(a) In general.
(1) Standard
for clearing. It shall be unlawful for any person to engage in
a security-based swap unless that person submits such security-based
swap for clearing to a clearing agency that is registered under this
Act or a clearing agency that is exempt from registration under this
Act if the security-based swap is required to be cleared.
(2) Open access. The rules of a clearing agency described in paragraph (1) shall—
(A) prescribe that
all security-based swaps submitted to the clearing agency with the
same terms and conditions are economically equivalent within the clearing
agency and may be offset with each other within the clearing agency;
and
(B) provide for non-discriminatory
clearing of a security-based swap executed bilaterally or on or through
the rules of an unaffiliated national securities exchange or security-based
swap execution facility.
(b) Commission Review.
(1) Commission-initiated
review.
(A)
The Commission on an ongoing basis shall review each security-based
swap, or any group, category, type, or class of security-based swaps
to make a determination that such security-based swap, or group, category,
type, or class of security-based swaps should be required to be cleared.
(B) The Commission shall provide
at least a 30-day public comment period regarding any determination
under subparagraph (A).
(2) Swap submissions.
(A) A clearing agency shall submit
to the Commission each security-based swap, or any group, category,
type, or class of security-based swaps that it plans to accept for
clearing and provide notice to its members (in a manner to be determined
by the Commission) of such submission.
(B) Any security-based swap or group,
category, type, or class of security-based swaps listed for clearing
by a clearing agency as of the date of enactment of this subsection
shall be considered submitted to the Commission.
(C) The Commission shall—
(i) make available to the public any submission
received under subparagraphs (A) and (B);
(ii) review each submission made under subparagraphs (A) and (B),
and determine whether the security-based swap, or group, category,
type, or class of security-based swaps, described in the submission
is required to be cleared; and
(iii)
provide at least a 30-day public comment period regarding its determination
whether the clearing requirement under subsection (a)(1) shall apply
to the submission.
(3) Deadline. The Commission shall make its determination under paragraph (2)(C)
not later than 90 days after receiving a submission made under paragraphs
(2)(A) and (2)(B), unless the submitting clearing agency agrees to
an extension for the time limitation established under this paragraph.
(4) Determination.
(A) In reviewing
a submission made under paragraph (2), the Commission shall review
whether the submission is consistent with section 17A.
(B) In reviewing a security-based swap,
group of security-based swaps or class of security-based swaps pursuant
to paragraph (1) or a submission made under paragraph (2), the Commission
shall take into account the following factors:
(i) The existence of significant outstanding
notional exposures, trading liquidity and adequate pricing data.
(ii) The availability of rule framework,
capacity, operational expertise and resources, and credit support
infrastructure to clear the contract on terms that are consistent
with the material terms and trading conventions on which the contract
is then traded.
(iii) The effect on
the mitigation of systemic risk, taking into account the size of the
market for such contract and the resources of the clearing agency
available to clear the contract.
(iv)
The effect on competition, including appropriate fees and charges
applied to clearing.
(v) The existence
of reasonable legal certainty in the event of the insolvency of the
relevant clearing agency or 1 or more of its clearing members with
regard to the treatment of customer and security-based swap counterparty
positions, funds, and property.
(C) In making a determination under
subsection (b)(1) or paragraph (2)(C) that the clearing requirement
shall apply, the Commission may require such terms and conditions
to the requirement as the Commission determines to be appropriate.
(5) Rules. Not later than 1 year after the
date of the enactment of this section, the Commission shall adopt
rules for a clearing agency’s submission for review, pursuant to this
subsection, of a security-based swap, or a group, category, type,
or class of security-based swaps, that it seeks to accept for clearing.
Nothing in this paragraph limits the Commission from making a determination
under paragraph (2)(C) for security-based swaps described in paragraph
(2)(B).
(c) Stay of clearing
requirement.
(1) In general. After making a determination
pursuant to subsection (b)(2), the Commission, on application of a
counterparty to a security-based swap or on its own initiative, may
stay the clearing requirement of subsection (a)(1) until the Commission
completes a review of the terms of the security-based swap (or the
group, category, type, or class of security-based swaps) and the clearing
arrangement.
