SEC Proposes Risk Mitigation Techniques for Uncleared Security-Based Swaps

The Securities and Exchange Commission today voted to propose rules requiring the application of risk mitigation techniques to portfolios of uncleared security-based swaps. Proposed Rules 15Fi-3 through 15Fi-5 would establish requirements for registered security-based swap dealers and major security-based swap participants (SBS Entities) with respect to: Reconciling outstanding security-based swaps with applicable counterparties on a periodic basis. Engaging in certain forms of portfolio compression exercises, as appropriate. Executing written security-based swap trading relationship documentation with each of its counterparties prior to, or contemporaneously with, executing a security-based swap transaction. Relationship documentation, portfolio reconciliation, and portfolio compression are important tools for increasing operational efficiency and reducing risk for SBS Entities.