Alert January 25, 2011

SEC Proposes Rules Regarding Acknowledgement and Verification of Security-Based Swap Transactions

The SEC issued a release proposing rules regarding trade acknowledgment and verification of security-based swap transactions (“SBS Transactions”), which would require security-based swap dealers and major security-based swap participants (“SBS Entities”) to provide trade acknowledgments and to verify those trade acknowledgments in security-based swap transactions.  SBS Entities would be required to provide trade acknowledgments to their counterparties within a prescribed time-frame (which would be less than 24 hours in all circumstances) and to obtain acknowledgement from them.  Clearing agencies would be expected to adopt verification procedures for SBS transactions subject to clearing, but SBS Entities would be required to establish their own verification procedures for SBS Transactions not subject to clearing.  The SEC is seeking comment on a variety of questions regarding the proposed procedures; comments must be received on or before February 22, 2011.