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ISDA® Launches 2021 Security-Based Swaps (SBS) Top-Up Protocol in Anticipation of Upcoming SEC SBS Compliance Dates
Practical Law Legal Update w-030-1611 (Approx. 4 pages)
ISDA® Launches 2021 Security-Based Swaps (SBS) Top-Up Protocol in Anticipation of Upcoming SEC SBS Compliance Dates
by Practical Law Finance
| Published on 16 Mar 2021 • USA (National/Federal) |
ISDA launched the ISDA 2021 Security-Based Swaps (SBS) Top-Up Protocol, which is intended to assist firms in complying with certain SEC SBS rules adopted under Title VII of the Dodd-Frank Act. Registration for certain SBS entities under these rules is required by November 1, 2021.
On March 15, 2021, ISDA® launched the ISDA 2021 Security-Based Swaps (SBS) Top-Up Protocol (2021 SBS protocol), which is intended to assist firms in complying with certain SEC security-based swap (SBS) rules adopted pursuant to Title VII of the Dodd-Frank Act. Registration for certain SBS entities, including security-based swap dealers (SBSDs) and major security-based swap participants (MSBSPs), is required by November 1, 2021.
The 2021 SBS protocol was created in anticipation of the upcoming October 6, 2021 compliance date for a framework of SEC SBS rules and the related registration deadlines for SBSDs and MSBSPs of November 1, 2021 and December 1, 2021, respectively (see Legal Update, SEC Adopts Final Cross-Border Security-Based Swap (SBS) Amendments and Guidance; SBS Registration and Compliance Requirements Triggered). These rules include:
- SEC registration for SBSDs and MSBSPs.
- SBS capital, margin, and margin segregation requirements.
- SBS recordkeeping, reporting, and notification requirements.
- SBSD and MSBSP business conduct and chief compliance officer (CCO) requirements.
- SBSD and MSBSP trade acknowledgement and verification requirements.
- SBS and risk-mitigation rules.
- SBS cross-border rules.
For details on these rules and upcoming SBSD and MSBSP registration requirements, see Practice Note: US Derivatives Regulation: Checklist for Swap Dealers and Security-Based Swap Dealers: Requirements for Security-Based Swap Dealers and MSBSPs and SBSD and MSBSP Registration.
The 2021 SBS protocol builds on ISDA's previous protocols, which assisted firms in complying with similar Dodd-Frank rules under the CFTC for swap dealers (SDs) and major swap participants (MSPs):
- The ISDA August 2012 Dodd-Frank Protocol (August 2012 protocol), designed to facilitate compliance with Dodd-Frank external business conduct (EBC) rules for SDs and MSPs (see Practice Note, Practical Law Guide to the ISDA Dodd-Frank Protocols and ISDA Amend: The August 2012 Protocol: Compliance with EBC Rules for Swap Dealers and MSPs).
- The ISDA March 2013 Dodd-Frank Protocol (March 2013 protocol, collectively with the August 2012 protocol, Dodd-Frank protocols), designed to facilitate compliance with Dodd-Frank internal business conduct (IBC) rules for SDs and MSPs (see Practice Note, Practical Law Guide to the ISDA Dodd-Frank Protocols and ISDA Amend: The March 2013 Protocol: Compliance with IBC and Swap Documentation Rules for Swap Dealers and MSPs).
Adherence to the 2021 SBS protocol is currently only available to firms that have already adhered to the Dodd-Frank protocols. Firms that have already adhered to the Dodd-Frank protocols can use the 2021 SBS protocol to amend the terms of the swap agreements that the parties have elected to supplement using the protocols (called protocol covered agreements), such as an ISDA Master Agreement, to meet SEC SBS requirements, as well as the applicable CFTC requirements. The 2021 SBS protocol does not require parties to exchange questionnaires or new compliance information since it relies on information previously exchanged under the Dodd-Frank protocols.
The 2021 SBS protocol is open for adherence on March 15, 2021. There is no cutoff date for adherence. According to ISDA, a separate protocol for entities that have not adhered to the August 2012 protocol or the March 2013 protocol will be made available later this year.
For information on ISDA protocols generally, see Practice Note, ISDA Documents: Overview (US): ISDA Protocols.
"ISDA" is a registered trademark of the International Swaps and Derivatives Association, Inc. (ISDA). ISDA is not a sponsor of Practical Law and had no part in the development of this Update.