(1) Compliance
with core principles.
(A) In general. To be registered, and maintain registration, as a security-based
swap execution facility, the security-based swap execution facility
shall comply with—
(i)
the core principles described in this subsection; and
(ii) any requirement that the Commission may
impose by rule or regulation.
(B) Reasonable
discretion of security-based swap execution facility. Unless
otherwise determined by the Commission, by rule or regulation, a security-based
swap execution facility described in subparagraph (A) shall have reasonable
discretion in establishing the manner in which it complies with the
core principles described in this subsection.
(2) Compliance
with rules. A security-based swap execution facility shall—
(A) establish and enforce
compliance with any rule established by such security-based swap execution
facility, including—
(i) the terms and conditions of the security-based swaps traded or
processed on or through the facility; and
(ii) any limitation on access to the facility;
(B) establish and enforce trading,
trade processing, and participation rules that will deter abuses and
have the capacity to detect, investigate, and enforce those rules,
including means—
(i)
to provide market participants with impartial access to the market;
and
(ii) to capture information that
may be used in establishing whether rule violations have occurred;
and
(C) establish
rules governing the operation of the facility, including rules specifying
trading procedures to be used in entering and executing orders traded
or posted on the facility, including block trades.
(3) Security-based
swaps not readily susceptible to manipulation. The security-based
swap execution facility shall permit trading only in security-based
swaps that are not readily susceptible to manipulation.
(4) Monitoring
of trading and trade processing. The security-based swap execution
facility shall—
(A)
establish and enforce rules or terms and conditions defining, or specifications
detailing—
(i) trading
procedures to be used in entering and executing orders traded on or
through the facilities of the security-based swap execution facility;
and
(ii) procedures for trade processing
of security-based swaps on or through the facilities of the security-based
swap execution facility; and
(B) monitor trading in security-based
swaps to prevent manipulation, price distortion, and disruptions of
the delivery or cash settlement process through surveillance, compliance,
and disciplinary practices and procedures, including methods for conducting
real-time monitoring of trading and comprehensive and accurate trade
reconstructions.
(5) Ability to obtain information. The security-based
swap execution facility shall—
(A) establish and enforce rules that
will allow the facility to obtain any necessary information to perform
any of the functions described in this subsection;
(B) provide the information to the Commission
on request; and
(C) have the
capacity to carry out such international information-sharing agreements
as the Commission may require.
(6) Financial
integrity of transactions. The security-based swap execution
facility shall establish and enforce rules and procedures for ensuring
the financial integrity of security-based swaps entered on or through
the facilities of the security-based swap execution facility, including
the clearance and settlement of security-based swaps pursuant to section
3C(a)(1).
(7) Emergency authority. The security-based
swap execution facility shall adopt rules to provide for the exercise
of emergency authority, in consultation or cooperation with the Commission,
as is necessary and appropriate, including the authority to liquidate
or transfer open positions in any security-based swap or to suspend
or curtail trading in a security-based swap.
(8) Timely publication
of trading information.
(A) In general. The security-based swap execution facility shall make public timely
information on price, trading volume, and other trading data on security-based
swaps to the extent prescribed by the Commission.
(B) Capacity
of security-based swap execution facility. The security-based
swap execution facility shall be required to have the capacity to
electronically capture and transmit and disseminate trade information
with respect to transactions executed on or through the facility.
(9) Recordkeeping and reporting.
(A) In
general. A security-based swap execution facility shall—
(i) maintain records of all activities
relating to the business of the facility, including a complete audit
trail, in a form and manner acceptable to the Commission for a period
of 5 years; and
(ii) report to the
Commission, in a form and manner acceptable to the Commission, such
information as the Commission determines to be necessary or appropriate
for the Commission to perform the duties of the Commission under this
title.
(B) Requirements. The Commission shall adopt
data collection and reporting requirements for security-based swap
execution facilities that are comparable to corresponding requirements
for clearing agencies and security-based swap data repositories.
(10) Antitrust considerations. Unless necessary
or appropriate to achieve the purposes of this title, the security-based
swap execution facility shall not—
(A) adopt any rules or taking any actions
that result in any unreasonable restraint of trade; or
(B) impose any material anticompetitive
burden on trading or clearing.
(11) Conflicts
of interest. The security-based swap execution facility shall—
(A) establish and enforce rules
to minimize conflicts of interest in its decision-making process;
and
(B) establish a process for
resolving the conflicts of interest.
(12) Financial
resources.
(A) In general. The security-based
swap execution facility shall have adequate financial, operational,
and managerial resources to discharge each responsibility of the security-based
swap execution facility, as determined by the Commission.
(B) Determination
of resource adequacy. The financial resources of a security-based
swap execution facility shall be considered to be adequate if the
value of the financial resources—
(i) enables the organization to meet its financial
obligations to its members and participants notwithstanding a default
by the member or participant creating the largest financial exposure
for that organization in extreme but plausible market conditions;
and
(ii) exceeds the total amount that
would enable the security-based swap execution facility to cover the
operating costs of the security-based swap execution facility for
a 1-year period, as calculated on a rolling basis.
(13) System safeguards. The security-based swap
execution facility shall—
(A) establish and maintain a program
of risk analysis and oversight to identify and minimize sources of
operational risk, through the development of appropriate controls
and procedures, and automated systems, that—
(i) are reliable and secure; and
(ii) have adequate scalable capacity;
(B) establish and maintain emergency
procedures, backup facilities, and a plan for disaster recovery that
allow for—
(i) the timely
recovery and resumption of operations; and
(ii) the fulfillment of the responsibilities
and obligations of the security-based swap execution facility; and
(C) periodically
conduct tests to verify that the backup resources of the security-based
swap execution facility are sufficient to ensure continued—
(i) order processing and trade matching;
(ii) price reporting;
(iii) market surveillance; and
(iv) maintenance of a comprehensive and accurate
audit trail.
(14) Designation
of chief compliance officer.
(A) In general. Each security-based swap execution facility shall designate an individual
to serve as a chief compliance officer.
(B) Duties. The chief compliance officer shall—
(i) report directly to the board or to the
senior officer of the facility;
(ii)
review compliance with the core principles in this subsection;
(iii) in consultation with the board
of the facility, a body performing a function similar to that of a
board, or the senior officer of the facility, resolve any conflicts
of interest that may arise;
(iv) be
responsible for establishing and administering the policies and procedures
required to be established pursuant to this section;
(v) ensure compliance with this title and
the rules and regulations issued under this title, including rules
prescribed by the Commission pursuant to this section;
(vi) establish procedures for the remediation
of noncompliance issues found during—
(I) compliance
office reviews;
(II) look backs;
(III) internal or external audit findings;
(IV) self-reported errors; or
(V) through validated complaints; and
(vii) establish and follow
appropriate procedures for the handling, management response, remediation,
retesting, and closing of noncompliance issues.
(C) Annual
reports.
(i) In general. In accordance with rules prescribed
by the Commission, the chief compliance officer shall annually prepare
and sign a report that contains a description of—
(I) the compliance
of the security-based swap execution facility with this title; and
(II) the policies and procedures, including
the code of ethics and conflict of interest policies, of the security-based
swap execution facility.
(ii) Requirements. The chief compliance
officer shall—
(I) submit each report described in clause
(i) with the appropriate financial report of the security-based swap
execution facility that is required to be submitted to the Commission
pursuant to this section; and
(II)
include in the report a certification that, under penalty of law,
the report is accurate and complete.
[15 USC 78c-4. As added by act of July 21, 2010 (124 Stat. 1769).]
