Document ID: SEC-2011-0867-0001
Agency: sec
Document Type: Rule
Title: Exemptive Orders: Temporary Exemptions and Other Temporary Relief Applicable to Security-Based Swaps
Posted Date: 2011-06-22T04:00Z

[Federal Register Volume 76, Number 120 (Wednesday, June 22, 2011)]
[Rules and Regulations]
[Pages 36287-36307]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-15432]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 240

[Release No. 34-64678; File No. S7-24-11]

Temporary Exemptions and Other Temporary Relief, Together With 
Information on Compliance Dates for New Provisions of the Securities 
Exchange Act of 1934 Applicable to Security-Based Swaps

AGENCY: Securities and Exchange Commission.

ACTION: Exemptive order.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
issuing an exemptive order granting temporary exemptive relief and 
other temporary relief from compliance with certain provisions of the 
Securities Exchange Act of 1934 (``Exchange Act'') concerning security-
based swaps. The Commission also is providing guidance regarding 
compliance with other provisions of the Exchange Act concerning 
security-based swaps that were amended or added by the Dodd-Frank Wall 
Street Reform and Consumer Protection Act of 2010 (``Dodd-Frank Act'') 
and requesting comments on such guidance and the temporary relief 
granted.

DATES: This exemptive order is effective June 15, 2011. Comments must 
be received on or before July 6, 2011.

ADDRESSES: Comments may be submitted, identified by File Number S7-24-
11, by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/interp.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number S7-24-11 on the subject line; or
     Use the Federal Rulemaking Portal (http://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090. All submissions should refer to File Number 
S7-24-11. This file number should be included on the subject line if e-
mail is used. To help us process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec/gov/rules/proposed.shtml). Comments are also available for Web site viewing 
and printing in the Commission's Public Reference Room, 100 F Street, 
NE., Washington DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. All comments received will be posted without 
charge; the Commission does not edit personal identifying information 
from submissions. You should only submit information that you wish to 
make publicly available.

FOR FURTHER INFORMATION CONTACT: Jack Habert, Attorney Fellow, at (202) 
551-5063; Leah Drennan, Attorney-Adviser, at (202) 551-5507; or Ann 
McKeehan, Attorney-Adviser, at (202) 551-5797, Division of Trading and 
Markets, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-7010.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction and Background.
II. Discussion.
    A. Clearing for Security-Based Swaps.
    B. Security-Based Swap Execution Facilities.
    C. Segregation of Collateral in Security-Based Swaps.
    D. Security-Based Swap Antifraud Provisions.
    E. Position Limits for Security-Based Swaps.
    F. Reporting of Security-Based Swaps.
    i. Public Availability of Security-Based Swap Data.
    ii. Security-Based Swap Data Repositories.

[[Page 36288]]

    iii. Reporting and Recordkeeping for Security-Based Swaps.
    G. Registration and Regulation of Security-Based Swap Dealers 
and Major Security-Based Swap Participants.
    H. Registration of Clearing Agencies for Security-Based Swaps.
    I. Other Amendments to the Federal Securities Laws Relating to 
Security-Based Swaps.
    J. Section 29(b) of the Exchange Act.
III. Solicitation of Comments.
IV. Temporary Exemptions and Other Temporary Relief

I. Introduction and Background.

    On July 21, 2010, President Barack Obama signed the Dodd-Frank Act 
into law.\1\ The Dodd-Frank Act was enacted, among other reasons, to 
promote the financial stability of the United States by improving 
accountability and transparency in the financial system.\2\ The recent 
financial crisis demonstrated the need for enhanced regulation of the 
over-the-counter (``OTC'') derivatives markets, which have experienced 
dramatic growth in recent years \3\ and are capable of affecting 
significant sectors of the U.S. economy.\4\ Title VII of the Dodd-Frank 
Act (``Title VII'') establishes a regulatory regime applicable to the 
OTC derivatives markets by providing the Commission and the Commodity 
Futures Trading Commission (``CFTC'') with the tools to oversee these 
heretofore largely unregulated markets. The Dodd-Frank Act provides 
that the CFTC will regulate ``swaps,'' the Commission will regulate 
``security-based swaps,'' and the CFTC and the Commission will jointly 
regulate ``mixed swaps.'' \5\
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    \1\ The Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Public Law 111-203, 124 Stat. 1376 (2010).
    \2\ Id. at preamble.
    \3\ From their beginnings in the early 1980s, the notional value 
of these markets has grown to almost $600 trillion globally. See 
Monetary and Econ. Dep't, Bank for Int'l Settlements, Triennial and 
Semiannual Surveys--Positions in Global Over-the-Counter (OTC) 
Derivatives Markets at End-June 2010 (Nov. 2010), available at 
http://www.bis.org/publ/otc_hy1011.pdf.
    \4\ See 156 Cong. Rec. S5878 (daily ed. July 15, 2010) 
(statement of Sen. Dodd).
    \5\ Section 712(d) of the Dodd-Frank Act provides that the 
Commission and the CFTC, in consultation with the Board of Governors 
of the Federal Reserve System, shall further define the terms 
``swap,'' ``security-based swap,'' ``swap dealer,'' ``security-based 
swap dealer,'' ``major security-based swap participant,'' ``eligible 
contract participant,'' and ``security-based swap agreement.'' These 
terms are defined in sections 721 and 761 of the Dodd-Frank Act and 
the Commission and the CFTC have proposed to further define these 
terms in proposed joint rulemaking. See Further Definition of 
``Swap,'' ``Security-Based Swap,'' and ``Security-Based Swap 
Agreement''; Mixed Swaps; Security-Based Swap Agreement 
Recordkeeping, 76 FR 29818 (May 23, 2011); Further Definition of 
``Swap Dealer,'' ``Security-Based Swap Dealer,'' ``Major Swap 
Participant,'' ``Major Security-Based Swap Participant'' and 
``Eligible Contract Participant,'' 75 FR 80174 (Dec. 21, 2010) 
(``Entity Definitions Release'').
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    Title VII amends the Exchange Act \6\ to substantially expand the 
regulation of the security-based swap (``SB swap'') markets, 
establishing a new regulatory framework within which such markets can 
continue to evolve in a more transparent, efficient, fair, accessible, 
and competitive manner.\7\ The Dodd-Frank Act amendments to the 
Exchange Act impose, among other requirements, the following: (1) 
Registration and comprehensive oversight of SB swap dealers (``SBSDs'') 
and major SB swap participants (``MSBSPs'' and, collectively with 
SBSDs, ``SBS Entities''); \8\ (2) reporting of SB swaps to a registered 
SB swap data repository (``SDR''), to the Commission, and to the 
public; \9\ (3) clearing of SB swaps through a registered clearing 
agency or through a clearing agency that is exempt from registration 
\10\ if such SB swaps are of a type that the Commission determines is 
required to be cleared, unless an exemption or exception from such 
mandatory clearing applies; \11\ and (4) if an SB swap is subject to 
the clearing requirement,\12\ execution of the SB swap transaction on 
an exchange, on an SB swap execution facility (``SB SEF'') registered 
under section 3D of the Exchange Act,\13\ or on an SB SEF that has been 
exempted from registration by the Commission under section 3D(e) of the 
Exchange Act,\14\ unless no SB SEF or exchange makes such SB swap 
available for trading.\15\ Title VII also amends the Exchange Act and 
the Securities Act of 1933 \16\ (``Securities Act'') to include 
``security-based swaps'' in the definition of ``security'' for purposes 
of those statutes.\17\ As a result, ``security-based swaps'' will be 
subject to the provisions of the Securities Act and the Exchange Act 
and the rules thereunder applicable to ``securities.'' \18\ The 
Commission has proposed exemptions \19\ under the Securities Act, the 
Exchange Act, and the Trust Indenture Act of 1939 \20\ (``Trust 
Indenture Act'') for SB swaps issued by certain clearing agencies 
satisfying certain conditions.\21\ In addition, the Commission will 
take other actions to address certain SB swaps, such as providing 
guidance regarding--and where appropriate, temporary relief from--the 
various pre-Dodd Frank Act provisions that would otherwise apply to SB 
swaps on July 16, 2011, as well as extending existing temporary rules 
under the Securities Act, the Exchange

[[Page 36289]]

Act, and the Trust Indenture Act for certain SB swaps.\22\
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    \6\ 15 U.S.C. 78a et seq.
    \7\ See generally subtitle B of Title VII. Citations to 
provisions of the Exchange Act in this Order refer to the numbering 
of those provisions after the amendments made by the Dodd-Frank Act, 
except as otherwise provided.
    \8\ As required by the Dodd-Frank Act, the Commission will 
propose rules regarding the registration of SBS Entities and a 
process for revocation of such registration. See section 15F of the 
Exchange Act, 15 U.S.C. 78o-10.
    \9\ See section 3(a)(75) of the Exchange Act, 15 U.S.C. 
78c(a)(75) (defining the term ``security-based swap data 
repository''). The registration of an SDR and the reporting of SB 
swaps are the subject of separate Commission rulemakings. See 
Security-Based Swap Data Repository Registration, Duties, and Core 
Principles, 75 FR 77305 (Dec. 10, 2010), corrected at 75 FR 79320 
(Dec. 20, 2010) and 76 FR 2287 (Jan. 13, 2011); Regulation SBSR--
Reporting and Dissemination of Security-Based Swap Information, 75 
FR 75207 (Dec. 2, 2010).
    \10\ See Clearing Agency Standards for Operation and Governance, 
76 FR 14472 (Mar. 16, 2011). The Commission has proposed rules 
regarding registration of clearing agencies and standards for the 
operation and governance of clearing agencies, including rules that 
would exempt certain SBSDs and SB SEFs from the definition of a 
clearing agency.
    \11\ See section 3C(a)(1) of the Exchange Act, 15 U.S.C. 78c-
3(a)(1). The Commission has proposed rules regarding the manner in 
which clearing agencies provide information to the Commission about 
SB swaps that the clearing agency plans to accept for clearing and 
that would, in turn, be used by the Commission in determining 
whether such SB swaps are required to be cleared. See Process for 
Submissions for Review of Security-Based Swaps for Mandatory 
Clearing and Notice Filing Requirements for Clearing Agencies; 
Technical Amendments to Rule 19b-4 and Form 19b-4 Applicable to All 
Self-Regulatory Organizations, 75 FR 82489 (Dec. 30, 2010).
    \12\ See section 3C(g) of the Exchange Act, 15 U.S.C. 78c-3(g) 
(providing an exception to the clearing requirement for certain 
persons).
    \13\ 15 U.S.C. 78c-4.
    \14\ 15 U.S.C. 78c-4(e).
    \15\ See section 3C(g) of the Exchange Act, 15 U.S.C. 78c-3(g). 
See section 3C(h) of the Exchange Act, 15 U.S.C. 78c-3(h). See also 
section 3(a)(77) of the Exchange Act, 15 U.S.C. 78c(77) (defining 
the term ``security-based swap execution facility''). The Commission 
has proposed an interpretation of the definition of ``security-based 
swap execution facility'' and has proposed rules to implement 
registration requirements, duties, and core principles for SB SEFs. 
See Registration and Regulation of Security-Based Swap Execution 
Facilities, 76 FR 10946 (Feb. 28, 2011).
    \16\ 15 U.S.C. 77a et seq.
    \17\ See sections 761(a)(2) and 768(a)(1) of the Dodd-Frank Act 
(amending sections 3(a)(10) of the Exchange Act, 15 U.S.C. 
78c(a)(10), and 2(a)(1) of the Securities Act, 15 U.S.C. 77b(a)(1), 
respectively).
    \18\ The Commission has considered similar issues raised by the 
treatment of credit default swaps as securities in connection with 
taking action in the past to facilitate clearing of certain credit 
default swaps (``CDS'') by clearing agencies functioning as central 
counterparties (``CCPs''). See infra notes 222 and 223.
    \19\ See Exemptions for Security-Based Swaps Issued by Certain 
Clearing Agencies, Securities Act Release No. 9222, Exchange Act 
Release No. 64639, Trust Indenture Act Release No. 2474 (June 9, 
2011) (``Proposed Cleared SB Swap Exemptions'').
    \20\ 15 U.S.C. 77aaa et seq.
    \21\ See discussion infra note 223.
    \22\ See SEC Announces Steps to Address One-Year Effective Date 
of Title VII of Dodd-Frank Act, available at http://www.sec.gov/news/press/2011/2011-125.htm (June 10, 2011).
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    The provisions of Title VII generally are effective on July 16, 
2011 (360 days after enactment of the Dodd-Frank Act, referred to 
herein as the ``Effective Date''), unless a provision requires a 
rulemaking. Specifically, if a Title VII provision requires a 
rulemaking, such provision will not necessarily go into effect on the 
Effective Date, but instead will go into effect ``not less than'' 60 
days after publication of the related final rule or on July16, 2011, 
whichever is later.\23\ A substantial number of Title VII provisions 
require a rulemaking and thus will not go into effect on the Effective 
Date. A number of Title VII provisions also expressly (or implicitly) 
apply only to ``registered'' persons. Until the related registration 
processes for such persons have been established by final Commission 
rules, and such persons have become registered pursuant to such rules, 
they will not be required to comply with these Title VII 
provisions.\24\ Other provisions of Title VII impose requirements that 
require compliance by market participants as a result of, or in 
response to, Commission action other than rulemaking and thus do not 
impose a compliance obligation upon market participants in the absence 
of such Commission action.
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    \23\ See section 774 of the Dodd-Frank Act, 15 U.S.C. 77b note.
    \24\ See, e.g., sections 15F(e)(1) of the Exchange Act, 15 
U.S.C. 78o-10(e)(1) (capital and margin requirements); 15F(f)(1) 
(reporting and recordkeeping); 15F(h)(1) (business conduct 
standards).
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    In addition, Title VII provides the Commission with flexibility to 
establish effective dates beyond the minimum 60 days specified therein 
for Title VII provisions that require a rulemaking.\25\ Furthermore, as 
with other rulemakings under the Exchange Act, the Commission may set 
compliance dates (which may be later than the effective dates) for 
rulemakings under the Title VII amendments to the Exchange Act. 
Together, this provides the Commission with the ability to sequence the 
implementation of the various Title VII requirements in a way that 
effectuates the policy goals of Title VII while minimizing unnecessary 
disruption or costs.
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    \25\ See id. (specifying that the effective date for a provision 
requiring a rulemaking is ``not less than 60 days after publication 
of the final rule or regulation implementing such provision'').
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    Title VII also includes certain provisions that authorize or direct 
the Commission to take specified action that, once undertaken, may 
impose compliance obligations upon market participants.\26\ These 
provisions will become effective on the Effective Date, but, by their 
plain language, pertain to Commission action. Accordingly, these 
provisions do not require compliance by market participants on the 
Effective Date unless the relevant Commission action already has been 
undertaken. The Commission does not expect to complete all of the 
rulemaking it is directed to carry out pursuant to these provisions 
prior to the Effective Date.
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    \26\ See, e.g., section 3D(f) of the Exchange Act, 15 U.S.C. 
78c-4(f) (requiring the Commission to prescribe rules governing the 
regulation of SB SEFs). Certain of these provisions relate to the 
CFTC or another government agency in addition to, or instead of, the 
Commission.
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    In furtherance of the Dodd-Frank Act's stated objective of 
promoting financial stability in the U.S. financial system, the 
Commission intends to move forward expeditiously with the 
implementation of the new SB swap requirements in an efficient manner, 
while minimizing unnecessary disruption and costs to the markets. The 
Commission recognizes that many market participants will find 
compliance with Title VII to be a substantial undertaking. SB swap 
markets already exist, are global in scope, and have generally grown in 
the absence of regulation in the United States and elsewhere. In 
addition, the SB swap markets are interconnected with other financial 
markets, including the traditional securities markets. In order to 
comply with Title VII provisions and related rules, the Commission 
recognizes that market participants will need additional time to 
acquire and configure necessary systems or to modify existing practices 
and systems, engage and train necessary staff, and develop and 
implement necessary policies and procedures.\27\ Furthermore, some of 
these changes cannot be finalized until certain rules are effective. 
Accordingly, it is necessary or appropriate to defer some of these 
tasks until certain rules are effective, as more fully described below.
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    \27\ The Commission expects that it will not, by July 16, 2011, 
have completed implementing Title VII. As a result, the Commission 
believes it would not be reasonable to require market participants 
to put systems in place or hire personnel based on a regulatory 
scheme that is not fully in place. To require otherwise, depending 
on the content of the final rules, might require these entities to 
incur costs to change their systems again in a relatively short 
period of time.
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    In order to effectuate the purposes of Title VII, and in response 
to comments received from market participants,\28\ the Commission is 
providing guidance as to the provisions of the Exchange Act added by 
Title VII with which industry compliance will be required as of the 
Effective Date.\29\
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    \28\ The Commission has received comments from a wide range of 
commenters inquiring as to the effective dates and related 
compliance dates of certain provisions and requesting that the 
Commission propose a compliance schedule for the statutory 
provisions of subtitle B of Title VII and the rules being 
promulgated thereunder. See, e.g., letter from American Bankers 
Association, Financial Services Roundtable, Futures Industry 
Association, Institute of International Bankers, International Swaps 
and Derivatives Association, Investment Company Institute, 
Securities Industry and Financial Markets Association, U.S. Chamber 
of Commerce (June 10, 2011) (``Trade Association Letter''); letter 
from Stephen Merkel, Chairman, Wholesale Markets Brokers' 
Association Americas (June 3, 2010) (``WMBA Letter''); letter from 
Richard M. Whiting, Executive Director and General Counsel, 
Financial Services Roundtable (May 12, 2011); letter from Andrew 
Downes, Managing Director, and James B. Fuqua, Managing Director, 
UBS Securities LLC (Feb. 7, 2011); letter from Craig S. Donohue, CME 
Group Inc. (Jan. 18, 2011); letter from R. Glenn Hubbard, Co-Chair, 
John L. Thornton, Co-Chair, and Hal S. Scott, Director, the 
Committee on Capital Markets Regulation (Jan. 18, 2011) (``Committee 
on Capital Markets Regulation Letter''); letter from Larry E. 
Thompson, General Counsel, the Depository Trust & Clearing 
Corporation (Jan 18, 2011) (``DTCC Letter''); letter from Mr. James 
Hill, Managing Director, Morgan Stanley (Nov. 1, 2010) (``Morgan 
Stanley Letter'').
     In addition, many letters from market participants have 
advocated for a phased-in approach to compliance with the 
requirements of Title VII. See, e.g., WMBA Letter (suggesting a 
``progression'' of finalization of specific Title VII rules); 
Committee on Capital Markets Regulation Letter (stating that ``the 
reporting and recordkeeping requirements should be implemented 
gradually over time''); letter from Financial Services Forum, 
Futures Industry Association, International Swaps and Derivatives 
Association, and Securities Industry and Financial Markets 
Association (May 4, 2011) (stating that ``[t]he Commissions should 
phase in requirements based on the state of readiness of each 
particular asset class''); letter from G14 Member dealers and others 
(Mar. 31, 2011) (suggesting a ``phased-in implementation 
schedule''); letter from Richard H. Baker, President & Chief 
Executive Officer, Managed Funds Association (Mar. 24, 2011) 
(recommending ``milestones for clearing access and voluntary 
clearing with a phase-in period before clearing becomes 
mandatory''); DTCC Letter (recommending a ``phased-in'' approach to 
implementation of reporting requirements under Regulation SBSR); 
Morgan Stanley Letter (urging the Commission and the CFTC ``to phase 
in the clearing, execution and other requirements product-by-product 
over time'').
     Some of the commenters cited above addressed issues regarding 
effective dates, compliance, and implementation that will be 
addressed by other action to be taken the Commission. See supra note 
22 and accompanying text.
    \29\ While this release provides guidance with respect to the 
provisions of the Exchange Act added by Title VII, as indicated 
above, the Commission will take other actions to address SB swaps 
under various provisions of the Federal securities laws. See supra 
note 22 and accompanying text. In addition, after proposing all of 
the key rules under Title VII, the Commission intends to consider 
publishing a detailed implementation plan in order to enable the 
Commission to move forward expeditiously with the roll-out of the 
new SB swap requirements in an efficient manner, while minimizing 
unnecessary disruption and costs to the markets. Id.
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    In addition, and for the reasons discussed in this Order, the 
Commission

