Sections 763-764 Dodd Frank Act

H. R. 4173—387
(B) in subsection (g), by striking ‘‘(as defined in section
206B of the Gramm-Leach-Bliley Act)’’.
SEC. 763. AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF 1934.

(a) CLEARING FOR SECURITY-BASED SWAPS.—The Securities
Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by
inserting after section 3B (as added by section 717 of this Act):
‘‘SEC. 3C. CLEARING FOR SECURITY-BASED SWAPS.

‘‘(a) IN GENERAL.—
‘‘(1) STANDARD FOR CLEARING.—It shall be unlawful for
any person to engage in a security-based swap unless that
person submits such security-based swap for clearing to a
clearing agency that is registered under this Act or a clearing
agency that is exempt from registration under this Act if the
security-based swap is required to be cleared.
‘‘(2) OPEN ACCESS.—The rules of a clearing agency described
in paragraph (1) shall—
‘‘(A) prescribe that all security-based swaps submitted
to the clearing agency with the same terms and conditions
are economically equivalent within the clearing agency and
may be offset with each other within the clearing agency;
and
‘‘(B) provide for non-discriminatory clearing of a security-based swap executed bilaterally or on or through the
rules of an unaffiliated national securities exchange or
security-based swap execution facility.
‘‘(b) COMMISSION REVIEW.—
‘‘(1) COMMISSION-INITIATED REVIEW.—
‘‘(A) The Commission on an ongoing basis shall review
each security-based swap, or any group, category, type,
or class of security-based swaps to make a determination
that such security-based swap, or group, category, type,
or class of security-based swaps should be required to be
cleared.
‘‘(B) The Commission shall provide at least a 30-day
public comment period regarding any determination under
subparagraph (A).
‘‘(2) SWAP SUBMISSIONS.—
‘‘(A) A clearing agency shall submit to the Commission
each security-based swap, or any group, category, type,
or class of security-based swaps that it plans to accept
for clearing and provide notice to its members (in a manner
to be determined by the Commission) of such submission.
‘‘(B) Any security-based swap or group, category, type,
or class of security-based swaps listed for clearing by a
clearing agency as of the date of enactment of this subsection shall be considered submitted to the Commission.
‘‘(C) The Commission shall—
‘‘(i) make available to the public any submission
received under subparagraphs (A) and (B);
‘‘(ii) review each submission made under subparagraphs (A) and (B), and determine whether the security-based swap, or group, category, type, or class of
security-based swaps, described in the submission is
required to be cleared; and
‘‘(iii) provide at least a 30-day public comment
period regarding its determination whether the

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clearing requirement under subsection (a)(1) shall
apply to the submission.
‘‘(3) DEADLINE.—The Commission shall make its determination under paragraph (2)(C) not later than 90 days after
receiving a submission made under paragraphs (2)(A) and
(2)(B), unless the submitting clearing agency agrees to an extension for the time limitation established under this paragraph.
‘‘(4) DETERMINATION.—
‘‘(A) In reviewing a submission made under paragraph
(2), the Commission shall review whether the submission
is consistent with section 17A.
‘‘(B) In reviewing a security-based swap, group of security-based swaps or class of security-based swaps pursuant
to paragraph (1) or a submission made under paragraph
(2), the Commission shall take into account the following
factors:
‘‘(i) The existence of significant outstanding
notional exposures, trading liquidity and adequate
pricing data.
‘‘(ii) The availability of rule framework, capacity,
operational expertise and resources, and credit support
infrastructure to clear the contract on terms that are
consistent with the material terms and trading conventions on which the contract is then traded.
‘‘(iii) The effect on the mitigation of systemic risk,
taking into account the size of the market for such
contract and the resources of the clearing agency available to clear the contract.
‘‘(iv) The effect on competition, including appropriate fees and charges applied to clearing.
‘‘(v) The existence of reasonable legal certainty
in the event of the insolvency of the relevant clearing
agency or 1 or more of its clearing members with
regard to the treatment of customer and security-based
swap counterparty positions, funds, and property.
‘‘(C) In making a determination under subsection (b)(1)
or paragraph (2)(C) that the clearing requirement shall
apply, the Commission may require such terms and conditions to the requirement as the Commission determines
to be appropriate.
‘‘(5) RULES.—Not later than 1 year after the date of the
enactment of this section, the Commission shall adopt rules
for a clearing agency’s submission for review, pursuant to this
subsection, of a security-based swap, or a group, category, type,
or class of security-based swaps, that it seeks to accept for
clearing. Nothing in this paragraph limits the Commission
from making a determination under paragraph (2)(C) for security-based swaps described in paragraph (2)(B).
‘‘(c) STAY OF CLEARING REQUIREMENT.—
‘‘(1) IN GENERAL.—After making a determination pursuant
to subsection (b)(2), the Commission, on application of a
counterparty to a security-based swap or on its own initiative,
may stay the clearing requirement of subsection (a)(1) until
the Commission completes a review of the terms of the securitybased swap (or the group, category, type, or class of securitybased swaps) and the clearing arrangement.

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‘‘(2) DEADLINE.—The Commission shall complete a review
undertaken pursuant to paragraph (1) not later than 90 days
after issuance of the stay, unless the clearing agency that
clears the security-based swap, or group, category, type, or
class of security-based swaps, agrees to an extension of the
time limitation established under this paragraph.
‘‘(3) DETERMINATION.—Upon completion of the review
undertaken pursuant to paragraph (1), the Commission may—
‘‘(A) determine, unconditionally or subject to such
terms and conditions as the Commission determines to
be appropriate, that the security-based swap, or group,
category, type, or class of security-based swaps, must be
cleared pursuant to this subsection if it finds that such
clearing is consistent with subsection (b)(4); or
‘‘(B) determine that the clearing requirement of subsection (a)(1) shall not apply to the security-based swap,
or group, category, type, or class of security-based swaps.
‘‘(4) RULES.—Not later than 1 year after the date of the
enactment of this section, the Commission shall adopt rules
for reviewing, pursuant to this subsection, a clearing agency’s
clearing of a security-based swap, or a group, category, type,
or class of security-based swaps, that it has accepted for
clearing.
‘‘(d) PREVENTION OF EVASION.—
‘‘(1) IN GENERAL.—The Commission shall prescribe rules
under this section (and issue interpretations of rules prescribed
under this section), as determined by the Commission to be
necessary to prevent evasions of the mandatory clearing
requirements under this Act.
‘‘(2) DUTY OF COMMISSION TO INVESTIGATE AND TAKE CERTAIN ACTIONS.—To the extent the Commission finds that a
particular security-based swap or any group, category, type,
or class of security-based swaps that would otherwise be subject
to mandatory clearing but no clearing agency has listed the
security-based swap or the group, category, type, or class of
security-based swaps for clearing, the Commission shall—
‘‘(A) investigate the relevant facts and circumstances;
‘‘(B) within 30 days issue a public report containing
the results of the investigation; and
‘‘(C) take such actions as the Commission determines
to be necessary and in the public interest, which may
include requiring the retaining of adequate margin or capital by parties to the security-based swap or the group,
category, type, or class of security-based swaps.
‘‘(3) EFFECT ON AUTHORITY.—Nothing in this subsection—
‘‘(A) authorizes the Commission to adopt rules
requiring a clearing agency to list for clearing a securitybased swap or any group, category, type, or class of security-based swaps if the clearing of the security-based swap
or the group, category, type, or class of security-based
swaps would threaten the financial integrity of the clearing
agency; and
‘‘(B) affects the authority of the Commission to enforce
the open access provisions of subsection (a)(2) with respect
to a security-based swap or the group, category, type, or
class of security-based swaps that is listed for clearing
by a clearing agency.

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‘‘(e) REPORTING TRANSITION RULES.—Rules adopted by the
Commission under this section shall provide for the reporting of
data, as follows:
‘‘(1) Security-based swaps entered into before the date of
the enactment of this section shall be reported to a registered
security-based swap data repository or the Commission no later
than 180 days after the effective date of this section.
‘‘(2) Security-based swaps entered into on or after such
date of enactment shall be reported to a registered securitybased swap data repository or the Commission no later than
the later of—
‘‘(A) 90 days after such effective date; or
‘‘(B) such other time after entering into the securitybased swap as the Commission may prescribe by rule or
regulation.
‘‘(f) CLEARING TRANSITION RULES.—
‘‘(1) Security-based swaps entered into before the date of
the enactment of this section are exempt from the clearing
requirements of this subsection if reported pursuant to subsection (e)(1).
‘‘(2) Security-based swaps entered into before application
of the clearing requirement pursuant to this section are exempt
from the clearing requirements of this section if reported pursuant to subsection (e)(2).
‘‘(g) EXCEPTIONS.—
‘‘(1) IN GENERAL.—The requirements of subsection (a)(1)
shall not apply to a security-based swap if 1 of the counterparties to the security-based swap—
‘‘(A) is not a financial entity;
‘‘(B) is using security-based swaps to hedge or mitigate
commercial risk; and
‘‘(C) notifies the Commission, in a manner set forth
by the Commission, how it generally meets its financial
obligations associated with entering into non-cleared security-based swaps.
‘‘(2) OPTION TO CLEAR.—The application of the clearing
exception in paragraph (1) is solely at the discretion of the
counterparty to the security-based swap that meets the conditions of subparagraphs (A) through (C) of paragraph (1).
‘‘(3) FINANCIAL ENTITY DEFINITION.—
‘‘(A) IN GENERAL.—For the purposes of this subsection,
the term ‘financial entity’ means—
‘‘(i) a swap dealer;
‘‘(ii) a security-based swap dealer;
‘‘(iii) a major swap participant;
‘‘(iv) a major security-based swap participant;
‘‘(v) a commodity pool as defined in section 1a(10)
of the Commodity Exchange Act;
‘‘(vi) a private fund as defined in section 202(a)
of the Investment Advisers Act of 1940 (15 U.S.C.
80–b–2(a));
‘‘(vii) an employee benefit plan as defined in paragraphs (3) and (32) of section 3 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002);
‘‘(viii) a person predominantly engaged in activities
that are in the business of banking or financial in

