[Federal Register Volume 88, Number 240 (Friday, December 15, 2023)]
[Rules and Regulations]
[Pages 87156-87328]
[FR Doc No: 2023-24587]

Vol. 88

Friday,

No. 240

December 15, 2023

Part III

Securities and Exchange Commission

-----------------------------------------------------------------------

17 CFR Parts 200, 201, 232, et al.

Security-Based Swap Execution and Registration and Regulation of
Security-Based Swap Execution Facilities; Final Rule

Federal Register / Vol. 88 , No. 240 / Friday, December 15, 2023 /
Rules and Regulations

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 200, 201, 232, 240, 242, and 249

[Release No. 34-98845; File No. S7-14-22]
RIN 3235-AK93

Security-Based Swap Execution and Registration and Regulation of
Security-Based Swap Execution Facilities

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Securities and Exchange Commission (``SEC'' or
``Commission'') is adopting a set of rules and forms under the
Securities Exchange Act of 1934 (``SEA'') that would create a regime
for the registration and regulation of security-based swap execution
facilities (``SBSEFs'') and address other issues relating to security-
based swap (``SBS'') execution generally. One of the rules being
adopted implements an element of the Dodd-Frank Act that is intended to
mitigate conflicts of interest at SBSEFs and national securities
exchanges that trade SBS (``SBS exchanges''). Other rules being adopted
address the cross-border application of the SEA's trading venue
registration requirements and the trade execution requirement for SBS.
In addition, the Commission is amending an existing rule to exempt,
from the SEA definition of ``exchange,'' certain registered clearing
agencies, as well as registered SBSEFs that provide a market place only
for SBS. The Commission is also adopting a new rule that, while
affirming that an SBSEF would be a broker under the SEA, exempts a
registered SBSEF from certain broker requirements. Further, the
Commission is adopting certain new rules and amendments to its Rules of
Practice to allow persons who are aggrieved by certain actions by an
SBSEF to apply for review by the Commission. Finally, the Commission is
delegating new authority to the Director of the Division of Trading and
Markets and to the General Counsel to take actions necessary to carry
out the rules being adopted.

DATES:
    Effective date: February 13, 2024.
    Compliance dates: See section XVI (Compliance Schedule).

FOR FURTHER INFORMATION CONTACT: Michael E. Coe, Assistant Director;
David Liu, Special Counsel; Leah Mesfin, Special Counsel; Michou
Nguyen, Special Counsel; or Geoffrey Pemble, Special Counsel, at (202)
551-5000, Office of Market Supervision, Division of Trading and
Markets, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is adopting new 17 CFR
242.800 through 242.835 (``Regulation SE'') to create a regime for the
registration and regulation of SBSEFs and to address other issues
relating to SBS execution generally. Regulation SE consists of 17 CFR
242.800 through 242.835 (Rules 800 through 835). Key rules within
Regulation SE include Rule 803, which establishes a process for SBSEF
registration; Rules 804 to 810, which establish procedures for rule and
product filings by SBSEFs; Rule 815, which establishes permissible
execution methods for SBS that are subject to the SEA's trade execution
requirement; Rule 816, which sets out a procedure for SBSEFs to make an
SBS available to trade and establish certain exemptions from the trade
execution requirement; Rules 818 to 831, which implement the 14 Core
Principles for SBSEFs set forth in section 3D(d) of the SEA; Rules 832
to 833, which address cross-border matters; and Rule 834, which imposes
requirements addressing conflicts of interest involving SBSEFs and SBS
exchanges, as required by section 765 of the Dodd-Frank Act.
    In addition to the rules described above, the Commission is also
adopting 17 CFR 249.1701 (Form SBSEF), which is the form that an entity
will use to register with the Commission as an SBSEF; 17 CFR 249.1702
(a submission cover sheet), which will be required to accompany filings
with the Commission made by SBSEFs for rule and rule amendments and for
product listings; adopting amendments to 17 CFR 232.405 (Rule 405 of
Regulation S-T) to require various SBSEF filings to be provided in
Inline eXtensible Business Reporting Language (``Inline XBRL''), a
structured data language; adopting amendments to 17 CFR 240.3a1-1 (Rule
3a1-1) to exempt from the SEA definition of ``exchange'' certain
registered clearing agencies, as well as registered SBSEFs that provide
a market place only for SBS; adopting 17 CFR 240.15a-12 (Rule 15a-12),
which, while affirming that an SBSEF would also be a broker under the
SEA, exempts a registered SBSEF from certain broker requirements;
providing for the sunset of existing temporary exemptions from the
requirement to register as a clearing agency that, among other things,
applies to an entity performing the functions of an SBSEF but that is
not yet registered as such, and from the requirement to register as an
SBSEF or a national securities exchange for entities that meet the
statutory definition of SBSEF; adopting certain new rules and
amendments to 17 CFR part 201 (Rules of Practice) to allow persons who
are aggrieved by certain actions by an SBSEF to apply for review by the
Commission; and adopting amendments to 17 CFR 200.30-3 and 17 CFR
200.30-14 regarding delegations of authority to the Director of the
Division of Trading and Markets and to the General Counsel.

Table of Contents

I. Background
II. Introductory Provisions of Regulation SE
    A. Rule 800--Scope
    B. Rule 801--Applicable Provisions
    C. Rule 802--Definitions
III. Registration of SBSEFs
    A. Rule 803--Requirements and Procedures for Registration
    B. Form SBSEF
IV. Rule and Product Filings by SBSEFs
    A. Rule 804--Listing Products for Trading by Certification
    B. Rule 805--Voluntary Submission of New Products for Commission
Review and Approval
    C. Rule 806--Voluntary Submission of Rules for Commission Review
and Approval
    D. Rule 807--Self-Certification of Rules
    E. Submission Cover Sheet and Instructions
    F. Rule 808--Availability of Public Information
    G. Rule 809--Staying of Certification and Tolling of Review
Period Pending Jurisdictional Determination
    H. Rule 810--Product Filings by SBSEFs That Are Not Yet
Registered and by Dormant SBSEFs
V. Miscellaneous Requirements
    A. Rule 811--Information Relating to SBSEF Compliance
    B. Rule 812--Enforceability
    C. Rule 813--Prohibited Use of Data Collected for Regulatory
Purposes
    D. Rule 814--Entity Operating Both a National Securities
Exchange and an SBSEF
    E. Rule 815--Methods of Execution for Required and Permitted
Transactions
    F. Rule 816--Trade Execution Requirement and Exemptions
Therefrom
    G. Rule 817--Trade Execution Compliance Schedule
VI. Implementation of Core Principles
    A. Rule 818--Core Principle 1--Compliance With Core Principles
    B. Rule 819--Core Principle 2--Compliance With Rules
    C. Rule 820--Core Principle 3--SBS Not Readily Susceptible to
Manipulation
    D. Rule 821--Core Principle 4--Monitoring of Trading and Trade
Processing
    E. Rule 822--Core Principle 5--Ability To Obtain Information
    F. Rule 823--Core Principle 6--Financial Integrity of
Transactions
    G. Rule 824--Core Principle 7--Emergency Authority
    H. Rule 825--Core Principle 8--Timely Publication of Trading
Information

    I. Rule 826--Core Principle 9--Recordkeeping and Reporting
    J. Rule 827--Core Principle 10--Antitrust Considerations
    K. Rule 828--Core Principle 11--Conflicts of Interest
    L. Rule 829--Core Principle 12--Financial Resources
    M. Rule 830--Core Principle 13--System Safeguards
    N. Rule 831--Core Principle 14--Designation of Chief Compliance
Officer
VII. Cross-Border Rules
    A. Rule 832--Cross-Border Mandatory Trade Execution
    B. Rule 833--Cross-Border Exemptions for Foreign Trading Venues
and Relating to the Trade Execution Requirement
VIII. Rule 834--Implementation of Section 765 of the Dodd-Frank Act
and Governance of SBSEFs and SBS Exchanges
    A. Rule 834(a)
    B. Rule 834(b)
    C. Rule 834(c)
    D. Rule 834(d)
    E. Rule 834(e)
    F. Rule 834(f)
    G. Rule 834(g)
    H. Rule 834(h)
IX. Rule 835--Notice to Commission by SBSEF of Final Disciplinary
Action, Denial or Conditioning of Membership, or Denial or
Limitation of Access
X. Amendments to Existing Rule 3a1-1 Under the SEA-Exemptions From
the Definition of ``Exchange''
XI. Rule 15a-12--SBSEFs as Registered Brokers; Relief From Certain
Broker Requirements
XII. Termination of Temporary Exemptions
XIII. Electronic Filings Under Regulation SE
    A. Use of Electronic Filing Systems and Structured Data
    B. Use of Identifiers
XIV. Amendments to Commission's Rules of Practice for Appeals of
SBSEF Actions
    A. Amendment to Rule 101
    B. Amendment to Rule 202
    C. Amendment to Rule 210
    D. Amendment to Rule 401
    E. Rule 442--Right To Appeal
    F. Rule 443--Sua sponte Review by Commission
    G. Amendment to Rule 450
    H. Amendment to Rule 460
XV. Amendments to Delegations of Authority in Rule 30-3 and Rule 30-
14
    A. Delegated Authority Related to SBSEF Registration and Form
SBSEF
    B. Delegated Authority Related to New Products Proposed by an
SBSEF
    C. Delegated Authority Related to New Rules or Rule Amendments
Proposed by an SBSEF
    D. Delegated Authority Related To Request for Joint
Interpretation
    E. Delegated Authority Related to SBSEF Submissions Contemplated
by Rule 811
    F. Delegated Authority Related to Information Sharing
    G. Delegated Authority Related to Commission Review Proceedings
XVI. Compliance Schedule
XVII. Economic Analysis
    A. Introduction
    B. Economic Baseline
    C. Benefits and Costs
    D. Effects on Efficiency, Competition, and Capital Formation
    E. Reasonable Alternatives
XVIII. Paperwork Reduction Act
    A. Summary of Collection of Information
    B. Proposed Use of Information
    C. Respondents
    D. Total Annual Reporting and Recordkeeping Burden
    E. Collection of Information is Mandatory
    F. Responses To Collection of Information Will Not Be
Confidential
    G. Retention Period of Recordkeeping Requirements
XIX. Regulatory Flexibility Certification
    A. SBSEFs
    B. Persons Requesting an Exemption Order Pursuant to Rule 833
    C. SBS Exchanges
    D. Certification
XX. Other Matters

I. Background

    The Commission is adopting Regulation SE,\1\ which governs the
registration and regulation of SBSEFs, as required by section 3D of the
SEA.\2\ Section 3D was enacted as part of Title VII of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act'').\3\
The Dodd-Frank Act was enacted, among other reasons, to promote the
financial stability of the United States by improving accountability
and transparency in the financial system.\4\ The 2008 financial crisis
highlighted significant issues in the over-the-counter (``OTC'')
derivatives markets, which experienced dramatic growth in the years
leading up to the financial crisis and are capable of affecting
significant sectors of the U.S. economy.
---------------------------------------------------------------------------

    \1\ The Commission proposed Regulation SE on Apr. 6, 2022. See
Rules Relating to Security-Based Swap Execution and Registration and
Regulation of Security-Based Swap Execution Facilities (Proposed
Rule), SEA Release No. 94615 (Apr. 6, 2022), 87 FR 28872 (May 11,
2022) (``Proposing Release'').
    \2\ 15 U.S.C. 78c-4. In this release, the Commission is defining
the Securities Exchange Act as the ``SEA'' to distinguish it from
the Commodity Exchange Act (``CEA'').
    \3\ Public Law 111-203, H.R. 4173, sec. 763(c).
    \4\ See Public Law 111-203 Preamble.
---------------------------------------------------------------------------