[[Page 36290]]

is granting temporary exemptive and other relief that is necessary or 
appropriate in the public interest, and consistent with the protection 
of investors, from compliance with certain of those provisions of the 
Exchange Act with which compliance would otherwise be required as of 
the Effective Date. Generally, section 36 of the Exchange Act 
authorizes the Commission to conditionally or unconditionally exempt, 
by rule, regulation, or order, any person, security, or transaction (or 
any class or classes of persons, securities, or transactions) from any 
provision or provisions of the Exchange Act or any rule or regulation 
thereunder, to the extent such exemption is necessary or appropriate in 
the public interest, and is consistent with the protection of 
investors.\30\ This exemptive authority is not available for certain 
specified provisions of the Exchange Act that relate to SB swaps.\31\ 
Where such exemptive authority is not provided, the Commission is using 
other available authority to provide appropriate temporary relief.
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    \30\ 15 U.S.C. 78mm.
    \31\ See section 36(c) of the Exchange Act, 15 U.S.C. 78mm(c) 
(limiting the Commission's exemptive authority with respect to 
certain provisions of the Exchange Act added by Title VII, such as 
sections 13A, 15F, and 17A(g) through (l) of the Exchange Act, 15 
U.S.C. 78m-1, 78o-10, and 78q-1(g) through (l)). The Commission 
notes that the Securities Act provides for exemptive authority to be 
exercised through rulemaking and, as a result, this Order does not 
provide for any exemptive action with respect to the Securities Act.
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II. Discussion

A. Clearing for Security-Based Swaps

    Section 3C of the Exchange Act, added by section 763(a) of the 
Dodd-Frank Act, generally provides that, if an SB swap is required to 
be cleared, it is unlawful for any person to engage in such SB swap 
unless that person submits such SB swap for clearing to a clearing 
agency that is registered under the Exchange Act or to a clearing 
agency that is exempt from registration under the Exchange Act.\32\ 
Table A below lists each provision of section 3C of the Exchange Act 
and identifies those with which compliance will be required on the 
Effective Date and those with which compliance will be triggered by 
registration of a person as a clearing agency, adoption of final rules, 
or other action by the Commission.\33\ For the provisions with which 
compliance will be required on the Effective Date, Table A notes 
whether temporary relief from compliance is granted. The rationale and 
duration for such relief is explained in the text following the table. 
The table also includes provisions that authorize or direct the 
Commission to take specified action that, once undertaken, may impose 
compliance obligations upon market participants.\34\ Unless otherwise 
noted in the table below, these provisions do not require compliance by 
market participants on the Effective Date.
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    \32\ 15 U.S.C. 78c-3.
    \33\ Id.
    \34\ See supra note 26 and accompanying text.

                          Table A--Clearing for Security-Based Swaps--Compliance Dates
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                                           Compliance date
                              ----------------------------------------
                                                   Upon registration,  Authorizes/directs
  Exchange act section \35\      Upon effective      publication of     commission action      Relief granted
                                 date  (July 16,     final rules, or          \36\
                                      2011)         other commission
                                                       action \37\
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3C(a)(1): In general--         ..................            [check]   ..................  N/A. \38\
 standard for clearing.
3C(a)(2): In general--open     ..................            [check]   ..................  N/A. \39\
 access.
3C(b)(1): Commission review--  ..................  ..................            [check]   N/A.
 Commission-initiated review.
3C(b)(2)(A) and (B):           ..................            [check]   ..................  N/A. \40\
 Commission review--swap
 submission.
3C(b)(2)(C): Commission        ..................  ..................            [check]   N/A.
 review--swap submission.
3C(b)(3): Commission review--  ..................  ..................            [check]   N/A.
 deadline.
3C(b)(4): Commission review--  ..................  ..................            [check]   N/A.
 determination.
3C(b)(5): Commission review--  ..................  ..................            [check]   N/A.
 rules.
3C(c): Stay of clearing        ..................  ..................            [check]   N/A.
 requirement.
3C(d): Prevention of evasion.  ..................  ..................            [check]   N/A.
3C(e)(1): Reporting            ..................  ..................            [check]   Yes. \41\
 transition rules--pre-
 enactment SB swaps.
3C(e)(2): Reporting            ..................  ..................            [check]   N/A. \42\
 transition rules--post-
 enactment SB swaps.
3C(f)(1): Clearing transition  ..................            [check]   ..................  N/A. \43\
 rules.
3C(f)(2): Clearing transition  ..................            [check]   ..................  N/A. \44\
 rules.
3C(g)(1)-(2), (4):             ..................            [check]   ..................  N/A. \45\
 Exceptions--in general;
 option to clear; treatment
 of affiliates.
3C(g)(3)(A): Exceptions --     ..................            [check]   ..................  N/A. \46\
 financial entity definition--
 in general.
3C(g)(3)(B): Exceptions--      ..................  ..................            [check]   N/A.
 financial entity definition--
 exclusion.
3C(g)(5)(A): Exceptions--      ..................            [check]   ..................  N/A.
 election of counterparty--SB
 swaps required to be cleared.
3C(g)(5)(B): Exceptions--                [check]   ..................  ..................  Yes.
 election of counterparty--SB
 swaps not required to be
 cleared.
3C(g)(6): Exceptions--abuse    ..................  ..................            [check]   N/A.
 of exception.
3C(h): Trade execution.......  ..................            [check]   ..................  N/A.
3C(i): Board approval........  ..................            [check]   ..................  N/A. \47\
3C(j)(1)--(2): Designation of  ..................            [check]   ..................  Yes. \48\
 chief compliance officer--in
 general; duties.
3C(j)(3): Designation of       ..................            [check]   ..................  N/A.
 chief compliance officer--
 annual reports.
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    As indicated in Table A, the Commission is providing temporary 
exemptive relief from compliance with section 3C(e)(1) of the Exchange 
Act \49\

[[Page 36291]]

for market participants with reporting obligations under section 13A of 
the Exchange Act.\50\
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    \35\ References to section 3C of the Exchange Act in this table 
are to 15 U.S.C. 78c-3.
    \36\ These provisions do not require compliance by market 
participants on the Effective Date, unless the relevant Commission 
action already has been undertaken. See supra note 26 and 
accompanying text.
    \37\ A number of Title VII provisions expressly (or implicitly) 
apply only to ``registered'' persons. Until the related registration 
processes for such persons have been established by final Commission 
rules, and such persons have become registered pursuant to such 
rules, they will not be required to comply with these Title VII 
provisions. If a Title VII provision requires a rulemaking, such 
provision will not necessarily go into effect on the Effective Date, 
but instead will go into effect ``not less than'' 60 days after 
publication of the related final rule or on July 16, 2011, whichever 
is later. See section 774 of the Dodd-Frank Act, 15 U.S.C. 77b note.
    \38\ Section 3C(b)(5) of the Exchange Act, 15 U.S.C. 78c-
3(b)(5), requires the Commission to ``adopt rules for a clearing 
agency's submission for review * * * of a security-based swap, or a 
group, category, type, or class of [SB swaps], that it seeks to 
accept for clearing.''
    \39\ Section 3C(a)(2) of the Exchange Act, 15 U.S.C. 78c-
3(a)(2), is applicable to ``rules of a clearing agency described in 
[section 3C(a)(1) of the Exchange Act, 15 U.S.C. 78c-3(a)(1)].'' The 
clearing agencies described in section 3C(a)(1) of the Exchange Act, 
15 U.S.C. 78c-3(a)(1), are required to be registered, or exempt from 
registration, and clearing SB swaps subject to the clearing 
requirement. As a result, the requirements of section 3C(a)(2) of 
the Exchange Act, 15 U.S.C. 78c-3, will not be triggered until a 
clearing agency is registered or exempt from registration and also 
is clearing SB swaps that are subject to the clearing requirement. 
Three entities will be deemed registered on the Effective Date. See 
discussion infra part 0. However, no SB swaps will be subject to the 
clearing requirement on the Effective Date.
    \40\ Section 3C(b)(2)(B) of the Exchange Act, 15 U.S.C. 78c-
3(b)(2)(B), states in part that SB swaps ``listed for clearing by a 
clearing agency as of the date of enactment of [section 3C(b) of the 
Exchange Act, 15 U.S.C. 78c-3(b)], shall be considered submitted to 
the Commission.'' However, pursuant to section 3C(b)(3) of the 
Exchange Act, 15 U.S.C. 78c-3(b)(3), a clearing agency may agree to 
extend the time for action required under the section. The relevant 
clearing agencies have agreed to an extension of the deadline for a 
determination by the Commission ``until 90 days after the Commission 
has published final rules governing the process by which SB swaps 
shall be submitted to the Commission for a clearing determination.'' 
Until the rulemaking is completed, therefore, no SB swaps will be 
considered submitted. See letter from Lisa Dunsky, Chicago 
Mercantile Exchange Inc., to Robert Cook, Director, Division of 
Trading and Markets, Commission (Aug. 26, 2010); letter from Thomas 
Book, Eurex Clearing AG, to Robert Cook, Director, Division of 
Trading and Markets, Commission (Aug. 19, 2010); and letter from 
Trabue Bland, regarding ICE Trust U.S. LLC and ICE Clear Europe 
Limited, to Robert Cook, Director, Division of Trading and Markets, 
Commission (Sept. 2, 2010).
    \41\ The Commission has proposed rules pursuant to this 
provision. See infra note 172.
    \42\ The Commission has proposed rules pursuant to this 
provision. See Regulation SBSR--Reporting and Dissemination of 
Security-Based Swap Information, supra note 9 (providing by rule a 
deadline by which post-enactment SB swaps must be reported).
    \43\ Because the exemption from the clearing requirement in this 
provision requires the reporting of SB swaps pursuant to section 
3C(e)(1) of the Exchange Act, 15 U.S.C. 78c-3(e)(1), market 
participants cannot comply with this provision until final rules 
have been adopted pursuant to such section 3C(e)(1).
    \44\ Because the exemption from the clearing requirement in this 
provision requires the reporting of SB swaps pursuant to section 
3C(e)(2) of the Exchange Act, 15 U.S.C. 78c-3(e)(2), market 
participants cannot comply with this provision until final rules 
have been adopted pursuant to such section 3C(e)(2).
    \45\ Because the mandatory clearing requirement is a predicate 
requirement for the end-user clearing exception set forth in section 
3C(g) of the Exchange Act, 15 U.S.C. 78c-3(g), end users will not 
need to rely upon that exception until such time as an SB swap is 
determined by the Commission to be required to be cleared. 
Accordingly, the provisions of sections 3C(g)(1), (2) and (4) of the 
Exchange Act, 15 U.S.C. 78c-3(g)(1), (2) and (4), will not be 
triggered until that time.
    \46\ Since the mandatory clearing requirement is a predicate 
requirement for the end-user clearing exception set forth in section 
3C(g) of the Exchange Act, 15 U.S.C. 78c-3(g), end users will not 
need to rely upon that exception until such time as a SB swap is 
determined by the Commission to be required to be cleared.
    \47\ Since the mandatory clearing requirement is a predicate 
requirement for any exemptions to it, this provision will not be 
trigged until such time as a SB swap is determined by the Commission 
to be required to be cleared.
    \48\ Section 3C(j) of the Exchange Act, 15 U.S.C. 78c-3(j), 
applies only to registered clearing agencies, including clearing 
agencies that provide clearance and settlement services for 
securities other than SB swaps. Accordingly, compliance with such 
requirements will be required on the later of the Effective Date and 
registration of the clearing agency. As noted above, three clearing 
agencies will be deemed registered on the Effective Date, in 
addition to clearing agencies already registered with the 
Commission. See discussion infra part II.H.
    \49\ 15 U.S.C. 78c-3(e)(1).
    \50\ 15 U.S.C. 78m-1.
---------------------------------------------------------------------------

    Section 3C(e)(1) of the Exchange Act requires the Commission to 
adopt rules that provide that ``[s]ecurity-based swaps entered into 
before the date of enactment of this section [(`pre-enactment SB 
swaps')] shall be reported to a registered security-based swap data 
repository or the Commission no later than 180 days after the effective 
date of [section 3C of the Exchange Act].'' \51\ Section 3C of the 
Exchange Act becomes effective on July 16, 2011, and 180 days after 
that date is January 12, 2012.
---------------------------------------------------------------------------

    \51\ 15 U.S.C. 78c-3(e)(1).
---------------------------------------------------------------------------

    The Commission is exercising its authority under section 36 of the 
Exchange Act \52\ to exempt any person from having to report any pre-
enactment SB swaps as set forth in the rules adopted by the Commission 
pursuant to section 3C(e)(1) of the Exchange Act \53\ until six (6) 
months after an SDR that is capable of accepting the asset class of the 
pre-enactment SB swaps is registered by the Commission. The Commission 
finds that such exemption is necessary or appropriate in the public 
interest, and is consistent with the protection of investors, because, 
even after an SDR is registered, market participants will need 
additional time to establish connectivity and develop appropriate 
policies and procedures to be able to deliver information to the 
registered SDR. Therefore, under this exemption, no person will be 
required to report a pre-enactment SB swap in an asset class until six 
(6) months after an SDR that is capable of accepting SB swaps in that 
asset class has registered with the Commission.\54\
---------------------------------------------------------------------------

    \52\ 15 U.S.C. 78mm.
    \53\ 15 U.S.C. 78c-3(e)(1).
    \54\ Similarly, we proposed--in rule 910 of Regulation SBSR--
that no transaction reports for any SB swap executed on or after 
July 21, 2010 would have to be submitted to a registered SDR until 
six months after the date that an SDR registers with the Commission. 
See Regulation SBSR--Reporting and Dissemination of Security-Based 
Swap Information, supra note 9. As we stated in the Regulation SBSR 
proposing release, before reporting to a registered SDR could 
commence, persons with a duty to report would have to know the 
policies and procedures of the SDR and have time to implement 
necessary systems changes. Id.
---------------------------------------------------------------------------

    The Commission also is exercising its authority pursuant to section 
36 of the Exchange Act to grant a temporary exemption from section 
3C(g)(5)(B) of the Exchange Act.\55\ Section 3C(g)(5)(B) of the 
Exchange Act \56\ permits a counterparty to an SB swap that is not 
subject to the mandatory clearing requirement to elect to clear its SB 
swap with an SBS Entity. The Commission finds that it is necessary or 
appropriate in the public interest, and consistent with the protection 
of investors to grant a temporary exemption to SBS Entities from 
section 3C(g)(5)(B) of the Exchange Act \57\ because the Commission 
understands that there are currently no CCPs offering customer clearing 
of SB swaps and additional action by the Commission will be necessary 
to address segregation and other customer protection issues. Therefore, 
under this exemption, section 3C(g)(5)(B) of the Exchange Act \58\ will 
not apply until the earliest compliance date set forth in any of the 
final rules regarding section 3C(b) of the Exchange Act.\59\
---------------------------------------------------------------------------