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nature, as defined in section 4(k) of the Bank Holding
Company Act of 1956.
‘‘(B) EXCLUSION.—The Commission shall consider
whether to exempt small banks, savings associations, farm
credit system institutions, and credit unions, including—
‘‘(i) depository institutions with total assets of
$10,000,000,000 or less;
‘‘(ii) farm credit system institutions with total
assets of $10,000,000,000 or less; or
‘‘(iii) credit unions with total assets of
$10,000,000,000 or less.
‘‘(4) TREATMENT OF AFFILIATES.—
‘‘(A) IN GENERAL.—An affiliate of a person that qualifies
for an exception under this subsection (including affiliate
entities predominantly engaged in providing financing for
the purchase of the merchandise or manufactured goods
of the person) may qualify for the exception only if the
affiliate, acting on behalf of the person and as an agent,
uses the security-based swap to hedge or mitigate the
commercial risk of the person or other affiliate of the
person that is not a financial entity.
‘‘(B) PROHIBITION RELATING TO CERTAIN AFFILIATES.—
The exception in subparagraph (A) shall not apply if the
affiliate is—
‘‘(i) a swap dealer;
‘‘(ii) a security-based swap dealer;
‘‘(iii) a major swap participant;
‘‘(iv) a major security-based swap participant;
‘‘(v) an issuer that would be an investment company, as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a–3), but for paragraph
(1) or (7) of subsection (c) of that Act (15 U.S.C. 80a–
3(c));
‘‘(vi) a commodity pool; or
‘‘(vii) a bank holding company with over
$50,000,000,000 in consolidated assets.
‘‘(C) TRANSITION RULE FOR AFFILIATES.—An affiliate,
subsidiary, or a wholly owned entity of a person that qualifies for an exception under subparagraph (A) and is
predominantly engaged in providing financing for the purchase or lease of merchandise or manufactured goods of
the person shall be exempt from the margin requirement
described in section 15F(e) and the clearing requirement
described in subsection (a) with regard to security-based
swaps entered into to mitigate the risk of the financing
activities for not less than a 2-year period beginning on
the date of enactment of this subparagraph.
‘‘(5) ELECTION OF COUNTERPARTY.—
‘‘(A) SECURITY-BASED SWAPS REQUIRED TO BE
CLEARED.—With respect to any security-based swap that
is subject to the mandatory clearing requirement under
subsection (a) and entered into by a security-based swap
dealer or a major security-based swap participant with
a counterparty that is not a swap dealer, major swap
participant, security-based swap dealer, or major securitybased swap participant, the counterparty shall have the

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sole right to select the clearing agency at which the security-based swap will be cleared.
‘‘(B) SECURITY-BASED SWAPS NOT REQUIRED TO BE
CLEARED.—With respect to any security-based swap that
is not subject to the mandatory clearing requirement under
subsection (a) and entered into by a security-based swap
dealer or a major security-based swap participant with
a counterparty that is not a swap dealer, major swap
participant, security-based swap dealer, or major securitybased swap participant, the counterparty—
‘‘(i) may elect to require clearing of the securitybased swap; and
‘‘(ii) shall have the sole right to select the clearing
agency at which the security-based swap will be
cleared.
‘‘(6) ABUSE OF EXCEPTION.—The Commission may prescribe
such rules or issue interpretations of the rules as the Commission determines to be necessary to prevent abuse of the exceptions described in this subsection. The Commission may also
request information from those persons claiming the clearing
exception as necessary to prevent abuse of the exceptions
described in this subsection.
‘‘(h) TRADE EXECUTION.—
‘‘(1) IN GENERAL.—With respect to transactions involving
security-based swaps subject to the clearing requirement of
subsection (a)(1), counterparties shall—
‘‘(A) execute the transaction on an exchange; or
‘‘(B) execute the transaction on a security-based swap
execution facility registered under section 3D or a securitybased swap execution facility that is exempt from registration under section 3D(e).
‘‘(2) EXCEPTION.—The requirements of subparagraphs (A)
and (B) of paragraph (1) shall not apply if no exchange or
security-based swap execution facility makes the security-based
swap available to trade or for security-based swap transactions
subject to the clearing exception under subsection (g).
‘‘(i) BOARD APPROVAL.—Exemptions from the requirements of
this section to clear a security-based swap or execute a securitybased swap through a national securities exchange or securitybased swap execution facility shall be available to a counterparty
that is an issuer of securities that are registered under section
12 or that is required to file reports pursuant to section 15(d),
only if an appropriate committee of the issuer’s board or governing
body has reviewed and approved the issuer’s decision to enter
into security-based swaps that are subject to such exemptions.
‘‘(j) DESIGNATION OF CHIEF COMPLIANCE OFFICER.—
‘‘(1) IN GENERAL.—Each registered clearing agency shall
designate an individual to serve as a chief compliance officer.
‘‘(2) DUTIES.—The chief compliance officer shall—
‘‘(A) report directly to the board or to the senior officer
of the clearing agency;
‘‘(B) in consultation with its board, a body performing
a function similar thereto, or the senior officer of the registered clearing agency, resolve any conflicts of interest
that may arise;

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‘‘(C) be responsible for administering each policy and
procedure that is required to be established pursuant to
this section;
‘‘(D) ensure compliance with this title (including regulations issued under this title) relating to agreements, contracts, or transactions, including each rule prescribed by
the Commission under this section;
‘‘(E) establish procedures for the remediation of noncompliance issues identified by the compliance officer
through any—
‘‘(i) compliance office review;
‘‘(ii) look-back;
‘‘(iii) internal or external audit finding;
‘‘(iv) self-reported error; or
‘‘(v) validated complaint; and
‘‘(F) establish and follow appropriate procedures for
the handling, management response, remediation, retesting, and closing of noncompliance issues.
‘‘(3) ANNUAL REPORTS.—
‘‘(A) IN GENERAL.—In accordance with rules prescribed
by the Commission, the chief compliance officer shall
annually prepare and sign a report that contains a description of—
‘‘(i) the compliance of the registered clearing
agency or security-based swap execution facility of the
compliance officer with respect to this title (including
regulations under this title); and
‘‘(ii) each policy and procedure of the registered
clearing agency of the compliance officer (including
the code of ethics and conflict of interest policies of
the registered clearing agency).
‘‘(B) REQUIREMENTS.—A compliance report under
subparagraph (A) shall—
‘‘(i) accompany each appropriate financial report
of the registered clearing agency that is required to
be furnished to the Commission pursuant to this section; and
‘‘(ii) include a certification that, under penalty of
law, the compliance report is accurate and complete.’’.
(b) CLEARING AGENCY REQUIREMENTS.—Section 17A of the
Securities Exchange Act of 1934 (15 U.S.C. 78q–1) is amended
by adding at the end the following:
‘‘(g) REGISTRATION REQUIREMENT.—It shall be unlawful for a
clearing agency, unless registered with the Commission, directly
or indirectly to make use of the mails or any means or instrumentality of interstate commerce to perform the functions of a clearing
agency with respect to a security-based swap.
‘‘(h) VOLUNTARY REGISTRATION.—A person that clears agreements, contracts, or transactions that are not required to be cleared
under this title may register with the Commission as a clearing
agency.
‘‘(i) STANDARDS FOR CLEARING AGENCIES CLEARING SECURITYBASED SWAP TRANSACTIONS.—To be registered and to maintain
registration as a clearing agency that clears security-based swap
transactions, a clearing agency shall comply with such standards
as the Commission may establish by rule. In establishing any
such standards, and in the exercise of its oversight of such a

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clearing agency pursuant to this title, the Commission may conform
such standards or oversight to reflect evolving United States and
international standards. Except where the Commission determines
otherwise by rule or regulation, a clearing agency shall have reasonable discretion in establishing the manner in which it complies
with any such standards.
‘‘(j) RULES.—The Commission shall adopt rules governing persons that are registered as clearing agencies for security-based
swaps under this title.
‘‘(k) EXEMPTIONS.—The Commission may exempt, conditionally
or unconditionally, a clearing agency from registration under this
section for the clearing of security-based swaps if the Commission
determines that the clearing agency is subject to comparable, comprehensive supervision and regulation by the Commodity Futures
Trading Commission or the appropriate government authorities
in the home country of the agency. Such conditions may include,
but are not limited to, requiring that the clearing agency be available for inspection by the Commission and make available all
information requested by the Commission.
‘‘(l) EXISTING DEPOSITORY INSTITUTIONS AND DERIVATIVE
CLEARING ORGANIZATIONS.—
‘‘(1) IN GENERAL.—A depository institution or derivative
clearing organization registered with the Commodity Futures
Trading Commission under the Commodity Exchange Act that
is required to be registered as a clearing agency under this
section is deemed to be registered under this section solely
for the purpose of clearing security-based swaps to the extent
that, before the date of enactment of this subsection—
‘‘(A) the depository institution cleared swaps as a multilateral clearing organization; or
‘‘(B) the derivative clearing organization cleared swaps
pursuant to an exemption from registration as a clearing
agency.
‘‘(2) CONVERSION OF DEPOSITORY INSTITUTIONS.—A depository institution to which this subsection applies may, by the
vote of the shareholders owning not less than 51 percent of
the voting interests of the depository institution, be converted
into a State corporation, partnership, limited liability company,
or similar legal form pursuant to a plan of conversion, if the
conversion is not in contravention of applicable State law.
‘‘(3) SHARING OF INFORMATION.—The Commodity Futures
Trading Commission shall make available to the Commission,
upon request, all information determined to be relevant by
the Commodity Futures Trading Commission regarding a
derivatives clearing organization deemed to be registered with
the Commission under paragraph (1).
‘‘(m) MODIFICATION OF CORE PRINCIPLES.—The Commission
may conform the core principles established in this section to reflect
evolving United States and international standards.’’.
(c) SECURITY-BASED SWAP EXECUTION FACILITIES.—The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended
by inserting after section 3C (as added by subsection (a) of this
section) the following:
‘‘SEC. 3D. SECURITY-BASED SWAP EXECUTION FACILITIES.