    Section 3D(a)(1) of the SEA provides that no person may operate a
facility for the trading or processing of SBS unless the facility is
registered as an SBSEF or as a national securities exchange. Section
3D(d) enumerates 14 Core Principles with which SBSEFs must comply.\5\
And section 3D(f) requires the Commission to prescribe rules governing
the regulation of SBSEFs. In addition, section 765 of the Dodd-Frank
Act directs the Commission to adopt rules to mitigate conflicts of
interest with respect to clearing agencies that clear SBS (``SBS
clearing agencies''), SBSEFs, and national securities exchanges that
post or make available for trading SBS (``SBS exchanges'').
---------------------------------------------------------------------------

    \5\ See infra section VI (listing the Core Principles).
---------------------------------------------------------------------------

    On April 6, 2022, the Commission proposed Regulation SE, relating
to the registration and regulation of SBSEFs and to SBS execution
generally.\6\ As discussed in the Proposing Release, the proposed rules
superseded previous Commission proposals on these subjects.\7\
---------------------------------------------------------------------------

    \6\ See Proposing Release, supra note 1. In 2011, the Commission
published for comment proposed Regulation SBSEF relating to, among
other things, the registration and regulation of SBSEFs.
Registration and Regulation of Security-Based Swap Execution
Facilities, SEA Release No. 63825 (Feb. 2, 2011), 76 FR 10948 (Feb.
28, 2011) (``2011 SBSEF Proposal''). The Proposing Release, which
contains a more detailed discussion of that and related proposals,
withdrew the 2011 SBSEF Proposal. See Proposing Release, 87 FR at
28874.
    \7\ See Proposing Release, supra note 1, 87 FR at 28874.
However, Rule 834 of proposed Regulation SE would implement section
765 only with respect to SBSEFs and SBS exchanges. See infra section
VIII.
---------------------------------------------------------------------------

    The SBS market is closely related to the swaps market, which is
regulated by the Commodity Futures Trading Commission (``CFTC'').\8\ In
June 2013, the CFTC adopted rules (in 17 CFR chapter I) under Title VII
of the Dodd-Frank Act for swap execution facilities (``SEFs'').\9\ The
swaps market has grown and matured within the framework established by
the CFTC's rules.\10\ As

discussed in the Proposing Release, the SBS market is a small fraction
of the overall swaps market, and the swaps market provides greater
opportunities for revenue capture from swap execution as compared to
SBS execution.\11\ For example, as of November 25, 2022, the gross
notional amount outstanding in the SBS market was approximately $8.5
trillion across the credit, equity, and interest rate asset
classes,\12\ while the gross notional amount outstanding in the swaps
market was approximately $352 trillion across the interest rate,
credit, and foreign-exchange asset classes.\13\ The Commission was
sensitive in the Proposing Release to the economic impact its proposed
SBSEF rules could have.\14\
---------------------------------------------------------------------------

    \8\ In adopting Regulation SE, the Commission has consulted and
coordinated with the CFTC and the prudential regulators, in
accordance with the consultation mandate of the Dodd-Frank Act.
Section 712(a)(2) of the Dodd-Frank Act provides in relevant part
that the Commission shall ``consult and coordinate to the extent
possible with the Commodity Futures Trading Commission and the
prudential regulators for the purposes of assuring regulatory
consistency and comparability, to the extent possible.'' In
addition, section 752(a) of the Dodd-Frank Act provides in relevant
part that ``[i]n order to promote effective and consistent global
regulation of swaps and security-based swaps, the Commodity Futures
Trading Commission, the Securities and Exchange Commission, and the
prudential regulators . . . as appropriate, shall consult and
coordinate with foreign regulatory authorities on the establishment
of consistent international standards with respect to the regulation
(including fees) of swaps.'' The term ``prudential regulator'' is
defined in section 1a(39) of the CEA, 7 U.S.C. 1a(39), and that
definition is incorporated by reference in section 3(a)(74) of the
SEA, 15 U.S.C. 78c(a)(74).
    \9\ See CFTC, Core Principles and Other Requirements for Swap
Execution Facilities, 78 FR 33476 (June 4, 2013) (``2013 CFTC Final
SEF Rules Release''); CFTC, Process for a Designated Contract Market
or Swap Execution Facility To Make a Swap Available to Trade, Swap
Transaction Compliance and Implementation Schedule, and Trade
Execution Requirement Under the Commodity Exchange Act, 78 FR 33606
(June 4, 2013) (``2013 CFTC Final MAT Rules Release'').
    \10\ In 2018, the CFTC proposed to make fundamental changes to
the SEF regulatory structure. See CFTC, Swap Execution Facilities
and Trade Execution Requirement, 83 FR 61946 (Nov. 30, 2018) (``2018
SEF Proposal''). In 2021, the CFTC ultimately declined to finalize
the 2018 SEF Proposal and elected instead ``to improve the SEF
framework through targeted rulemakings that address distinct
issues.'' Accordingly, the CFTC withdrew the unadopted portions of
its 2018 proposal. See CFTC, Swap Execution Facilities and Trade
Execution Requirement--Proposed rule; partial withdrawal, 86 FR
9304, 9304 (Feb. 12, 2021).
    \11\ See Proposing Release, supra note 1, 87 FR at 28874-76.
    \12\ See Report on Security-Based Swaps (Mar. 20, 2023),
available at https://www.sec.gov/files/report-security-based-swaps-032023.pdf. See also infra note 815 and accompanying text
(discussing security-based swap transactions data in the credit,
equity, and interest rate derivatives asset classes reported by
registered SBSDRs).
    \13\ See CFTC Swaps Report, available at https://www.cftc.gov/MarketReports/SwapsReports/L3Grossexp.html (accessed on Sept. 27,
2023).
    \14\ See Proposing Release, supra note 1, 87 FR at 28875.
---------------------------------------------------------------------------

    In addition, the Commission recognized that the entities that are
most likely to register with the Commission as SBSEFs are existing,
CFTC-registered SEFs, which have already made substantial investments
in systems, policies, and procedures to comply with and adapt to the
regulatory system developed by the CFTC. Harmonization between the
Commission's SBSEF rules and the CFTC's SEF rules could facilitate the
ability of entities to dually register and minimize costs by allowing
incumbent SEFs to use their existing systems, policies, and procedures
to comply with the Commission's SBSEF rules.\15\
---------------------------------------------------------------------------

    \15\ See Proposing Release, supra note 1, 87 FR at 28875.
---------------------------------------------------------------------------

    Thus, in proposing Regulation SE, the Commission took the general
approach of harmonizing closely with analogous CFTC SEF rules, except
where differences in the SEC's statutory authority relative to the
CFTC's statutory authority, or differences in the SBS market relative
to the swaps market, necessitated differences between the Commission's
rules and the CFTC's, or where the benefits of deviating from the
CFTC's rules would otherwise justify the burdens and costs associated
with imposing different or additional requirements than the
corresponding CFTC rule. And the Commission sought public comment on
this approach.\16\
---------------------------------------------------------------------------

    \16\ The comment letters are available at https://www.sec.gov/comments/s7-14-22/s71422.htm. The Commission also received comments
on topics outside the scope of the proposal that are not addressed
in this release. See, e.g., Letter from Anonymous (Apr. 27, 2022)
(discussing CFTC oversight and transparency); Letter from Anonymous
(Apr. 20, 2022) (discussing securities financial transactions).
---------------------------------------------------------------------------

    One commenter opposes this harmonization approach, and argues that
it does not make sense to harmonize with the ``looser'' rules of SEFs,
which he believes would allow ``more fraud and false narratives to
creep into the market,'' and instead advocates that the Commission
start from scratch with new rules.\17\ Many other commenters, however,
generally support this harmonization approach.\18\ Many of these
commenters echo the Commission's rationale for harmonizing with the
CFTC's SEF rules, and state that such harmonization would minimize the
compliance burden for dually registered entities.\19\ Two of these
commenters also state that the CFTC's regulatory framework has been in
place for almost a decade and has functioned well.\20\ One commenter
also supports the Commission's decision and rationale in withdrawing
proposed Regulation MC \21\ and the Commission's 2011 SBSEF
Proposal.\22\
---------------------------------------------------------------------------

    \17\ See Letter from Robert McLaughlin (Apr. 7, 2022).
    \18\ See, e.g., Letter from Robert Laorno, General Counsel, ICE
Swap Trade, LLC, to Vanessa A. Countryman, Secretary, Commission, at
1-2 (June 20, 2022) (``ICE Letter''); Letter from Stephen W. Hall,
Legal Director and Securities Specialist, and Jason Grimes, Senior
Counsel, Better Markets, Inc., to Vanessa A. Countryman, Secretary,
Commission, at 9-11 (June 10, 2022) (``Better Markets Letter'');
Letter from Derek J. Kleinbauer, Vice-President, Bloomberg SEF LLC,
and Benjamin MacDonald, Global Head Enterprise Products, Bloomberg
L.P., to Vanessa A. Countryman, Secretary, Commission, at 1-2 (June
10, 2022) (``Bloomberg Letter''); Letter from Bella Rosenberg,
Senior Counsel and Head of Legal and Regulatory Practice Group,
International Swaps and Derivatives Association, Inc., and Kyla
Brandon, Managing Director, Head of Derivatives Policy, Securities
Industry and Financial Markets Association, to Vanessa Countryman,
Secretary, Commission, at 1-2 (June 10, 2022) (``ISDA-SIFMA
Letter''); Letter from Sarah A. Bessin Associate General Counsel,
and Nicholas Valderrama, Counsel, Investment Company Institute, at
1-2 (June 10, 2022) (``ICI Letter''); Letter from Elizabeth Kirby,
Head of U.S. Market Structure, Tradeweb Markets Inc., to Vanessa A.
Countryman, Secretary, Commission, at 1-2 (June 10, 2022)
(``Tradeweb Letter''); Letter from Williams Shields, Chairman,
Wholesale Markets Brokers' Association, Americas, to Vanessa A.
Countryman, Secretary, Commission, at 1-2 (June 10, 2022) (``WMBAA
Letter''); Letter from Lindsey Weber Keljo, Head of SIFMA Asset
Management Group, and William Thun, Associate General Counsel, SIFMA
Asset Management Group, to Vanessa A. Countryman, Secretary,
Commission, at 1-2 (June 10, 2022) (``SIFMA AMG Letter''); Letter
from Jennifer W. Han, Chief Counsel & Head of Regulatory Affairs,
Managed Funds Association, at 1-2 (June 10, 2022) (``MFA Letter'');
Letter from Stephen John Berger, Global Head of Government &
Regulatory Policy, Citadel and Citadel Securities (June 10, 2022)
(``Citadel Letter''). While these commenters support the
Commission's general harmonization approach, they also provide
specific recommendations on changes to the Commission's Regulation
SE proposal that they believe would improve the rules, as described
in detail below in the sections discussing these individual rules.
See infra sections II through XVII.
    \19\ See, e.g., ICE Letter, supra note 18, at 1-2; ISDA-SIFMA
Letter, supra note 18, at 1-2; ICI Letter, supra note 18, at 1-2;
Tradeweb Letter, supra note 18, at 1-2; WMBAA Letter, supra note 18,
at 1-2; MFA Letter, supra note 18, at 1.
    \20\ See, e.g., ISDA-SIFMA Letter, supra note 18, at 1-2; SIFMA
AMG Letter, supra note 18, at 1-2.
    \21\ Ownership Limitations and Governance Requirements for
Security-Based Swap Clearing Agencies, Security-Based Swap Execution
Facilities, and National Securities Exchanges With Respect to
Security-Based Swaps Under Regulation MC, SEA Release No. 63107
(Oct. 14, 2010), 75 FR 65882 (Oct. 26, 2010) (``Regulation MC
Proposal'').
    \22\ See Bloomberg Letter, supra note 18, at 2.
---------------------------------------------------------------------------