    \55\ 15 U.S.C. 78c-3(g)(5)(B).
    \56\ Id.
    \57\ Id.
    \58\ Id.
    \59\ 15 U.S.C. 78c-3(b).
---------------------------------------------------------------------------

    In addition, the Commission is exercising its authority pursuant to 
section 36 of the Exchange Act to grant temporary exemptions from 
sections 3C(j)(1) and (2) of the Exchange Act.\60\ Section 3C(j)(1) of 
the Exchange Act \61\ requires that each registered clearing agency 
designate an individual to serve as a chief compliance officer. The 
chief compliance officer will be required to comply with the duties 
specified in

[[Page 36292]]

section 3C(j)(2) of the Exchange Act,\62\ as well as, following 
rulemaking, the reporting provisions of section 3C(j)(3) of the 
Exchange Act.\63\ The Commission finds that it is necessary or 
appropriate in the public interest, and consistent with the protection 
of investors to grant temporary exemptions from sections 3C(j)(1) and 
(2) of the Exchange Act \64\ because there is potential uncertainty 
regarding the duties of a chief compliance officer as required by 
section 3C(j)(2).\65\ Therefore, under this exemption, no person will 
be required to comply with section 3C(j)(1) or (2) of the Exchange Act 
\66\ until the earliest compliance date set forth in any of the final 
rules regarding section 3C(j)(2) of the Exchange Act.\67\
---------------------------------------------------------------------------

    \60\ 15 U.S.C. 78c-3(j)(1) and (2).
    \61\ 15 U.S.C. 78c-3(j)(1).
    \62\ 15 U.S.C. 78c-3(j)(2).
    \63\ 15 U.S.C. 78c-3(j)(2).
    \64\ 15 U.S.C. 78c-3(j)(1) and (2).
    \65\ See Letter from DTCC (April 29, 2011) (stating that 
``[w]hile DTCC fully supports the principle of a clearing agency 
designating a CCO, DTCC believes that some of the duties of the CCO 
specified in Proposed Rule 3Cj-1 require clarification in order to 
avoid an overly broad reading of those duties. DTCC believes that 
some of the duties of the CCO specified in the Proposed Rule go 
beyond those duties traditionally understood to be part of the 
compliance function.'').
    \66\ 15 U.S.C. 78c-3(j)(1) or (2).
    \67\ 15 U.S.C. 78c-3(j)(2).
---------------------------------------------------------------------------

    With respect to the remaining provisions of section 3C of the 
Exchange Act, unless and until the Commission makes a determination 
that an SB swap is required to be cleared, section 3C of the Exchange 
Act, by its terms, does not require any SB swap to be cleared through a 
registered clearing agency or a clearing agency that is exempt from 
registration.\68\ The Commission is required to adopt rules for 
clearing agencies' submissions to the Commission for review of SB swaps 
that clearing agencies seek to accept for clearing.\69\ Thus, no SB 
swaps will be required to be submitted to the Commission for review 
until the compliance date set forth in such rules.
---------------------------------------------------------------------------

    \68\ See supra note 45.
    \69\ See section 3C(b)(5) of the Exchange Act, 15 U.S.C. 78c-
3(b)(5). The Commission published proposed rules regarding the 
submission process. See Process for Submissions for Review of 
Security-Based Swaps for Mandatory Clearing and Notice Filing 
Requirements for Clearing Agencies; Technical Amendments to Rule 
19b-4 and Form 19b-4 Applicable to All Self-Regulatory 
Organizations, supra note 11.
---------------------------------------------------------------------------

Request for Comment
     Are there other provisions of section 3C of the Exchange 
Act for which the Commission should grant temporary exemptive relief? 
Please specify which provisions and provide a detailed explanation of 
why granting such exemption would be necessary or appropriate in the 
public interest, and consistent with the protection of investors.

B. Security-Based Swap Execution Facilities

    Section 3D of the Exchange Act, added by section 763(c) of the 
Dodd-Frank Act, contains the provisions regarding the registration of 
SB SEFs and the core principles with which registered SB SEFs must 
comply.\70\ Table B below lists each provision of section 3D of the 
Exchange Act and identifies those with which compliance will be 
required on the Effective Date and those with which compliance will be 
triggered by registration of a person as a SB SEF, adoption of final 
rules, or other action by the Commission.\71\ For the provisions with 
which compliance will be required on the Effective Date, Table B notes 
whether temporary relief from compliance is granted. The rationale and 
duration for such relief is explained in the text following the table. 
The table also includes provisions that authorize or direct the 
Commission to take specified action that, once undertaken, may impose 
compliance obligations upon market participants. Unless otherwise noted 
in the table below, these provisions do not require compliance by 
market participants on the Effective Date.
---------------------------------------------------------------------------

    \70\ 15 U.S.C. 78c-4.
    \71\ Id.

                       Table B--Security-Based Swap Execution Facilities--Compliance Dates
----------------------------------------------------------------------------------------------------------------
                                           Compliance date
                              ----------------------------------------
                                                   Upon registration,  Authorizes/directs
  Exchange act section \72\      Upon effective      publication of     commission action      Relief granted
                                 date (July 16,      final rules, or          \73\
                                      2011)         other commission
                                                       action \74\
----------------------------------------------------------------------------------------------------------------
3D(a)(1): Registration--in     ..................            [check]   ..................  Yes.\75\
 general.
3D(a)(2): Registration --dual  ..................            [check]   ..................  N/A.
 registration.
3D(b): Trading and trade       ..................            [check]   ..................  N/A.
 processing.
3D(c): Identification of                 [check]   ..................  ..................  Yes.
 facility used to trade SB
 swaps by national securities
 exchanges.
3D(d): Core principles for SB  ..................            [check]   ..................  N/A.\76\
 SEFs--compliance with core
 principles--in general and
 Commission rules and
 information requests.
3D(e): Exemptions............  ..................  ..................            [check]   N/A.
3D(f): Rules.................  ..................  ..................            [check]   N/A.
----------------------------------------------------------------------------------------------------------------

    As indicated in Table B, the Commission finds, pursuant to section 
36 of the Exchange Act,\77\ that it is necessary or appropriate in the 
public interest, and is consistent with the protection of investors, to 
grant

[[Page 36293]]

temporary exemptions from sections 3D(a)(1) and 3D(c) of the Exchange 
Act.\78\ Section 3D(a)(1) of the Exchange Act states that no person may 
operate a facility for the trading or processing of SB swaps unless the 
facility is registered as a SB SEF or as a national securities exchange 
under section 3D of the Exchange Act.\79\ The temporary exemption from 
section 3D(a)(1) would allow an entity that trades SB swaps and is not 
currently registered as a national securities exchange, or that cannot 
yet register as a SB SEF because final rules for such registration have 
not yet been adopted,\80\ to continue trading SB swaps during this 
temporary period without registering as a national securities exchange 
or SB SEF.\81\ The Commission finds that such action is necessary or 
appropriate in the public interest, and consistent with the protection 
of investors, to facilitate the operation of entities that trade SB 
swaps so that these instruments can continue to be traded without the 
need for entities that trade such instruments to register as national 
securities exchanges before the Commission has put in place a 
registration regime for SB SEFs, at which time the entities that 
operate these facilities would be able to choose between registration 
as a national securities exchange and a SB SEF.
---------------------------------------------------------------------------

    \72\ References to section 3D of the Exchange Act in this table 
are to 15 U.S.C. 78c-4.
    \73\ These provisions do not require compliance by market 
participants on the Effective Date, unless the relevant Commission 
action already has been undertaken. See supra note 26 and 
accompanying text.
    \74\ A number of Title VII provisions expressly (or implicitly) 
apply only to ``registered'' persons. Until the related registration 
processes for such persons have been established by final Commission 
rules, and such persons have become registered pursuant to such 
rules, they will not be required to comply with these Title VII 
provisions. If a Title VII provision requires a rulemaking, such 
provision will not necessarily go into effect on the Effective Date, 
but instead will go into effect ``not less than'' 60 days after 
publication of the related final rule or on July 16, 2011, whichever 
is later. See section 774 of the Dodd-Frank Act, 15 U.S.C. 77b note.
    \75\ Rulemaking is necessary to establish the form and manner of 
registration.
    \76\ Section 3D(d)(1) of the Exchange Act, 15 U.S.C. 78c-
4(d)(1), states in part that ``[t]o be registered, and to maintain 
registration, as a security-based swap execution facility, the 
security-based swap execution facility shall comply with * * * any 
requirement that the Commission may impose by rule or regulation.'' 
Accordingly, compliance with such requirements will be required on 
the later of the registration of the SB SEF and the compliance date 
of any Commission rule establishing such requirements under section 
3D of the Exchange Act, 15 U.S.C. 78c-4.
    \77\ 15 U.S.C. 78mm.
    \78\ 15 U.S.C. 78c-4(a)(1) and 78c-4(c).
    \79\ 15 U.S.C. 78c-4(a)(1).
    \80\ Such an entity could, for example, be an alternative 
trading system or a trading platform that is currently not 
registered with the Commission in any capacity. The Commission notes 
that, if such an entity were doing business as an alternative 
trading system, it would continue to be subject to the requirements 
of Regulation ATS (17 CFR 242.300 et seq.) during this temporary 
period.
    \81\ The Commission intends to separately consider temporary 
relief from the exchange registration requirements of Sections 5 and 
6 of the Exchange Act, 15 U.S.C. 78f.
---------------------------------------------------------------------------

    Section 3D(c) of the Exchange Act requires that a national 
securities exchange (to the extent that it also operates an SB SEF and 
uses the same electronic trade execution system for listing and 
executing trades of SB swaps on or through the exchange and the 
facility) identify whether electronic trading of such SB swaps is 
taking place on or through the national securities exchange or the SB 
SEF.\82\ The temporary exemption from section 3D(c) of the Exchange Act 
\83\ would avoid legal uncertainty regarding whether a national 
securities exchange is operating as a SB SEF until further guidance is 
available.
---------------------------------------------------------------------------

    \82\ 15 U.S.C. 78c-4(c).
    \83\ Id.
---------------------------------------------------------------------------

    The temporary exemptions from sections 3D(a)(1) and 3D(c) of the 
Exchange Act \84\ will expire on the earliest compliance date set forth 
in any of the final rules regarding registration of SB SEFs.
---------------------------------------------------------------------------

    \84\ 15 U.S.C. 78c-4(a)(1) and (c).
---------------------------------------------------------------------------

Request for Comment
     Are there other provisions of section 3D of the Exchange 
Act for which the Commission should grant temporary exemptive relief? 
Please provide a detailed explanation of why granting such an exemption 
would be necessary or appropriate in the public interest, and 
consistent with the protection of investors.

C. Segregation of Collateral in Security-Based Swaps

    Section 3E of the Exchange Act, added by section 763(d) of the 
Dodd-Frank Act, regulates the collection and handling of collateral 
that counterparties to SB swaps deliver to secure their obligations 
arising from such SB swaps and sets out certain rights of the 
counterparties who deliver such collateral.\85\ Certain of these 
provisions require rulemaking by the Commission and thus will not 
require compliance on the Effective Date because the Commission will 
not have adopted a segregation rule by that date. Table C below lists 
each provision of section 3E of the Exchange Act and identifies those 
provisions that will require compliance on the Effective Date and those 
with which compliance will be triggered by the adoption of final rules 
or other action by the Commission.\86\ For the provisions with which 
compliance will be required on the Effective Date, Table C notes 
whether temporary relief from compliance is granted. The rationale and 
duration for such relief is explained in the text following the table.
---------------------------------------------------------------------------

    \85\ 15 U.S.C. 78c-5.
    \86\ Section 3E of the Exchange Act, 15 U.S.C. 78c-5, contains 
no provisions that expressly apply only to registered SBSDs.

                 Table C--Segregation of Collateral in Security-Based Swaps-- Compliance Dates.
----------------------------------------------------------------------------------------------------------------
                                               Compliance date
                                     ----------------------------------
                                                             Upon
                                                        registration,     Authorizes/
      Exchange act section \87\        Upon effective   publication of      directs          Relief  granted
                                       date (July 16,  final rules, or     commission
                                           2011)            other         action \88\
                                                          commission
                                                         action \89\
----------------------------------------------------------------------------------------------------------------
3E(a): Registration requirement.....         [check]   ...............  ...............  No.\90\
3E(b): Cleared SB swaps--segregation         [check]   ...............  ...............  No.\91\
 required; commingling prohibited.
3E(c)(1): Exceptions--use of funds..         [check]   ...............  ...............  N/A.
3E(c)(2): Exceptions--Commission             [check]   ...............  ...............  N/A.\92\
 action.
3E(d): Permitted investments........         [check]   ...............  ...............  N/A.
3E(d): Permitted investments--        ...............         [check]   ...............  N/A.
 specified as permitted investments
 by the Commission.
3E(e): Prohibition..................         [check]   ...............  ...............  No.\93\
3E(f): Segregation requirements for          [check]   ...............  ...............  Yes.
 uncleared SB swaps.
3E(g): Bankruptcy...................         [check]   ...............  ...............  N/A.\94\
----------------------------------------------------------------------------------------------------------------

    As indicated in Table C, the Commission is granting temporary

[[Page 36294]]

exemptions from compliance with section 3E(f) of the Exchange Act for 
SBS Entities.\95\ Section 3E(f) of the Exchange Act requires SBS 
Entities to segregate initial margin amounts delivered by their 
counterparties in uncleared SB swap transactions if requested to do so 
by such counterparties.\96\ Such segregation would require the 
establishment of accounts in which to segregate collateral with 
independent third-party custodians.\97\ The establishment of these 
accounts and the adoption of policies and procedures setting forth the 
proper collection and maintenance of collateral will require 
expenditures of resources and time.\98\
---------------------------------------------------------------------------

    \87\ References to section 3E of the Exchange Act in this table 
are to 15 U.S.C. 78c-5.
    \88\ These provisions do not require compliance by market 
participants on the Effective Date, unless the relevant Commission 
action already has been undertaken. See supra note 26 and 
accompanying text.
    \89\ A number of Title VII provisions expressly (or implicitly) 
apply only to ``registered'' persons. Until the related registration 
processes for such persons have been established by final Commission 
rules, and such persons have become registered pursuant to such 
rules, they will not be required to comply with these Title VII 
provisions. If a Title VII provision requires a rulemaking, such 
provision will not necessarily go into effect on the Effective Date, 
but instead will go into effect ``not less than'' 60 days after 
publication of the related final rule or on July16, 2011, whichever 
is later. See section 774 of the Dodd-Frank Act, 15 U.S.C. 77b note.
    \90\ As explained below, the Commission will consider requests 
for relief from compliance with this provision by CCPs on behalf of 
participants.
    \91\ As explained below, the Commission will consider requests 
for relief from compliance with this provision by CCPs on behalf of 
participants.
    \92\ As explained below, the Commission will consider requests 
for relief from CCPs on behalf of participants.
    \93\ As explained below, the Commission will consider requests 
for relief from CCPs on behalf of participants.
    \94\ This section incorporates ``security-based swap'' into 
certain provisions of the Bankruptcy Code, 11 U.S.C. 1 et seq.
    \95\ 15 U.S.C. 78c-5(f).
    \96\ Id.
    \97\ 15 U.S.C. 78c-5(f)(1)(B) and (3).
    \98\ Notwithstanding the exemption granted, market participants 
in uncleared SB swaps may continue to voluntarily negotiate for and 
receive similar protections to those provided in section 3E(f) of 
the Exchange Act, 15 U.S.C. 78c-5(f), until compliance with such 
section 3E(f) is required.
---------------------------------------------------------------------------

    The Commission finds that temporary exemption from section 3E(f) of 
the Exchange Act for SBS Entities is necessary or appropriate in the 
public interest, and is consistent with the protection of investors, 
because it would allow persons to register as an SBS Entity in 
accordance with the applicable registration requirements, once 
established, prior to expending resources to comply with the provisions 
of section 3E(f) of the Exchange Act as discussed above.\99\ In 
addition, the Commission believes the exemption will give SBS Entities 
additional time to establish the necessary accounts and adopt the 
policies and procedures required by section 3E(f) of the Exchange 
Act.\100\ Accordingly, the Commission is providing a temporary 
exemption pursuant to section 36 of the Exchange Act \101\ from section 
3E(f) of the Exchange Act \102\ for SBS Entities. The temporary 
exemption will expire on the date upon which the rules adopted by the 
Commission to register SBSDs and MSBSPs become effective.
---------------------------------------------------------------------------

    \99\ 15 U.S.C. 78c-5(f).
    \100\ Id.
    \101\ 15 U.S.C. 78mm.
    \102\ 15 U.S.C. 78c-5(f)(1), (f)(3), and (f)(4).
---------------------------------------------------------------------------

    Section 3E(a) of the Exchange Act prohibits a person not registered 
as a broker, dealer, or SBSD from undertaking specified actions 
pertaining to the collection of margin associated with clearing an SB 
swap for an SB swap customer through a clearing agency.\103\ Section 
3E(a) of the Exchange Act requires that a person register with the 
Commission as a broker, dealer, or SBSD in order to comply with the 
provision.\104\ Section 3E(b) of the Exchange Act obligates such 
persons to segregate initial margin amounts delivered by their 
counterparties in cleared SB swaps.\105\ Sections 3E(c), (d), and (e) 
of the Exchange Act,\106\ respectively, contain exceptions to section 
3E(b) of the Exchange Act \107\ permitting the commingling of funds for 
convenience in certain circumstances, prescribe certain obligations of 
the United States government in which margin collected may be invested, 
and contain other prohibitions on the use of margin.
---------------------------------------------------------------------------

    \103\ 15 U.S.C. 78c-5(a).
    \104\ Id.
    \105\ 15 U.S.C. 78c-5(b).
    \106\ 15 U.S.C. 78c-5(c), (d), and (e).
    \107\ 15 U.S.C. 78c-5(b).
---------------------------------------------------------------------------

    The Commission is not granting exemptions from the requirements of 
sections 3E(a), (b), (c) or (e) of the Exchange Act.\108\ Based on the 
Commission's experience in granting, and representations made by 
recipients of, previous exemptive orders for CCPs, the Commission 
understands that there are currently no CCPs offering customer clearing 
of SB swaps.\109\ However, for CCPs that are planning to offer customer 
clearing of SB swaps before the compliance date for any of the final 
rules regarding registration of SBS Entities, the Commission will 
consider requests for relief from such CCPs on behalf of their 
participants from sections 3E(a), (b), and (e) of the Exchange Act, as 
appropriate, based on the applicable facts and circumstances.\110\
---------------------------------------------------------------------------

    \108\ 15 U.S.C. 78c-5(a), (b), (c) or (e).
    \109\ The Commission has granted temporary conditional 
exemptions to facilitate CDS clearing in connection with requests on 
behalf of ICE Clear Europe Limited; Eurex Clearing AG; Chicago 
Mercantile Exchange Inc.; ICE Trust US LLC; and LIFFE Administration 
and Management and LCH.Clearnet Ltd. See infra note 222 and 
accompanying text.
    \110\ 15 U.S.C. 78c-5(a), (b), and (e).
---------------------------------------------------------------------------

Request for Comment
     Under the stock-broker bankruptcy provisions of the 
Bankruptcy Code,\111\ the description of which persons have the status 
as a customer of a broker-dealer with respect to their posted margin 
includes persons whose margin is required to be segregated. Given that 
reference to a segregation requirement, is any temporary exemption from 
section 3E(f) of the Exchange Act appropriate?
---------------------------------------------------------------------------

    \111\ See generally 11 U.S.C. 741 et seq.
---------------------------------------------------------------------------

     Please explain the steps that must be taken for an SBSD to 
segregate initial margin for uncleared SB swap transactions. How long 
would it take to put in place such an arrangement with an independent 
third-party custodian? Would any existing documentation between the 
parties need to be amended?
     Are there other provisions of section 3E of the Exchange 
Act for which the Commission should consider granting a temporary 
exemption? Please specify the provision or provisions for which 
exemptions should be granted and provide a detailed explanation of why 
granting such exemptions would be necessary or appropriate in the 
public interest, and consistent with the protection of investors.