‘‘(a) REGISTRATION.—

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‘‘(1) IN GENERAL.—No person may operate a facility for
the trading or processing of security-based swaps, unless the
facility is registered as a security-based swap execution facility
or as a national securities exchange under this section.
‘‘(2) DUAL REGISTRATION.—Any person that is registered
as a security-based swap execution facility under this section
shall register with the Commission regardless of whether the
person also is registered with the Commodity Futures Trading
Commission as a swap execution facility.
‘‘(b) TRADING AND TRADE PROCESSING.—A security-based swap
execution facility that is registered under subsection (a) may—
‘‘(1) make available for trading any security-based swap;
and
‘‘(2) facilitate trade processing of any security-based swap.
‘‘(c) IDENTIFICATION OF FACILITY USED TO TRADE SECURITYBASED SWAPS BY NATIONAL SECURITIES EXCHANGES.—A national
securities exchange shall, to the extent that the exchange also
operates a security-based swap execution facility and uses the same
electronic trade execution system for listing and executing trades
of security-based swaps on or through the exchange and the facility,
identify whether electronic trading of such security-based swaps
is taking place on or through the national securities exchange
or the security-based swap execution facility.
‘‘(d) CORE PRINCIPLES FOR SECURITY-BASED SWAP EXECUTION
FACILITIES.—
‘‘(1) COMPLIANCE WITH CORE PRINCIPLES.—
‘‘(A) IN GENERAL.—To be registered, and maintain registration, as a security-based swap execution facility, the
security-based swap execution facility shall comply with—
‘‘(i) the core principles described in this subsection;
and
‘‘(ii) any requirement that the Commission may
impose by rule or regulation.
‘‘(B) REASONABLE DISCRETION OF SECURITY-BASED SWAP
EXECUTION FACILITY.—Unless otherwise determined by the
Commission, by rule or regulation, a security-based swap
execution facility described in subparagraph (A) shall have
reasonable discretion in establishing the manner in which
it complies with the core principles described in this subsection.
‘‘(2) COMPLIANCE WITH RULES.—A security-based swap
execution facility shall—
‘‘(A) establish and enforce compliance with any rule
established by such security-based swap execution facility,
including—
‘‘(i) the terms and conditions of the security-based
swaps traded or processed on or through the facility;
and
‘‘(ii) any limitation on access to the facility;
‘‘(B) establish and enforce trading, trade processing,
and participation rules that will deter abuses and have
the capacity to detect, investigate, and enforce those rules,
including means—
‘‘(i) to provide market participants with impartial
access to the market; and
‘‘(ii) to capture information that may be used in
establishing whether rule violations have occurred; and

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‘‘(C) establish rules governing the operation of the
facility, including rules specifying trading procedures to
be used in entering and executing orders traded or posted
on the facility, including block trades.
‘‘(3) SECURITY-BASED SWAPS NOT READILY SUSCEPTIBLE TO
MANIPULATION.—The security-based swap execution facility
shall permit trading only in security-based swaps that are
not readily susceptible to manipulation.
‘‘(4) MONITORING OF TRADING AND TRADE PROCESSING.—
The security-based swap execution facility shall—
‘‘(A) establish and enforce rules or terms and conditions
defining, or specifications detailing—
‘‘(i) trading procedures to be used in entering and
executing orders traded on or through the facilities
of the security-based swap execution facility; and
‘‘(ii) procedures for trade processing of securitybased swaps on or through the facilities of the securitybased swap execution facility; and
‘‘(B) monitor trading in security-based swaps to prevent
manipulation, price distortion, and disruptions of the
delivery or cash settlement process through surveillance,
compliance, and disciplinary practices and procedures,
including methods for conducting real-time monitoring of
trading and comprehensive and accurate trade reconstructions.
‘‘(5) ABILITY TO OBTAIN INFORMATION.—The security-based
swap execution facility shall—
‘‘(A) establish and enforce rules that will allow the
facility to obtain any necessary information to perform
any of the functions described in this subsection;
‘‘(B) provide the information to the Commission on
request; and
‘‘(C) have the capacity to carry out such international
information-sharing agreements as the Commission may
require.
‘‘(6) FINANCIAL INTEGRITY OF TRANSACTIONS.—The securitybased swap execution facility shall establish and enforce rules
and procedures for ensuring the financial integrity of securitybased swaps entered on or through the facilities of the securitybased swap execution facility, including the clearance and
settlement of security-based swaps pursuant to section 3C(a)(1).
‘‘(7) EMERGENCY AUTHORITY.—The security-based swap
execution facility shall adopt rules to provide for the exercise
of emergency authority, in consultation or cooperation with
the Commission, as is necessary and appropriate, including
the authority to liquidate or transfer open positions in any
security-based swap or to suspend or curtail trading in a security-based swap.
‘‘(8) TIMELY PUBLICATION OF TRADING INFORMATION.—
‘‘(A) IN GENERAL.—The security-based swap execution
facility shall make public timely information on price,
trading volume, and other trading data on security-based
swaps to the extent prescribed by the Commission.
‘‘(B) CAPACITY OF SECURITY-BASED SWAP EXECUTION
FACILITY.—The security-based swap execution facility shall
be required to have the capacity to electronically capture

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and transmit and disseminate trade information with
respect to transactions executed on or through the facility.
‘‘(9) RECORDKEEPING AND REPORTING.—
‘‘(A) IN GENERAL.—A security-based swap execution
facility shall—
‘‘(i) maintain records of all activities relating to
the business of the facility, including a complete audit
trail, in a form and manner acceptable to the Commission for a period of 5 years; and
‘‘(ii) report to the Commission, in a form and
manner acceptable to the Commission, such information as the Commission determines to be necessary
or appropriate for the Commission to perform the
duties of the Commission under this title.
‘‘(B) REQUIREMENTS.—The Commission shall adopt
data collection and reporting requirements for securitybased swap execution facilities that are comparable to corresponding requirements for clearing agencies and securitybased swap data repositories.
‘‘(10) ANTITRUST CONSIDERATIONS.—Unless necessary or
appropriate to achieve the purposes of this title, the securitybased swap execution facility shall not—
‘‘(A) adopt any rules or taking any actions that result
in any unreasonable restraint of trade; or
‘‘(B) impose any material anticompetitive burden on
trading or clearing.
‘‘(11) CONFLICTS OF INTEREST.—The security-based swap
execution facility shall—
‘‘(A) establish and enforce rules to minimize conflicts
of interest in its decision-making process; and
‘‘(B) establish a process for resolving the conflicts of
interest.
‘‘(12) FINANCIAL RESOURCES.—
‘‘(A) IN GENERAL.—The security-based swap execution
facility shall have adequate financial, operational, and
managerial resources to discharge each responsibility of
the security-based swap execution facility, as determined
by the Commission.
‘‘(B) DETERMINATION OF RESOURCE ADEQUACY.—The
financial resources of a security-based swap execution
facility shall be considered to be adequate if the value
of the financial resources—
‘‘(i) enables the organization to meet its financial
obligations to its members and participants notwithstanding a default by the member or participant creating the largest financial exposure for that organization in extreme but plausible market conditions; and
‘‘(ii) exceeds the total amount that would enable
the security-based swap execution facility to cover the
operating costs of the security-based swap execution
facility for a 1-year period, as calculated on a rolling
basis.
‘‘(13) SYSTEM SAFEGUARDS.—The security-based swap
execution facility shall—

H. R. 4173—398
‘‘(A) establish and maintain a program of risk analysis
and oversight to identify and minimize sources of operational risk, through the development of appropriate controls and procedures, and automated systems, that—
‘‘(i) are reliable and secure; and
‘‘(ii) have adequate scalable capacity;
‘‘(B) establish and maintain emergency procedures,
backup facilities, and a plan for disaster recovery that
allow for—
‘‘(i) the timely recovery and resumption of operations; and
‘‘(ii) the fulfillment of the responsibilities and
obligations of the security-based swap execution
facility; and
‘‘(C) periodically conduct tests to verify that the backup
resources of the security-based swap execution facility are
sufficient to ensure continued—
‘‘(i) order processing and trade matching;
‘‘(ii) price reporting;
‘‘(iii) market surveillance; and
‘‘(iv) maintenance of a comprehensive and accurate
audit trail.
‘‘(14) DESIGNATION OF CHIEF COMPLIANCE OFFICER.—
‘‘(A) IN GENERAL.—Each security-based swap execution
facility shall designate an individual to serve as a chief
compliance officer.
‘‘(B) DUTIES.—The chief compliance officer shall—
‘‘(i) report directly to the board or to the senior
officer of the facility;
‘‘(ii) review compliance with the core principles
in this subsection;
‘‘(iii) in consultation with the board of the facility,
a body performing a function similar to that of a board,
or the senior officer of the facility, resolve any conflicts
of interest that may arise;
‘‘(iv) be responsible for establishing and administering the policies and procedures required to be
established pursuant to this section;
‘‘(v) ensure compliance with this title and the rules
and regulations issued under this title, including rules
prescribed by the Commission pursuant to this section;
‘‘(vi) establish procedures for the remediation of
noncompliance issues found during—
‘‘(I) compliance office reviews;
‘‘(II) look backs;
‘‘(III) internal or external audit findings;
‘‘(IV) self-reported errors; or
‘‘(V) through validated complaints; and
‘‘(vii) establish and follow appropriate procedures
for the handling, management response, remediation,
retesting, and closing of noncompliance issues.
‘‘(C) ANNUAL REPORTS.—
‘‘(i) IN GENERAL.—In accordance with rules prescribed by the Commission, the chief compliance officer
shall annually prepare and sign a report that contains
a description of—

H. R. 4173—399
‘‘(I) the compliance of the security-based swap
execution facility with this title; and
‘‘(II) the policies and procedures, including the
code of ethics and conflict of interest policies, of
the security-based security-based swap execution
facility.
‘‘(ii) REQUIREMENTS.—The chief compliance officer
shall—
‘‘(I) submit each report described in clause
(i) with the appropriate financial report of the
security-based swap execution facility that is
required to be submitted to the Commission pursuant to this section; and
‘‘(II) include in the report a certification that,
under penalty of law, the report is accurate and
complete.
‘‘(e) EXEMPTIONS.—The Commission may exempt, conditionally
or unconditionally, a security-based swap execution facility from
registration under this section if the Commission finds that the
facility is subject to comparable, comprehensive supervision and
regulation on a consolidated basis by the Commodity Futures
Trading Commission.
‘‘(f) RULES.—The Commission shall prescribe rules governing
the regulation of security-based swap execution facilities under
this section.’’.
(d) SEGREGATION OF ASSETS HELD AS COLLATERAL IN SECURITYBASED SWAP TRANSACTIONS.—The Securities Exchange Act of 1934
(15 U.S.C. 78a et seq.) is amended by inserting after section 3D
(as added by subsection (b)) the following:
‘‘SEC. 3E. SEGREGATION OF ASSETS HELD AS COLLATERAL IN SECURITY-BASED SWAP TRANSACTIONS.