    The Commission disagrees with the comment that harmonizing with the
CFTC approach would allow for more fraud and false narratives in the
SBS markets. Standing up a formal regulatory framework for SBSEFs where
none yet exists will provide greater accountability and oversight for
the SBS market and should, contrary to this commenter's views, serve to
detect and deter abusive and manipulative trading practices by
providing for a set of Commission rules that SBSEFs must adhere to in
operating their platforms and by requiring SBSEFs to make filings with
the Commission regarding the operation of their platforms and to make
their rules publicly available, as described in detail in sections II
through XVII below.
    Given the relative size of the SBS market as compared to the swaps
market, the fact that the CFTC's SEF regulation has been in place for
many years now, and the cost efficiencies and reduced burdens that
would result from harmonized rules for dually registered SEFs/SBSEFs,
it is appropriate to generally harmonize the Commission's SBSEF
regulatory framework with the CFTC's SEF regulatory framework. At the
same time, where appropriate, adopted Regulation SE differs in certain
targeted respects from the CFTC's regulatory framework for SEFs. This
includes areas where differences in the Commission's statutory
authority relative to the CFTC's statutory authority or differences in
the SBS market relative to the swaps market necessitate differences
between the

Commission's rules and the CFTC's, or where the benefits of deviating
from the CFTC's rules would otherwise justify the burdens and costs
associated with imposing different or additional requirements than the
corresponding CFTC rule. The specific approach to harmonization that
the Commission has pursued, along with differences from CFTC's regime
for SEFs, are described in detail in sections II through XVII below.
    As discussed below, the Commission is modifying the proposed
provisions of Regulation SE regarding the definition of ``block
trade,'' \23\ the treatment of package transactions,\24\ the treatment
of SBS transactions that are intended to be cleared but are not
accepted for clearing by a registered clearing agency,\25\ permitting
SBSEFs to contract with designated contract markets (``DCMs'') to
provide services to assist in complying with the SEA and Commission
rules thereunder,\26\ the content and timing of the Daily Market Data
Report,\27\ an exception to ownership and voting restrictions for
SBSEFs,\28\ the application of deadlines and standard of review for
Commission review of SBSEF actions,\29\ and the applicability of
electronic filing and structured-data requirements with respect to
specific SBSEF filings.\30\ Otherwise, the rules of Regulation SE are
generally being adopted as proposed, in some instances with minor or
technical modifications, which are described in more detail below.\31\
---------------------------------------------------------------------------

    \23\ See infra section V.E.1(c).
    \24\ See infra section V.E.4.
    \25\ See infra section V.E.7.
    \26\ See infra section VI.B.5.
    \27\ See infra section VI.H.
    \28\ See infra section VIII.B.
    \29\ See infra section XIV.E.
    \30\ See infra section XIII.
    \31\ See infra note 32.
---------------------------------------------------------------------------

II. Introductory Provisions of Regulation SE

A. Rule 800--Scope

    Proposed Rule 800 is based on 17 CFR 37.1, which provides that part
37 of the CFTC's regulations applies to every SEF that is registered or
applying to become registered as a SEF under section 5h of the CEA.
Proposed Rule 800 would provide that the provisions of Regulation SE
apply to every SBSEF that is registered or is applying to become
registered as an SBSEF under section 3D of the SEA.
    The Commission received no comments on Proposed Rule 800 and is
adopting Rule 800 as proposed, with minor technical modifications,\32\
for the reasons stated in the Proposing Release.
---------------------------------------------------------------------------

    \32\ In several instances, here and as noted below, the
Commission has made technical modifications to the proposed
regulatory text to conform cross-references in the regulatory text
to the CFR to the required style, as well as to correct simple
typographical errors. Here, the Commission has modified Rule 800 to
change a reference from ``[t]he provisions of this section'' to
``[t]he provisions of Sec. Sec.  242.800 through 242.835.'' In other
instances, the Commission has added the words ``of this section'' to
a CFR cross-reference to conform to the required form of citation.
Other types of technical modifications, and any substantive
modifications, are described below with respect to specific
instances.
---------------------------------------------------------------------------

B. Rule 801--Applicable Provisions

    Proposed Rule 801 is based on Sec.  37.2 of the CFTC's rules, which
provides that a SEF shall comply with the requirements of part 37 and
all other applicable CFTC regulations, including 17 CFR 1.60 and part
9, and including any related definitions and cross-referenced sections.
Proposed Rule 801 would require an SBSEF to comply with the
requirements of Regulation SE and all other applicable Commission
rules, including any related definitions and cross-referenced sections.
    The Commission did not receive any comments on Proposed Rule 801
and is adopting Rule 801 as proposed, with minor technical
modifications.\33\
---------------------------------------------------------------------------

    \33\ See id.
---------------------------------------------------------------------------

C. Rule 802--Definitions

    Proposed Rule 802 would set forth the definitions of terms that are
used in multiple rules in proposed Regulation SE. The majority of these
terms were adapted from the CFTC's swaps rules. Other terms were taken
from section 3 of the SEA \34\ or from a Commission rule under the SEA.
In particular, Proposed Rule 802 would define the term ``security-based
swap execution facility'' by cross-referencing the definition of that
term provided in section 3(a)(77) of the SEA,\35\ but with one carve-
out. An entity that is registered with the Commission as a clearing
agency pursuant to section 17A of the SEA \36\ and limits its SBSEF
functions to operation of a trading session that is designed to further
the accuracy of end-of-day valuations--i.e., a ``forced trading
session''--would be exempt from the definition of ``security-based swap
execution facility.'' \37\
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78c.
    \35\ 15 U.S.C. 78c(a)(77).
    \36\ 15 U.S.C. 78q-1.
    \37\ See Proposing Release, supra note 1, 87 FR at 28878. This
provision codifies a series of exemptions granted by the Commission
to SBS clearing agencies that operate ``forced trading'' sessions.
See, e.g., Order Granting Temporary Exemptions Under the Securities
Exchange Act of 1934 in Connection With Request on Behalf of ICE
U.S. Trust LLC Related to Central Clearing of Credit Default Swaps,
and Request for Comments, SEA Release No. 59527 (Mar. 6, 2009), 74
FR 10791, 10796 (Mar. 12, 2009) (providing, among other things, an
exemption from sections 5 and 6 of the SEA because ``ICE Trust will
periodically require ICE Trust Participants to execute certain CDS
trades at the applicable end-of-day settlement price. Requiring ICE
Trust Participants to trade CDS periodically in this manner is
designed to help ensure that such submitted prices reflect each ICE
Trust Participant's best assessment of the value of each of its open
positions in Cleared CDS on a daily basis, thereby reducing risk by
allowing ICE Trust to impose appropriate margin requirements'');
Order Extending and Modifying Temporary Exemptions Under the
Securities Exchange Act of 1934 in Connection With Request of
Chicago Mercantile Exchange Inc. Related to Central Clearing of
Credit Default Swaps, and Request for Comments, SEA Release No.
61164 (Dec. 14, 2009), 74 FR 67258, 67262 (Dec. 18, 2009)
(providing, among other things, an exemption from sections 5 and 6
of the SEA because, ``[a]s part of the CDS clearing process, CME
will periodically require CDS clearing members to trade at prices
generated by their indicative settlement prices where those
indicative settlement prices generate crossed bids and offers,
pursuant to CME's price quality auction methodology'').
---------------------------------------------------------------------------

    Although the Commission received comments regarding the proper
application of the proposed definitions with respect to registration
requirements, discussed below in section III.A.2, and the proposed
amendments to Rule 3a1-1, discussed below in section X, the Commission
did not receive comments suggesting a modification of the definitions
themselves. The term ``security-based swap execution facility'' is
defined directly in section 3(a)(77) of the SEA as ``a trading system
or platform in which multiple participants have the ability to execute
or trade security-based swaps by accepting bids and offers made by
multiple participants in the facility or system. . . ,'' \38\ and it is
appropriate to adopt the same definition in Rule 802, with a narrow
exception to address certain activities of registered clearing agencies
in furthering the accuracy of end-of-day valuations.\39\
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78c(a)(77).
    \39\ Because this exception for certain clearing agencies
specifies ``an entity that is registered with the Commission as a
clearing agency pursuant to section 17A of the [SEA]'' and meets
other specified conditions, the exception would not be available to
any exempt clearing agency.
---------------------------------------------------------------------------

    Specifically, it is necessary or appropriate in the public
interest, and is consistent with the protection of investors, to exempt
a registered clearing agency that utilizes a forced trading
functionality for SBS from the definition of ``security-based swap
execution facility.'' Such an entity will continue to be registered as
a clearing agency and subject to the requirements of section 17A of the
SEA. Furthermore, a registered clearing agency is a self-regulatory
organization (``SRO''); therefore, all of its rules--including

those governing the forced trading session--have to be submitted to the
Commission pursuant to section 19 of the SEA. Therefore, codification
of the exemption from the definitions of ``exchange'' and ``security-
based swap execution facility'' preserves the status quo and eliminates
a largely duplicative and unnecessary set of regulatory requirements.
This exemption covers only the forced-trading functionality of an SBS
clearing agency; any other exchange or SBSEF activity in which a
clearing agency might engage could subject the clearing agency to the
SEA provisions and the Commission's rules thereunder applying to
exchanges or SBSEFs.
    Proposed Rule 802 would have defined the term ``block trade'' to be
an SBS transaction that, among other requirements, is an SBS based on a
single credit instrument (or issuer of credit instruments) or a narrow-
based index of credit instruments (or issuers of credit instruments)
having a notional size of $5 million or greater.\40\ The Commission
received a number of comments on the proposed definition of ``block
trade.'' These comments are discussed below in section V.E.1(c)
relating to Rule 815(a), which specifies mandatory methods of execution
for a Required Transaction that is not a block trade. As discussed in
detail below in section V.E.1(c), the Commission is not adopting the
proposed definition of ``block trade.\41\
---------------------------------------------------------------------------

    \40\ See Proposing Release, supra note 1, 87 FR at 28896, 28975.
    \41\ Additionally, as discussed below, the Commission is
removing the term ``block trade'' from the text of certain rules
other than Rule 815(a), see infra sections VI.B.1 (Rule 819(a)(3)),
V.B (Rule 812(b)), VI.B.4 (Rule 819(d)(1)), VI.H (Rule 825(c)(1)(i)
and (ii)), and is adding language regarding future definition of
``block trade'' in Rule 825(c)(1)(iii). See infra section VI.H.
---------------------------------------------------------------------------

    Therefore, the Commission is adopting Rule 802 as proposed, except
for the definition of ``block trade,'' which it is reserving, and minor
technical modifications.\42\
---------------------------------------------------------------------------