(2) Deadline. The Commission shall complete
a review undertaken pursuant to paragraph (1) not later than 90 days
after issuance of the stay, unless the clearing agency that clears
the security-based swap, or group, category, type, or class of security-based
swaps, agrees to an extension of the time limitation established under
this paragraph.
(3) Determination. Upon completion of the review
undertaken pursuant to paragraph (1), the Commission may—
(A) determine, unconditionally or
subject to such terms and conditions as the Commission determines
to be appropriate, that the security-based swap, or group, category,
type, or class of security-based swaps, must be cleared pursuant to
this subsection if it finds that such clearing is consistent with subsection
(b)(4); or
(B) determine that
the clearing requirement of subsection (a)(1) shall not apply to the
security-based swap, or group, category, type, or class of security-based
swaps.
(4) Rules. Not later than 1 year after the
date of the enactment of this section, the Commission shall adopt
rules for reviewing, pursuant to this subsection, a clearing agency’s
clearing of a security-based swap, or a group, category, type, or
class of security-based swaps, that it has accepted for clearing.
(d) Prevention of evasion.
(1) In general. The Commission shall prescribe
rules under this section (and issue interpretations of rules prescribed
under this section), as determined by the Commission to be necessary
to prevent evasions of the mandatory clearing requirements under this
Act.
(2) Duty of commission to investigate and take certain actions. To
the extent the Commission finds that a particular security-based swap
or any group, category, type, or class of security-based swaps that
would otherwise be subject to mandatory clearing but no clearing agency
has listed the security-based swap or the group, category, type, or
class of security-based swaps for clearing, the Commission shall—
(A) investigate the
relevant facts and circumstances;
(B) within 30 days issue a public report containing the results of
the investigation; and
(C) take
such actions as the Commission determines to be necessary and in the
public interest, which may include requiring the retaining of adequate
margin or capital by parties to the security-based swap or the group,
category, type, or class of security-based swaps.
(3) Effect
on authority. Nothing in this subsection—
(A) authorizes the Commission to adopt
rules requiring a clearing agency to list for clearing a security-based
swap or any group, category, type, or class of security-based swaps
if the clearing of the security-based swap or the group, category,
type, or class of security-based swaps would threaten the financial
integrity of the clearing agency; and
(B) affects the authority of the Commission
to enforce the open access provisions of subsection (a)(2) with respect
to a security-based swap or the group, category, type, or class of
security-based swaps that is listed for clearing by a clearing agency.
(e) Reporting
transition rules. Rules adopted by the Commission under this
section shall provide for the reporting of data, as follows:
(1) Security-based swaps entered into
before the date of the enactment of this section shall be reported
to a registered security-based swap data repository or the Commission
no later than 180 days after the effective date of this section.
(2) Security-based swaps entered into
on or after such date of enactment shall be reported to a registered
security-based swap data repository or the Commission no later than
the later of—
(A)
90 days after such effective date; or
(B) such other time after entering into
the security-based swap as the Commission may prescribe by rule or
regulation.
(f) Clearing transition rules.
(1) Security-based swaps entered into before
the date of the enactment of this section are exempt from the clearing
requirements of this subsection if reported pursuant to subsection
(e)(1).
(2) Security-based swaps
entered into before application of the clearing requirement pursuant
to this section are exempt from the clearing requirements of this
section if reported pursuant to subsection (e)(2).
(g) Exceptions.
(1) In general. The requirements of subsection (a)(1) shall not apply to a security-based
swap if 1 of the counterparties to the security-based swap—
(A) is not a financial entity;
(B) is using security-based swaps to
hedge or mitigate commercial risk; and
(C) notifies the Commission, in a manner
set forth by the Commission, how it generally meets its financial
obligations associated with entering into non-cleared security-based
swaps.
(2) Option to clear. The application of the
clearing exception in paragraph (1) is solely at the discretion of
the counterparty to the security-based swap that meets the conditions
of subparagraphs (A) through (C) of paragraph (1).
(3) Financial
entity definition.