‘‘(a) REGISTRATION REQUIREMENT.—It shall be unlawful for any
person to accept any money, securities, or property (or to extend
any credit in lieu of money, securities, or property) from, for, or
on behalf of a security-based swaps customer to margin, guarantee,
or secure a security-based swap cleared by or through a clearing
agency (including money, securities, or property accruing to the
customer as the result of such a security-based swap), unless the
person shall have registered under this title with the Commission
as a broker, dealer, or security-based swap dealer, and the registration shall not have expired nor been suspended nor revoked.
‘‘(b) CLEARED SECURITY-BASED SWAPS.—
‘‘(1) SEGREGATION REQUIRED.—A broker, dealer, or securitybased swap dealer shall treat and deal with all money, securities, and property of any security-based swaps customer
received to margin, guarantee, or secure a security-based swap
cleared by or though a clearing agency (including money, securities, or property accruing to the security-based swaps customer
as the result of such a security-based swap) as belonging to
the security-based swaps customer.
‘‘(2) COMMINGLING PROHIBITED.—Money, securities, and
property of a security-based swaps customer described in paragraph (1) shall be separately accounted for and shall not be
commingled with the funds of the broker, dealer, or securitybased swap dealer or be used to margin, secure, or guarantee

H. R. 4173—400
any trades or contracts of any security-based swaps customer
or person other than the person for whom the same are held.
‘‘(c) EXCEPTIONS.—
‘‘(1) USE OF FUNDS.—
‘‘(A) IN GENERAL.—Notwithstanding subsection (b),
money, securities, and property of a security-based swaps
customer of a broker, dealer, or security-based swap dealer
described in subsection (b) may, for convenience, be
commingled and deposited in the same 1 or more accounts
with any bank or trust company or with a clearing agency.
‘‘(B) WITHDRAWAL.—Notwithstanding subsection (b),
such share of the money, securities, and property described
in subparagraph (A) as in the normal course of business
shall be necessary to margin, guarantee, secure, transfer,
adjust, or settle a cleared security-based swap with a
clearing agency, or with any member of the clearing agency,
may be withdrawn and applied to such purposes, including
the payment of commissions, brokerage, interest, taxes,
storage, and other charges, lawfully accruing in connection
with the cleared security-based swap.
‘‘(2) COMMISSION ACTION.—Notwithstanding subsection (b),
in accordance with such terms and conditions as the Commission may prescribe by rule, regulation, or order, any money,
securities, or property of the security-based swaps customer
of a broker, dealer, or security-based swap dealer described
in subsection (b) may be commingled and deposited as provided
in this section with any other money, securities, or property
received by the broker, dealer, or security-based swap dealer
and required by the Commission to be separately accounted
for and treated and dealt with as belonging to the securitybased swaps customer of the broker, dealer, or security-based
swap dealer.
‘‘(d) PERMITTED INVESTMENTS.—Money described in subsection
(b) may be invested in obligations of the United States, in general
obligations of any State or of any political subdivision of a State,
and in obligations fully guaranteed as to principal and interest
by the United States, or in any other investment that the Commission may by rule or regulation prescribe, and such investments
shall be made in accordance with such rules and regulations and
subject to such conditions as the Commission may prescribe.
‘‘(e) PROHIBITION.—It shall be unlawful for any person,
including any clearing agency and any depository institution, that
has received any money, securities, or property for deposit in a
separate account or accounts as provided in subsection (b) to hold,
dispose of, or use any such money, securities, or property as
belonging to the depositing broker, dealer, or security-based swap
dealer or any person other than the swaps customer of the broker,
dealer, or security-based swap dealer.
‘‘(f) SEGREGATION REQUIREMENTS FOR UNCLEARED SECURITYBASED SWAPS.—
‘‘(1) SEGREGATION OF ASSETS HELD AS COLLATERAL IN
UNCLEARED SECURITY-BASED SWAP TRANSACTIONS.—
‘‘(A) NOTIFICATION.—A security-based swap dealer or
major security-based swap participant shall be required
to notify the counterparty of the security-based swap dealer
or major security-based swap participant at the beginning
of a security-based swap transaction that the counterparty

H. R. 4173—401
has the right to require segregation of the funds of other
property supplied to margin, guarantee, or secure the
obligations of the counterparty.
‘‘(B) SEGREGATION AND MAINTENANCE OF FUNDS.—At
the request of a counterparty to a security-based swap
that provides funds or other property to a security-based
swap dealer or major security-based swap participant to
margin, guarantee, or secure the obligations of the
counterparty, the security-based swap dealer or major security-based swap participant shall—
‘‘(i) segregate the funds or other property for the
benefit of the counterparty; and
‘‘(ii) in accordance with such rules and regulations
as the Commission may promulgate, maintain the
funds or other property in a segregated account separate from the assets and other interests of the securitybased swap dealer or major security-based swap
participant.
‘‘(2) APPLICABILITY.—The requirements described in paragraph (1) shall—
‘‘(A) apply only to a security-based swap between a
counterparty and a security-based swap dealer or major
security-based swap participant that is not submitted for
clearing to a clearing agency; and
‘‘(B)(i) not apply to variation margin payments; or
‘‘(ii) not preclude any commercial arrangement
regarding—
‘‘(I) the investment of segregated funds or other
property that may only be invested in such investments
as the Commission may permit by rule or regulation;
and
‘‘(II) the related allocation of gains and losses
resulting from any investment of the segregated funds
or other property.
‘‘(3) USE OF INDEPENDENT THIRD-PARTY CUSTODIANS.—The
segregated account described in paragraph (1) shall be—
‘‘(A) carried by an independent third-party custodian;
and
‘‘(B) designated as a segregated account for and on
behalf of the counterparty.
‘‘(4) REPORTING REQUIREMENT.—If the counterparty does
not choose to require segregation of the funds or other property
supplied to margin, guarantee, or secure the obligations of
the counterparty, the security-based swap dealer or major security-based swap participant shall report to the counterparty
of the security-based swap dealer or major security-based swap
participant on a quarterly basis that the back office procedures
of the security-based swap dealer or major security-based swap
participant relating to margin and collateral requirements are
in compliance with the agreement of the counterparties.
‘‘(g) BANKRUPTCY.—A security-based swap, as defined in section
3(a)(68) shall be considered to be a security as such term is used
in section 101(53A)(B) and subchapter III of title 11, United States
Code. An account that holds a security-based swap, other than
a portfolio margining account referred to in section 15(c)(3)(C) shall
be considered to be a securities account, as that term is defined
in section 741 of title 11, United States Code. The definitions

H. R. 4173—402
of the terms ‘purchase’ and ‘sale’ in section 3(a)(13) and (14) shall
be applied to the terms ‘purchase’ and ‘sale’, as used in section
741 of title 11, United States Code. The term ‘customer’, as defined
in section 741 of title 11, United States Code, excludes any person,
to the extent that such person has a claim based on any open
repurchase agreement, open reverse repurchase agreement, stock
borrowed agreement, non-cleared option, or non-cleared securitybased swap except to the extent of any margin delivered to or
by the customer with respect to which there is a customer protection
requirement under section 15(c)(3) or a segregation requirement.’’.
(e) TRADING IN SECURITY-BASED SWAPS.—Section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by adding
at the end the following:
‘‘(l) SECURITY-BASED SWAPS.—It shall be unlawful for any person to effect a transaction in a security-based swap with or for
a person that is not an eligible contract participant, unless such
transaction is effected on a national securities exchange registered
pursuant to subsection (b).’’.
(f) ADDITIONS OF SECURITY-BASED SWAPS TO CERTAIN ENFORCEMENT PROVISIONS.—Section 9(b) of the Securities Exchange Act
of 1934 (15 U.S.C. 78i(b)) is amended by striking paragraphs (1)
through (3) and inserting the following:
‘‘(1) any transaction in connection with any security
whereby any party to such transaction acquires—
‘‘(A) any put, call, straddle, or other option or privilege
of buying the security from or selling the security to
another without being bound to do so;
‘‘(B) any security futures product on the security; or
‘‘(C) any security-based swap involving the security
or the issuer of the security;
‘‘(2) any transaction in connection with any security with
relation to which such person has, directly or indirectly, any
interest in any—
‘‘(A) such put, call, straddle, option, or privilege;
‘‘(B) such security futures product; or
‘‘(C) such security-based swap; or
‘‘(3) any transaction in any security for the account of
any person who such person has reason to believe has, and
who actually has, directly or indirectly, any interest in any—
‘‘(A) such put, call, straddle, option, or privilege;
‘‘(B) such security futures product with relation to such
security; or
‘‘(C) any security-based swap involving such security
or the issuer of such security.’’.
(g) RULEMAKING AUTHORITY TO PREVENT FRAUD, MANIPULATION AND DECEPTIVE CONDUCT IN SECURITY-BASED SWAPS.—Section
9 of the Securities Exchange Act of 1934 (15 U.S.C. 78i) is amended
by adding at the end the following:
‘‘(j) It shall be unlawful for any person, directly or indirectly,
by the use of any means or instrumentality of interstate commerce
or of the mails, or of any facility of any national securities exchange,
to effect any transaction in, or to induce or attempt to induce
the purchase or sale of, any security-based swap, in connection
with which such person engages in any fraudulent, deceptive, or
manipulative act or practice, makes any fictitious quotation, or
engages in any transaction, practice, or course of business which
operates as a fraud or deceit upon any person. The Commission

H. R. 4173—403
shall, for the purposes of this subsection, by rules and regulations
define, and prescribe means reasonably designed to prevent, such
transactions, acts, practices, and courses of business as are fraudulent, deceptive, or manipulative, and such quotations as are fictitious.’’.
(h) POSITION LIMITS AND POSITION ACCOUNTABILITY FOR SECURITY-BASED SWAPS.—The Securities Exchange Act of 1934 is
amended by inserting after section 10A (15 U.S.C. 78j–1) the following:
‘‘SEC. 10B. POSITION LIMITS AND POSITION ACCOUNTABILITY FOR
SECURITY-BASED SWAPS AND LARGE TRADER REPORTING.

‘‘(a) POSITION LIMITS.—As a means reasonably designed to prevent fraud and manipulation, the Commission shall, by rule or
regulation, as necessary or appropriate in the public interest or
for the protection of investors, establish limits (including related
hedge exemption provisions) on the size of positions in any securitybased swap that may be held by any person. In establishing such
limits, the Commission may require any person to aggregate positions in—
‘‘(1) any security-based swap and any security or loan or
group of securities or loans on which such security-based swap
is based, which such security-based swap references, or to which
such security-based swap is related as described in paragraph
(68) of section 3(a), and any other instrument relating to such
security or loan or group or index of securities or loans; or
‘‘(2) any security-based swap and—
‘‘(A) any security or group or index of securities, the
price, yield, value, or volatility of which, or of which any
interest therein, is the basis for a material term of such
security-based swap as described in paragraph (68) of section 3(a); and
‘‘(B) any other instrument relating to the same security
or group or index of securities described under subparagraph (A).
‘‘(b) EXEMPTIONS.—The Commission, by rule, regulation, or
order, may conditionally or unconditionally exempt any person or
class of persons, any security-based swap or class of security-based
swaps, or any transaction or class of transactions from any requirement the Commission may establish under this section with respect
to position limits.
‘‘(c) SRO RULES.—
‘‘(1) IN GENERAL.—As a means reasonably designed to prevent fraud or manipulation, the Commission, by rule, regulation, or order, as necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance
of the purposes of this title, may direct a self-regulatory
organization—
‘‘(A) to adopt rules regarding the size of positions in
any security-based swap that may be held by—
‘‘(i) any member of such self-regulatory organization; or
‘‘(ii) any person for whom a member of such selfregulatory organization effects transactions in such
security-based swap; and

