WASHINGTON (Reuters) - The top U.S. securities regulator on Wednesday took another step toward tightening its oversight of security-based swaps by proposing new reporting requirements for transactions, nearly six years after Congress directed it to build a regulatory regime for the derivatives.
"These provisions will result in increased transparency which should allow for a more efficient market, better price discovery, and increased competition," said Democratic Commissioner Kara Stein at a Securities and Exchange Commission (SEC) meeting, saying the proposal will cast "light on this previously opaque market."
But Stein also noted that the requirements were mandated by the Dodd-Frank Wall Street reform law, enacted in 2010. The SEC only oversees a slim portion of the swaps market, with the Commodity Futures Trading Commission charged with the bulk of regulation. The derivatives were only lightly regulated until soured swaps helped fuel the financial crisis of 2007-09.
"Six years should have been more than enough time for the Commission’s rules to have been completed," she said.
The proposal primarily adds requirements for posting more information and making it publicly available. Exchanges, swap-execution facilities and clearing agencies would have to report swaps. Clearing agencies would also have to report whether they do not accept a transaction. Repositories of the information would not be able to charge fees or limit access to data. The proposal also expands reporting for cross-border swaps.
Republican Commissioner Michael Piwowar said "there is simply no excuse for our lack of final rules in this space," and called out Chair Mary Jo White for the slow pace of bringing the framework to fruition. He said he has repeatedly asked the SEC to take up dealer capital and margin requirements.
"We still have no idea when final rules on capital and margin will make their way onto the Commission agenda, much less when the entire regime will be up and running," he said. "The calls of a bipartisan majority of the Commission have not been enough to influence the Chair into prioritizing our ... mandates."
He said Wednesday's proposal should "spur a heightened level of action."
In response, White said rulemaking for dealer capital margin is "next in line."
"I think we’re all united, Chair, all commissioners and staff about the high priority of completing the ... rules for the security-based swaps and doing so as promptly as we can." she said.
The three commission members unanimously approved publishing the proposal in the Federal Register, which will become effective 60 days after publication. Compliance will be phased in over the following months.