    \42\ See supra note 32. The Commission has also replaced the
term ``SBSEF'' with ``security-based swap execution facility,''
defined ``SBS exchange'' when the term is first used, added the
words ``of this definition of trading facility'' to paragraph
(2)(C)(ii) of the definition of ``trading facility,'' and moved the
definition of ``dormant security-based swap execution facility'' so
that it appears in alphabetical order.
---------------------------------------------------------------------------

III. Registration of SBSEFS

    Section 3D(a)(1) of the SEA \43\ provides that no person may
operate a facility for the trading or processing of SBS \44\ unless the
facility is registered as an SBSEF or as a national securities
exchange. After issuing the 2011 SBSEF Proposal, the Commission granted
temporary exemptions pursuant to section 36(a)(1) of the SEA \45\ to
entities that meet the definition of ``security-based swap execution
facility'' from having to register with the Commission as an SBSEF or
national securities exchange (``Temporary SBSEF Exemptions'').\46\
According to their terms, the Temporary SBSEF Exemptions expire upon
the earliest compliance date for the Commission's final rules regarding
SBSEF registration.\47\
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78c-4(a)(1).
    \44\ The term ``security-based swap'' is defined in section
3(a)(68) of the SEA, 15 U.S.C. 78c(a)(68), to include, among other
things, a swap that is based on a single security or loan, including
any interest therein or on the value thereof. A single security
could include, for example, a cash equity, a crypto/digital asset
security, or a security option.
    \45\ 15 U.S.C. 78mm(a)(1).
    \46\ See SEA Release No. 64678 (June 15, 2011), 76 FR 36287
(June 22, 2011) (temporarily exempting entities that meet the
definition of ``security-based swap execution facility'' from the
requirement to register with the Commission as an SBSEF) (``June
2011 Exemptive Order''); SEA Release No. 64795 (July 1, 2011), 76 FR
39927 (July 7, 2011) (temporarily exempting entities that meet the
definition of ``security-based swap execution facility'' from the
restrictions and requirements of sections 5 and 6 of the SEA)
(``July 2011 Exemptive Order''). An entity that meets the definition
of ``security-based swap execution facility'' is required to
register as an SBSEF under section 3D of the SEA or as an exchange
under section 6 of the SEA. But because the Commission has not
previously adopted final rules relating to SBSEFs, such entities
have been unable to register with the Commission as SBSEFs. The
Temporary SBSEF Exemptions have allowed such entities to continue
trading SBS without needing to register either as SBSEFs or national
securities exchanges before the compliance date of the SBSEF
registration rules.
    \47\ See June 2011 Exemptive Order, supra note 46, 76 FR at
36293, 36306; July 2011 Exemptive Order, supra note 46, 76 FR at
39934, 39939. The July 2011 Exemptive Order also provided an
exemption from the broker registration requirements of section
15(a)(1) of the SEA, 15 U.S.C. 78o(a)(1), and other requirements of
the SEA and the Commission's rules thereunder that apply to a
broker, solely in connection with broker activities involving SBS
(``Broker Exemptions''). The Broker Exemptions generally expired on
Oct. 6, 2021; however, because an entity that meets the definition
of ``security-based swap execution facility'' also would also meet
the definition of ``broker'' in section 3(a)(4) of the SEA, 15
U.S.C. 78c(a)(4), the Commission extended the Broker Exemptions
solely for persons acting as an SBSEF until the expiration of the
Temporary SBSEF Exemptions (i.e., the earliest compliance date set
forth in any of the Commission's final rules regarding registration
of SBSEFs). See SEA Release No. 87005 (Sept. 19, 2019), 84 FR 68550,
68602 (Dec. 16, 2019).
---------------------------------------------------------------------------

A. Rule 803--Requirements and Procedures for Registration

1. Summary of Proposed Rule 803
    Proposed Rule 803 of Regulation SE is closely modeled on Sec.  37.3
of the CFTC's rules and would set forth a process for registration with
the Commission as an SBSEF.
    Paragraph (a)(1) of Proposed Rule 803 would track the language of
Sec.  37.3(a)(1) closely, and would provide that any person operating a
facility that offers a trading system or platform in which more than
one market participant has the ability to execute or trade security-
based swaps with more than one other market participant on the system
or platform shall register the facility as a security-based swap
execution facility under this section or as a national securities
exchange pursuant to section 6 of the SEA.\48\
---------------------------------------------------------------------------

    \48\ A person that registers with the Commission as a national
securities exchange pursuant to section 6 of the SEA does not fall
within the statutory definition of ``security-based swap execution
facility,'' see sec. 3(a)(77) of the SEA, 15 U.S.C. 78c(a)(77), and
thus does not need to register as an SBSEF under Rule 803.
Furthermore, as discussed below, see infra section X (discussing
proposed paragraph (a)(4) of SEA Rule 3a1-1), a person that
registers as an SBSEF under Rule 803 and provides a market place for
no securities other than SBS is exempt from the definition of
``exchange'' and does not need to register as such pursuant to
section 6 of the SEA. 15 U.S.C. 78c(a)(1) (defining ``exchange'' as
``any organization, association, or group of persons, whether
incorporated or unincorporated, which constitutes, maintains, or
provides a market place or facilities for bringing together
purchasers and sellers of securities or for otherwise performing
with respect to securities the functions commonly performed by a
stock exchange as that term is generally understood, and includes
the market place and the market facilities maintained by such
exchange'').
---------------------------------------------------------------------------

    Paragraph (a)(2) of Rule 803, like Sec.  37.3(a)(2), would require
an SBSEF, at a minimum, to offer an order book, which would be defined
in Rule 802 to mean an electronic trading facility, a trading facility,
or a trading system or platform in which all market participants in the
trading system or platform have the ability to enter multiple bids and
offers, observe or receive bids and offers entered by other market
participants, and transact on such bids and offers.\49\
---------------------------------------------------------------------------

    \49\ Section 37.3(a)(3) defines ``trading facility'' and
``electronic trading facility'' by cross-referencing definitions of
those terms in the CEA. Rather than cross-referencing the CEA, the
Commission adapted the CEA definitions of those terms directly into
Rule 802. See Proposed Rule 802 (defining ``trading facility'' and
``electronic trading facility'').
---------------------------------------------------------------------------

    Paragraph (a)(3) of Rule 803 is closely modeled on Sec.  37.3(a)(4)
and would provide a narrow exception to the requirement to provide an
order book for a Required Transaction \50\ to allow an SBSEF not to
offer an order book for the SBS component(s) of a package transaction
that contains a mix of products, with some parts of the

package being subject to a trade execution requirement and some not.
---------------------------------------------------------------------------

    \50\ As discussed below in section V.E.1(a), the Commission is
incorporating into Regulation SE the concepts of ``Required
Transaction'' and ``Permitted Transaction'' in a manner closely
modeled on the CFTC's use of those terms. A Required Transaction
would be a transaction involving an SBS that is subject to the trade
execution requirement. Section 37.3 of the CFTC's rules requires an
order book as a minimum trading functionality for all SEFs and is
not limited to provision of an order book only for Required
Transactions.
---------------------------------------------------------------------------

    Paragraph (b) of Proposed Rule 803 is closely modeled on Sec.
37.3(b) and would set out procedures for full registration of an SBSEF.
Paragraph (b)(1), like Sec.  37.3(b)(1), would provide that an
applicant requesting registration must file electronically a complete
Form SBSEF or any successor forms, and all information and
documentation described in such forms with the Commission using the
Electronic Data Gathering, Analysis, and Retrieval (``EDGAR'') system
as an Interactive Data File in accordance with Rule 405 of Regulation
S-T, and must provide to the Commission, upon the Commission's request,
any additional information and documentation necessary to review an
application.
    Paragraph (b)(2) of Proposed Rule 803, like Sec.  37.3(b)(2), would
provide that an applicant requesting registration as an SBSEF must
identify with particularity any information in the application that
will be subject to a request for confidential treatment pursuant to
Rule 24b-2 under the SEA.\51\ Paragraph (b)(2) would also provide that,
as set forth in Rule 808, certain information provided in an
application shall be made publicly available.
---------------------------------------------------------------------------

    \51\ See 17 CFR 240.24b-2 (setting forth the procedures for
identifying and redacting the portion of a submission under the SEA
for which confidential treatment is requested). As the Commission
stated in the Proposing Release, it is not necessary or appropriate
to establish and utilize one set of procedures to handle
confidential treatment requests made by SBSEFs while utilizing a
different set of procedures for other persons who request
confidential treatment from the Commission under the SEA. See
Proposing Release, supra note 1, 87 FR at 28880 n.50.
---------------------------------------------------------------------------

    Paragraph (b)(3) of Proposed Rule 803 would address amendments to
the SBSEF registration application. Like Sec.  37.3(b)(3), Rule
803(b)(3) would provide that an applicant amending a pending
application or requesting an amendment to an order of registration
shall file an amended application electronically with the Commission
using the EDGAR system as an Interactive Data File in accordance with
Rule 405 of Regulation S-T. Subsequent to being registered, an SBSEF
would be required to submit rule and product filings under Rule 806 or
Rule 807, as well as provide other updates as may be required pursuant
to other rules for SBSEFs.
    Paragraph (b)(4) of Proposed Rule 803 would address the effect of
an incomplete application. Like Sec.  37.3(b)(4), Proposed Rule
803(b)(4) would provide that, if an application is incomplete, the
Commission shall notify the applicant that its application will not be
deemed to have been submitted for purposes of the Commission's review.
    Paragraph (b)(5) of Proposed Rule 803 would establish the
Commission review period for an application to register as an SBSEF.
Proposed Rule 803(b)(5) is closely modeled on Sec.  37.3(b)(5) and
would require the Commission to approve or deny an application for
registration as an SBSEF within 180 days of the filing of the
application. Proposed Rule 803(b)(5) would further provide that, if the
Commission notifies the person that its application is materially
incomplete and specifies the deficiencies in the application, the
running of the 180-day period would be stayed from the time of that
notification until the application is resubmitted in completed form. In
such a case, the Commission would have not less than 60 days to approve
or deny the application from the time the application is resubmitted in
completed form.
    Paragraph (b)(6)(i) of Proposed Rule 803, like Sec.  37.3(b)(6)(i),
would provide that the Commission shall issue an order granting
registration upon a Commission determination, in its discretion, that
the applicant has demonstrated compliance with the SEA and the
Commission's rules applicable to SBSEFs. Paragraph (b)(6)(i) would
allow the Commission to issue an order granting registration, subject
to conditions. Paragraph (b)(6)(ii) of Proposed Rule 803, modeled on
Sec.  37.3(b)(6)(ii), would provide that the Commission may issue an
order denying registration upon a Commission determination, in its own
discretion, that the applicant has not demonstrated compliance with the
SEA and the Commission's rules applicable to SBSEFs. If the Commission
denies an application under Rule 803(b)(6)(ii), it would be required to
specify the grounds for the denial.
    Paragraph (c) of Proposed Rule 803, like Sec.  37.3(d), would
address reinstatement of a dormant registration. Proposed Rule 803(c)
would provide that a dormant SBSEF \52\ may reinstate its registration
under the procedures of Rule 803(b). Proposed Rule 803(c) would further
provide that the applicant may rely upon previously submitted materials
if such materials accurately describe the dormant SBSEF's conditions at
the time that it applies for reinstatement of its registration.
---------------------------------------------------------------------------

