SEC Adopts Risk Mitigation Techniques for Uncleared Security-Based Swaps

The Securities and Exchange Commission today voted to adopt rules requiring the application of risk mitigation techniques to portfolios of uncleared security-based swaps. New Rules 15Fi-3, 15Fi-4, and 15Fi-5 establish requirements for registered security-based swap dealers and major security-based swap participants (“SBS Entities”) to: Periodically reconcile outstanding security-based swaps with counterparties, Engage in certain forms of portfolio compression exercises, as appropriate, and Execute written trading relationship documentation with each of their counterparties prior to, or contemporaneously with, executing a security-based swap transaction. These rules were adopted pursuant to Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). The Commission also adopted amendments to its existing cross-border rule to provide a means to request substituted compliance with respect to the portfolio reconciliation, compression, and trading relationship documentation requirements.