(A) In general. For the purposes of this subsection, the term “financial entity”
means—
(i) a swap dealer;
(ii) a security-based swap dealer;
(iii) a major swap participant;
(iv) a major security-based swap participant;
(v) a commodity pool as defined in section
1a(10) of the Commodity Exchange Act;
(vi) a private fund as defined in section 202(a) of the Investment
Advisers Act of 1940 (15 U.S.C. 80-b-2(a));
(vii) an employee benefit plan as defined
in paragraphs (3) and (32) of section 3 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1002);
(viii) a person predominantly engaged in activities
that are in the business of banking or financial in nature, as defined
in section 4(k) of the Bank Holding Company Act of 1956.
(B) Exclusion. The Commission shall consider whether to exempt small banks, savings
associations, farm credit system institutions, and credit unions,
including—
(i) depository
institutions with total assets of $10,000,000,000 or less;
(ii) farm credit system institutions with
total assets of $10,000,000,000 or less; or
(iii) credit unions with total assets of $10,000,000,000
or less.
(4) Treatment of affiliates.
(A) In
general. An affiliate of a person that qualifies for an exception
under this subsection (including affiliate entities predominantly
engaged in providing financing for the purchase of the merchandise
or manufactured goods of the person) may qualify for the exception
only if the affiliate—
(i) enters into the security-based swap to hedge or mitigate the
commercial risk of the person or other affiliate of the person that
is not a financial entity, and the commercial risk that the affiliate
is hedging or mitigating has been transferred to the affiliate;
(ii) is directly and wholly-owned by
another affiliate qualified for the exception under this paragraph
or an entity that is not a financial entity;
(iii) is not indirectly majority-owned by
a financial entity;
(iv) is not ultimately
owned by a parent company that is a financial entity; and
(v) does not provide any services, financial
or otherwise, to any affiliate that is a nonbank financial company
supervised by the Board of Governors (as defined under section 102
of the Financial Stability Act of 2010).
(B) Limitation
on qualifying affiliates. The exception in subparagraph (A) shall
not apply if the affiliate is—
(i) a swap dealer;
(ii) a security-based swap dealer;
(iii) a major swap participant;
(iv) a major security-based swap participant;
(v) a commodity pool;
(vi) a bank holding company;
(vii) a private fund, as defined in section
202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80-b-2(a));
(viii) an employee benefit plan or government
plan, as defined in paragraphs (3) and (32) of section 3 of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1002);
(ix) an insured depository institution;
(x) a farm credit system institution;
(xi) a credit union;
(xii) a nonbank financial company supervised
by the Board of Governors (as defined under section 102 of the Financial
Stability Act of 2010); or
(xiii) an
entity engaged in the business of insurance and subject to capital
requirements established by an insurance governmental authority of
a State, a territory of the United States, the District of Columbia,
a country other than the United States, or a political subdivision
of a country other than the United States that is engaged in the supervision
of insurance companies under insurance law.
(C) Limitation
on affiliates’ affiliates. Unless the Commission determines,
by order, rule, or regulation, that it is in the public interest,
the exception in subparagraph (A) shall not apply with respect to
an affiliate if such affiliate is itself affiliated with—
(i) a major security-based swap participant;
(ii) a security-based swap dealer;
(iii) a major swap participant; or
(iv) a swap dealer.
(D) Conditions
on transactions. With respect to an affiliate that qualifies
for the exception in subparagraph (A)—
(i) such affiliate may not enter into any
security-based swap other than for the purpose of hedging or mitigating
commercial risk; and
(ii) neither such
affiliate nor any person affiliated with such affiliate that is not
a financial entity may enter into a security-based swap with or on
behalf of any affiliate that is a financial entity or otherwise assume,
net, combine, or consolidate the risk of security-based swaps entered
into by any such financial entity, except one that is an affiliate
that qualifies for the exception under subparagraph (A).
(E) Transition
rule for affiliates. An affiliate, subsidiary, or a wholly owned
entity of a person that qualifies for an exception under subparagraph
(A) and is predominantly engaged in providing financing for the purchase
or lease of merchandise or manufactured goods of the person shall
be exempt from the margin requirement described in section 15F(e)
and the clearing requirement described in subsection (a) with regard
to security-based swaps entered into to mitigate the risk of the financing
activities for not less than a 2-year period beginning on the date
of enactment of this subparagraph.