H. R. 4173—404
‘‘(B) to adopt rules reasonably designed to ensure
compliance with requirements prescribed by the Commission under this subsection.
‘‘(2) REQUIREMENT TO AGGREGATE POSITIONS.—In establishing the limits under paragraph (1), the self-regulatory
organization may require such member or person to aggregate
positions in—
‘‘(A) any security-based swap and any security or loan
or group or narrow-based security index of securities or
loans on which such security-based swap is based, which
such security-based swap references, or to which such security-based swap is related as described in section 3(a)(68),
and any other instrument relating to such security or loan
or group or narrow-based security index of securities or
loans; or
‘‘(B)(i) any security-based swap; and
‘‘(ii) any security-based swap and any other instrument
relating to the same security or group or narrow-based
security index of securities.
‘‘(d) LARGE TRADER REPORTING.—The Commission, by rule or
regulation, may require any person that effects transactions for
such person’s own account or the account of others in any securitiesbased swap or uncleared security-based swap and any security
or loan or group or narrow-based security index of securities or
loans as set forth in paragraphs (1) and (2) of subsection (a) under
this section to report such information as the Commission may
prescribe regarding any position or positions in any security-based
swap or uncleared security-based swap and any security or loan
or group or narrow-based security index of securities or loans and
any other instrument relating to such security or loan or group
or narrow-based security index of securities or loans as set forth
in paragraphs (1) and (2) of subsection (a) under this section.’’.
(i) PUBLIC REPORTING AND REPOSITORIES FOR SECURITY-BASED
SWAPS.—Section 13 of the Securities Exchange Act of 1934 (15
U.S.C. 78m) is amended by adding at the end the following:
‘‘(m) PUBLIC AVAILABILITY OF SECURITY-BASED SWAP TRANSACTION DATA.—
‘‘(1) IN GENERAL.—
‘‘(A) DEFINITION OF REAL-TIME PUBLIC REPORTING.—
In this paragraph, the term ‘real-time public reporting’
means to report data relating to a security-based swap
transaction, including price and volume, as soon as technologically practicable after the time at which the securitybased swap transaction has been executed.
‘‘(B) PURPOSE.—The purpose of this subsection is to
authorize the Commission to make security-based swap
transaction and pricing data available to the public in
such form and at such times as the Commission determines
appropriate to enhance price discovery.
‘‘(C) GENERAL RULE.—The Commission is authorized
to provide by rule for the public availability of securitybased swap transaction, volume, and pricing data as follows:
‘‘(i) With respect to those security-based swaps
that are subject to the mandatory clearing requirement
described in section 3C(a)(1) (including those securitybased swaps that are excepted from the requirement

H. R. 4173—405
pursuant to section 3C(g)), the Commission shall
require real-time public reporting for such transactions.
‘‘(ii) With respect to those security-based swaps
that are not subject to the mandatory clearing requirement described in section 3C(a)(1), but are cleared
at a registered clearing agency, the Commission shall
require real-time public reporting for such transactions.
‘‘(iii) With respect to security-based swaps that
are not cleared at a registered clearing agency and
which are reported to a security-based swap data
repository or the Commission under section 3C(a)(6),
the Commission shall require real-time public
reporting for such transactions, in a manner that does
not disclose the business transactions and market positions of any person.
‘‘(iv) With respect to security-based swaps that
are determined to be required to be cleared under
section 3C(b) but are not cleared, the Commission shall
require real-time public reporting for such transactions.
‘‘(D) REGISTERED ENTITIES AND PUBLIC REPORTING.—
The Commission may require registered entities to publicly
disseminate the security-based swap transaction and
pricing data required to be reported under this paragraph.
‘‘(E) RULEMAKING REQUIRED.—With respect to the rule
providing for the public availability of transaction and
pricing data for security-based swaps described in clauses
(i) and (ii) of subparagraph (C), the rule promulgated by
the Commission shall contain provisions—
‘‘(i) to ensure such information does not identify
the participants;
‘‘(ii) to specify the criteria for determining what
constitutes a large notional security-based swap transaction (block trade) for particular markets and contracts;
‘‘(iii) to specify the appropriate time delay for
reporting large notional security-based swap transactions (block trades) to the public; and
‘‘(iv) that take into account whether the public
disclosure will materially reduce market liquidity.
‘‘(F) TIMELINESS OF REPORTING.—Parties to a securitybased swap (including agents of the parties to a securitybased swap) shall be responsible for reporting securitybased swap transaction information to the appropriate registered entity in a timely manner as may be prescribed
by the Commission.
‘‘(G) REPORTING OF SWAPS TO REGISTERED SECURITYBASED SWAP DATA REPOSITORIES.—Each security-based
swap (whether cleared or uncleared) shall be reported to
a registered security-based swap data repository.
‘‘(H) REGISTRATION OF CLEARING AGENCIES.—A clearing
agency may register as a security-based swap data repository.
‘‘(2) SEMIANNUAL AND ANNUAL PUBLIC REPORTING OF AGGREGATE SECURITY-BASED SWAP DATA.—

H. R. 4173—406
‘‘(A) IN GENERAL.—In accordance with subparagraph
(B), the Commission shall issue a written report on a
semiannual and annual basis to make available to the
public information relating to—
‘‘(i) the trading and clearing in the major securitybased swap categories; and
‘‘(ii) the market participants and developments in
new products.
‘‘(B) USE; CONSULTATION.—In preparing a report under
subparagraph (A), the Commission shall—
‘‘(i) use information from security-based swap data
repositories and clearing agencies; and
‘‘(ii) consult with the Office of the Comptroller
of the Currency, the Bank for International Settlements, and such other regulatory bodies as may be
necessary.
‘‘(C) AUTHORITY OF COMMISSION.—The Commission
may, by rule, regulation, or order, delegate the public
reporting responsibilities of the Commission under this
paragraph in accordance with such terms and conditions
as the Commission determines to be appropriate and in
the public interest.
‘‘(n) SECURITY-BASED SWAP DATA REPOSITORIES.—
‘‘(1) REGISTRATION REQUIREMENT.—It shall be unlawful for
any person, unless registered with the Commission, directly
or indirectly, to make use of the mails or any means or
instrumentality of interstate commerce to perform the functions
of a security-based swap data repository.
‘‘(2) INSPECTION AND EXAMINATION.—Each registered security-based swap data repository shall be subject to inspection
and examination by any representative of the Commission.
‘‘(3) COMPLIANCE WITH CORE PRINCIPLES.—
‘‘(A) IN GENERAL.—To be registered, and maintain registration, as a security-based swap data repository, the
security-based swap data repository shall comply with—
‘‘(i) the requirements and core principles described
in this subsection; and
‘‘(ii) any requirement that the Commission may
impose by rule or regulation.
‘‘(B) REASONABLE DISCRETION OF SECURITY-BASED SWAP
DATA REPOSITORY.—Unless otherwise determined by the
Commission, by rule or regulation, a security-based swap
data repository described in subparagraph (A) shall have
reasonable discretion in establishing the manner in which
the security-based swap data repository complies with the
core principles described in this subsection.
‘‘(4) STANDARD SETTING.—
‘‘(A) DATA IDENTIFICATION.—
‘‘(i) IN GENERAL.—In accordance with clause (ii),
the Commission shall prescribe standards that specify
the data elements for each security-based swap that
shall be collected and maintained by each registered
security-based swap data repository.
‘‘(ii) REQUIREMENT.—In carrying out clause (i), the
Commission shall prescribe consistent data element
standards applicable to registered entities and
reporting counterparties.

H. R. 4173—407
‘‘(B) DATA COLLECTION AND MAINTENANCE.—The
Commission shall prescribe data collection and data
maintenance standards for security-based swap data repositories.
‘‘(C) COMPARABILITY.—The standards prescribed by the
Commission under this subsection shall be comparable to
the data standards imposed by the Commission on clearing
agencies in connection with their clearing of security-based
swaps.
‘‘(5) DUTIES.—A security-based swap data repository shall—
‘‘(A) accept data prescribed by the Commission for each
security-based swap under subsection (b);
‘‘(B) confirm with both counterparties to the securitybased swap the accuracy of the data that was submitted;
‘‘(C) maintain the data described in subparagraph (A)
in such form, in such manner, and for such period as
may be required by the Commission;
‘‘(D)(i) provide direct electronic access to the Commission (or any designee of the Commission, including another
registered entity); and
‘‘(ii) provide the information described in subparagraph
(A) in such form and at such frequency as the Commission
may require to comply with the public reporting requirements set forth in subsection (m);
‘‘(E) at the direction of the Commission, establish automated systems for monitoring, screening, and analyzing
security-based swap data;
‘‘(F) maintain the privacy of any and all security-based
swap transaction information that the security-based swap
data repository receives from a security-based swap dealer,
counterparty, or any other registered entity; and
‘‘(G) on a confidential basis pursuant to section 24,
upon request, and after notifying the Commission of the
request, make available all data obtained by the securitybased swap data repository, including individual
counterparty trade and position data, to—
‘‘(i) each appropriate prudential regulator;
‘‘(ii) the Financial Stability Oversight Council;
‘‘(iii) the Commodity Futures Trading Commission;
‘‘(iv) the Department of Justice; and
‘‘(v) any other person that the Commission determines to be appropriate, including—
‘‘(I) foreign financial supervisors (including foreign futures authorities);
‘‘(II) foreign central banks; and
‘‘(III) foreign ministries.
‘‘(H) CONFIDENTIALITY AND INDEMNIFICATION AGREEMENT.—Before the security-based swap data repository may
share information with any entity described in subparagraph (G)—
‘‘(i) the security-based swap data repository shall
receive a written agreement from each entity stating
that the entity shall abide by the confidentiality
requirements described in section 24 relating to the
information on security-based swap transactions that
is provided; and

H. R. 4173—408
‘‘(ii) each entity shall agree to indemnify the security-based swap data repository and the Commission
for any expenses arising from litigation relating to
the information provided under section 24.
‘‘(6) DESIGNATION OF CHIEF COMPLIANCE OFFICER.—
‘‘(A) IN GENERAL.—Each security-based swap data
repository shall designate an individual to serve as a chief
compliance officer.
‘‘(B) DUTIES.—The chief compliance officer shall—
‘‘(i) report directly to the board or to the senior
officer of the security-based swap data repository;
‘‘(ii) review the compliance of the security-based
swap data repository with respect to the requirements
and core principles described in this subsection;
‘‘(iii) in consultation with the board of the securitybased swap data repository, a body performing a function similar to the board of the security-based swap
data repository, or the senior officer of the securitybased swap data repository, resolve any conflicts of
interest that may arise;
‘‘(iv) be responsible for administering each policy
and procedure that is required to be established pursuant to this section;
‘‘(v) ensure compliance with this title (including
regulations) relating to agreements, contracts, or transactions, including each rule prescribed by the Commission under this section;
‘‘(vi) establish procedures for the remediation of
noncompliance issues identified by the chief compliance
officer through any—
‘‘(I) compliance office review;
‘‘(II) look-back;
‘‘(III) internal or external audit finding;
‘‘(IV) self-reported error; or
‘‘(V) validated complaint; and
‘‘(vii) establish and follow appropriate procedures
for the handling, management response, remediation,
retesting, and closing of noncompliance issues.
‘‘(C) ANNUAL REPORTS.—
‘‘(i) IN GENERAL.—In accordance with rules prescribed by the Commission, the chief compliance officer
shall annually prepare and sign a report that contains
a description of—
‘‘(I) the compliance of the security-based swap
data repository of the chief compliance officer with
respect to this title (including regulations); and
‘‘(II) each policy and procedure of the securitybased swap data repository of the chief compliance
officer (including the code of ethics and conflict
of interest policies of the security-based swap data
repository).
‘‘(ii) REQUIREMENTS.—A compliance report under
clause (i) shall—
‘‘(I) accompany each appropriate financial
report of the security-based swap data repository
that is required to be furnished to the Commission
pursuant to this section; and