D. Security-Based Swap Antifraud Provisions

    Section 9(j) of the Exchange Act,\112\ added by 763(g) of the Dodd-
Frank Act, includes a provision regarding the prevention of fraud, 
manipulation, and deception in connection with SB swaps. As indicated 
in Table D below, section 9(j) of the Exchange Act requires 
rulemaking.\113\
---------------------------------------------------------------------------

    \112\ 15 U.S.C. 78i(j).
    \113\ Id. In the context of Section 774 of the Dodd-Frank Act, 
which addresses provisions that require rulemaking, we believe 
Section 9(j) requires rulemaking.

[[Page 36295]]

                       Table D--Security-Based Swap Antifraud Provisions--Compliance Dates
----------------------------------------------------------------------------------------------------------------
                                           Compliance date
                              ----------------------------------------
                                                   Upon registration,  Authorizes/directs
  Exchange act section \114\     Upon effective      publication of     commission action      Relief granted
                                 date  (July 16,     final rules, or          \115\
                                      2011)         other commission
                                                      action \116\
----------------------------------------------------------------------------------------------------------------
9(j): Amends Exchange Act to   ..................            [check]   ..................  N/A.
 make unlawful fraud,
 manipulation and deception
 in connection with SB swaps
 directs the Commission to
 engage in rulemaking to
 define and prescribe means
 reasonably designed to
 prevent, such fraud,
 manipulation and deception.
----------------------------------------------------------------------------------------------------------------

    The Commission notes that, as of the Effective Date, SB swaps will 
be securities.\117\ Thus, once the relevant provisions of the Dodd-
Frank Act take effect,\118\ persons effecting transactions in, or 
engaged in acts, practices, and courses of business involving, SB swaps 
will be subject to the Commission's rules and regulations that define 
and prescribe acts and practices involving securities that are 
manipulative, deceptive, fraudulent, or otherwise unlawful for purposes 
of the general antifraud and anti-manipulation provisions of the 
Federal securities laws, including sections 9(a) and 10(b) \119\ of the 
Exchange Act, rule 10b-5 thereunder \120\ (and the prohibitions against 
insider trading), section 15(c) of the Exchange Act,\121\ and section 
17(a) of the Securities Act,\122\ among others.
---------------------------------------------------------------------------

    \114\ References to section 9 of the Exchange Act in this table 
are to 15 U.S.C. 78i.
    \115\ These provisions do not require compliance by market 
participants on the Effective Date, unless the relevant Commission 
action already has been undertaken. See supra note 26 and 
accompanying text.
    \116\ A number of Title VII provisions expressly (or implicitly) 
apply only to ``registered'' persons. Until the related registration 
processes for such persons have been established by final Commission 
rules, and such persons have become registered pursuant to such 
rules, they will not be required to comply with these Title VII 
provisions. If a Title VII provision requires a rulemaking, such 
provision will not necessarily go into effect on the Effective Date, 
but instead will go into effect ``not less than'' 60 days after 
publication of the related final rule or on July 16, 2011, whichever 
is later. See section 774 of the Dodd-Frank Act, 15 U.S.C. 77b note.
    \117\ See discussion infra. Section 761(a)(2) of the Dodd-Frank 
Act amends the definition of ``security'' in section 3(a)(10) of the 
Exchange Act, 15 U.S.C. 78c(a)(10), to include SB swaps. Section 
768(a)(1) of the Dodd-Frank Act amends the Securities Act to include 
SB swaps in the definition of ``security'' in section 2(a)(1) 
thereof, 15 U.S.C. 77b(a)(1).
    \118\ See section 774 of the Dodd-Frank Act.
    \119\ 15 U.S.C. 78i(a) and 78j(b).
    \120\ 17 CFR 240.10b-5.
    \121\ 15 U.S.C. 78o(c).
    \122\ 15 U.S.C. 77q(a).
---------------------------------------------------------------------------

E. Position Limits for Security-Based Swaps.

    Section 10B of the Exchange Act, added by section 763(h) of the 
Dodd-Frank Act, provides that the Commission ``shall, by rule or 
regulation, as necessary or appropriate in the public interest or for 
the protection of investors'' establish limits on the size of positions 
in any SB swap that may be held by any person.\123\ As indicated in 
Table E below, the provisions of section 10B authorize and direct the 
Commission to undertake certain actions pertaining to position 
limits.\124\ These provisions will become effective on the Effective 
Date, but, by their plain language, pertain to Commission action. 
Accordingly, these provisions do not require compliance by market 
participants on the Effective Date.
---------------------------------------------------------------------------

    \123\ 15 U.S.C. 78j-2.
    \124\ Id.

                       Table E--Position Limits for Security-Based Swaps--Compliance Dates
----------------------------------------------------------------------------------------------------------------
                                                 Compliance date
                                    ----------------------------------------
                                                         Upon registration,
     Exchange act section \125\        Upon effective      publication of        Authorizes/directs       Relief
                                       date  (July 16,     final rules, or     commission action \126\   granted
                                            2011)         other commission
                                                               action
----------------------------------------------------------------------------------------------------------------
10B(a): Position limits............  ..................  ..................  [check]...................  N/A.
10B(b): Exemptions.................  ..................  ..................  [check]...................  N/A.
10B(c): SRO rules..................  ..................  ..................  [check]...................  N/A.
10B(d): Large trader reporting.....  ..................  ..................  [check]...................  N/A.
----------------------------------------------------------------------------------------------------------------

F. Reporting of Security-Based Swaps
---------------------------------------------------------------------------

    \125\ References to section 10B of the Exchange Act in this 
table are to 15 U.S.C. 78j-2.
    \126\ These provisions do not require compliance by market 
participants on the Effective Date, unless the relevant Commission 
action already has been undertaken. See supra note 26 and 
accompanying text.
---------------------------------------------------------------------------

i. Public Availability of Security-Based Swap Data
    Section 13(m) of the Exchange Act, added by section 763(i) of the 
Dodd-Frank Act, includes provisions regarding the reporting of SB swap 
transactions and the public dissemination of such reported 
information.\127\ As set forth in Table F-1 below, certain of the 
statutory provisions of section 13(m) of the Exchange Act require 
Commission rulemaking or other action or are only applicable once there 
are registered SDRs to accept SB swap transaction data.\128\ The table 
also includes provisions that authorize or direct the Commission to 
take specified action that, once undertaken, may impose compliance 
obligations upon market participants.\129\ Unless otherwise noted in 
the table below, these provisions do not require compliance by market 
participants on the Effective Date. The remaining provisions of section 
13(m) of the Exchange Act will require compliance on the Effective Date 
but do not impose any self-executing duties or

[[Page 36296]]

requirements upon market participants.\130\ Accordingly, the Commission 
is not granting temporary relief from compliance with any provisions of 
section 13(m) of the Exchange Act.
---------------------------------------------------------------------------

    \127\ 15 U.S.C. 78m(m).
    \128\ Id.
    \129\ See supra note 26 and accompanying text.
    \130\ Id.

                   Table F--Public Availability of Security-Based Swap Data--Compliance Dates
----------------------------------------------------------------------------------------------------------------
                                               Compliance Date
                                     ----------------------------------
                                                             Upon
                                                        registration,     Authorizes/
     Exchange Act Section \131\        Upon effective   publication of      directs           Relief granted
                                      date  (July 16,  final rules, or     commission
                                           2011)            other         action \132\
                                                          commission
                                                         action \133\
----------------------------------------------------------------------------------------------------------------
13(m)(1)(A): In general--definition          [check]   ...............  ...............  N/A.\134\
 of real-time public reporting.
13(m)(1)(B): In general--purpose....         [check]   ...............  ...............  N/A.\135\
13(m)(1)(C): In general--general      ...............  ...............         [check]   N/A.
 rule.
13(m)(1)(D): In general--registered   ...............  ...............         [check]   N/A.
 entities and public reporting.
13(m)(1)(E): In general--rulemaking   ...............  ...............         [check]   N/A.
 required.
13(m)(1)(F): In general--timeliness   ...............         [check]   ...............  N/A.
 of reporting.
13(m)(1)(G): In general--reporting    ...............         [check]   ...............  N/A.
 of swaps to registered SDRs.
13(m)(1)(H): In general--             ...............         [check]   ...............  N/A.
 registration of clearing agencies.
13(m)(2): Semiannual and annual       ...............  ...............         [check]   N/A.
 public reporting of aggregate SB
 swap data.
----------------------------------------------------------------------------------------------------------------

ii. Security-Based Swap Data Repositories.
    Section 13(n) of the Exchange Act, added by section 763(i) of the 
Dodd-Frank Act, provides for the registration, operation, and 
governance of SDRs.\136\ Certain of the statutory provisions in section 
13(n) of the Exchange Act either require a rulemaking or other 
Commission action or apply only to SDRs once registered, rather than to 
SDRs generally.\137\ Compliance with those provisions will not be 
required on the Effective Date because the Commission will not have 
adopted final rules (including rules regarding the manner and form of 
registration) by that date. The table also includes provisions that 
authorize or direct the Commission to take specified action that, once 
undertaken, may impose compliance obligations upon market 
participants.\138\ Unless otherwise noted in the table below, these 
provisions do not require compliance by market participants on the 
Effective Date. Table F-2 below lists each provision of section 13(n) 
of the Exchange Act and identifies those provisions with which 
compliance will be required on the Effective Date and those with which 
compliance will be triggered by registration of a person as an SDR or 
by adoption of final rules by the Commission.\139\ For the provisions 
with which compliance will be required on the Effective Date, Table F-2 
notes whether temporary relief from compliance is granted. The 
rationale and duration for such relief is explained in the text 
following the table.
---------------------------------------------------------------------------

    \131\ References to section 13(m) of the Exchange Act in this 
table are to 15 U.S.C. 78m(m).
    \132\ These provisions do not require compliance by market 
participants on the Effective Date, unless the relevant Commission 
action already has been undertaken. See supra note 26 and 
accompanying text.
    \133\ A number of Title VII provisions expressly (or implicitly) 
apply only to ``registered'' persons. Until the related registration 
processes for such persons have been established by final Commission 
rules, and such persons have become registered pursuant to such 
rules, they will not be required to comply with these Title VII 
provisions. If a Title VII provision requires a rulemaking, such 
provision will not necessarily go into effect on the Effective Date, 
but instead will go into effect ``not less than'' 60 days after 
publication of the related final rule or on July 16, 2011, whichever 
is later. See section 774 of the Dodd-Frank Act, 15 U.S.C. 77b note.
    \134\ This section defines ``real-time public reporting'' for 
the purposes of section 13(m) of the Exchange Act, 15 U.S.C. 78m(m).
    \135\ This section sets forth the purpose of section 13(m) of 
the Exchange Act, 15 U.S.C. 78m(m).
    \136\ 15 U.S.C. 78m(n).
    \137\ Id.
    \138\ See supra note 26 and accompanying text.
    \139\ Id.

                       Table F-2--Security-Based Swap Data Repositories--Compliance Dates
----------------------------------------------------------------------------------------------------------------
                                               Compliance date
                                     ----------------------------------
                                                             Upon
                                                        registration,     Authorizes/
      Exchange act section\140\        Upon effective   publication of      directs           Relief granted
                                      date  (July 16,  final rules, or     commission
                                           2011)            other         action\141\
                                                          commission
                                                         action\142\
----------------------------------------------------------------------------------------------------------------
13(n)(1): Registration requirement..  ...............         [check]   ...............  N/A.\143\
13(n)(2): Inspection and examination  ...............         [check]   ...............  N/A.
13(n)(3)(A): Compliance with core     ...............         [check]   ...............  N/A.
 principles.
13(n)(3)(B): Compliance with core     ...............         [check]   ...............  N/A.
 principles--reasonable discretion
 of SDR.
13(n)(4)(A): Standard setting--data   ...............  ...............         [check]   N/A.
 identification.
13(n)(4)(B): Standard setting--data   ...............  ...............         [check]   N/A.
 collection and maintenance.
13(n)(4)(C): Standard setting--       ...............  ...............         [check]   N/A.
 comparability.
13(n)(5)(A), (B),\144\(C), (D)(ii),   ...............         [check]   ...............  N/A.
 and (E): Duties.
13(n)(5)(D)(i), (F), (G), and (H):           [check]   ...............  ...............  Yes.
 Duties.
13(n)(6)(A)--(B): Designation of      ...............         [check]   ...............  N/A.\145\
 chief compliance officer--in
 general; duties.
13(n)(6)(C): Designation of chief     ...............         [check]   ...............  N/A.
 compliance officer--annual reports.

[[Page 36297]]

 
13(n)(7)(A): Core principles                 [check]   ...............  ...............  Yes.
 applicable to SDRs--market access
 to services and data.
13(n)(7)(B): Core principles                 [check]   ...............  ...............  Yes.
 applicable to SDRs--governance
 arrangements.
13(n)(7)(C): Core principles                 [check]   ...............  ...............  Yes.
 applicable to SDRs--Conflicts of
 interest.
13(n)(7)(D): Core principles          ...............  ...............         [check]   N/A.
 applicable to SDRs--additional
 duties developed by Commission.
13(n)(8): Required registration for   ...............         [check]   ...............  N/A.
 SDRs.
13(n)(9): Rules.....................  ...............  ...............         [check]   N/A.
----------------------------------------------------------------------------------------------------------------

    As indicated in Table F-2, the Commission finds, pursuant to 
section 36 of the Exchange Act,\146\ that it is necessary or 
appropriate in the public interest, and is consistent with the 
protection of investors, to grant temporary exemptions from the 
provisions of sections 13(n)(5)(D)(i), 13(n)(5)(F), 13(n)(5)(G), 
13(n)(5)(H), and 13(n)(7)(A) through (C) of the Exchange Act\147\ that 
would otherwise impose obligations on SDRs as of the Effective Date. 
These temporary exemptions will allow SDRs additional time to develop 
the policies, procedures, and systems necessary to comply with the 
requirements of section 13(n) of the Exchange Act.\148\
---------------------------------------------------------------------------

    \140\ References to section 13(n) of the Exchange Act in this 
table are to 15 U.S.C. 78m(n).
    \141\ These provisions do not require compliance by market 
participants on the Effective Date, unless the relevant Commission 
action already has been undertaken. See supra note 26 and 
accompanying text.
    \142\ A number of Title VII provisions expressly (or implicitly) 
apply only to ``registered'' persons. Until the related registration 
processes for such persons have been established by final Commission 
rules, and such persons have become registered pursuant to such 
rules, they will not be required to comply with these Title VII 
provisions. If a Title VII provision requires a rulemaking, such 
provision will not necessarily go into effect on the Effective Date, 
but instead will go into effect ``not less than'' 60 days after 
publication of the related final rule or on July 16, 2011, whichever 
is later. See section 774 of the Dodd-Frank Act, 15 U.S.C. 77b note.
    \143\ In order to provide for orderly registration of SDRs, the 
Commission will need to propose rules regarding the form and manner 
of registration with the Commission as an SDR.
    \144\ The data for which an SDR needs to confirm the accuracy 
first needs to be prescribed by the Commission pursuant to section 
13(n)(5)(A).
    \145\ Section 13(n)(6) of the Exchange Act, 15 U.S.C. 78m(n)(6), 
requires each SDR to designate a chief compliance officer who shall 
perform certain specified duties and prepare annual reports. 
Although the provision does not explicitly limit its application to 
registered SDRs, within the context of Title VII and section 13(n) 
of the Exchange Act, 15 U.S.C. 78m(n), which addresses registered 
SDRs, the Commission believes that Congress intended these 
requirements to apply only to SDRs that are registered or are 
required to register with the Commission.
    \146\ 15 U.S.C. 78mm.
    \147\ 15 U.S.C. 78m(n)(5)(D)(i), (n)(5)(F), (n)(5)(G), 
(n)(5)(H), and (n)(7)(A) through (C).
    \148\ 15 U.S.C. 78m(n).
---------------------------------------------------------------------------