    \52\ See Proposed Rule 802 (defining ``dormant security-based
swap execution facility'' to mean ``a security-based swap execution
facility on which no trading has occurred for the previous 12
consecutive calendar months; provided, however, that no security-
based swap execution facility shall be considered to be a dormant
security-based swap execution facility if its initial and original
Commission order of registration was issued within the preceding 36
consecutive calendar months''). This definition is modeled on the
definition of ``dormant swap execution facility'' found in Sec.
40.1(f).
---------------------------------------------------------------------------

    Paragraph (d) of Proposed Rule 803, like Sec.  37.3(e), would set
out procedures for an SBSEF to request a transfer of registration.
Paragraph (d)(1), which is closely modeled on Sec.  37.3(e)(1), would
provide that an SBSEF seeking to transfer its registration from its
current legal entity to a new legal entity as a result of a corporate
change shall file a request for approval to transfer such registration
with the Commission in the form and manner specified by the Commission.
Paragraph (d)(2), modeled on Sec.  37.3(e)(2), would provide that a
request for transfer of registration shall be filed no later than three
months prior to the anticipated corporate change; or in the event that
the SBSEF could not have known of the anticipated change three months
prior to the anticipated change, as soon as it knows of that change.
    Paragraph (d)(3) of Proposed Rule 803, like Sec.  37.3(e)(3), would
require an SBSEF's request for a transfer of registration to include
the underlying agreement governing the corporate change, a description
of the corporate change, a discussion of the transferee's ability to
comply with the SEA, the governing documents of the transferee, the
transferee's rules marked to show changes from the rules of the SBSEF,
and specified representations by the transferee.\53\
---------------------------------------------------------------------------

    \53\ See Proposing Release, supra note 1, 87 FR at 28880-81.
---------------------------------------------------------------------------

    Paragraph (d)(4) of Proposed Rule 803, modeled on Sec.  37.3(e)(4),
would provide that, upon review of a request for transfer of
registration, the Commission, as soon as practicable, shall issue an
order either approving or denying the request.
    Paragraph (e) of Proposed Rule 803, like Sec.  37.3(f), would
provide that an applicant for registration as an SBSEF may withdraw its
application by filing a withdrawal request electronically with the
Commission using the EDGAR system as an Interactive Data File in
accordance with Rule 405 of Regulation S-T.\54\ Proposed Rule 803(e)
would further provide that withdrawal of an application for
registration shall not affect any action taken or to be taken by

the Commission based upon actions, activities, or events occurring
during the time that the application was pending with the Commission.
---------------------------------------------------------------------------

    \54\ 17 CFR 232.405. The proposed electronic filing requirement
discussed above does not appear in the CFTC version of this
provision. The Commission is adding this specification to implement
the Inline XBRL and EDGAR electronic filing requirements for certain
documents required by Regulation SE. See infra section XIII.A.
---------------------------------------------------------------------------

    Paragraph (f) of Proposed Rule 803, like Sec.  37.3(g), would
provide that an SBSEF may request that its registration be vacated by
filing a vacation request electronically with the Commission using the
EDGAR system and must be provided as an Interactive Data File in
accordance with Rule 405 of Regulation S-T at least 90 days prior to
the date that the vacation is requested to take effect.
2. Comments and Analysis
(a) Registration Requirements, Generally
    Two commenters support the proposed SBSEF registration requirements
under Rule 803 being modeled on the CFTC's rules and state that, as
market participants are familiar with CFTC's requirements, they
appreciate the Commission's attempts to minimize registration burdens
and expedite the establishment of the SBSEF regime.\55\
---------------------------------------------------------------------------

    \55\ See SIFMA AMG Letter, supra note 18, at 5; see also
Bloomberg Letter, supra note 18, at 11.
---------------------------------------------------------------------------

    One commenter states that the Commission should ensure that all
multilateral trading venues for SBS are required to register as an
SBSEF, regardless of the specific trading protocol used.\56\ Another
commenter argues that section 3D(a)(1) of the SEA requires the
registration of any ``facility for the trading or processing of SBS,''
not just those that meet the statutory definition of SBSEF, which
includes multiple-to-multiple trading.\57\ Accordingly, this commenter
states that single-dealer platforms should be required to register as
SBSEFs and to change their operations to offer multiple-to-multiple
trading, consistent with the definition of SBSEF.\58\
---------------------------------------------------------------------------

    \56\ See Citadel Letter, supra note 18, at 9 (``[A] security-
based swap transaction executed via a fully electronic multilateral
RFQ protocol should be subject to the same regulations as one
executed by voice with the assistance of a voice broker (who may or
may not be employed by the SBSEF)'').
    \57\ As discussed above, see supra note 38 and accompanying
text, the statutory definition of SBSEF provides in relevant part
that an SBSEF is ``a trading system platform in which multiple
participants have the ability to execute or trade security-based
swaps by accepting bids and offers made by multiple participants. .
. .'' SEA section 3(a)(77), 15 U.S.C. 78c(a)(77) (emphasis added).
This is sometimes referred to as ``multiple-to-multiple trading.''
    \58\ See Better Markets Letter, supra note 18, at 11-13.
---------------------------------------------------------------------------

    One commenter asks the Commission to ``make clear that the SBSEF
registration requirement applies only to these types of platforms that
are within the statutory and proposed regulatory definition and does
not include any broader CFTC staff interpretations purporting to expand
the SEF definition.'' \59\ This commenter states that CFTC Staff Letter
21-19 \60\ maintains that platforms can be required to register as SEFs
``(i) even where multiple participants cannot simultaneously request,
make, or accept bids and offers from market participants; or (ii) where
multiple participants can initiate a one-to-many communication.'' \61\
The commenter states that extending the definition of SBSEF to include
``facilities offering one-to-many or bilateral communications if more
than one participant is able to submit an RFQ on the platform'' would
``contradict Congress' express intent'' to limit the scope of SBSEF
registration requirements to multiple-to-multiple platforms; that the
Commission should make clear that the CFTC staff guidance is
inapplicable to SBSEFs; and that the Commission should confirm that it
is not adopting or incorporating, explicitly or implicitly, similar
guidance.\62\
---------------------------------------------------------------------------

    \59\ See MFA Letter, supra note 18, at 3.
    \60\ See CFTC Staff Advisory on Swap Execution Facility
Registration Requirement, Letter No. 21-19 (Sept. 29, 2021),
available at https://www.cftc.gov/node/238336.
    \61\ See MFA Letter, supra note 18, at 3 (quoting CFTC Staff
Letter No. 21-19, supra note 60 (emphasis in original)).
    \62\ MFA Letter, supra note 18, at 3-4 (internal quotations
omitted).
---------------------------------------------------------------------------

    The Commission agrees with the comment that the definition of SBSEF
applies to multilateral trading facilities regardless of the specific
trading protocol used. As the statutory definition of SBSEF makes
clear, a trading facility would fall under the definition of SBSEF if
it offers ``multiple participants the ability to execute or trade
security-based swaps by accepting bids and offers made by multiple
participants in the facility or system, through any means of interstate
commerce. . . .'' \63\ Whether a specific instance or practice of
brokering in fact offers multiple participants the ability to accept
the bids or offers made by multiple participants, though, will depend
on the attendant facts and circumstances of that instance or practice.
The Commission does not, however, agree with the comment that the
language of SEA section 3D(a)(1) means that single-dealer platforms for
trading SBS must register as SBSEFs and, consistent with the statutory
definition of SBSEF, change their operations to provide multiple-to-
multiple trading. SEA section 3D is titled ``Security-based swap
execution facilities,'' and section 3D(a)(1) states, in full, ``No
person may operate a facility for the trading or processing of
security-based swaps, unless the facility is registered as a security-
based swap execution facility or as a national securities exchange
under this section.'' \64\ The Commission is not persuaded that the
phrase ``facility for the trading or processing of security-based
swaps'' in this context can reasonably be read to apply more broadly to
encompass anything other than an SBSEF or an SBS exchange. Since the
definitions of both SBSEF and exchange include the concept of multiple-
to-multiple trading,\65\ single-dealer ``one-to-many'' trading
platforms that do not offer multiple-to-multiple trading are outside
the scope of the provisions of section 3D(a)(1).
---------------------------------------------------------------------------

    \63\ SEA section 3(a)(77), 15 U.S.C. 78c(a)(77) (emphasis
added).
    \64\ SEA section 3D(a)(1), 15 U.S.C. 78c-4(a)(1).
    \65\ See SEA section 3(a)(77), 15 U.S.C. 78c(a)(77) (defining
SBSEF in relevant part as ``a trading system or platform in which
multiple participants have the ability to execute or trade security-
based swaps by accepting bids and offers made by multiple
participants in the facility or system . . .''); SEA section
3(a)(1), 15 U.S.C. 78c(a)(1) (defining an exchange in relevant part
as ``any organization, association, or group of persons, whether
incorporated or unincorporated, which constitutes, maintains, or
provides a market place or facilities for bringing together
purchasers and sellers of securities'') (emphasis added).
---------------------------------------------------------------------------

    It is not necessary to incorporate the guidance in CFTC Staff
Letter 21-19 into this release, because the CFTC staff letter in large
part refers to fact-specific circumstances that the Commission has yet
to encounter since Reg SE is not yet effective and the application of
the SBSEF definition depends on the particular facts and circumstances
of a platform's structure and operations. For the same reason, it would
be premature to reject the possibility of taking a position similar to
that of the CFTC guidance with regard to SBSEFs, as one commenter
suggested.\66\ Moreover, because the statutory definition of SBSEF does
not include the word ``simultaneous,'' the Commission declines to issue
its own guidance to reflect a requirement for simultaneity here. Where
operators of SBS trading platforms have questions about the facts and
circumstances particular to their situations, they can discuss their
particular circumstances with Commission staff.
---------------------------------------------------------------------------

    \66\ See supra notes 59-62 and accompanying text.
---------------------------------------------------------------------------

(b) Abbreviated Registration Procedures for CFTC-Registered SEFs
    Several commenters state that the Commission should use its
exemptive authority to provide a streamlined registration process for
SBSEFs that are already registered with the CFTC as

SEFs.\67\ One commenter states that, because many entities will likely
be registering with both the Commission and the CFTC, a streamlined
SBSEF registration process will ease the burden of new requirements
imposed on potential dual-registrants.\68\ This commenter further
states that allowing currently registered CFTC SEFs to become SEC-
registered SBSEFs would be more efficient and would more quickly kick-
start the Commission's SBS regime. This commenter thus supports the use
of exemptive authority for SEFs that are currently registered, provided
that the Commission's approach to exemptive authority does not disrupt
the existing market structure and the relationships between venues and
participants. Another commenter states that a streamlined registration
process for SEFs currently registered and in good standing with the
CFTC would have the potential to lower the costs of registration and
encourage the entry of market participants.\69\
---------------------------------------------------------------------------

    \67\ See SIFMA AMG Letter, supra note 18, at 5; Bloomberg
Letter, supra note 18, at 11; WMBAA Letter, supra note 18, at 3; ICE
Letter, supra note 18, at 5.
    \68\ See SIFMA AMG Letter, supra note 18, at 5.
    \69\ See Bloomberg Letter, supra note 18, at 11.
---------------------------------------------------------------------------

    One commenter that supports a streamlined SBSEF registration
process for SEFs states that a prolonged registration process,
particularly for venues already registered with the CFTC, only further
delays the introduction of regulated price discovery, liquidity
formation, and trade execution for SBS.\70\ This commenter also states
that SBSEF registration also further expedites SBS data reporting to
the extent SBSEFs will report trades to an SBS swap data repository
under the Commission's Regulation SBSR, as this service cannot be
provided until SBSEFs are registered and operational. If the Commission
were not to retain the exemptive authority within Rule 803, this
commenter supports a process that gives deference to existing CFTC SEFs
and provides a more streamlined process for such registrants. The
commenter states that, as the Commission observed in the proposing
release, most of the SBS liquidity will likely be centralized around a
few facilities, with most (if not all) of them already operating CFTC-
regulated SEFs.\71\
---------------------------------------------------------------------------