H. R. 4173—409
‘‘(II) include a certification that, under penalty
of law, the compliance report is accurate and complete.
‘‘(7) CORE PRINCIPLES APPLICABLE TO SECURITY-BASED SWAP
DATA REPOSITORIES.—
‘‘(A) ANTITRUST CONSIDERATIONS.—Unless necessary or
appropriate to achieve the purposes of this title, the swap
data repository shall not—
‘‘(i) adopt any rule or take any action that results
in any unreasonable restraint of trade; or
‘‘(ii) impose any material anticompetitive burden
on the trading, clearing, or reporting of transactions.
‘‘(B) GOVERNANCE ARRANGEMENTS.—Each securitybased swap data repository shall establish governance
arrangements that are transparent—
‘‘(i) to fulfill public interest requirements; and
‘‘(ii) to support the objectives of the Federal
Government, owners, and participants.
‘‘(C) CONFLICTS OF INTEREST.—Each security-based
swap data repository shall—
‘‘(i) establish and enforce rules to minimize conflicts of interest in the decision-making process of the
security-based swap data repository; and
‘‘(ii) establish a process for resolving any conflicts
of interest described in clause (i).
‘‘(D) ADDITIONAL DUTIES DEVELOPED BY COMMISSION.—
‘‘(i) IN GENERAL.—The Commission may develop
1 or more additional duties applicable to security-based
swap data repositories.
‘‘(ii) CONSIDERATION OF EVOLVING STANDARDS.—In
developing additional duties under subparagraph (A),
the Commission may take into consideration any
evolving standard of the United States or the international community.
‘‘(iii) ADDITIONAL DUTIES FOR COMMISSION DESIGNEES.—The Commission shall establish additional
duties for any registrant described in section
13(m)(2)(C) in order to minimize conflicts of interest,
protect data, ensure compliance, and guarantee the
safety and security of the security-based swap data
repository.
‘‘(8) REQUIRED REGISTRATION FOR SECURITY-BASED SWAP
DATA REPOSITORIES.—Any person that is required to be registered as a security-based swap data repository under this
subsection shall register with the Commission, regardless of
whether that person is also licensed under the Commodity
Exchange Act as a swap data repository.
‘‘(9) RULES.—The Commission shall adopt rules governing
persons that are registered under this subsection.’’.
SEC. 764. REGISTRATION AND REGULATION OF SECURITY-BASED SWAP
DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS.

(a) IN GENERAL.—The Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.) is amended by inserting after section 15E
(15 U.S.C. 78o–7) the following:

H. R. 4173—410
‘‘SEC. 15F. REGISTRATION AND REGULATION OF SECURITY-BASED
SWAP DEALERS AND MAJOR SECURITY-BASED SWAP
PARTICIPANTS.

‘‘(a) REGISTRATION.—
‘‘(1) SECURITY-BASED SWAP DEALERS.—It shall be unlawful
for any person to act as a security-based swap dealer unless
the person is registered as a security-based swap dealer with
the Commission.
‘‘(2) MAJOR SECURITY-BASED SWAP PARTICIPANTS.—It shall
be unlawful for any person to act as a major security-based
swap participant unless the person is registered as a major
security-based swap participant with the Commission.
‘‘(b) REQUIREMENTS.—
‘‘(1) IN GENERAL.—A person shall register as a securitybased swap dealer or major security-based swap participant
by filing a registration application with the Commission.
‘‘(2) CONTENTS.—
‘‘(A) IN GENERAL.—The application shall be made in
such form and manner as prescribed by the Commission,
and shall contain such information, as the Commission
considers necessary concerning the business in which the
applicant is or will be engaged.
‘‘(B) CONTINUAL REPORTING.—A person that is registered as a security-based swap dealer or major securitybased swap participant shall continue to submit to the
Commission reports that contain such information pertaining to the business of the person as the Commission
may require.
‘‘(3) EXPIRATION.—Each registration under this section shall
expire at such time as the Commission may prescribe by rule
or regulation.
‘‘(4) RULES.—Except as provided in subsections (d) and
(e), the Commission may prescribe rules applicable to securitybased swap dealers and major security-based swap participants,
including rules that limit the activities of non-bank securitybased swap dealers and major security-based swap participants.
‘‘(5) TRANSITION.—Not later than 1 year after the date
of enactment of the Wall Street Transparency and Accountability Act of 2010, the Commission shall issue rules under
this section to provide for the registration of security-based
swap dealers and major security-based swap participants.
‘‘(6) STATUTORY DISQUALIFICATION.—Except to the extent
otherwise specifically provided by rule, regulation, or order
of the Commission, it shall be unlawful for a security-based
swap dealer or a major security-based swap participant to
permit any person associated with a security-based swap dealer
or a major security-based swap participant who is subject to
a statutory disqualification to effect or be involved in effecting
security-based swaps on behalf of the security-based swap
dealer or major security-based swap participant, if the securitybased swap dealer or major security-based swap participant
knew, or in the exercise of reasonable care should have known,
of the statutory disqualification.
‘‘(c) DUAL REGISTRATION.—
‘‘(1) SECURITY-BASED SWAP DEALER.—Any person that is
required to be registered as a security-based swap dealer under
this section shall register with the Commission, regardless

H. R. 4173—411
of whether the person also is registered with the Commodity
Futures Trading Commission as a swap dealer.
‘‘(2) MAJOR SECURITY-BASED SWAP PARTICIPANT.—Any person that is required to be registered as a major security-based
swap participant under this section shall register with the
Commission, regardless of whether the person also is registered
with the Commodity Futures Trading Commission as a major
swap participant.
‘‘(d) RULEMAKING.—
‘‘(1) IN GENERAL.—The Commission shall adopt rules for
persons that are registered as security-based swap dealers or
major security-based swap participants under this section.
‘‘(2) EXCEPTION FOR PRUDENTIAL REQUIREMENTS.—
‘‘(A) IN GENERAL.—The Commission may not prescribe
rules imposing prudential requirements on security-based
swap dealers or major security-based swap participants
for which there is a prudential regulator.
‘‘(B) APPLICABILITY.—Subparagraph (A) does not limit
the authority of the Commission to prescribe rules as
directed under this section.
‘‘(e) CAPITAL AND MARGIN REQUIREMENTS.—
‘‘(1) IN GENERAL.—
‘‘(A) SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS THAT ARE BANKS.—Each
registered security-based swap dealer and major securitybased swap participant for which there is not a prudential
regulator shall meet such minimum capital requirements
and minimum initial and variation margin requirements
as the prudential regulator shall by rule or regulation
prescribe under paragraph (2)(A).
‘‘(B) SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS THAT ARE NOT BANKS.—
Each registered security-based swap dealer and major security-based swap participant for which there is not a prudential regulator shall meet such minimum capital requirements and minimum initial and variation margin requirements as the Commission shall by rule or regulation prescribe under paragraph (2)(B).
‘‘(2) RULES.—
‘‘(A) SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS THAT ARE BANKS.—The
prudential regulators, in consultation with the Commission
and the Commodity Futures Trading Commission, shall
adopt rules for security-based swap dealers and major security-based swap participants, with respect to their activities
as a swap dealer or major swap participant, for which
there is a prudential regulator imposing—
‘‘(i) capital requirements; and
‘‘(ii) both initial and variation margin requirements
on all security-based swaps that are not cleared by
a registered clearing agency.
‘‘(B) SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS THAT ARE NOT BANKS.—
The Commission shall adopt rules for security-based swap
dealers and major security-based swap participants, with
respect to their activities as a swap dealer or major swap

H. R. 4173—412
participant, for which there is not a prudential regulator
imposing—
‘‘(i) capital requirements; and
‘‘(ii) both initial and variation margin requirements
on all swaps that are not cleared by a registered
clearing agency.
‘‘(C) CAPITAL.—In setting capital requirements for a
person that is designated as a security-based swap dealer
or a major security-based swap participant for a single
type or single class or category of security-based swap
or activities, the prudential regulator and the Commission
shall take into account the risks associated with other
types of security-based swaps or classes of security-based
swaps or categories of security-based swaps engaged in
and the other activities conducted by that person that
are not otherwise subject to regulation applicable to that
person by virtue of the status of the person.
‘‘(3) STANDARDS FOR CAPITAL AND MARGIN.—
‘‘(A) IN GENERAL.—To offset the greater risk to the
security-based swap dealer or major security-based swap
participant and the financial system arising from the use
of security-based swaps that are not cleared, the requirements imposed under paragraph (2) shall —
‘‘(i) help ensure the safety and soundness of the
security-based swap dealer or major security-based
swap participant; and
‘‘(ii) be appropriate for the risk associated with
the non-cleared security-based swaps held as a security-based swap dealer or major security-based swap
participant.
‘‘(B) RULE OF CONSTRUCTION.—
‘‘(i) IN GENERAL.—Nothing in this section shall
limit, or be construed to limit, the authority—
‘‘(I) of the Commission to set financial responsibility rules for a broker or dealer registered
pursuant to section 15(b) (except for section
15(b)(11) thereof) in accordance with section
15(c)(3); or
‘‘(II) of the Commodity Futures Trading
Commission to set financial responsibility rules
for a futures commission merchant or introducing
broker registered pursuant to section 4f(a) of the
Commodity Exchange Act (except for section
4f(a)(3) thereof) in accordance with section 4f(b)
of the Commodity Exchange Act.
‘‘(ii) FUTURES COMMISSION MERCHANTS AND OTHER
DEALERS.—A futures commission merchant, introducing broker, broker, or dealer shall maintain sufficient capital to comply with the stricter of any
applicable capital requirements to which such futures
commission merchant, introducing broker, broker, or
dealer is subject to under this title or the Commodity
Exchange Act.
‘‘(C) MARGIN REQUIREMENTS.—In prescribing margin
requirements under this subsection, the prudential regulator with respect to security-based swap dealers and major
security-based swap participants that are depository