    The Commission finds that granting a temporary exemption from 
compliance with the requirements of section 13(n)(5)(D)(i) of the 
Exchange Act \149\ is necessary or appropriate in the public interest, 
and is consistent with the protection of investors. Section 
13(n)(5)(D)(i) of the Exchange Act requires an SDR to provide direct 
electronic access to the Commission or any designee of the 
Commission.\150\ The Commission believes that this provision will 
require investment of significant time and resources by an SDR to 
implement the technology to be used to enable this direct electronic 
access and to coordinate with the Commission to establish its direct 
electronic access to data maintained by the SDR. The form and manner in 
which an SDR will provide direct electronic access may vary, depending 
in part on the amount of data stored at the SDR and how the SDR 
maintains that data. In addition, this requirement would obligate SDRs 
to make changes to existing systems and practices, or develop entirely 
new systems and practices, all of which would require significant 
investment of time and resources. The Commission believes it would be 
inefficient for an SDR to expend time and resources to develop the 
technological systems necessary to provide the direct electronic access 
required by section 13(n)(5)(D)(i) of the Exchange Act prior to knowing 
the capabilities the Commission rules will require these systems to 
have.\151\
---------------------------------------------------------------------------

    \149\ 15 U.S.C. 78m(n)(5)(D)(i).
    \150\ Id.
    \151\ Id.
---------------------------------------------------------------------------

    Section 13(n)(5)(F) of the Exchange Act requires and SDR to 
maintain the privacy of any and all SB swap transaction information 
that the SDR receives from an SBSD, counterparty, or other registered 
entity.\152\ The Commission finds that granting a temporary exemption 
from compliance with section 13(n)(5)(F) of the Exchange Act \153\ is 
necessary or appropriate in the public interest because it will provide 
SDRs additional time to establish and implement robust policies and 
procedures to protect the privacy of data reported to them.
---------------------------------------------------------------------------

    \152\ 15 U.S.C. 78m(n)(5)(G).
    \153\ Id.
---------------------------------------------------------------------------

    Section 13(n)(5)(G) of the Exchange Act requires that SDRs, on a 
confidential basis, and after notifying the Commission of the request, 
make available all data obtained by the SDR, including individual 
counterparty trade and position data, to certain enumerated 
entities.\154\ Section 13(n)(5)(H) of the Exchange Act \155\ requires 
that an SDR, before sharing information with any of the entities listed 
in section 13(n)(5)(G) of the Exchange Act,\156\ (i) receive a written 
agreement from such entity that the entity will abide by certain 
confidentiality provisions relating to the information on SB swap 
transactions that is provided and (ii) each such entity shall agree to 
indemnify the SDR and the Commission for any expenses arising from 
litigation relating to the information provided. The Commission finds 
that granting a temporary exemption from compliance with the 
notification and indemnification requirements of sections 13(n)(5)(G) 
and 13(n)(5)(H) of the Exchange Act,\157\ is necessary or appropriate 
in the public interest, and is consistent with the protection of 
investors, because it would enable relevant authorities to continue

[[Page 36298]]

to have access to data maintained by SDRs necessary to fulfill their 
respective mandates while the Commission considers various issues 
related to these requirements.
---------------------------------------------------------------------------

    \154\ Id.
    \155\ 15 U.S.C. 78m(n)(5)(G).
    \156\ 15 U.S.C. 78m(n)(5)(H).
    \157\ 15 U.S.C. 78m(n)(5)(G) and 78m(n)(5)(H).
---------------------------------------------------------------------------

    The Commission also finds that it is necessary or appropriate in 
the public interest, and is consistent with the protection of 
investors, to grant temporary exemptions from section 13(n)(7)(B) of 
the Exchange Act's \158\ requirement that SDRs establish transparent 
governance arrangements for certain enumerated reasons. Delaying 
compliance with this requirement until the Commission's final rules 
setting forth the full panoply of duties applicable to SDRs have been 
adopted would avoid possible complications and unnecessary expenditures 
of time and resources by an SDR. It also would avoid unnecessary 
disruption of an SDR's governance structure, which could adversely 
impact the SDR's operations and could result in unnecessary 
expenditures of time and resources by the SDR. In addition, the 
Commission finds that it is necessary or appropriate in the public 
interest, and is consistent with the protection of investors, to grant 
temporary relief from compliance with (i) section 13(n)(7)(A) of the 
Exchange Act,\159\ which prohibits an SDR from adopting any rule or 
taking any action that results in any unreasonable restraint of trade 
or impose any material anticompetitive burden on the trading, clearing, 
or reporting of transactions and (ii) section 13(n)(7)(C) of the 
Exchange Act,\160\ which requires that SDRs establish rules to minimize 
conflicts of interest and establish a process for resolving conflicts 
of interest. The Commission believes that, until SDRs can register with 
the Commission, they should be given additional time to establish and 
implement the policies and procedures required by these provisions. In 
addition, providing additional time through a temporary exemption for 
SDRs to examine current business practices and any past issues they may 
have dealt with will likely result in more robust policies and 
procedures that will better protect market participants.
---------------------------------------------------------------------------

    \158\ 15 U.S.C. 78m(n)(7)(B).
    \159\ 15 U.S.C. 78m(n)(7)(A).
    \160\ 15 U.S.C. 78m(n)(7)(C).
---------------------------------------------------------------------------

    The temporary exemption granted by the Commission from compliance 
with the requirements of sections 13(n)(5)(D)(i), 13(n)(5)(F), 
13(n)(5)(G), 13(n)(5)(H), 13(n)(7)(A), 13(n)(7)(B), and 13(n)(7)(C) of 
the Exchange Act \161\ will expire on the earlier of (1) the date the 
Commission grants registration to the SDR and (2) the earliest 
compliance date set forth in any of the final rules regarding the 
registration of SDRs.
---------------------------------------------------------------------------

    \161\ 15 U.S.C. 78m(n)(5)(D)(i), (n)(5)(G), (n)(5)(H)(ii), 
(n)(7)(A), (n)(7)(B), and (n)(7)(C).
---------------------------------------------------------------------------

    Request for Comment:
     Are there other provisions in addition to those identified 
above for which compliance is required as of the Effective Date but 
exemptive relief is or is not appropriate? If so, please specify those 
provisions and provide a detailed explanation of why granting such an 
exemption is or is not necessary or appropriate in the public interest, 
or consistent with the protection of investors.
iii. Reporting and Recordkeeping for Security-Based Swaps
    Section 13A of the Exchange Act, added by section 766(a) of the 
Dodd-Frank Act, generally sets forth reporting requirements for SB 
swaps that are not cleared.\162\ As set forth in Table F-3 below, 
certain of the statutory provisions of section 13A of the Exchange Act 
require Commission rulemaking or other action or are only applicable if 
a registered SDR will accept reports.\163\ The table also includes 
provisions that authorize or direct the Commission to take specified 
action that, once undertaken, may impose compliance obligations upon 
market participants.\164\ Unless otherwise noted in the table below, 
these provisions do not require compliance by market participants on 
the Effective Date. The remaining provisions of section 13A of the 
Exchange Act will become effective on the Effective Date but do not 
impose any duties or requirements upon market participants.\165\ 
Accordingly, the Commission is not granting temporary relief from 
compliance with any provisions of section 13A of the Exchange Act.\166\
---------------------------------------------------------------------------

    \162\ 15 U.S.C. 78m-1.
    \163\ Id.
    \164\ See supra note 26 and accompanying text.
    \165\ Id.
    \166\ Id.

                Table F-3--Reporting and Recordkeeping for Security-Based Swaps--Compliance Dates
----------------------------------------------------------------------------------------------------------------
                                           Compliance Date
                              ----------------------------------------
                                                   Upon registration,  Authorizes/directs
  Exchange act section \167\     Upon effective      publication of     commission action      Relief granted
                                 date  (July 16,     final rules, or          \168\
                                      2011)         other commission
                                                      action \169\
----------------------------------------------------------------------------------------------------------------
13A(a)(1)(A): Required         ..................            [check]   ..................  N/A.\170\
 reporting of SB swaps not
 accepted by a clearing
 agency or derivatives
 clearing organization--in
 general--reporting to SDRs.
13A(a)(1)(B): Required         ..................            [check]   ..................  N/A.\171\
 reporting of SB swaps not
 accepted by a clearing
 agency or derivatives
 clearing organization--in
 general--reporting to the
 Commission.
13A(a)(2)(A): Required         ..................            [check]   ..................  N/A.\172\
 reporting of SB swaps not
 accepted by a clearing
 agency or derivatives
 clearing organization--
 transition rule pre-
 enactment SB swaps.
13A(a)(2)(B): Required         ..................  ..................            [check]   N/A.
 reporting of SB swaps not
 accepted by a clearing
 agency or derivatives
 clearing organization--
 rulemaking for transition
 rule pre-enactment SB swaps.
13A(a)(2)(C): Required                   [check]   ..................  ..................  N/A.\173\
 reporting of SB swaps not
 accepted by a clearing
 agency or derivatives
 clearing organization--
 effective date.
13A(a)(3): Reporting           ..................            [check]   ..................  N/A.
 obligations \174\.
13A(b): Duties of certain      ..................            [check]   ..................  N/A.\175\
 individuals.

[[Page 36299]]

 
13A(c)(1): Requirements--      ..................            [check]   ..................  N/A.
 provision of reports on SB
 swaps to the Commission.
13A(c)(2): Requirements--      ..................            [check]   ..................  N/A.
 recordkeeping requirement.
13A(d): Identical data.......  ..................  ..................            [check]   N/A.
----------------------------------------------------------------------------------------------------------------

     
---------------------------------------------------------------------------

    \167\ References to section 13A of the Exchange Act in this 
table are to 15 U.S.C. 78m-1.
    \168\ These provisions do not require compliance by market 
participants on the Effective Date, unless the relevant Commission 
action already has been undertaken. See supra note 26 and 
accompanying text.
    \169\ A number of Title VII provisions expressly (or implicitly) 
apply only to ``registered'' persons. Until the related registration 
processes for such persons have been established by final Commission 
rules, and such persons have become registered pursuant to such 
rules, they will not be required to comply with these Title VII 
provisions. If a Title VII provision requires a rulemaking, such 
provision will not necessarily go into effect on the Effective Date, 
but instead will go into effect ``not less than'' 60 days after 
publication of the related final rule or on July 16, 2011, whichever 
is later. See section 774 of the Dodd-Frank Act, 15 U.S.C. 77b note.
    \170\ Section 13A(a)(1) of the Exchange Act, 15 U.S.C. 78m-
1(a)(1), states in part that ``[e]ach security-based swap that is 
not accepted for clearing by any clearing agency or derivatives 
clearing organization shall be reported to (A) a security-based swap 
data repository described in section 13(n) [of the Exchange Act, 15 
U.S.C. 78m(n)].'' Because the SDRs described in section 13(n) of the 
Exchange Act, 15 U.S.C. 78m(n), are required by section 13(n)(1) of 
the Exchange Act, 15 U.S.C. 78m(n)(1), to be registered, the 
Commission believes this requirement is not triggered until an SDR 
is registered.
    \171\ Section 13A(a)(1)(B) of the Exchange Act, 15 U.S.C. 78m-
1(a)(1)(B), provides for an alternative method of reporting if there 
is no SDR that will accept a report; however, the time frame for 
that reporting requirement must be established by Commission rule.
    \172\ Section 13A(a)(2) of the Exchange Act, 15 U.S.C. 78m-
1(a)(2), required the Commission to promulgate an interim final rule 
regarding reporting of pre-enactment SB swaps and states in part 
that each such pre-enactment SB swap, the terms of which have not 
expired as of such date, ``shall be reported to a registered 
security-based swap data repository or the Commission by a date that 
is not later than (i) 30 days after issuance of the interim final 
rule; or (ii) such other period as the Commission determines to be 
appropriate.'' The effective date of the interim final rule was 
October 20, 2010. However, pursuant to the interim final temporary 
rule issued by the Commission on reporting of pre-enactment SB swap 
data, specified counterparties to such pre-enactment SB swaps are 
required to (1) report certain information to a registered SDR or 
the Commission by the compliance date established in the reporting 
rules required under sections 3C(e) and 13A(a)(1) of the Exchange 
Act, 15 U.S.C. 78c-3(e) and 78m-1(a)(1), or within 60 days after a 
registered SDR commences operations to receive and maintain data 
concerning such SB swap, whichever occurs first, and (2) report to 
the Commission any information relating to such pre-enactment SB 
swaps upon request of the Commission. No SDR is registered yet to 
accept SB swap data and the reporting rules under section 3C(e) have 
not yet been adopted. In addition, the Commission stated, in an 
interpretative note to the interim final rule, its belief that it is 
necessary for a counterparty, that may be required to report 
transactions under the interim final rule, to retain all information 
relating to the terms of pre-enactment security-based swaps in order 
for that counterparty to be able to comply with the reporting 
requirements of the interim final rule. See Reporting of Security-
Based Swap Transaction Data, 75 FR 64643 (Oct. 20, 2010). The 
reporting rules under sections 3C(e) and 13A(a)(1) of the Exchange 
Act, 15 U.S.C. 78c-3(e) and 78m-1(a)(1), are included in a separate 
release. See Regulation SBSR--Reporting and Dissemination of 
Security-Based Swap Information, supra note 9.
    \173\ This section provides that the effective date of section 
13A of the Exchange Act, 15 U.S.C. 78m-1, is the date of enactment 
of section 13A of the Exchange Act, 15 U.S.C. 78m-1. However, 
compliance will not be required until applicable rules and 
regulations regarding registered SDRs are in place.
    \174\ See supra note 170.
    \175\ This section defines the individuals and entities to which 
the requirements of section 13A(c) of the Exchange Act, 15 U.S.C. 
78m-1(c), apply.
---------------------------------------------------------------------------

Request for Comment
     Are there provisions of section 13A of the Exchange Act 
for which the Commission should grant temporary exemptive relief? 
Please specify which provisions and provide a detailed explanation of 
why granting such exemption would be necessary or appropriate in the 
public interest, and consistent with the protection of investors.

G. Registration and Regulation of Security-Based Swap Dealers and Major 
Security-Based Swap Participants

    Section 15F of the Exchange Act, added by section 764(a) of the 
Dodd-Frank Act, establishes requirements for registration and 
comprehensive oversight of SBS Entities.\176\ Many of the provisions of 
section 15F of the Exchange Act either require rulemaking or other 
action by the Commission \177\ or apply only to SBS Entities once 
registered, rather than to SBS Entities generally.\178\ Those 
provisions that either require rulemaking or other action by the 
Commission or apply only to registered SBS Entities will not require 
compliance on the Effective Date because the Commission will not have 
adopted final rules (including rules regarding the manner and form of 
registration) or taken other required action by that date. Table G 
below lists each provision of section 15F of the Exchange Act \179\ and 
identifies those provisions with which compliance will be required on 
the Effective Date and those with which compliance will be triggered by 
registration of SBS Entities or by the adoption of final rules or other 
action by the Commission. The table also includes provisions that 
authorize or direct the Commission to take specified action that, once 
undertaken, may impose compliance obligations upon market 
participants.\180\ Unless otherwise noted in the table below, these 
provisions do not require compliance by market participants on the 
Effective Date. For the provisions with which compliance will be 
required on the Effective Date, Table G notes whether the Commission is 
providing temporary relief from compliance. The rationale and duration 
for such relief is explained in the text following the table.
---------------------------------------------------------------------------

    \176\ 15 U.S.C. 78o-10.
    \177\ See, e.g., section 15F(b)(2) of the Exchange Act, 15 
U.S.C. 78o-10(b)(2) (providing that the registration application of 
SBS Entities ``shall be made in such form and manner as prescribed 
by the Commission'').
    \178\ See, e.g., section 15F(h)(1) of the Exchange Act, 15 
U.S.C. 78o-10(h)(1) (providing that registered SBS Entities shall 
conform to certain prescribed business conduct standards); section 
15F(h)(6) of the Exchange Act, 15 U.S.C. 78o-10(h)(6) (directing the 
Commission to prescribe rules to implement the business conduct 
requirements of subsection (h) of such section 15F applicable to 
registered SBS Entities).
    \179\ 15 U.S.C. 78o-10.
    \180\ See supra note 26 and accompanying text.