    \70\ See WMBAA Letter, supra note 18, at 3.
    \71\ See WMBAA Letter, supra note 18, at 3-4.
---------------------------------------------------------------------------

    Another commenter states that SEFs that are currently registered
and in good standing with the CFTC should be permitted to register with
the Commission utilizing their current documentation filed pursuant to
the requirements of Form SEF.\72\ This commenter states that CFTC
registered SEFs are required to keep their Form SEF and its exhibits
current through post-registration amendments and that, as the
Commission is modeling proposed Form SBSEF on the CFTC's Form SEF,
substituting the forms should not be problematic for the Commission to
review. The commenter states that the Commission should permit
registered SEFs seeking to register as an SBSEF to submit their Form
SEF and exhibits, with an accompanying addendum reflecting only those
changes necessary to fulfill the specific requirements of proposed
Regulation SE, in lieu of filing a new Form SBSEF.
---------------------------------------------------------------------------

    \72\ See ICE Letter, supra note 18, at 5.
---------------------------------------------------------------------------

    One commenter, however, stated that ``relaxing or eliminating any
registration requirements would be highly inappropriate,'' and argued
that the Commission must be ``rigorous in reviewing and approving
SBSEFs applicants while upholding complete impartiality.'' \73\ This
commenter further states that both active SEFs and non-SEFs seeking to
register SBSEFs ``must be held under the same standard to avoid any
conflict of interests.'' \74\ Therefore, this commenter states that the
Commission should not use exemptive authority under SEA section
36(a)(1) to adopt an abbreviated procedure for SEFs seeking to register
as SBSEFs, because doing so would rely on the ``CFTC's biased
judgment'' and would not permit an ``unprejudiced determination'' by
the Commission.\75\
---------------------------------------------------------------------------

    \73\ Letter from J. T. at 1 (May 26, 2022).
    \74\ Id.
    \75\ Id.
---------------------------------------------------------------------------

    In the Proposing Release, the Commission stated that it was
considering that, after adopting final rules establishing a
registration process for SBSEFs, it could exercise its exemptive
authority under section 36(a)(1) of the SEA \76\ to relax or eliminate
entirely certain of the registration requirements for entities that are
already registered as SEFs with the CFTC.\77\ The Commission recognizes
that many of the entities that will seek registration with the
Commission as SBSEFs are already registered with the CFTC as SEFs.
Entities that seek dual registration presumably see efficiencies in
utilizing the same systems, policies, and procedures to trade both
swaps and SBS. As noted throughout this release, the Commission has
sought to harmonize the SBSEF regulatory regime as closely as
practicable with the CFTC's SEF regulatory regime, achieving similar
regulatory benefits as the CFTC regime while minimizing costs so as to
impose only marginal costs on dually registered SEF/SBSEFs and their
members. As a result of these harmonized regimes, SEFs that seek dual
registration with the SEC would likely need to make only minor
adjustments to their rules and trading procedures to support trading of
SBS in addition to the trading of swaps.
---------------------------------------------------------------------------

    \76\ 15 U.S.C. 78mm(a)(1).
    \77\ See Proposing Release, supra note 1, 87 FR at 28882.
---------------------------------------------------------------------------

    While one commenter states that it would be inappropriate to relax
or eliminate any SBSEF registration requirements for CFTC-registered
SEFs,\78\ an entity's status as a registered SEF in good standing with
the CFTC is relevant when considering its application to register as an
SBSEF and that reducing the registration burden for CFTC-registered
SEFs, where possible, is appropriate. However, granting exemptive
relief under section 36(a)(1), which this commenter opposes, or
providing for a formally abbreviated SBSEF registration regime for
CFTC-registered SEFs is not necessary to accomplish expedited
registration and reduced registration burdens.\79\ Requiring all
applicants to submit Form SBSEF will support consistency in the review
by the Commission and its staff of applications for registration of
SBSEFs, which will include a review of the proposed rules for the
SBSEFs. The Commission expects that prospective SBSEFs will be able to
use the information in their SEF applications to complete their SBSEF
applications, as discussed below.
---------------------------------------------------------------------------

    \78\ See supra note 75 and accompanying text.
    \79\ In the Proposing Release, the Commission stated that it was
``preliminarily considering'' that it would exercise exemptive
authority under section 36(a)(1) of the Act, 15 U.S.C. 78mm(a)(1),
``to relax or eliminate entirely certain of the registration
requirements for entities that are already registered as SEFs with
the CFTC.'' Proposing Release, supra note 1, 87 FR at 28882.
---------------------------------------------------------------------------

    For the reasons discussed above, the Commission is adopting Rule
803 as proposed, with minor technical modifications.\80\
---------------------------------------------------------------------------

    \80\ See supra note 32. The Commission is also deleting the
header text ``Minimum trading functionality'' from paragraph (a)(3),
and is adding the header text ``Request to register'' to paragraph
(b)(1), in order to maintain consistency of style in the regulatory
text. Additionally, the Commission is removing the requirement to
use an Interactive Data File for filing requests to withdraw or
vacate an application for registration pursuant to Rules 803(e) and
803(f). See infra section XIII.A.
---------------------------------------------------------------------------

B. Form SBSEF

    The Commission proposed new Sec.  249.2001 to require that entities
use Form SBSEF to register with the Commission as an SBSEF. Form SBSEF
would also be used for submitting any

updates, corrections, or supplemental information to a pending
application for registration. Form SBSEF is closely modeled on the
CFTC's Form SEF for entities that seek to register with the CFTC as
SEFs, with only minor changes to remove from the form the concept of
post-registration amendments, as the proposed rule would not require
any amendments to Form SBSEF post-registration. The exhibits that were
proposed along with Form SBSEF are very similar to the exhibits in Form
SEF. As with Form SEF, each applicant submitting a Form SBSEF would be
required to provide the Commission with documents and descriptions
pertaining to its business organization, financial resources, and
compliance program, including various documents describing the
applicant's legal and financial status. An applicant would be required
to disclose any affiliates, provide a brief description of the nature
of the affiliation, and submit copies of any agreements between the
SBSEF and third parties that would assist the applicant in complying
with its duties under the SEA. In addition, an applicant would be
required to demonstrate operational capability through documentation,
including technical manuals and third-party service provider
agreements.
    Under Rule 803(b)(1), an applicant for SBSEF registration would be
required to complete Form SBSEF and provide, upon the Commission's
request, any additional necessary information and documentation in
order review the application. The determination as to when an
application submission is complete would be at the sole discretion of
the Commission. The Commission would review Form SBSEF and, at the
conclusion of its review, by order either: (i) grant registration; (ii)
deny the application for registration; or (iii) grant registration
subject to certain conditions. After an applicant is granted
registration, any updates or amendments to the information contained in
its Form SBSEF by an active SBSEF would be required to be submitted as
rules or rule amendments under Rule 806 or Rule 807 or as may be
required by other rules in Regulation SE.
    One commenter states that the Commission should closely harmonize
the rules for SBSEF registration with the CFTC's rules, with the
exception of Exhibits D and H of Form SBSEF, which require: (a) a list
of all affiliates and a description of any material pending legal
proceedings of such affiliates, and (b) the financial statements of the
affiliates. This commenter states that the information required by
these exhibits is ``burdensome and not fit for purpose'' and should not
be required unless the affiliate provides support services to the SBSEF
or the legal proceedings are expected to have a material effect on the
applicant or the operation of its proposed SBSEF.\81\ As discussed
above, several commenters expressed support for the Commission
providing an expedited process for CFTC-registered SEFs that wish to
register as SBSEFs.
---------------------------------------------------------------------------

    \81\ See Bloomberg Letter, supra note 18, at 11.
---------------------------------------------------------------------------

    The CFTC adopted rules for the registration and regulation of SEFs
in 2013,\82\ and the CFTC's process for registering SEFs appears to be
well understood by the industry and well designed for being adapted to
the SBS market. Therefore, the Commission has used the CFTC's process
as a basis for its own process for registering SBSEFs, and information
about SBSEF affiliates is relevant to the Commission's oversight of
SBSEFs and, in particular, oversight of SBSEF compliance with Rule 828
(conflicts of interest).\83\ In addition, we assume that most if not
all SBSEFs will be dually registered as SEFs.
---------------------------------------------------------------------------

    \82\ See 2013 CFTC Final SEF Rules Release, supra note 9.
    \83\ See infra section VI.K.
---------------------------------------------------------------------------

    However, while the content and exhibits of Form SBSEF closely match
the form and content of Form SEF, exhibits to Form SEF are provided to
the CFTC as unstructured documents, whereas most exhibits to Form SBSEF
will be provided to the Commission as structured, machine-readable
documents. Permitting SBSEFs to provide copies of Form SEF exhibits in
lieu of Form SBSEF exhibits, while likely resulting in an expedited
registration process for most SBSEFs, would also potentially result in
a much higher volume of unstructured data, making the Form SBSEF
disclosures more difficult for market participants and the Commission
to analyze in an efficient manner. Thus, notwithstanding some
commenters' support for an expedited registration process, the final
rules do not permit SBSEFs to provide copies of Form SEF exhibits in
lieu of Form SBSEF exhibits. The Commission is therefore adopting 17
CFR 249.2001 as proposed, but is renumbering it as 17 CFR 249.1701
under new subpart R (``Forms for Registration of, and Filings by,
Security-Based Swap Execution Facilities'') and is making a minor
technical correction.\84\
---------------------------------------------------------------------------

    \84\ The Commission is correcting the text in Instruction 20 to
Form SBSEF to read ``a list with the name(s) of the clearing
agency(ies)'' instead of ``a list of the name of the clearing
organization(s).''
---------------------------------------------------------------------------

IV. Rule and Product Filings by SBSEFs

    Unlike section 19(b) of the SEA,\85\ which sets out a process
whereby national securities exchanges and other SROs submit filings to
the Commission to add, delete, or amend rules (including rules to list
products), section 3D of the SEA \86\ does not set out an equivalent
process for SBSEFs, which are not SROs. It can be expected, however,
that an SBSEF will seek to change its rules over time in order, for
example, to implement new trading methodologies and to expand its
product offerings to make its market more attractive to participants,
and adopting rules for filings related to these changes will promote
public transparency regarding the changes, as well as consistent
handling of those filings by the Commission.
---------------------------------------------------------------------------

    \85\ 15 U.S.C. 78s(b).
    \86\ 15 U.S.C. 78c-4.
---------------------------------------------------------------------------

    An appropriate review process is necessary to assess whether
changes to an SBSEF's rules and product offerings are consistent with
section 3D of the SEA and the Commission's rules thereunder, and the
CFTC's filing procedures are an appropriate model on which to base the
Commission's own filing procedures. Furthermore, because of the
likelihood that most if not all SBSEFs will be dually registered with
the CFTC as SEFs, and that many rule changes for a dual registrant will
affect both its SBS and swap trading businesses, close harmonization
with the CFTC's filing procedures would allow a dual registrant to make
a similar filing to each agency, allowing each agency to carry out its
oversight functions while minimizing the burdens on dual registrants.
    Parts 37 and 40 of the CFTC's rules set out processes whereby SEFs
may establish or amend rules and list products. These processes allow a
SEF to voluntarily submit a rule, rule amendment, or new product for
CFTC review and approval, or to ``self-certify'' that a rule, rule
amendment, or new product meets applicable standards under the CEA and
the CFTC's rules thereunder without obtaining CFTC approval, although
the CFTC retains the ability, in certain circumstances, to stay the
self-certification for further review before it may become effective.
Using its general authority to impose any requirement on SBSEFs and to
prescribe rules governing the regulation of SBSEFs,\87\ the Commission
proposed to

establish similar filing processes for registered SBSEFs in Rules 804
to 810 of Regulation SE.\88\
---------------------------------------------------------------------------