(F) Risk management program. Any security-based
swap entered into by an affiliate that qualifies for the exception
in subparagraph (A) shall be subject to a centralized risk management
program of the affiliate, which is reasonably designed both to monitor
and manage the risks associated with the security-based swap and to
identify each of the affiliates on whose behalf a security-based swap
was entered into.
(5) Election of counterparty.
(A) Security-based swaps required
to be cleared. With respect to any security-based swap that is subject
to the mandatory clearing requirement under subsection (a) and entered
into by a security-based swap dealer or a major security-based swap
participant with a counterparty that is not a swap dealer, major swap
participant, security-based swap dealer, or major security-based swap
participant, the counterparty shall have the sole right to select
the clearing agency at which the security-based swap will be cleared.
(B) Security-based
swaps not required to be cleared. With respect to any security-based
swap that is not subject to the mandatory clearing requirement under
subsection (a) and entered into by a security-based swap dealer or
a major security-based swap participant with a counterparty that is
not a swap dealer, major swap participant, security-based swap dealer,
or major security-based swap participant, the counterparty—
(i) may elect to require clearing of the
security-based swap; and
(ii) shall
have the sole right to select the clearing agency at which the security-based
swap will be cleared.
(6) Abuse of
exception. The Commission may prescribe such rules or issue interpretations
of the rules as the Commission determines to be necessary to prevent
abuse of the exceptions described in this subsection. The Commission
may also request information from those persons claiming the clearing
exception as necessary to prevent abuse of the exceptions described
in this subsection.
(h) Trade execution.
(1) In general. With respect to transactions
involving security-based swaps subject to the clearing requirement
of subsection (a)(1), counterparties shall—
(A) execute the transaction on an exchange;
or
(B) execute the transaction
on a security-based swap execution facility registered under section
3D or a security-based swap execution facility that is exempt from
registration under section 3D(e).
(2) Exception. The requirements of subparagraphs (A) and (B) of paragraph (1) shall
not apply if no exchange or security-based swap execution facility
makes the security-based swap available to trade or for security-based
swap transactions subject to the clearing exception under subsection
(g).
(i) Board approval. Exemptions from the requirements of this section to clear a security-based
swap or execute a security-based swap through a national securities
exchange or security-based swap execution facility shall be available
to a counterparty that is an issuer of securities that are registered
under section 12 or that is required to file reports pursuant to section
15(d), only if an appropriate committee of the issuer’s board or governing
body has reviewed and approved the issuer’s decision to enter into
security-based swaps that are subject to such exemptions.
(j) Designation of chief compliance officer.
(1) In general. Each registered clearing agency
shall designate an individual to serve as a chief compliance officer.
(2) Duties. The chief compliance officer shall—
(A) report directly to the board or
to the senior officer of the clearing agency;
(B) in consultation with its board,
a body performing a function similar thereto, or the senior officer
of the registered clearing agency, resolve any conflicts of interest
that may arise;
(C) be responsible
for administering each policy and procedure that is required to be
established pursuant to this section;
(D) ensure compliance with this title
(including regulations issued under this title) relating to agreements,
contracts, or transactions, including each rule prescribed by the
Commission under this section;
(E) establish procedures for the remediation of noncompliance issues
identified by the compliance officer through any—
(i) compliance office review;
(ii) look-back;
(iii) internal or external audit finding;
(iv) self-reported error; or
(v) validated complaint; and
(F) establish and follow appropriate
procedures for the handling, management response, remediation, retesting,
and closing of noncompliance issues.
(3) Annual reports.
(A) 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 registered clearing
agency or security-based swap execution facility of the compliance
officer with respect to this title (including regulations under this
title); and
(ii) each policy and procedure
of the registered clearing agency of the compliance officer (including
the code of ethics and conflict of interest policies of the registered
clearing agency).
(B) Requirements. A compliance report
under subparagraph (A) shall—
(i) accompany each appropriate financial report
of the registered clearing agency that is required to be furnished
to the Commission pursuant to this section; and
(ii) include a certification that, under penalty
of law, the compliance report is accurate and complete.
[15 USC 78c-3. As added by act of July
21, 2010 (124 Stat. 1762) and amended by act of Dec. 18, 2015 (129
Stat. 3027-28).]