[[Page 36300]]

Table G--Registration and Regulation of Security-Based Swap Dealers and Major Security-Based Swap Participants--
                                                Compliance Dates
----------------------------------------------------------------------------------------------------------------
                                           Compliance date
                              ----------------------------------------
                                                   Upon registration,  Authorizes/directs/
  Exchange act section \181\     Upon effective      publication of     limits commission      Relief granted
                                 date (July 16,      final rules, or      action \182\
                                      2011)         other commission
                                                      action \183\
----------------------------------------------------------------------------------------------------------------
15F(a): Registration of SBSDs  ..................            [check]   ..................  N/A.\184\
 and MSBSPs.
15F(b)(1)-(3): Requirements--  ..................            [check]   ..................  N/A.
 in general; contents;
 expiration.
15F(b)(4): Requirements--      ..................  ..................            [check]   N/A.
 rules.
15F(b)(5): Requirements--      ..................  ..................            [check]   N/A.
 transition.
15F(b)(6): Requirements--                [check]   ..................  ..................  Yes
 statutory disqualification.
15F(c): Dual registration--    ..................            [check]   ..................  N/A.
 SBS Entities.
15F(d): Rulemaking...........  ..................  ..................            [check]   N/A.
15F(e)(1): Capital and margin  ..................            [check]   ..................  N/A.\185\
 requirements--in general.
15F(e)(2): Capital and margin  ..................  ..................            [check]   N/A.\186\
 requirements--rules.
15F(e)(3)(A): Capital and      ..................  ..................            [check]   N/A.
 margin requirements.
15F(e)(3)(B)(i): Capital and   ..................  ..................      [check] \187\   N/A.
 margin requirements--rule of
 construction; in general.
15F(e)(3)(B)(ii): Capital and            [check]   ..................  ..................  N/A.\188\
 margin requirements--rule of
 construction; futures
 commission merchants and
 other dealers.
15F(e)(3)(C), (D): Capital     ..................  ..................            [check]   N/A.\189\
 and margin requirements--
 rule of construction; margin
 requirements and;
 comparability.
15F(f)(1): Reporting and       ..................            [check]   ..................  N/A.\190\
 recordkeeping--in general.
15F(f)(2): Reporting and       ..................  ..................            [check]   N/A.
 recordkeeping--rules.
15F(g)(1)-(4): Daily trading   ..................            [check]   ..................  N/A.\191\
 records--in general;
 information requirements;
 counterparty records; audit
 trail.
15F(g)(5): Daily trading       ..................  ..................            [check]   N/A.
 records--rules.
15F(h)(1): Business conduct    ..................            [check]   ..................  N/A.\192\
 standards.
15F(h)(2): Business conduct    ..................            [check]   ..................  N/A.\193\
 standards--responsibilities
 with respect to special
 entities.
15F(h)(3): Business conduct    ..................  ..................            [check]   N/A.\194\
 standards--business conduct
 requirements.
15F(h)(4): Business conduct    ..................            [check]   ..................  N/A.\195\
 standards--special
 requirements for SBSDs
 acting as advisors.
15F(h)(5)(A): Business         ..................            [check]   ..................  N/A.\196\
 conduct standards--special
 requirements for SBSDs as
 counterparties to special
 entities.
15F(h)(5)(B): Business         ..................  ..................            [check]   N/A.
 conduct standards--
 Commission authority.
15F(h)(6): Business conduct    ..................  ..................            [check]   N/A.
 standards--rules.
15F(h)(7): Business conduct              [check]   ..................  ..................  N/A.\197\
 standards--applicability.
15F(i)(1): Documentation       ..................            [check]   ..................  N/A.\198\
 standards--in general.
15F(i)(2): Documentation       ..................  ..................            [check]   N/A.
 standards--rules.
15F(j)(1)-(6): Duties--        ..................            [check]   ..................  N/A.
 monitoring of trading; risk
 management procedures;
 disclosure of general
 information; ability to
 obtain information;
 conflicts of interest;
 antitrust considerations.
15F(j)(7): Duties--rules.....  ..................  ..................            [check]   N/A.
15F(k)(1)-(2): Designation of  ..................            [check]   ..................  N/A.\199\
 chief compliance officer--in
 general; duties.
15F(k)(3): Designation of      ..................            [check]   ..................  N/A.
 chief compliance officer--
 annual reports.
15F(l): Enforcement and        ..................  ..................      [check] \201\   N/A.
 administrative proceeding
 authority.\200\
----------------------------------------------------------------------------------------------------------------

     
---------------------------------------------------------------------------

    \181\ References to section 15F of the Exchange Act in this 
table are to 15 U.S.C. 78o-10.
    \182\ These provisions do not require compliance by market 
participants on the Effective Date, unless the relevant Commission 
action already has been undertaken. See supra note 26 and 
accompanying text.
    \183\ A number of Title VII provisions expressly (or implicitly) 
apply only to ``registered'' persons. Until the related registration 
processes for such persons have been established by final Commission 
rules, and such persons have become registered pursuant to such 
rules, they will not be required to comply with these Title VII 
provisions. If a Title VII provision requires a rulemaking, such 
provision will not necessarily go into effect on the Effective Date, 
but instead will go into effect ``not less than'' 60 days after 
publication of the related final rule or on July16, 2011, whichever 
is later. See section 774 of the Dodd-Frank Act, 15 U.S.C. 77b note.
    \184\ Section 15F(b)(2)(A) of the Exchange Act, 15 U.S.C. 78o-
10(b)(2)(A), requires SBS Entities to register as such ``in such 
form and manner as prescribed by the Commission * * * ''
    \185\ Section 15F(e)(1) of the Exchange Act, 15 U.S.C. 78o-
10(e)(1), states in part that registered SBS Entities for which 
there is not a prudential regulator ``shall meet such minimum 
capital requirements and minimum initial and variation and margin 
requirements as the Commission shall by rule or regulation prescribe 
* * * '' Accordingly, compliance with such requirements will be 
required on the later of the registration of a person as an SBS 
Entity and the compliance date of any Commission rule establishing 
these capital and margin requirements.
    \186\ For SBS Entities for which there is a prudential 
regulator, the prudential regulator shall consult with the 
Commission and the CFTC in establishing capital and margin 
requirements.
    \187\ Section 15F(e)(3)(B)(i) of the Exchange Act, 15 U.S.C. 
78o-10(e)(3)(B)(i), provides that nothing in section 15F of the 
Exchange Act, 15 U.S.C. 78o-10, shall limit the authority of the 
Commission or the CFTC to set financial responsibility rules for SBS 
Entities over which they have jurisdiction, respectively.
    \188\ Section 15F(e)(3)(B)(ii) of the Exchange Act, 15 U.S.C. 
78o-10(e)(3)(B)(ii), provides that a futures commission merchant, 
introducing broker, broker, or dealer shall maintain sufficient 
capital to comply with the stricter of any applicable capital 
requirements to which such futures commission merchant, introducing 
broker, broker, or dealer is subject to under section 15(f) of the 
Exchange Act, 15 U.S.C. 78o-10(f), or the Commodity Exchange Act.
    \189\ Section 15F(e)(3)(C) of the Exchange Act, 15 U.S.C. 78o-
10(e)(3)(C), provides, inter alia, that prudential regulators, the 
Commission, and the CFTC shall consult and ``to the maximum extent 
practicable'' establish and maintain comparable minimum capital and 
margin requirements.
    \190\ Section 15F(f)(1) of the Exchange Act, 15 U.S.C. 78o-
10(f)(1), states in part that registered SBS Entities ``shall make 
such reports as are required by the Commission, by rule or 
regulation, regarding the transactions and positions and financial 
condition of the registered security-based swap dealer or major 
security-based swap participant'' and ``shall keep books and records 
* * * in such form and manner and for such period as may be 
prescribed by the Commission by rule or regulation * * * '' 
Accordingly, compliance with such reporting and recordkeeping 
requirements will be required on the later of the registration of a 
person as an SBS Entity and the compliance date of any Commission 
rule establishing these reporting and recordkeeping requirements.
    \191\ Section 15F(g)(1) of the Exchange Act, 15 U.S.C. 78o-
10(g)(1), states in part that each registered SBS Entity shall 
maintain daily trading records and recorded communications ``for 
such period as may be required by the Commission by rule or 
regulation.'' In addition, section 15F(g)(2) of the Exchange Act, 15 
U.S.C. 78o-10(g)(2) provides that the daily trading records shall 
include ``such information as the Commission shall require by rule 
or regulation.'' Accordingly, compliance with such recordkeeping 
requirements will be required on the later of the registration of a 
person as an SBS Entity and the compliance date of the Commission 
rule establishing these recordkeeping requirements.
    \192\ Section 15F(h)(6) of the Exchange Act, 15 U.S.C. 78o-
10(h)(6), directs the Commission to ``prescribe rules under this 
subsection [(h) of the Exchange Act, 15 U.S.C. 78o-10(h),] governing 
business conduct standards.'' Accordingly, business conduct 
standards pursuant to section 15F(h) of the Exchange Act, 15 U.S.C. 
78o-10(h), will be established by rule and compliance will be 
required on the compliance date of the Commission rule establishing 
these business conduct standards. See also infra note 195.
    \193\ Id.
    \194\ Id.
    \195\ Id. The Commission notes, however, that, as of the 
Effective Date, SB swaps will be securities and will be subject to 
the Commission's authority under sections 9(a) and 10(b) of the 
Exchange Act, 15 U.S.C. 78i(a) and 78j(b), including rule 10b-5 
thereunder, 17 CFR 240.10b-5, section 15(c) of the Exchange Act, 15 
U.S.C. 78o(c), and section 17(a) of the Securities Act, 15 U.S.C. 
77q(a), among others. See discussion supra note 117 and accompanying 
text.
    \196\ See supra note 192.
    \197\ This section limits the applicability of section 15F(h) of 
the Exchange Act, 15 U.S.C. 78o-10(h).
    \198\ Section 15F(i) of the Exchange Act, 15 U.S.C. 78o-10(i), 
states in part that each registered SBS Entity ``shall conform with 
such standards as may be prescribed by the Commission, by rule or 
regulation, that relate to timely and accurate confirmation, 
processing, netting, documentation, and valuation of all security-
based swaps.'' Accordingly, compliance with such requirements will 
be required on the later of the registration of a person as an SBS 
Entity and the compliance date of the Commission rule establishing 
these documentation standards.
    \199\ Section 15F(k) of the Exchange Act, 15 U.S.C. 78o-10(k), 
requires each SBS Entity to designate a chief compliance officer who 
shall perform certain specified duties and prepare annual reports. 
Although the provision does not explicitly limit its application to 
a registered SBS Entity, within the context of Title VII and section 
15F of the Exchange Act, 15 U.S.C. 78o-10, which regulates 
registered SBS Entities, the Commission believes that Congress 
intended these requirements to apply only to SBS Entities that are 
registered or are required to register with the Commission.
    \200\ As discussed above, provisions in this column that require 
Commission action will be effective on the Effective Date. In 
particular, if (after the Effective Date) the Commission has issued 
an order pursuant to section 15F(l)(3) of the Exchange Act, 15 
U.S.C. 78o-10(l)(3), then, section 15F(l)(4) of the Exchange Act, 15 
U.S.C. 78o-10(l)(4), will be applicable and will require Commission 
consent for persons subject to such an order to be associated with a 
SBS Entity.
    \201\ In addition to Commission authority, section 15F(l) of the 
Exchange Act, 15 U.S.C. 78o-10(l), also provides enforcement 
authority to prudential regulators for SBS Entities for which they 
are the prudential regulator.

---------------------------------------------------------------------------

[[Page 36301]]

    As indicated in Table G, the Commission is providing a temporary 
exception for SBS Entities from compliance with section 15F(b)(6) of 
the Exchange Act.\202\ Section 15F(b)(6) of the Exchange Act prohibits 
an SBS Entity from permitting an associated person who is subject to a 
statutory disqualification, as defined in section 3(a)(39) of the 
Exchange Act,\203\ to effect or be involved in effecting SB swaps on 
its behalf if the SBS Entity knew or should have known of the statutory 
disqualification.\204\ Section 15F(b)(6) expressly authorizes the 
Commission to establish exceptions to this provision by rule, 
regulation, or order.\205\ This authority is similar to authority 
provided to the Commission with respect to the ``traditional'' 
securities industry, i.e., the industry regulated under the Exchange 
Act prior to the Dodd-Frank Act amendments. This existing Exchange Act 
authority permits self-regulatory organizations (``SROs''), subject to 
Commission review, to allow, among other things, a person subject to a 
statutory disqualification to associate with a broker-dealer.\206\
---------------------------------------------------------------------------

    \202\ 15 U.S.C. 78o-10(b)(6).
    \203\ 15 U.S.C. 78c(a)(39).
    \204\ 15 U.S.C. 78o-10(b)(6).
    \205\ Id.
    \206\ When such a person seeks admission to or continuance in 
membership or association, the Commission and the SRO have the 
opportunity to give special review to such person and to restrict or 
prevent entry into, or continuance in, the business where 
appropriate in the public interest and for the protection of 
investors. See Senate Comm. on Banking, Housing, and Urban Affairs, 
The Securities Act Amendments of 1989, S. Rep. No. 101-105, at 39 
(1989); Provision for Notices by Self-Regulatory Organizations of 
Stays of Such Actions; Appeals; and Admissions to Membership or 
Association of Disqualified Persons, 42 FR 36409 (Jul. 14, 1977) 
(adopting rule 19h-1 under the Exchange Act, 17 CFR 240.19h-1, and 
providing rules for process of filing notices, content of notices, 
and Commission determination).
---------------------------------------------------------------------------

    Similarly, Commission rule 193 (Applications by Barred Individuals 
for Consent to Associate) provides a process by which persons that are 
not regulated by a SRO (e.g., an investment adviser, an investment 
company, or a transfer agent) can seek to reenter the securities 
industry despite previously being barred by the Commission.\207\
---------------------------------------------------------------------------

    \207\ 17 CFR 201.193.
---------------------------------------------------------------------------

    The Commission intends to separately consider issues relating to 
how an associated person of an SBS Entity subject to a statutory 
disqualification may be involved in the SB swap business of the SBS 
Entity. The Commission believes that existing business relationships 
and market activity may be unnecessarily disrupted if market 
participants were required to comply with section 15F(b)(6) of the 
Exchange Act \208\ before the Commission considered, through notice and 
comment rulemaking, whether to adopt a procedure for potential 
modifications of the effect of statutory disqualifications under Title 
VII for SBS Entities and what any such procedure would require. The 
Commission, therefore, by this Order and pursuant to the authority 
granted in section 15F(b)(6) of the Exchange Act, is providing a 
temporary and limited exception for SBS Entities from the application 
of the prohibition in section 15F(b)(6) of the Exchange Act.\209\ 
Specifically, persons subject to a statutory disqualification (as 
defined in section 3(a)(39) of the Exchange Act \210\) who are, as of 
the Effective Date, currently associated with an SBS Entity and who 
effect or are involved in effecting SB swaps on behalf of such SBS 
Entity may continue to be associated with any SBS Entity until the date 
upon which rules adopted by the Commission to register SBS Entities 
become effective.
---------------------------------------------------------------------------

    \208\ 15 U.S.C. 78o-10(b)(6).
    \209\ Id.
    \210\ 15 U.S.C. 78c(a)(39).
---------------------------------------------------------------------------

    Request for Comment:
     Are there certain persons subject to statutory 
disqualification who should not be permitted to remain associated with 
an SBS Entity during the time period of the exception, for example, 
based upon the nature of the underlying conduct or sanction that 
resulted in the disqualification?
     Should there be any differentiation in relief from section 
15F(b)(6) of the Exchange Act based upon the nature of the person, 
e.g., a natural person or an entity? If so, how and why?
     Are there persons who are not currently associated with an 
SBS Entity but who should be able to associate with

[[Page 36302]]

such entities notwithstanding their statutory disqualification until 
such time as a procedural rule defining the application of section 
15F(b)(6) of the Exchange Act is in place?

H. Registration of Clearing Agencies for Security-Based Swaps

    Section 17A of the Exchange Act, amended by section 763(b) of the 
Dodd-Frank Act,\211\ requires registration of persons performing the 
functions of a clearing agency with respect to SB swaps. Many of the 
provisions of section 17A of the Exchange Act either require rulemaking 
or other action by the Commission or apply only to clearing agencies 
once registered. Those provisions that either require rulemaking or 
other action by the Commission or apply only to registered clearing 
agencies will not require compliance on the Effective Date. Table H 
below lists each provision of section 17A of the Exchange Act \212\ 
that was added by the Dodd-Frank Act and identifies those provisions 
with which compliance will be required on the Effective Date and those 
with which compliance will be triggered by registration of clearing 
agencies or by the adoption of final rules or other action by the 
Commission. The table also includes provisions that authorize or direct 
the Commission to take specified action that, once undertaken, may 
impose compliance obligations upon market participants.\213\ Unless 
otherwise noted in the table below, these provisions do not require 
compliance by market participants on the Effective Date. For the 
provisions with which compliance will be required on the Effective 
Date, Table H notes whether temporary relief from compliance is 
granted.
---------------------------------------------------------------------------

    \211\ 15 U.S.C. 78q-1.
    \212\ Id.
    \213\ See supra note 26 and accompanying text.

