ISDA issued a set of "suggested operational practices" ("SOPs") for determining the counterparty with the reporting obligation for SEC security-based swap ("SBS") transactions. ISDA stated that the best practices reflect existing reporting standards put out by ISDA for CFTC and Canada derivatives reporting requirements.
The SOPs outline scenarios under SEC Regulation SBSR in which two persons of the same type for purposes of the rules must agree on which person is responsible for reporting. The SOPs provide standardized tiebreaker logic to be used by market participants:
- Two SBS dealers ("SBSDs"), both direct counterparties to the SBS. Apply asset-class tiebreaker logic, which is broken down by (i) credit, (ii) equities, (iii) rates and (iv) the legal-entity identifiers tiebreaker process.
- One SBSD is a direct counterparty and faces one non-SBSD guaranteed by a SBSD. The SBSD that is the direct counterparty is the reporting counterparty.
ISDA said that the SOPs are intended to be consistent with Regulation SBSR Rule 901(a) ("Assigning Reporting Duties") and (ii) related April 2020 SEC relief. ISDA explained that the logic will apply for the four-year period provided under the SEC relief, and noted that, should the SEC extend the relief period, the logic will apply to any additional extension.
Primary Sources
- ISDA Data and Reporting: SEC SBS Transaction Reporting Party Requirements
- Security-Based Swap Transaction Reporting Party Determination: Industry Suggested Operating Practices
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