Alert March 08, 2011

SEC Proposes Rules on Clearing Agency Standards for Operation and Governance

On March 2, 2011, the SEC, in accordance with Sections 763 and 805 of the Dodd-Frank Act and Section 17A of the Securities Exchange Act of 1934, voted to propose rules regarding the operation and governance of clearing agencies (the “Proposed Rules”).  The Proposed Rules are designed to strengthen the SEC’s oversight of clearing agencies and mitigate systemic risk concerns by enhancing the regulatory framework for the supervision of clearing agencies.

More specifically, the Proposed Rules would: (1) identify certain minimum standards for all clearing agencies (with additional requirements for clearing agencies that perform central counterparty services); (2) require dissemination of pricing and valuation information by security-based swap clearing agencies that perform central counterparty services; (3) require all clearing agencies to have adequate safeguards and procedures to protect the confidentiality of trading information of clearing agency participants; (4) exempt certain security-based swap dealers and security-based swap execution facilities from the definition of a clearing agency; (5) amend rules concerning registration of clearing agencies to account for security-based swap clearing agencies and to make other technical changes; (6) require all clearing agencies to have procedures that identify and address conflicts of interest; (7) require standards for all members of clearing agency boards of directors or committees; and (8) require all clearing agencies to designate a chief compliance officer.

Comments on the Proposed Rules are due by April 29, 2011.