              Table H--Registration of Clearing Agencies for Security-Based Swaps--Compliance Dates
----------------------------------------------------------------------------------------------------------------
                                               Compliance Date
                                     ----------------------------------
                                                             Upon
                                                        registration,     Authorizes/
     Exchange Act Section \214\        Upon effective   publication of      directs           Relief granted
                                      date  (July 16,  final rules, or     commission
                                           2011)            other         action \215\
                                                          commission
                                                         action \216\
----------------------------------------------------------------------------------------------------------------
17A(g): Registration requirement....  ...............         [check]   ...............  N/A \217\
17A(h): Voluntary registration......         [check]   ...............  ...............  No.\218\
17A(i): Standards for clearing        ...............         [check]   ...............  N/A.\219\
 agencies clearing SB swap
 transactions.
17A(j): Rules.......................  ...............  ...............         [check]   N/A.
17A(k): Exceptions..................  ...............  ...............         [check]   N/A.
17A(l)(1)-(2): Existing depository           [check]   ...............  ...............  No.\220\
 institutions and derivative
 clearing organizations--in general;
 conversion of depository
 institutions.
17A(l)(3): Existing depository        ...............  ...............         [check]   N/A.\221\
 institutions and derivative
 clearing organizations--sharing of
 information.
17A(m): Modification of core          ...............  ...............         [check]   N/A.
 principles.
----------------------------------------------------------------------------------------------------------------

    As of July 16, 2011, ICE Trust U.S. LLC, ICE Clear Europe Limited 
and the Chicago Mercantile Exchange Inc., which are operating pursuant 
to exemptive authority granted by the Commission to clear CDS,\222\ 
will be

[[Page 36303]]

deemed registered with the Commission solely for the purpose of 
clearing SB swaps pursuant to the Dodd-Frank Act.\223\
---------------------------------------------------------------------------

    \214\ References to section 17A of the Exchange Act in this 
table are to 15 U.S.C. 78q-1.
    \215\ These provisions do not require compliance by market 
participants on the Effective Date, unless the relevant Commission 
action already has been undertaken. See supra note 26 and 
accompanying text.
    \216\ A number of Title VII provisions expressly (or implicitly) 
apply only to ``registered'' persons. Until the related registration 
processes for such persons have been established by final Commission 
rules, and such persons have become registered pursuant to such 
rules, they will not be required to comply with these Title VII 
provisions. If a Title VII provision requires a rulemaking, such 
provision will not necessarily go into effect on the Effective Date, 
but instead will go into effect ``not less than'' 60 days after 
publication of the related final rule or on July16, 2011, whichever 
is later. See section 774 of the Dodd-Frank Act, 15 U.S.C. 77b note.
    \217\ Section 17A(g) of the Exchange Act, 15 U.S.C. 78q-1(g), 
will not require compliance as of the Effective Date because 
sections 17A(i) and (j) of the Exchange Act, 15 U.S.C. 78q-1(i) and 
(j), require rulemaking regarding registration of clearing agencies 
that clear SB swap transactions. The Commission notes that the 
general clearing agency registration requirement under section 
17A(b) of the Exchange Act, 15 U.S.C. 78q-1(b), also will apply to 
SB swap clearing agencies when the provisions amending the 
definitions of ``security'' to include SB swaps become effective on 
the Effective Date. See supra note 17. As noted above, however, the 
Commission intends to provide temporary relief from certain 
provisions of the Exchange Act that would otherwise be applicable to 
SB swaps. See supra note 22 and accompanying text. This includes 
temporary relief from the clearing agency registration requirement 
to certain persons with respect to SB swaps. Specifically, persons 
that currently provide important post-trade, non-CCP clearance and 
settlement processing services for SB swaps may be required to 
register as a clearing agency as of the Effective Date (including 
trade matching, collateral management, and tear-up/compression 
services). Temporary relief for such persons would provide time for 
the Commission to consider comments from industry on the issue of 
registration of these non-CCP clearance and settlement service 
providers, and to consider possible alternatives to full 
registration as clearing agencies. See infra note 223 and 
accompanying text.
    \218\ Section 17A(h) provides that a person that clears trades 
that are not required to be cleared may nevertheless register as a 
clearing agency with the Commission. It is a voluntary provision.
    \219\ Rules adopted under section 17A(i) of the Exchange Act, 15 
U.S.C. 78q-1(i), apply only to registered clearing agencies. 
Accordingly, compliance with such requirements will be required on 
the later of the registration of the clearing agency and the 
compliance date of the Commission rule establishing these clearing 
agency standards.
    \220\ Section 17A(l)(1)-(2) provides for the deemed registration 
of certain clearing agencies. See infra note 223.
    \221\ Section 17A(l)(3) of the Exchange Act, 15 U.S.C. 78q-l(3), 
provides that the CFTC shall share certain information with the 
Commission regarding derivatives clearing organizations deemed to be 
registered.
    \222\ The Commission has authorized five entities to clear 
credit default swaps. See Exchange Act Release Nos. 60372 (July 23, 
2009), 74 FR 37748 (July 29, 2009), 61973 (Apr. 23, 2010), 75 FR 
22656 (Apr. 29, 2010) and 63389 (Nov. 29, 2010), 75 FR 75520 (Dec. 
3, 2010) (CDS clearing by ICE Clear Europe Limited); 60373 (July 23, 
2009), 74 FR 37740 (July 29, 2009), 61975 (Apr. 23, 2010), 75 FR 
22641 (Apr. 29, 2010) and 63390 (Nov. 29, 2010), 75 FR 75518 (Dec. 
3, 2010), (CDS clearing by Eurex Clearing AG); 59578 (Mar. 13, 
2009), 74 FR 11781 (Mar. 19, 2009), 61164 (Dec. 14, 2009), 74 FR 
67258 (Dec. 18, 2009), 61803 (Mar. 30, 2010), 75 FR 17181 (Apr. 5, 
2010) and 63388 (Nov. 29, 2010), 75 FR 75522 (Dec. 3, 2010) (CDS 
clearing by Chicago Mercantile Exchange Inc.); 59527 (Mar. 6, 2009), 
74 FR 10791 (Mar. 12, 2009), 61119 (Dec. 4, 2009), 74 FR 65554 (Dec. 
10, 2009), 61662 (Mar. 5, 2010), 75 FR 11589 (Mar. 11, 2010) and 
63387 (Nov. 29, 2010) 75 FR 75502 (Dec. 3, 2010) (CDS clearing by 
ICE Trust US LLC); 59164 (Dec. 24, 2008), 74 FR 139 (Jan. 2, 2009) 
(temporary CDS clearing by LIFFE Administration and Management and 
LCH.Clearnet Ltd.) (collectively, ``CDS Clearing Exemption 
Orders''). LIFFE Administration and Management and LCH.Clearnet Ltd. 
allowed their order to lapse without seeking renewal.
     There are currently four clearing agencies authorized to 
provide CCP services for SB swap transactions pursuant to these 
orders. Eurex Clearing AG will not be deemed registered as a 
clearing agency.
    \223\ See section 17A(l) of the Exchange Act, 15 U.S.C. 78q-
1(1). To be deemed registered, a clearing agency must be a 
depository institution that cleared swaps as a multilateral clearing 
organization or a derivative clearing organization that cleared 
swaps pursuant to an exemption from registration as a clearing 
agency. Id. Section 17A(l) of the Exchange Act, 15 U.S.C. 78q-1(l), 
provides that certain SB swap clearing agencies will be deemed 
registered for the purpose of clearing SB swaps (``Deemed Registered 
Provision''). Under this Deemed Registered Provision, a deemed 
registered clearing agency will be required to comply with all 
requirements of the Exchange Act, and the rules thereunder, 
applicable to registered clearing agencies, including, for example, 
the obligation to file proposed rule changes under section 19(b) of 
the Exchange Act, 15 U.S.C. 78s(b). After the Deemed Registered 
Provision becomes effective on the Effective Date, see supra Table 
H, certain clearing agencies will no longer need an exemption from 
registration as a clearing agency under section 17A of the Exchange 
Act, 15 U.S.C. 78q-1, in order to clear SB swaps. As noted above, 
ICE Trust U.S. LLC, ICE Clear Europe Limited, and the Chicago 
Mercantile Exchange Inc., are eligible for the Deemed Registered 
Provision based on the specified criteria in section 17A(l) of the 
Exchange Act, 15 U.S.C. 78q-1(l). In addition, to facilitate the 
operation of clearing agencies as CCPs for eligible CDS, the 
Commission also adopted interim temporary exemptions (``Temporary 
Exemptions'') from certain provisions of the Securities Act, the 
Exchange Act and the Trust Indenture Act, 15 U.S.C. 77aaa et seq., 
subject to certain conditions. See Temporary Exemptions for Eligible 
Credit Default Swaps to Facilitate Operation of Central 
Counterparties to Clear and Settle Credit Default Swaps, 74 FR 3967 
(Jan. 22, 2009). The Commission extended the expiration date of the 
final temporary rules until July 16, 2011. See Extension of 
Temporary Exemptions for Eligible Credit Default Swaps to Facilitate 
Operation of Central Counterparties to Clear and Settle Credit 
Default Swaps, 75 FR 72660 (Nov. 26, 2010). The Commission is 
considering extending the Temporary Exemptions. Once extended, the 
Temporary Exemptions would continue to be available to those 
clearing agencies that are deemed registered. The Commission also 
has proposed exemptions that would allow clearing agencies in their 
function as CCPs to offer or sell SB swaps subject to certain 
conditions. These proposed exemptions, if adopted, would replace the 
Temporary Exemptions and would extend to all SB swaps. See Proposed 
Cleared SB Swap Exemptions, supra note 19.
---------------------------------------------------------------------------

    By virtue of the broad definition of the term ``clearing agency'' 
in section 3(a)(23)(A) of the Exchange Act,\224\ certain entities that 
provide non-CCP clearing agency services with respect to SB swaps would 
be required to register as a clearing agency under section 17A(b) of 
the Exchange Act as of the Effective Date.\225\ This issue arises for 
these entities as of the Effective Date, and not before, because prior 
to such time SB swaps (other than in limited circumstances) were not 
deemed to be securities. Non-CCP clearing agency services include such 
services such as trade matching,\226\ collateral management,\227\ and 
tear-up/compression services,\228\ which are important post-trade 
processing services for the SB swap markets (``non-CCP clearing agency 
services''). On March 2, 2011, the Commission proposed exempting 
certain market participants from the definition of clearing agency as 
part of its clearing agency standards release.\229\ As noted above, the 
Commission also intends to separately consider temporary relief from 
section 17A(b) of the Exchange Act \230\ for persons that provide non-
CCP clearing agency services in connection with SB swaps so that those 
persons are not required to be registered as a clearing agency on the 
Effective Date.\231\
---------------------------------------------------------------------------

    \224\ 15 U.S.C. 78c(a)(23)(A).
    \225\ 15 U.S.C. 78q-1(b). As discussed above, the new 
registration requirement for SB swap clearing agencies in section 
17A(g) of the Exchange Act, 15 U.S.C. 78q-1(g), will not apply until 
at least 60 days after rulemaking is completed.
    \226\ See Clearing Agency Standards for Operation and 
Governance, supra note 10 (discussing trade matching services).
    \227\ Id. (discussing collateral management activities).
    \228\ Id. (discussing tear-up and compression services).
    \229\ Id. at 14494-96 (proposing, under section 36 of the 
Exchange Act, 15 U.S.C. 78mm, an exemption to certain persons from 
the definition of clearing agency in section 3(a)(23) of the 
Exchange Act, 15 U.S.C. 78c(a)(23), and asking questions regarding 
whether there are other persons for whom the Commission should grant 
a similar exemption).
    \230\ 15 U.S.C. 78q-1(b).
    \231\ See supra note 217.
---------------------------------------------------------------------------

    Request for Comment:
     Are there any provisions of section 17A of the Exchange 
Act for which the Commission should grant temporary exemptive relief? 
Please specify which provisions and provide a detailed explanation of 
why granting such exemption would be necessary or appropriate in the 
public interest, and consistent with the protection of investors.

I. Other Amendments to the Federal Securities Laws Relating to 
Security-Based Swaps.

    Table I lists the remaining statutory provisions of Title VII of 
the Dodd-Frank Act that have not been addressed above.

     Table I--Other Amendments to Federal Securities Laws Relating to Security-Based Swaps--Compliance Dates
----------------------------------------------------------------------------------------------------------------
                                           Compliance date
                              ----------------------------------------
                                                   Upon registration,  Authorizes/directs/
     Exchange act section        Upon effective      publication of     limits commission      Relief granted
                                 date  (July 16,     final rules, or      action \232\
                                      2011)         other commission
                                                      action \233\
----------------------------------------------------------------------------------------------------------------
761(a): Amendments to section            [check]   ..................  ..................  No.\236\
 3(a) of the Exchange Act
 \234\--Definitions (other
 than the definition of
 substantial position in
 section 3(a)(67)(B)).\235\
761(a): Amendments to section  ..................  ..................            [check]   N/A.
 3(a) of the Exchange Act
 \237\--Definition of
 substantial position in
 section 3(a)(67)(B).\238\
761(b): Authority to further   ..................  ..................            [check]   N/A.
 define terms.
762(a): Repeals section 206B             [check]   ..................  ..................  No.
 and 206C of the Gramm-Leach-
 Bliley Act (``GLBA'').\239\
762(b): Section 206A of GLBA:            [check]   ..................  ..................  No.
 conforming amendment. \240\.
762(c): Sections 2A and 17 of            [check]   ..................  ..................  No.
 the Securities Act:
 conforming amendments. \241\
762(d): Sections 3A, 9, 10,              [check]   ..................  ..................  No.
 15, 16, 20, and 21A of the
 Exchange Act: conforming
 amendments. \242\
763(e): Section 6(l) of the              [check]   ..................  ..................  Yes.
 Exchange Act: trading in SB
 swaps. \243\

[[Page 36304]]

 
763(f): Amends sections                  [check]   ..................  ..................  No.
 9(b)(1)-(3) of the Exchange
 Act to add ``security-based
 swaps''. \244\
764(b): Savings clause         ..................  ..................      [check] \245\   N/A.
 regarding Federal banking
 agency authority.
765: Rulemaking on conflicts   ..................  ..................            [check]   N/A.
 of interest.
766(b): Sections 13(d)(1) and            [check]   ..................  ..................  No.
 (g)(1) of the Exchange Act:
 beneficial ownership
 reporting. \246\
766(c): Section 13(f)(1) of              [check]   ..................  ..................  No.
 the Exchange Act: reports by
 institutional investment
 managers. \247\
766(d): Sections 15(b)(4)(C)             [check]   ..................  ..................  No.
 and (b)(4)(F) of the
 Exchange Act: administrative
 proceeding authority. \248\
766(e): Section 13(o) of the   ..................      [check] \250\   ..................  No.
 Exchange Act: SB swap
 beneficial ownership. \249\
767: Section 28(a) of the                [check]   ..................  ..................  N/A.\252\
 Exchange Act: state gaming
 and bucket shop laws. \251\
768: Sections 2(a) and 5(d)              [check]   ..................  ..................  No.\254\
 of the Securities Act:
 amendments to the Securities
 Act; treatment of SB
 swaps.\253\
769: Conforming definition in            [check]   ..................  ..................  No.
 section 2(a)(54) of the
 Investment Company Act of
 1940. \255\
770: Conforming definition in            [check]   ..................  ..................  No.
 section 202(a)(29) of the
 Investment Advisers Act of
 1940. \256\
771: Other authority of other            [check]   ..................  ..................  N/A.
 agencies.
772(a): Section 36(c) of the             [check]   ..................  ..................  N/A.
 Exchange Act: jurisdiction--
 in general. \257\
772(b): Section 30(c) of the             [check]   ..................  ..................  N/A.
 Securities Act:
 jurisdiction--rule of
 construction. \258\
773: Section 21B(f) of the               [check]   ..................  ..................  N/A.
 Exchange Act: civil
 penalties \259\.
774: Effective date..........            [check]   ..................  ..................  N/A.
----------------------------------------------------------------------------------------------------------------

    As indicated in Table I, the Commission finds, pursuant to section 
36 of the Exchange Act,\260\ that it is necessary or appropriate in the 
public interest, and is consistent with the protection of investors, to 
grant a temporary conditional exemption from section 6(l) of the 
Exchange Act to certain persons.\261\ Section 6(l) of the Exchange Act 
\262\ would make it unlawful, as of the Effective Date, for any person 
to effect a transaction in an SB swap with or for a person that is not 
an eligible contract participant,\263\ unless such transaction is 
effected on a national securities exchange registered pursuant to 
section 6(b) of the Exchange Act.\264\
---------------------------------------------------------------------------

    \232\ These provisions do not require compliance by market 
participants on the Effective Date, unless the relevant Commission 
action already has been undertaken. See supra note 26 and 
accompanying text.
    \233\ A number of Title VII provisions expressly (or implicitly) 
apply only to ``registered'' persons. Until the related registration 
processes for such persons have been established by final Commission 
rules, and such persons have become registered pursuant to such 
rules, they will not be required to comply with these Title VII 
provisions. If a Title VII provision requires a rulemaking, such 
provision will not necessarily go into effect on the Effective Date, 
but instead will go into effect ``not less than'' 60 days after 
publication of the related final rule or on July16, 2011, whichever 
is later. See section 774 of the Dodd-Frank Act, 15 U.S.C. 77b note.
    \234\ 15 U.S.C. 78c(a).
    \235\ 15 U.S.C. 78c(a)(67)(B).
    \236\ See supra note 22 and accompanying text.
    \237\ 15 U.S.C. 78c(a).
    \238\ 15 U.S.C. 78c(a)(67)(B).
    \239\ 15 U.S.C. 78c note. This amendment, along with the 
amendments in sections 762(b), (c), and (d) of the Dodd-Frank Act, 
repeals GLBA, Securities Act, and Exchange Act provisions (as added 
by the Commodity Futures Modernization Act of 2000) limiting the 
Commission's authority over security-based swap agreements (as 
defined in section 206B of the GLBA, 15 U.S.C. 78c note).
    \240\ Id.
    \241\ 15 U.S.C. 77b-1 and 77q.
    \242\ 15 U.S.C. 78c-1, 78i, 78j, 78o, 78p, 78t, and 78u-1. See 
supra note 224.
    \243\ 15 U.S.C. 78f(l).
    \244\ 15 U.S.C. 78i(b)(1)-(3). Section 763(f) makes conforming 
amendments to the Exchange Act.
    \245\ Section 764(b) provides that no appropriate Federal 
banking agency shall be divested of any authority for any entity 
over which it has authority.
    \246\ 15 U.S.C. 78m(d)(1) and (g)(1).
    \247\ 15 U.S.C. 78m(f)(1).
    \248\ 15 U.S.C. 78o(b)(4)(C) and (b)(4)(F).
    \249\ 15 U.S.C. 78m(o).
    \250\ See Beneficial Ownership Reporting Requirements and 
Security-Based Swaps, Exchange Act Release No. 64628 (June 8, 2011), 
available at http://www.sec.gov/rules/final/2011/34-64628.pdf.
    \251\ 15 U.S.C. 78bb(a).
    \252\ This section limits the scope of applicability of certain 
provisions of the Exchange Act and addresses certain state law 
issues.
    \253\ 15 U.S.C. 77b(a) and 77e(d).
    \254\ The Commission has proposed exemptions from the 
registration requirements of the Securities Act for offers or sales 
of SB swaps issued by certain clearing agencies satisfying certain 
conditions. See Proposed Cleared SB Swap Exemptions, supra note 19.
    \255\ 15 U.S.C. 80a-2(a)(54). Section 769 of the Dodd-Frank Act 
makes conforming amendments to section 2(a)(54) the Investment 
Company Act of 1940.
    \256\ 15 U.S.C. 80b-2(a)(29). Section 770 of the Dodd-Frank Act 
makes conforming amendments to section 202(a)(2) of the Investment 
Advisers Act of 1940.
    \257\ 15 U.S.C. 78mm(c).
    \258\ 15 U.S.C. 78dd(c).
    \259\ 15 U.S.C. 78u-2(f).
    \260\ 15 U.S.C. 78mm.
    \261\ 15 U.S.C. 78f(l).
    \262\ Id.
    \263\ See section 1a(18) of the Commodity Exchange Act, 7 U.S.C. 
1a(18).
    \264\ 15 U.S.C. 78f(b).
---------------------------------------------------------------------------