H. R. 4173—413
institutions, and the Commission with respect to securitybased swap dealers and major security-based swap participants that are not depository institutions shall permit the
use of noncash collateral, as the regulator or the Commission determines to be consistent with—
‘‘(i) preserving the financial integrity of markets
trading security-based swaps; and
‘‘(ii) preserving the stability of the United States
financial system.
‘‘(D) COMPARABILITY OF CAPITAL AND MARGIN REQUIREMENTS.—
‘‘(i) IN GENERAL.—The prudential regulators, the
Commission, and the Securities and Exchange
Commission shall periodically (but not less frequently
than annually) consult on minimum capital requirements and minimum initial and variation margin
requirements.
‘‘(ii) COMPARABILITY.—The entities described in
clause (i) shall, to the maximum extent practicable,
establish and maintain comparable minimum capital
requirements and minimum initial and variation
margin requirements, including the use of noncash
collateral, for—
‘‘(I) security-based swap dealers; and
‘‘(II) major security-based swap participants.
‘‘(f) REPORTING AND RECORDKEEPING.—
‘‘(1) IN GENERAL.—Each registered security-based swap
dealer and major security-based swap participant—
‘‘(A) shall make such reports as are required by the
Commission, by rule or regulation, regarding the transactions and positions and financial condition of the registered security-based swap dealer or major security-based
swap participant;
‘‘(B)(i) for which there is a prudential regulator, shall
keep books and records of all activities related to the business as a security-based swap dealer or major securitybased swap participant in such form and manner and for
such period as may be prescribed by the Commission by
rule or regulation; and
‘‘(ii) for which there is no prudential regulator, shall
keep books and records in such form and manner and
for such period as may be prescribed by the Commission
by rule or regulation; and
‘‘(C) shall keep books and records described in subparagraph (B) open to inspection and examination by any representative of the Commission.
‘‘(2) RULES.—The Commission shall adopt rules governing
reporting and recordkeeping for security-based swap dealers
and major security-based swap participants.
‘‘(g) DAILY TRADING RECORDS.—
‘‘(1) IN GENERAL.—Each registered security-based swap
dealer and major security-based swap participant shall maintain daily trading records of the security-based swaps of the
registered security-based swap dealer and major security-based
swap participant and all related records (including related cash
or forward transactions) and recorded communications,
including electronic mail, instant messages, and recordings of

H. R. 4173—414
telephone calls, for such period as may be required by the
Commission by rule or regulation.
‘‘(2) INFORMATION REQUIREMENTS.—The daily trading
records shall include such information as the Commission shall
require by rule or regulation.
‘‘(3) COUNTERPARTY RECORDS.—Each registered securitybased swap dealer and major security-based swap participant
shall maintain daily trading records for each counterparty in
a manner and form that is identifiable with each securitybased swap transaction.
‘‘(4) AUDIT TRAIL.—Each registered security-based swap
dealer and major security-based swap participant shall maintain a complete audit trail for conducting comprehensive and
accurate trade reconstructions.
‘‘(5) RULES.—The Commission shall adopt rules governing
daily trading records for security-based swap dealers and major
security-based swap participants.
‘‘(h) BUSINESS CONDUCT STANDARDS.—
‘‘(1) IN GENERAL.—Each registered security-based swap
dealer and major security-based swap participant shall conform
with such business conduct standards as prescribed in paragraph (3) and as may be prescribed by the Commission by
rule or regulation that relate to—
‘‘(A) fraud, manipulation, and other abusive practices
involving security-based swaps (including security-based
swaps that are offered but not entered into);
‘‘(B) diligent supervision of the business of the registered security-based swap dealer and major securitybased swap participant;
‘‘(C) adherence to all applicable position limits; and
‘‘(D) such other matters as the Commission determines
to be appropriate.
‘‘(2) RESPONSIBILITIES WITH RESPECT TO SPECIAL ENTITIES.—
‘‘(A) ADVISING SPECIAL ENTITIES.—A security-based
swap dealer or major security-based swap participant that
acts as an advisor to special entity regarding a securitybased swap shall comply with the requirements of paragraph (4) with respect to such special entity.
‘‘(B) ENTERING OF SECURITY-BASED SWAPS WITH
RESPECT TO SPECIAL ENTITIES.—A security-based swap
dealer that enters into or offers to enter into securitybased swap with a special entity shall comply with the
requirements of paragraph (5) with respect to such special
entity.
‘‘(C) SPECIAL ENTITY DEFINED.—For purposes of this
subsection, the term ‘special entity’ means—
‘‘(i) a Federal agency;
‘‘(ii) a State, State agency, city, county, municipality, or other political subdivision of a State or;
‘‘(iii) any employee benefit plan, as defined in section 3 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1002);
‘‘(iv) any governmental plan, as defined in section
3 of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1002); or

H. R. 4173—415
‘‘(v) any endowment, including an endowment that
is an organization described in section 501(c)(3) of the
Internal Revenue Code of 1986.
‘‘(3) BUSINESS CONDUCT REQUIREMENTS.—Business conduct
requirements adopted by the Commission shall—
‘‘(A) establish a duty for a security-based swap dealer
or major security-based swap participant to verify that
any counterparty meets the eligibility standards for an
eligible contract participant;
‘‘(B) require disclosure by the security-based swap
dealer or major security-based swap participant to any
counterparty to the transaction (other than a securitybased swap dealer, major security-based swap participant,
security-based swap dealer, or major security-based swap
participant) of—
‘‘(i) information about the material risks and
characteristics of the security-based swap;
‘‘(ii) any material incentives or conflicts of interest
that the security-based swap dealer or major securitybased swap participant may have in connection with
the security-based swap; and
‘‘(iii)(I) for cleared security-based swaps, upon the
request of the counterparty, receipt of the daily mark
of the transaction from the appropriate derivatives
clearing organization; and
‘‘(II) for uncleared security-based swaps, receipt
of the daily mark of the transaction from the securitybased swap dealer or the major security-based swap
participant;
‘‘(C) establish a duty for a security-based swap dealer
or major security-based swap participant to communicate
in a fair and balanced manner based on principles of fair
dealing and good faith; and
‘‘(D) establish such other standards and requirements
as the Commission may determine are appropriate in the
public interest, for the protection of investors, or otherwise
in furtherance of the purposes of this Act.
‘‘(4) SPECIAL REQUIREMENTS FOR SECURITY-BASED SWAP
DEALERS ACTING AS ADVISORS.—
‘‘(A) IN GENERAL.—It shall be unlawful for a securitybased swap dealer or major security-based swap participant—
‘‘(i) to employ any device, scheme, or artifice to
defraud any special entity or prospective customer who
is a special entity;
‘‘(ii) to engage in any transaction, practice, or
course of business that operates as a fraud or deceit
on any special entity or prospective customer who is
a special entity; or
‘‘(iii) to engage in any act, practice, or course of
business that is fraudulent, deceptive, or manipulative.
‘‘(B) DUTY.—Any security-based swap dealer that acts
as an advisor to a special entity shall have a duty to
act in the best interests of the special entity.
‘‘(C) REASONABLE EFFORTS.—Any security-based swap
dealer that acts as an advisor to a special entity shall
make reasonable efforts to obtain such information as is

H. R. 4173—416
necessary to make a reasonable determination that any
security-based swap recommended by the security-based
swap dealer is in the best interests of the special entity,
including information relating to—
‘‘(i) the financial status of the special entity;
‘‘(ii) the tax status of the special entity;
‘‘(iii) the investment or financing objectives of the
special entity; and
‘‘(iv) any other information that the Commission
may prescribe by rule or regulation.
‘‘(5) SPECIAL REQUIREMENTS FOR SECURITY-BASED SWAP
DEALERS AS COUNTERPARTIES TO SPECIAL ENTITIES.—
‘‘(A) IN GENERAL.—Any security-based swap dealer or
major security-based swap participant that offers to or
enters into a security-based swap with a special entity
shall—
‘‘(i) comply with any duty established by the
Commission for a security-based swap dealer or major
security-based swap participant, with respect to a
counterparty that is an eligible contract participant
within the meaning of subclause (I) or (II) of clause
(vii) of section 1a(18) of the Commodity Exchange Act,
that requires the security-based swap dealer or major
security-based swap participant to have a reasonable
basis to believe that the counterparty that is a special
entity has an independent representative that—
‘‘(I) has sufficient knowledge to evaluate the
transaction and risks;
‘‘(II) is not subject to a statutory disqualification;
‘‘(III) is independent of the security-based
swap dealer or major security-based swap participant;
‘‘(IV) undertakes a duty to act in the best
interests of the counterparty it represents;
‘‘(V) makes appropriate disclosures;
‘‘(VI) will provide written representations to
the special entity regarding fair pricing and the
appropriateness of the transaction; and
‘‘(VII) in the case of employee benefit plans
subject to the Employee Retirement Income Security act of 1974, is a fiduciary as defined in section
3 of that Act (29 U.S.C. 1002); and
‘‘(ii) before the initiation of the transaction, disclose
to the special entity in writing the capacity in which
the security-based swap dealer is acting.
‘‘(B) COMMISSION AUTHORITY.—The Commission may
establish such other standards and requirements under
this paragraph as the Commission may determine are
appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of
this Act.
‘‘(6) RULES.—The Commission shall prescribe rules under
this subsection governing business conduct standards for security-based swap dealers and major security-based swap participants.

H. R. 4173—417
‘‘(7) APPLICABILITY.—This subsection shall not apply with
respect to a transaction that is—
‘‘(A) initiated by a special entity on an exchange or
security-based swaps execution facility; and
‘‘(B) the security-based swap dealer or major securitybased swap participant does not know the identity of the
counterparty to the transaction.’’
‘‘(i) DOCUMENTATION STANDARDS.—
‘‘(1) IN GENERAL.—Each registered security-based swap
dealer and major security-based swap participant shall conform
with such standards as may be prescribed by the Commission,
by rule or regulation, that relate to timely and accurate confirmation, processing, netting, documentation, and valuation
of all security-based swaps.
‘‘(2) RULES.—The Commission shall adopt rules governing
documentation standards for security-based swap dealers and
major security-based swap participants.
‘‘(j) DUTIES.—Each registered security-based swap dealer and
major security-based swap participant shall, at all times, comply
with the following requirements:
‘‘(1) MONITORING OF TRADING.—The security-based swap
dealer or major security-based swap participant shall monitor
its trading in security-based swaps to prevent violations of
applicable position limits.
‘‘(2) RISK MANAGEMENT PROCEDURES.—The security-based
swap dealer or major security-based swap participant shall
establish robust and professional risk management systems
adequate for managing the day-to-day business of the securitybased swap dealer or major security-based swap participant.
‘‘(3) DISCLOSURE OF GENERAL INFORMATION.—The securitybased swap dealer or major security-based swap participant
shall disclose to the Commission and to the prudential regulator
for the security-based swap dealer or major security-based swap
participant, as applicable, information concerning—
‘‘(A) terms and conditions of its security-based swaps;
‘‘(B) security-based swap trading operations, mechanisms, and practices;
‘‘(C) financial integrity protections relating to securitybased swaps; and
‘‘(D) other information relevant to its trading in security-based swaps.
‘‘(4) ABILITY TO OBTAIN INFORMATION.—The security-based
swap dealer or major security-based swap participant shall—
‘‘(A) establish and enforce internal systems and procedures to obtain any necessary information to perform any
of the functions described in this section; and
‘‘(B) provide the information to the Commission and
to the prudential regulator for the security-based swap
dealer or major security-based swap participant, as
applicable, on request.
‘‘(5) CONFLICTS OF INTEREST.—The security-based swap
dealer and major security-based swap participant shall implement conflict-of-interest systems and procedures that—
‘‘(A) establish structural and institutional safeguards
to ensure that the activities of any person within the firm
relating to research or analysis of the price or market
for any security-based swap or acting in a role of providing

