF. Proposed Rule 802(w) implement the Exchange Act 

definition of “security-based swap execution facility” but would not include an entity that is registered 

with the Commission as a clearing agency and limits its security-based swap matching functions to 

operation of a trading session that is designed to further the accuracy of end-of-day valuations. 

Regulation SE also would establish various requirements for registered SBSEFs. Proposed Rules 

818 to 831 of Regulation SE, for example, would implement and require SBSEFs to comply with the 

14 “Core Principles” set forth in Section 3D(d) of the Exchange Act. 

The proposal also includes provisions designed to promote consistency between the proposed rules 

governing SBSEFs and existing rules under the Exchange Act, including provisions that would: 

● Deem a registered SBSEF also to be registered with the Commission as a broker, and 

exempt that SBSEF from certain broker requirements;

● Allow for Commission review of final actions taken by an SBSEF; 

The Securities and Exchange Commission proposed rules that would: 

● Create a regime for the registration and regulation of security-based swap execution facilities 

(SBSEFs);

● Implement the “trade execution requirement” for security-based swaps (SBS) and address 

various issues relating to the requirement, including its cross-border application;

● Address conflicts of interest at SBSEFs and national securities exchanges that trade SBS; and

● Promote consistency between the proposed rules governing SBSEFs and existing rules under 

the Securities Exchange Act of 1934 (Exchange Act).
FACT SHEET | Regulatory Regime for Security-Based Swap Execution Facilities

U.S. SECURITIES AND EXCHANGE COMMISSION Page 2 of 2

● Sunset an existing exemption from clearing agency registration for an entity performing the 

functions of an SBSEF but that is not yet registered as such; and

● Exclude from the definition of “exchange” registered SBSEFs and SBS clearing agencies 

that perform certain matching and execution functions.

What’s Required

For an entity meeting the definition of “security-based swap execution facility”: 

● Register with the Commission as an SBSEF on Form SBSEF or register as a national 

securities exchange; and

● Foreign SBS trading venues may seek an exemption from the definition of “security-based 

swap execution facility” pursuant to proposed Rule 833(a).

A registered SBSEF must: 

● Submit filings with the Commission for new rules, rule amendments, or products;

● Submit information to the Commission that the Commission requests, including 

demonstrations that the SBSEF is in compliance with one or more Core Principles, 

notification of a transfer 50 percent or more of the equity interest in the SBSEF, and 

information about pending legal proceedings;

● Establish, comply with, and enforce its rules, including, among others, rules regarding 

market access, trading and trade processing, the operation of the SBSEF, the financial 

integrity of SBS on its facility, the exercise of emergency authority, and conflicts of interest;

● Monitor trading and market activity to prevent manipulation, price distortion, and delivery or 

settlement disruptions;

● Make public timely information on price, trading volume, and other trading data on SBS 

transactions, as required by Regulation SBSR, and publish on its website a Daily Market 

Data Report;

● Maintain records of all activities relating to the business of the facility, including a complete 

audit trail, in a form and manner acceptable to the Commission, for a period of five years;

● Have adequate financial, operational, and managerial resources to discharge its 

responsibilities;

● Establish and maintain a program of automated systems and risk analysis to identify and 

minimize sources of operational risk, through the development of appropriate controls and 

procedures;

● Establish and maintain emergency procedures, backup facilities, and a disaster recovery

plan; and

● Designate a chief compliance officer (CCO) and establish regulatory and reporting 

obligations for the CCO.

Additional Information:

The public comment period will remain open for 60 days following publication of the proposing release on the 

SEC’s website or 30 days following publication of the proposing release in the Federal Register, whichever 

period is longer.