    Title VII amended the definition of eligible contract participant 
in the Commodity Exchange Act.\265\ A number

[[Page 36305]]

of commenters have raised concerns about potential uncertainty 
regarding the definition of ``eligible contract participant'' as a 
result of the Title VII amendments to that definition.\266\ They have 
suggested, among other things, that market participants may cease or 
limit their business with counterparties that could potentially be 
considered non-eligible contract participants when the Dodd-Frank Act 
amendments to the definition of eligible contract participant go into 
effect.\267\
---------------------------------------------------------------------------

    \265\ Section 721(a) of the Dodd-Frank Act amended section 
1a(18) of the Commodity Exchange Act, 7 U.S.C. 1a(18), to include a 
new definition of the term ``eligible contract participant.''
    \266\ See, e.g., Trade Association Letter, supra note 28 (``The 
definition of [eligible contract participant] was amended by [the 
Dodd-Frank Act], and the [Commission and the CFTC] have sought 
comments in [the Entity Definitions Release] on how to further 
define such term, including how to interpret the phrase 
``discretionary basis.'' Until the term [eligible contract 
participant] is further defined in a final rulemaking, market 
participants will not know whether they are dealing with an 
[eligible contract participant], and where the line is between their 
institutional and retail businesses. As a result, they will not know 
* * * whether certain transactions are subject to the new 
requirement for [non-eligible contract participant] transactions to 
be executed on an exchange * * *. As a result, market participants 
may cease or severely limit their business with counterparties that 
could potentially be considered [non-eligible contract participants] 
under the Dodd-Frank statutory definition of [eligible contract 
participant].'').
    \267\ Id.
---------------------------------------------------------------------------

    The Commission finds that temporary exemption from section 6(l) of 
the Exchange Act \268\ for persons that meet the definition of eligible 
contract participant as set forth in section 1a(12) of the Commodity 
Exchange Act (as in effect on July 20, 2010) \269\ is necessary or 
appropriate in the public interest, and is consistent with the 
protection of investors, because it would allow persons currently 
participating in the SB swap markets that could potentially be 
considered non-eligible contract participants under the definition of 
eligible contract participant as amended by Title VII of the Dodd-Frank 
Act, to continue to do so until the term eligible contract participant 
is further defined in final rulemaking. Accordingly, the Commission is 
providing a temporary conditional exemption pursuant to section 36 of 
the Exchange Act \270\ from section 6(l) of the Exchange Act \271\ for 
eligible contract participants under current law. The temporary 
exemption will expire on the effective date for the final rules further 
defining the term eligible contract participant.
---------------------------------------------------------------------------

    \268\ 15 U.S.C. 78(f)(l).
    \269\ 7 U.S.C. 1a(12) (as in effect on July 20, 2010).
    \270\ 15 U.S.C. 78mm.
    \271\ 15 U.S.C. 78f(l).
---------------------------------------------------------------------------

    In addition, the Commission has received comments \272\ expressing 
concern regarding the implication of the incorporation of SB swaps into 
the definition of ``security.'' \273\ Commenters have indicated that 
they are still analyzing the full implication of such expansion of the 
definition of security, but that it will take time.\274\ Market 
participants therefore have requested temporary relief from certain 
provisions of the Exchange Act that will impose new obligations on 
counterparties to SB swaps so that they may complete their analysis and 
submit requests for more targeted relief.\275\ The Commission intends 
to separately address relief in this area.\276\
---------------------------------------------------------------------------

    \272\ See supra note 28.
    \273\ The Commission notes however that it has not received any 
comments regarding the definition of ``security future'' or the 
possibility that SB swaps may be characterized as security futures. 
Section 3(a)(55) of the Exchange Act, 15 U.S.C. 78c(a)(55), excludes 
from the definition of security future ``any agreement, contract, or 
transaction excluded from the Commodity Exchange Act under section 
2(c), 2(d), 2(f), or 2(g) of the Commodity Exchange Act (as in 
effect on the date of enactment of the Commodity Futures 
Modernization Act of 2000) or title IV of the Commodity Futures 
Modernization Act of 2000.'' Although the Dodd-Frank Act repealed 
certain provisions of the Commodity Exchange Act added by the CFMA, 
Title VII did not affect this exclusion or otherwise affect the 
legal certainty provided by section 3(a)(55) of the Exchange Act 
regarding the potential scope of the definition of security future.
    \274\ See supra note 28 and note 275.
    \275\ See Trade Association Letter, supra note 28.
    \276\ See supra note 22 and accompanying text.
---------------------------------------------------------------------------

    Moreover, the Commission has proposed exemptions under the 
Securities Act, the Exchange Act, and the Trust Indenture Act for SB 
swaps issued by certain clearing agencies satisfying certain 
conditions.\277\ The proposed exemptive rules would exempt transactions 
by clearing agencies in these SB swaps from all provisions of the 
Securities Act, other than the section 17(a) \278\ antifraud 
provisions, as well as exempt these SB swaps from Exchange Act 
registration requirements and from the provisions of the Trust 
Indenture Act, provided certain conditions are met.\279\
---------------------------------------------------------------------------

    \277\ See Proposed Cleared SB Swap Exemptions, supra note 19 and 
discussion supra note 223.
    \278\ 15 U.S.C. 77q(a).
    \279\ See Proposed Cleared SB Swap Exemptions, supra note 19.
---------------------------------------------------------------------------

    Request for Comment:
     Is the temporary exemption from section 6(l) of the 
Exchange Act appropriate? If not, why not? Is the condition that 
transactions be limited to eligible contract participants as defined 
under current law sufficient to protect SB swap market participants 
that would otherwise receive the protection of the exchange-trading 
requirement of section 6(l) of the Exchange Act?
     Are there any provisions set out in Table I above, other 
than those for which the Commission has indicated that it will be 
providing guidance, and where appropriate, temporary relief, for which 
the Commission should grant temporary exemptive relief? Please specify 
which provisions and provide a detailed explanation of why granting 
such exemption would be necessary or appropriate in the public 
interest, and consistent with the protection of investors.

J. Section 29(b) of the Exchange Act

    Section 29(b) of the Exchange Act generally provides that contracts 
made in violation of any provision of the Exchange Act, or the rules 
thereunder, shall be void ``(1) as regards the rights of any person 
who, in violation of any such provision, * * * shall have made or 
engaged in the performance of any such contract, and (2) as regards the 
rights of any person who, not being a party to such contracts, shall 
have acquired any right thereunder with actual knowledge of the facts 
by reason of which the making or performance of such contracts in 
violation of any such provision * * *.'' \280\ As discussed above, the 
Commission does not believe that provisions of Title VII for which the 
Commission has taken the view that compliance will either be triggered 
by registration of a person or by adoption of final rules by the 
Commission, or for which the Commission has provided an exception or 
exemptive relief herein, require compliance as of the Effective Date. 
The Commission thus does not believe that section 29(b) of the Exchange 
Act \281\ would apply to such provisions. For the avoidance of doubt, 
however, and to avoid possible legal uncertainty or market disruption, 
the Commission is granting temporary exemptive relief from section 
29(b) of the Exchange Act.\282\
---------------------------------------------------------------------------

    \280\ 15 U.S.C. 78cc(b).
    \281\ Id.
    \282\ Id.
---------------------------------------------------------------------------

    The Commission is exercising its authority under section 36 of the 
Exchange Act \283\ to temporarily exempt any SB swap contract entered 
into on or after the Effective Date from being void or considered 
voidable by reason of section 29 of the Exchange Act \284\ because any 
person that is a party to the SB swap contract violated a provision of 
the Exchange Act that was amended or added by subtitle B of Title VII 
of the Dodd Frank Act and for which the Commission has taken the view 
that compliance will be triggered by registration of a person or by 
adoption of final rules by the Commission, or for which the Commission 
has provided an exception or exemptive relief herein,

[[Page 36306]]

until such date as the Commission specifies.
---------------------------------------------------------------------------

    \283\ 15 U.S.C. 78mm.
    \284\ 15 U.S.C. 78cc(b).
---------------------------------------------------------------------------

    The Commission finds that such exemption is necessary or 
appropriate in the public interest, and is consistent with the 
protection of investors, because the legal uncertainty that could 
result if contracts entered into after the Effective Date were void or 
voidable under section 29(b) of the Exchange Act \285\ could be 
disruptive to the financial markets, create confusion for both 
financial institutions and their customers, or result in unnecessary 
and wasteful litigation.
---------------------------------------------------------------------------

    \285\ Id.
---------------------------------------------------------------------------

    As previously discussed, once the relevant provisions of the Dodd-
Frank Act take effect,\286\ persons effecting transactions in SB swaps, 
or engaged in acts, practices, and courses of business involving SB 
swaps, will be subject to the general antifraud and anti-manipulation 
provisions of the Federal securities laws that were in place before the 
enactment of the Dodd-Frank Act, including sections 9(a) and 10(b) of 
the Exchange Act,\287\ rule 10b-5 thereunder \288\ (and the 
prohibitions against insider trading), section 15(c) of the Exchange 
Act,\289\ and section 17(a) of the Securities Act,\290\ among others. 
Persons would retain all available rights as a result of any violation 
of these general antifraud and anti-manipulation provisions.
---------------------------------------------------------------------------

    \286\ See section 774 of the Dodd-Frank Act.
    \287\ 15 U.S.C. 78i(a) and 78j(b).
    \288\ 17 CFR 240.10b-5.
    \289\ 15 U.S.C. 78o(c).
    \290\ 15 U.S.C. 77q(a).
---------------------------------------------------------------------------

III. Solicitation of Comments

    The Commission intends to monitor closely the transition of the 
derivatives markets to regulated markets and to determine to what 
extent, if any, additional regulatory action may be necessary. The 
Commission is soliciting public comment on all aspects of these 
exemptions and the guidance it provided regarding compliance dates, 
including:
    1. Is the guidance provided in this section useful, appropriate, 
and sufficient for persons to determine which amendments to the 
Exchange Act by Title VII require compliance on July 16, 2011? If not, 
please explain and provide examples of which provisions require 
additional guidance.
    2. Are there other provisions of the Exchange Act as amended by the 
Dodd-Frank Act for which temporary exemptive relief should be granted? 
Please provide section references and provide a detailed explanation of 
why granting such an exemption would be necessary or appropriate in the 
public interest, and consistent with the protection of investors.
    3. Is the duration of the temporary exemptions granted in this 
Order appropriate? If not, for which exemptions are the duration not 
appropriate and what should be the appropriate duration?
    4. Should any conditions be placed on any of these exemptions? If 
so, which exemptions? Please explain and provide specific examples.
    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Comments may be submitted by any of 
the following methods:

IV. Temporary Exemptions and Other Temporary Relief

    For the reasons discussed above in Part II, the Commission is 
granting the following temporary relief:
    It is hereby ordered, pursuant to section 36 of the Securities 
Exchange Act of 1934, that no reporting party (as defined in 17 CFR 
242.900) shall be required to report any pre-enactment security-based 
swap (as defined in 17 CFR 242.900) under section 3C(e)(1) of the 
Securities Exchange Act of 1934 until the date six (6) months after the 
date a security-based swap data repository that is capable of accepting 
the asset class (as defined in 17 CFR 242.900) of such security-based 
swap is registered by the Commission.
    It is hereby further ordered, pursuant to section 36 of the 
Securities Exchange Act of 1934, that security-based swap dealers and 
major security-based swap participants are exempt from the requirements 
of section 3C(g)(5)(B) of the of the Securities Exchange Act of 1934 
until the earliest compliance date set forth in any of the final rules 
regarding section 3C(b) of the Securities Exchange Act of 1934.
    It is hereby further ordered, pursuant to section 36 of the 
Securities Exchange Act of 1934, that registered clearing agencies 
under section 17A of the Securities Exchange Act of 1934 are exempt 
from the requirements of sections 3C(j)(1) and (2) of the of the 
Securities Exchange Act of 1934 until the earliest compliance date set 
forth in any of the final rules regarding section 3C(j)(2) of the 
Securities Exchange Act of 1934.
    It is hereby further ordered, pursuant to section 36 of the 
Securities Exchange Act of 1934, that persons that operate a facility 
for the trading or processing of security-based swaps that is not 
currently registered as a national securities exchange or that cannot 
yet register as a security-based swap execution facility because final 
rules for such registration have not yet been adopted are exempt from 
the requirements of section 3D(a)(1) of the Securities Exchange Act of 
1934 until the earliest compliance date set forth in any of the final 
rules regarding registration of security-based swap execution 
facilities.
    It is hereby further ordered, pursuant to section 36 of the 
Securities Exchange Act of 1934, that registered clearing agencies 
under section 17A of the Securities Exchange Act of 1934 are exempt 
from the requirements of section 3D(c) of the Securities Exchange Act 
of 1934 until the earliest compliance date set forth in any of the 
final rules regarding registration of security-based swap execution 
facilities.
    It is hereby further ordered, pursuant to section 36 of the 
Securities Exchange Act of 1934, that security-based swap dealers and 
major security-based swap participants are exempt from the requirements 
of section 3E(f) of the Securities Exchange Act of 1934 until the date 
upon which the rules adopted by the Commission to register security-
based swap dealers and major security-based swap participants become 
effective.
    It is hereby further ordered, pursuant to section 36 of the 
Securities Exchange Act of 1934, that entities that meet the definition 
of security-based swap data repository as set forth in section 3(a)(75) 
of the Securities Exchange Act of 1934 are exempt from requirements of 
sections 13(n)(5)(D)(i), 13(n)(5)(F), 13(n)(5)(G), 13(n)(5)(H), and 
13(n)(7)(A) through (C) of the Securities Exchange Act of 1934 until 
the earlier of (1) the date the Commission grants registration to the 
security-based swap data repository and (2) the earliest compliance 
date for any of the final rules regarding the registration of security-
based swap data repositories.
    It is hereby further ordered, pursuant to section 15F(b)(6) of the 
Securities Exchange Act of 1934, that security-based swap dealers and 
major security-based swap participants are temporarily excepted from 
the prohibition of section 15F(b)(6) of the Securities Exchange Act of 
1934 with respect to persons subject to a statutory disqualification 
(as defined in section 3(a)(39) of the Securities Exchange Act of 1934) 
who are currently associated with a security-based swap dealer or major 
security-based swap participant and who effect or are involved in 
effecting security-based swaps on behalf of such security-based swap 
dealer or major security-based swap participant until the date upon 
which rules adopted by the Commission to register security-based

[[Page 36307]]

swap dealers and major security-based swap participants become 
effective.
    It is hereby further ordered, pursuant to section 36 of the 
Securities Exchange Act of 1934, that any person that meets the 
definition of eligible contract participant as set forth in section 
1a(12) of the Commodity Exchange Act (as in effect on July 20, 2010) is 
exempt from the requirements of section 6(l) of the Securities Exchange 
Act of 1934 with respect to a transaction in a security-based swap 
until the effective date for the final rules further defining the term 
eligible contract participant, provided that such person effects such 
transaction with or for a person that also meets the definition of 
eligible contract participant as set forth in section 1a(12) of the 
Commodity Exchange Act (as in effect on July 20, 2010).
    It is hereby further ordered, pursuant to section 36 of the 
Securities Exchange Act of 1934, that no contract entered into on or 
after July 16, 2011 shall be void or considered voidable by reason of 
section 29(b) of the Securities and Exchange Act of 1934 because any 
person that is a party to the contract violated a provision of the 
Securities Exchange Act of 1934 that was amended or added by subtitle B 
of the Wall Street Transparency and Accountability Act of 2010 and for 
which the Commission has taken the view that compliance will be 
triggered by registration of a person or by adoption of final rules by 
the Commission, or for which the Commission has provided an exception 
or exemptive relief herein, until such date as the Commission 
specifies.

    By the Commission.
    Dated: June 15, 2011.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-15432 Filed 6-21-11; 8:45 am]
BILLING CODE 8011-01-P