H. R. 4173—418
clearing activities or making determinations as to accepting
clearing customers are separated by appropriate informational partitions within the firm from the review, pressure,
or oversight of persons whose involvement in pricing,
trading, or clearing activities might potentially bias their
judgment or supervision and contravene the core principles
of open access and the business conduct standards
described in this title; and
‘‘(B) address such other issues as the Commission
determines to be appropriate.
‘‘(6) ANTITRUST CONSIDERATIONS.—Unless necessary or
appropriate to achieve the purposes of this title, the securitybased swap dealer or major security-based swap participant
shall not—
‘‘(A) adopt any process or take any action that results
in any unreasonable restraint of trade; or
‘‘(B) impose any material anticompetitive burden on
trading or clearing.
‘‘(7) RULES.—The Commission shall prescribe rules under
this subsection governing duties of security-based swap dealers
and major security-based swap participants.
‘‘(k) DESIGNATION OF CHIEF COMPLIANCE OFFICER.—
‘‘(1) IN GENERAL.—Each security-based swap dealer and
major security-based swap participant shall designate an individual to serve as a chief compliance officer.
‘‘(2) DUTIES.—The chief compliance officer shall—
‘‘(A) report directly to the board or to the senior officer
of the security-based swap dealer or major security-based
swap participant;
‘‘(B) review the compliance of the security-based swap
dealer or major security-based swap participant with
respect to the security-based swap dealer and major security-based swap participant requirements described in this
section;
‘‘(C) in consultation with the board of directors, a body
performing a function similar to the board, or the senior
officer of the organization, resolve any conflicts of interest
that may arise;
‘‘(D) be responsible for administering each policy and
procedure that is required to be established pursuant to
this section;
‘‘(E) ensure compliance with this title (including regulations) relating to security-based swaps, including each rule
prescribed by the Commission under this section;
‘‘(F) establish procedures for the remediation of noncompliance issues identified by the chief compliance officer
through any—
‘‘(i) compliance office review;
‘‘(ii) look-back;
‘‘(iii) internal or external audit finding;
‘‘(iv) self-reported error; or
‘‘(v) validated complaint; and
‘‘(G) establish and follow appropriate procedures for
the handling, management response, remediation, retesting, and closing of noncompliance issues.
‘‘(3) ANNUAL REPORTS.—

H. R. 4173—419
‘‘(A) IN GENERAL.—In accordance with rules prescribed
by the Commission, the chief compliance officer shall
annually prepare and sign a report that contains a description of—
‘‘(i) the compliance of the security-based swap
dealer or major swap participant with respect to this
title (including regulations); and
‘‘(ii) each policy and procedure of the securitybased swap dealer or major security-based swap
participant of the chief compliance officer (including
the code of ethics and conflict of interest policies).
‘‘(B) REQUIREMENTS.—A compliance report under
subparagraph (A) shall—
‘‘(i) accompany each appropriate financial report
of the security-based swap dealer or major securitybased swap participant that is required to be furnished
to the Commission pursuant to this section; and
‘‘(ii) include a certification that, under penalty of
law, the compliance report is accurate and complete.
‘‘(l)
ENFORCEMENT
AND
ADMINISTRATIVE
PROCEEDING
AUTHORITY.—
‘‘(1) PRIMARY ENFORCEMENT AUTHORITY.—
‘‘(A) SECURITIES AND EXCHANGE COMMISSION.—Except
as provided in subparagraph (B), (C), or (D), the Commission shall have primary authority to enforce subtitle B,
and the amendments made by subtitle B of the Wall Street
Transparency and Accountability Act of 2010, with respect
to any person.
‘‘(B) PRUDENTIAL REGULATORS.—The prudential regulators shall have exclusive authority to enforce the provisions of subsection (e) and other prudential requirements
of this title (including risk management standards), with
respect to security-based swap dealers or major securitybased swap participants for which they are the prudential
regulator.
‘‘(C) REFERRAL.—
‘‘(i) VIOLATIONS OF NONPRUDENTIAL REQUIREMENTS.—If the appropriate Federal banking agency for
security-based swap dealers or major security-based
swap participants that are depository institutions has
cause to believe that such security-based swap dealer
or major security-based swap participant may have
engaged in conduct that constitutes a violation of the
nonprudential requirements of this section or rules
adopted by the Commission thereunder, the agency
may recommend in writing to the Commission that
the Commission initiate an enforcement proceeding as
authorized under this title. The recommendation shall
be accompanied by a written explanation of the concerns giving rise to the recommendation.
‘‘(ii) VIOLATIONS OF PRUDENTIAL REQUIREMENTS.—
If the Commission has cause to believe that a securities-based swap dealer or major securities-based swap
participant that has a prudential regulator may have
engaged in conduct that constitute a violation of the
prudential requirements of subsection (e) or rules
adopted thereunder, the Commission may recommend

H. R. 4173—420
in writing to the prudential regulator that the prudential regulator initiate an enforcement proceeding as
authorized under this title. The recommendation shall
be accompanied by a written explanation of the concerns giving rise to the recommendation.
‘‘(D) BACKSTOP ENFORCEMENT AUTHORITY.—
‘‘(i) INITIATION OF ENFORCEMENT PROCEEDING BY
PRUDENTIAL REGULATOR.—If the Commission does not
initiate an enforcement proceeding before the end of
the 90-day period beginning on the date on which
the Commission receives a written report under subsection (C)(i), the prudential regulator may initiate
an enforcement proceeding.
‘‘(ii) INITIATION OF ENFORCEMENT PROCEEDING BY
COMMISSION.—If the prudential regulator does not initiate an enforcement proceeding before the end of the
90-day period beginning on the date on which the
prudential regulator receives a written report under
subsection (C)(ii), the Commission may initiate an
enforcement proceeding.
‘‘(2) CENSURE, DENIAL, SUSPENSION; NOTICE AND HEARING.—
The Commission, by order, shall censure, place limitations on
the activities, functions, or operations of, or revoke the registration of any security-based swap dealer or major security-based
swap participant that has registered with the Commission
pursuant to subsection (b) if the Commission finds, on the
record after notice and opportunity for hearing, that such censure, placing of limitations, or revocation is in the public
interest and that such security-based swap dealer or major
security-based swap participant, or any person associated with
such security-based swap dealer or major security-based swap
participant effecting or involved in effecting transactions in
security-based swaps on behalf of such security-based swap
dealer or major security-based swap participant, whether prior
or subsequent to becoming so associated—
‘‘(A) has committed or omitted any act, or is subject
to an order or finding, enumerated in subparagraph (A),
(D), or (E) of paragraph (4) of section 15(b);
‘‘(B) has been convicted of any offense specified in
subparagraph (B) of such paragraph (4) within 10 years
of the commencement of the proceedings under this subsection;
‘‘(C) is enjoined from any action, conduct, or practice
specified in subparagraph (C) of such paragraph (4);
‘‘(D) is subject to an order or a final order specified
in subparagraph (F) or (H), respectively, of such paragraph
(4); or
‘‘(E) has been found by a foreign financial regulatory
authority to have committed or omitted any act, or violated
any foreign statute or regulation, enumerated in subparagraph (G) of such paragraph (4).
‘‘(3) ASSOCIATED PERSONS.—With respect to any person who
is associated, who is seeking to become associated, or, at the
time of the alleged misconduct, who was associated or was
seeking to become associated with a security-based swap dealer
or major security-based swap participant for the purpose of
effecting or being involved in effecting security-based swaps

H. R. 4173—421
on behalf of such security-based swap dealer or major securitybased swap participant, the Commission, by order, shall censure, place limitations on the activities or functions of such
person, or suspend for a period not exceeding 12 months, or
bar such person from being associated with a security-based
swap dealer or major security-based swap participant, if the
Commission finds, on the record after notice and opportunity
for a hearing, that such censure, placing of limitations, suspension, or bar is in the public interest and that such person—
‘‘(A) has committed or omitted any act, or is subject
to an order or finding, enumerated in subparagraph (A),
(D), or (E) of paragraph (4) of section 15(b);
‘‘(B) has been convicted of any offense specified in
subparagraph (B) of such paragraph (4) within 10 years
of the commencement of the proceedings under this subsection;
‘‘(C) is enjoined from any action, conduct, or practice
specified in subparagraph (C) of such paragraph (4);
‘‘(D) is subject to an order or a final order specified
in subparagraph (F) or (H), respectively, of such paragraph
(4); or
‘‘(E) has been found by a foreign financial regulatory
authority to have committed or omitted any act, or violated
any foreign statute or regulation, enumerated in subparagraph (G) of such paragraph (4).
‘‘(4) UNLAWFUL CONDUCT.—It shall be unlawful—
‘‘(A) for any person as to whom an order under paragraph (3) is in effect, without the consent of the Commission, willfully to become, or to be, associated with a security-based swap dealer or major security-based swap
participant in contravention of such order; or
‘‘(B) for any security-based swap dealer or major security-based swap participant to permit such a person, without the consent of the Commission, to become or remain
a person associated with the security-based swap dealer
or major security-based swap participant in contravention
of such order, if such security-based swap dealer or major
security-based swap participant knew, or in the exercise
of reasonable care should have known, of such order.’’.
(b) SAVINGS CLAUSE.—Notwithstanding any other provision of
this title, nothing in this subtitle shall be construed as divesting
any appropriate Federal banking agency of any authority it may
have to establish or enforce, with respect to a person for which
such agency is the appropriate Federal banking agency, prudential
or other standards pursuant to authority by Federal law other
than this title.
SEC. 765. RULEMAKING ON CONFLICT OF INTEREST.

(a) IN GENERAL.—In order to mitigate conflicts of interest,
not later than 180 days after the date of enactment of the Wall
Street Transparency and Accountability Act of 2010, the Securities
and Exchange Commission shall adopt rules which may include
numerical limits on the control of, or the voting rights with respect
to, any clearing agency that clears security-based swaps, or on
the control of any security-based swap execution facility or national
securities exchange that posts or makes available for trading security-based swaps, by a bank holding company (as defined in section