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 The Securities and Exchange Commission's plan primarily targets the
major clearinghouses it regulates, such as the Options Clearing Corp
(OCC) and units of the Depository Trust & Clearing Corp (DTCC).
Clearing agencies offer important back-office functions in the
marketplace, standing between trading partners to ensure money is
properly transferred and serving as a vital backstop in case a
brokerage defaults and cannot pay up.
The proposal would impose additional regulatory responsibilities on
large clearing agencies, such as stress-testing, capital
requirements and certain governance rules to strengthen board
independence.
The SEC's measure stems from a requirement of the 2010 Dodd-Frank
Wall Street reform law, which empowered the SEC and the Commodity
Futures Trading Commission to jointly police the over-the-counter
derivatives market.
A key pillar of the law aims to reduce risk in the derivatives
market by requiring many products to be routed through
clearinghouses.
Congress recognized that concentrating all of these derivatives into
a handful of clearing agencies could also pose risks, and the
Dodd-Frank law included a number of measures designed to prevent
such agencies from collapsing and spreading risk through the market.
One part of the law required the U.S. Financial Stability Oversight
Council to designate the largest market utilities, a tag that
carries additional oversight by the Federal Reserve.
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These systemic clearing agencies are eligible under the law to apply
for financial help from the Fed's discount window but also must
abide by heightened standards set by the SEC and CFTC.
The CFTC's rules for the systemic clearinghouses it regulates have
already been adopted, and the SEC's proposal is largely similar to
the CFTC's rule, agency officials said Wednesday.
"Given the crucial role that clearing agencies play in our financial
markets, it is important that they be subject to high standards of
governance and operation," said SEC Democratic Commissioner Luis
Aguilar.
(Reporting by Sarah N. Lynch; editing by
Franklin Paul and Meredith Mazzilli)
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