Executive Summary
In December 2021, the U.S. Securities and Exchange Commission published proposal that would, among other things (see more details below), establish a new reporting regime for security-based swaps ("SBS") positions. The proposal would require the reporting and subsequent public disclosure of: (i) certain large SBS positions; (ii) positions in any security or loan underlying the SBS position; and (iii) positions in another instrument relating to the underlying security or loan or group or index of securities or loans.
Persons that trigger this reporting requirement must file with the Commission a Schedule 10B and include information on nine specific items, including the name of the reporting person, the type of the reporting person and the reporting person’s Legal Entity Identifier (LEI), if applicable. This report must be filed no later than the end of the first business day following the day of execution of the SBS position that triggered the reporting requirement, i.e., T+1 reporting, and it would be made publicly available immediately upon filing.
The Commission has proposed separate thresholds for SBSs based on equity and debt, with a further delineation for CDSs. For CDSs, the threshold is the lesser of: (i) a long notional of $150 million; (ii) a short notional of $150 million; and (iii) a gross notional of $300 million. For SBSs based on debt securities, the Commission is proposing a gross notional threshold of $300 million without regard for the market participant’s CDS positions and without excluding any debt securities underlying a SBS included in its position. Finally, the threshold for SBSs based on equity securities would be the lesser of a gross notional amount of $300 million or a position that represents more than 5% of a class of equity securities.
On June 20, the SEC reopened the comment period for the proposed rule, which was accompanied by a memo from the Division of Economic and Risk Analysis that provides supplemental data and analysis regarding the proposed reporting thresholds in the equity SBS market.
AIMA's response to the proposed rule only focused on the proposed position reporting regime and did not comment on the other two parts of the 2021 proposed rule. On June 7, 2023, the SEC adopted final rules for these two parts of the 2021 proposed rule.
Please contact Adam Jacobs-Dean or Daniel Austin with any questions regarding this proposal.
-
Adam Jacobs-Dean
Managing Director, Global Head of Markets, Governance and Innovation
-
Daniel Austin
Head of U.S. Markets Policy and Regulation
Practical Implications
If these changes are adopted as proposed, they will present the following practical implications:
- Persons that meet any of the separate thresholds for SBSs based on equity, debt or CDS will need to develop the internal (or outsourced) capabilities to complete and submit a Schedule 10B no later than the end of the first business day following the day of execution of the position that triggered the reporting requirement.
- Persons that trade in SBSs based on equity, debt or CDS will need to closely monitor their positions to determine whether a reporting requirement is triggered.
- Because Schedule 10B reports will be disclosed to the public and identify the person making the filing, the market participant will need to consider potential consequences with its position-level data being available to the public.
Timeline
AIMA has categorized this reporting regime aspects of the proposal as Medium Priority/High Impact and it is therefore represented in lavender/purple in the AIMA Regulatory Horizon Scan gantt chart.
| Estimated Compliance Date3 | June 17, 2026 | **New** |
| Estimated Effective Date2 | June 17, 2025 | **New** |
| Estimated Publication Date1 | April 16, 2025 | **New** |
| AIMA supplemental response | August 21, 2023 | |
| AIMA letter on aggregate impact | August 11, 2023 | |
| Deadline for additional comments | August 21, 2023 | |
| Comment period re-opened | June 20, 2023 | |
| Comment deadline for proposal | March 21, 2022 | |
| AIMA response to current reporting proposal filed | March 21, 2022 | |
| Proposal published by SEC | January 26, 2022 |
1 Subject to change. Current estimate based on SEC's Fall 2024 Regulatory Flexibility Agenda. Of course, this is only an estimate and may move forward or backward as actual matters develop depending on the priorities of the SEC. This estimate has been provided solely to allow people to visualize the potential overlaps in compliance burdens for multiple pending rules at the same time.
2 Subject to change. The effective date for the final rules has been estimated as 60 days following publication. Note that for this purpose we have assumed the SEC's publication date and the Federal Register publication date are identical for ease of calculation. This will not be the case, but the actual time between (i) the SEC approval and publication on the SEC website and (ii) the official Federal Register publication is an unknowable period ranging from a few days to several weeks depending on multiple non-transparent variables. This means that in the end the actual effective date and therefore the actual compliance date will always be later than the estimate even if the SEC approval date estimate is correct.
3 Subject to change. The estimated compliance date of the final rules has been based on a 12-month compliance period.