    \87\ See 15 U.S.C. 78c-4(d)(1)(A)(ii) (requiring an SBSEF, in
order to be registered and to maintain registration, to comply with
any requirement that the Commission may impose by rule or
regulation); 15 U.S.C. 78c-4(f) (directing the Commission to
prescribe rules governing the regulation of SBSEFs).
    \88\ The CFTC has proposed to amend the rules that govern how
CFTC-registered entities submit self-certifications and requests for
approval of their rules, rule amendments, and new products for
trading and clearing, as well as the CFTC's review and processing of
such submissions. See CFTC, Provisions Common to Registered Entities
(Notice of Proposed Rulemaking), 88 FR 61432 (Sept. 9, 2023). The
CFTC's proposing release states that the proposed amendments ``are
intended to clarify, simplify and enhance the utility of those
regulations for market participants and the [CFTC].'' Id. at 61432.
The CFTC has not yet taken action on this proposal.
---------------------------------------------------------------------------

A. Rule 804--Listing Products for Trading by Certification

1. Summary of the Proposed Rule
    Proposed Rule 804 is modeled on 17 CFR 40.2 of the CFTC's rules and
would set forth procedures by which an SBSEF may list a product via
certification. Paragraph (a)(1) of Proposed Rule 804 would require an
SBSEF to file its submission electronically with the Commission using
the EDGAR system as an Interactive Data File in accordance with Rule
405 of Regulation S-T.
    Paragraph (a)(2) of Proposed Rule 804 would provide that the
Commission must receive the submission by the open of business on the
business day that is 10 business days preceding the product's
listing.\89\
---------------------------------------------------------------------------

    \89\ By contrast, the parallel provision in Sec.  40.2(a)
provides that a DCM or SEF must file the self-certification only one
business day before listing the product. See Sec.  40.2(a)(2) (one
of the conditions for a valid self-certification of a product is
that the CFTC has received the submission by the open of business on
the business day preceding the product's listing).
---------------------------------------------------------------------------

    Paragraph (a)(3) of Proposed Rule 804 would require a self-
certification to include a copy of the submission cover sheet; \90\ a
copy of the product's rules, including all rules related to its terms
and conditions; the intended listing date; a certification by the SBSEF
that the product to be listed complies with the SEA and the
Commission's rules thereunder; a concise explanation and analysis of
the product and its compliance with applicable provisions of the SEA,
including the Core Principles, and the Commission's rules thereunder; a
certification that the SBSEF posted a notice of pending product
certification with the Commission and a copy of the submission,
concurrent with the filing of a submission with the Commission, on the
SBSEF's website; \91\ and a request for confidential treatment, if
appropriate, as permitted pursuant to SEA Rule 24b-2.\92\
---------------------------------------------------------------------------

    \90\ The Commission proposed, in new Sec.  249.2002, a
submission cover sheet (with instructions) that is closely modeled
on the CFTC's submission cover sheet.
    \91\ Under Rule 804(a)(3)(vi), information that the SBSEF seeks
to keep confidential can be redacted from the documents published on
the SBSEF's website but would have to be republished consistent with
any determination made pursuant to SEA Rule 24b-2.
    \92\ Section 40.2(a)(3) instructs filers to make any request for
confidential treatment pursuant to Sec.  40.8 of the CFTC's rules,
which in turn cross-references 17 CFR 145.9. The Commission proposed
instead to direct filers to make any request for confidential
treatment pursuant to existing SEA Rule 24b-2. See supra note 51.
---------------------------------------------------------------------------

    Paragraph (b) of Proposed Rule 804, modeled on Sec.  40.2(b), would
provide that, if requested by Commission staff, an SBSEF shall provide
any additional evidence, information, or data that demonstrates that
the SBS meets, initially or on a continuing basis, the requirements of
the SEA or the Commission's rules or policies thereunder.
    Paragraph (c)(1) of Proposed Rule 804 would provide that the
Commission may stay the certification of a new product by issuing a
notification informing the SBSEF that the Commission is staying the
certification on the grounds that the product presents novel or complex
issues that require additional time to analyze, is accompanied by an
inadequate explanation, or is potentially inconsistent with the SEA or
the Commission's rules thereunder.\93\ Under paragraph (c)(1), the
Commission would have an additional 90 days from the date of the
notification to conduct the review.
---------------------------------------------------------------------------

    \93\ Rule 807(c) is based on Sec.  40.2(c), which provides that
the CFTC may stay the listing of a contract pursuant to paragraph
(a) of this section during the pendency of CFTC proceedings for
filing a false certification or during the pendency of a petition to
alter or amend the contract terms and conditions pursuant to section
8a(7) of the CEA. The SEA does not include the CEA's provisions
regarding altering or amending the terms and conditions of an SBS
listed by an SBSEF like the authority granted to the CFTC with
respect to products listed by SEFs, such that the Commission would
be able to stay the listing of an SBS that it believes may be
inconsistent with the SEA, pending proceedings to exercise that
authority. Nor are proceedings for false certification of an SBS
contemplated by the SEA. For this reason, in lieu of harmonizing
with Sec.  40.2(c), the Commission proposed, in Rule 804(c), a
provision that would allow the Commission to stay the certification
of a new product in the same manner that Rule 807(c) would allow the
Commission to stay the self-certification of a new rule or rule
amendment.
---------------------------------------------------------------------------

    Paragraph (c)(2) would require the Commission to provide a 30-day
comment period during that 90-day period, and to publish a notice of
the 30-day comment period on the Commission's website. Comments from
the public could be submitted as specified in that notice.
    Paragraph (c)(3) would provide that the product that had been
stayed would become effective, pursuant to the certification, at the
expiration of the 90-day review period, unless the Commission withdraws
the stay prior to that time, or the Commission notifies the SBSEF
during the 90-day time period that it objects to the proposed
certification on the grounds that the proposed product is inconsistent
with the SEA or the Commission's rules.
2. Comments and Analysis
    One commenter states that, while the proposed self-certification
process does include improvements to the CFTC's self-certification
process, including extending the initial review period from one
business day to 10 business days and expanding the scope of reasons for
staying the self-certification, it is still fundamentally flawed. This
commenter states that the CFTC's self-certification process is mandated
by statute and that, in the absence of any statutory mandate analogous
to that applicable to the CFTC, the Commission must, at the very least,
provide a coherent policy justification for its proposed self-
certification process.\94\
---------------------------------------------------------------------------

    \94\ See Better Markets Letter, supra note 18, at 13.
---------------------------------------------------------------------------

    This commenter states that it is not clear why it is necessary or
desirable for SBSEFs to be able to bring new products to the market
``speedily'' and that self-certification turns the regulatory process
on its head, creating in effect a presumption of regulatory compliance
and putting the onus on the agency, under a predetermined timeline, to
fully evaluate a proposed product that may threaten significant harm to
investors and market stability.\95\ This is especially the case, the
commenter states, considering the context in which the SEC was given
comprehensive authority to regulate and oversee the SBS market, i.e., a
financial crisis caused in large part by SBS and other novel financial
products whose risks regulators and market participants thought were
well understood, but in fact were not. Given this context, the
commenter states, it ``makes little policy sense to establish a regime
whereby an SBSEF could introduce a new potentially dangerous product to
the financial system without an affirmative, independent SEC

determination that such product not only complies with the SBSEF Core
Principles and other requirements, but also that it does not pose an
unwarranted danger to investors, the financial system, and the broader
economy.'' \96\
---------------------------------------------------------------------------

    \95\ See Better Markets Letter, supra note 18, at 13-14; see
also Letter from Bryce Keeney (Apr. 27, 2022) (``Keeney Letter'')
(stating that ``[d]erivatives are not the purpose of the market''
and that the Commission should ``align rules to focus on the primary
purpose, not to support tertiary aspects that result in systemic
risk and systemic abuse''); Letter from Kevin (Apr. 20, 2023)
(``Kevin Letter'') (stating that the proposed rules do not protect
retail investors and that ``[c]reating a self governing regime,
allowing easier swaps trading across borders, exemption exchanges
and registered brokers . . . sound like a terrible recipe for
disaster in a multi-trillion marketplace'').
    \96\ Better Markets Letter, supra note 18, at 13-14.
---------------------------------------------------------------------------

    For several reasons the Commission does not agree with the
objections raised by this commenter. First, the Commission does not
agree that the self-certification process of Rule 804 either ``turns
the regulatory process on its head'' or would deny the Commission the
opportunity to ``fully evaluate a proposed product that may threaten
significant harm to investors and market stability.'' \97\ The ability
of the Commission to stay the effectiveness of any product self-
certification, to seek public comment on that self-certification, and
to object to (i.e., effectively disapprove) the proposed certification
on the grounds that the product is inconsistent with the SEA or the
Commission's rules will provide the Commission with sufficient
opportunity (including the opportunity to seek public comment) to
consider the self-certified rules and take steps to protect investors
and maintain fair, orderly, and efficient markets. Further, the self-
certification process does not create a ``presumption of compliance,''
because: (a) Rule 804(b) requires an SBSEF to provide, at Commission
request, any ``additional evidence, information, or data that
demonstrates that the SBS meets, initially or on a continuing basis,
the requirements of the SEA or the Commission's rules or policies
thereunder''; (b) Rule 804(c)(1) permits the Commission to suspend a
new product certification because ``the product presents novel or
complex issues that require additional time to analyze, is accompanied
by an inadequate explanation, or is potentially inconsistent with the
SEA or the Commission's rules thereunder'' (emphasis added); and (c)
Rule 804(c)(3) does not create a presumption of compliance but instead
provides the Commission a mechanism by which to object to a proposed
certification ``on the grounds that the proposed product is
inconsistent with the SEA or the Commission's rules.'' \98\
---------------------------------------------------------------------------

    \97\ See supra note 96 and accompanying text.
    \98\ Section IV.D, infra, discusses the process for self-
certification of rule changes, including the Commission's ability to
stay the effectiveness of such a filing, which would lead to a
public comment period and the opportunity for the Commission to
object to the certification.
---------------------------------------------------------------------------

