US SEC proposes rules on swap trade documentation

Jan 14 (Reuters) – U.S. securities regulators proposed technical rules on Friday laying out standards for how swap dealers and major traders document their over-the-counter derivatives transactions with their customers.

The proposal by the Securities and Exchange Commission is the latest step toward implementing sweeping new regulations for the nearly $600 trillion over-the-counter derivatives market.

The SEC’s proposal, which would only apply to dealers or major traders offering security-linked swaps, requires them to provide their counterparties with documentation detailing key information about the trade. The proposal will now be issued for public comment. A second majority vote is needed to implement it.

The plan would require dealers and major traders like Morgan Stanley (MS.N) and Goldman Sachs (GS.N) to provide a trade acknowledgment to their counterparties within time windows of 15 minutes, 30 minutes or 24 hours, depending on how the trade is executed.

Transactions would need to be processed electronically if possible, in a move that would aim to reduce back-office paperwork.

They would also need to implement written policies to help verify the terms of every trade agreement.

Under the Dodd-Frank Act, the SEC and CFTC will share regulatory jurisdiction of the over-the-counter derivatives market. The SEC will oversee security-linked swaps, including certain kinds of credit derivatives, while the CFTC gets to oversee most other types of swaps like those linked to interest-rates.

The CFTC has also recently proposed similar rules. (Reporting by Sarah N. Lynch; Editing by Bernard Orr)


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