Security-Based Swap (SBS) | Practical Law

Security-Based Swap (SBS) | Practical Law

Security-Based Swap (SBS)

Security-Based Swap (SBS)

Practical Law Glossary Item 1-555-0765 (Approx. 3 pages)

Glossary

Security-Based Swap (SBS)

A swap that references a single security or loan, such as a single-name total return swap (TRS) or a single-name credit default swap (CDS), or a CDS that references a narrow-based index, in most cases composed of less than nine component securities (among other criteria related to weighting of the securities in the index). The regulation of swaps under Title VII of the Dodd-Frank Act is broken down between security-based swaps (SBS), which are regulated by the SEC, and non-security-based swaps (NSBS), which are regulated by the CFTC.
SBS are subject to certain US securities laws (see Practice Note, US Derivatives Regulation: Application of Securities Laws to Security-Based Swaps). SBS are a comparatively small segment of the global derivatives markets, as equity derivatives and single-name CDS compose less than 20% of the global swaps markets. For more details on SBS, see Practice Note, Summary of the Dodd-Frank Act: Swaps and Derivatives: Types of Swaps Under Title VII.