    Second, given the relationship between the swaps market and the SBS
market, as well as the likelihood that most or all entities seeking to
register as SBSEFs will be CFTC-registered SEFs, harmonization with the
CFTC filing procedures for new products should facilitate the ability
of entities to dually register and minimize costs by allowing incumbent
SEFs to use their existing systems, policies, and procedures to comply
with the Commission's SBSEF rules. The aim of the rule is, however, not
merely to allow SBSEFs to bring products to market ``speedily,'' or at
minimal cost, and, as discussed below in this section, it is
appropriate for its rules to provide for a longer review period than
the CFTC's rules.
    And third, the Commission disagrees with this commenter's view that
the self-certification process ``would pose an unwarranted danger to
investors, the financial system, and the broader economy.'' The new-
product provisions of Regulation SE must be read in the context of the
other relevant provisions of Title VII of the Dodd-Frank Act and the
Commission's rules thereunder, which include, among other things, rules
governing the registration and regulation of Security-Based Swap
Dealers (``SBSDs'') and Major Security-Based Swap Participants
(``MSBSPs''); \99\ capital, margin, and segregation requirements for
SBSDs and MSBSPs; \100\ business conduct standards and chief compliance
officer requirements for SBSDs and MSBSPs; \101\ and post-trade
reporting and public dissemination of SBS transactions.\102\ Because of
the significant role these other rules play in addressing potential
risks posed by SBS, the Commission's ability to require SBSEFs to
provide any evidence, information, or data demonstrating that the SBS
meets, initially or on a continuing basis, the requirements of the SEA
or the Commission's rules or policies thereunder, and the Commission's
ability to suspend and ultimately object to SBSEF self-certifications,
are appropriate to protect investors, the financial system, and the
broader economy with respect to new SBSEF products and rules.\103\
Thus, the self-certification process in this context is appropriate for
the underlying aims of the Dodd-Frank Act.
---------------------------------------------------------------------------

    \99\ See Registration Process for Security-Based Swap Dealers
and Major Security-Based Swap Participants, SEA Release No. 75611
(Aug. 5, 2015), 80 FR 48963 (Aug. 14, 2015) (``SBSD and MSBSP
Registration Release'').
    \100\ See Capital, Margin, and Segregation Requirements for
Security-Based Swap Dealers and Major Security-Based Swap
Participants and Capital and Segregation Requirements for Broker-
Dealers, SEA Release No. 86175 (June 21, 2019), 84 FR 43872 (Aug.
22, 2019) (``Capital, Margin, and Segregation Release'').
    \101\ See Business Conduct Standards for Security-Based Swap
Dealers and Major Security-Based Swap Participants, SEA Release No.
77617 (Apr. 14, 2016), 81 FR 29959 (May 13, 2016) (``Business
Conduct Standards Release'').
    \102\ See Regulation SBSR--Reporting and Dissemination of
Security-Based Swap Information, SEA Release No, 78321 (July 14,
2016), 81 FR 53546 (Aug. 12, 2016) (``Regulation SBSR Release'').
    \103\ The Commission's rules for SBSEFs do not directly affect
retail investors. Only eligible contract participants (``ECPs'') are
eligible to trade on an SBSEF, see section 6(l) of the SEA, 15
U.S.C. 78f(l), and retail investors would have access to an SBS only
after an SBS exchange has filed a proposed rule change with the
Commission under Rule 19b-4, 17 CFR 240.19b-4, to amend its rules to
permit the listing of a registered SBS, with that proposed rule
change being published for public comment.
---------------------------------------------------------------------------

    Two commenters state that the relatively low volume of SBS products
expected to be self-certified supports a shorter review period than the
proposed ten-business-day Commission review period.\104\ Both
commenters recommend a shorter review period of one day to harmonize
with the CFTC's approach.\105\ Alternatively, one of the commenters
suggests a two-day review period.\106\ This commenter suggests that a
shorter review period would be beneficial to allow market operators to
meet participants' demands to transact on regulated platforms in a
reasonable period of time.\107\ The commenter also states that a
shorter review period would accommodate participants' needs to hedge
risk in a timely manner.\108\ The other commenter states that a longer
review period would reduce the competitive benefit to SBSEFs that
develop new products because a 10-day review period would enable
competitors to list similar products.\109\ This commenter also suggests
varying from the one-day review period in certain limited
circumstances, such as when an SBSEF submits an SBS for a made-
available-to-trade determination.\110\
---------------------------------------------------------------------------

    \104\ See WMBAA Letter, supra note 18, at 4; ICE Letter, supra
note 18, at 2.
    \105\ See WMBAA Letter, supra note 18, at 4; ICE Letter, supra
note 18, at 2.
    \106\ See WMBAA Letter, supra note 18, at 4.
    \107\ See id.
    \108\ See id.
    \109\ See ICE Letter, supra note 18, at 3.
    \110\ See id.
---------------------------------------------------------------------------

    While a ten-day review period differs from the CFTC's one-day
review period, one business day would not provide the SEC staff
sufficient time to review a new product filing for error or
incompleteness, let alone review a new product for compliance with the
SEA or Regulation SE. Further, if a product does warrant a stay, the
Commission would also need sufficient time to go through the
administrative steps of formally issuing the stay.\111\ The

proposed ten-business-day review period for self-certified products
also accords with the CFTC's ten-business-day review period for self-
certified rules,\112\ which the Commission is replicating in Rule
807(a)(3).\113\
---------------------------------------------------------------------------

    \111\ See infra sections XV.D and XV.E (delegating authority to
the Director of the Division of Trading and Markets to stay the
effectiveness of a self-certification and to extend the period for
consideration of a new product).
    \112\ See Sec.  40.6(a)(3) (one of the conditions for a valid
self-certification of a rule or rule amendment is that the CFTC has
received the submission not later than the open of business on the
business day that is 10 business days prior to the registered
entity's implementation of the rule or rule amendment).
    \113\ See infra section IV.D.
---------------------------------------------------------------------------

    Further, while a shorter review period may allow SBS to trade on an
SBSEF more quickly, failing to provide the Commission with a meaningful
period for review of a new product would hamper the Commission's
ability to protect market participants and maintain fair, orderly, and
efficient SBS markets. A ten-day review period would still permit
market participants to trade SBS on regulated platforms within a
``reasonable period'' and would provide the Commission the time it
needs to review submissions. The Commission also disagrees with the
comment that a shorter review period is necessary to accommodate market
participants' need to hedge risk in a timely manner. During the
relatively brief and time-limited period for Commission review of an
SBSEF new-product filings, market participants would remain able to
hedge that risk in other ways, such as in the OTC SBS market or other
related securities markets, depending on the risk to be managed.
Finally, while the 10-day review period might reduce the first-to-
market competitive advantage of an SBSEF that first lists a given
SBS,\114\ the extent of such an advantage may vary considerably based
on other factors in the SBSEF market, and that, in any event, the need
for the Commission to have sufficient time to review a new product
before it is listed justifies the potential competitive effect.
---------------------------------------------------------------------------

    \114\ Cf. ICI Letter, supra note 18, at 9 n.29 (discussing
``first mover'' advantage in the context of an SBSEF that has made
an SBS available to trade).
---------------------------------------------------------------------------

    Thus, a ten-business-day review period strikes an appropriate
balance between allowing SBSEFs to list new products quickly and
affording Commission staff a sufficient time period in which to assess
those products prior to listing.
    One commenter asks the Commission to confirm that it does not
expect SBSEFs to self-certify for every security for which there may
exist a related SBS.\115\ This commenter states that, for example,
while an SBSEF may publish ``terms and conditions'' relevant for an
instrument (like a single-name total return SBS) under Rule 804, the
Commission might receive thousands of underlying national market system
equity stocks from each SBSEF, exponentially increasing the number of
products the Commission would need to review. The commenter also states
that, given the potential 10-day review period (compared to the CFTC's
shorter timeframe), SBSEFs will be forced to proactively self-certify
every potential SBS in an attempt to meet all potential participant
demand without a two-week delay, only increasing the volume of self-
certifications the Commission may receive. This commenter states that
listing the instrument, and not each equity that may be linked to the
instrument, is an appropriate approach to balance the SBSEFs and the
Commission's resources with respect to product self-certification.
---------------------------------------------------------------------------

    \115\ See WMBAA Letter, supra note 18, at 4.
---------------------------------------------------------------------------

    The Commission is conscious of the large number of individual SBS
that may constitute a ``class'' of SBS, such as single-name, total
return SBS given as an example by the commenter. While an SBSEF should
not necessarily be required to make an individual filing for each of
the securities underlying a single such class of SBS, a filing for a
simple class certification that merely described the parameters of the
SBS covered by the certification would not necessarily provide
sufficient information for the Commission to determine whether all the
potential products covered by the class are consistent with the SEA and
the rules thereunder, including Regulation SE. Therefore, while the
Commission is not providing for ``class certifications'' of SBS, the
Commission will not necessarily require separate submissions for each
underlying security.\116\ The Commission will consider submissions for
an SBS that might overlie one or more of a list of securities, provided
that those potential underlying securities are specifically identified
and that the submission addresses, as part of the requirement in Rule
804 to submit ``a concise explanation and analysis of the product and
its compliance with applicable provisions of the Act, including core
principles, and the Commission's rules thereunder,'' \117\ why all
included underlying securities meet the applicable provisions of the
SEA and the Commission's rules thereunder.\118\
---------------------------------------------------------------------------

    \116\ By contrast, paragraph (d) of Sec.  40.2 provides that a
DCM or SEF may submit a class certification of swaps based on an
``excluded commodity,'' subject to certain conditions. See section
1a(19) of the CEA, 7 U.S.C. 1a(19) (defining ``excluded
commodity'').
    \117\ Rule 804(a)(3)(v).
    \118\ For example, a submission might cover a single-name total
return SBS on any of the components of a given index, provided that
the submission explains why the minimum criteria for inclusion in
that index are sufficient to ensure that the proposed SBS are
consistent with the requirements of the SEA and the rules
thereunder, including Regulation SE.
---------------------------------------------------------------------------

    Accordingly, for the reasons discussed above, the Commission is
adopting Rule 804 as proposed, with the exception of the proposed
Inline XBRL and EDGAR filing requirements, and with minor technical
modifications.\119\
---------------------------------------------------------------------------

    \119\ See supra note 32. As described in further detail in the
discussion of electronic filing systems and structured data, the
Commission will require all rule and product filings required by
Rules 804 through 807 and 816 to be filed in unstructured format
through EFFS, rather than in Inline XBRL through EDGAR. See infra
section XIII.A.
---------------------------------------------------------------------------

B. Rule 805--Voluntary Submission of New Products for Commission Review
and Approval

    Proposed Rule 805 is closely modeled on Sec.  40.3 of the CFTC's
rules and would set forth procedures by which an SBSEF may voluntarily
submit new SBS products for Commission review and approval.
    Paragraph (a) of Proposed Rule 805 would adapt these requirements
for SBSEFs.\120\ First, an SBSEF would be required to file its
submission electronically with the Commission using the EDGAR system as
an Interactive Data File in accordance with Rule 405 of Regulation S-T.
The filing would also have to include a copy of the submission cover
sheet, a copy of the rules that set forth the terms and conditions of
the SBS to be listed, and an explanation and analysis of the product
and its compliance with applicable provisions of the SEA, including the
Core Principles and the Commission's rules thereunder.\121\ The
submission would also have to describe any agreements or contracts
entered into

with other parties that enable the SBSEF to carry out its
responsibilities.
---------------------------------------------------------------------------

    \120\ Paragraph (a) of Rule 805 omits two provisions in Sec.
40.3(a). First, Sec.  40.3(a)(6) requires the submitting entity to
include the certifications required in 17 CFR 41.22 for product
approval of a commodity that is a security future or a security
futures product, as defined in sections 1a(44) or 1a(45) of the CEA,
respectively. The Commission did not propose to adapt this provision
into proposed Regulation SE because it pertains to security futures
and security futures products, not to swaps or SBS. Second, Sec.
40.3(a)(8) requires the submitting entity to include a filing fee.
The Commission is not proposing to charge SBSEFs filing fees for
submitting new product proposals.
    \121\ This explanation and analysis would have to either be
accompanied by the documentation relied upon to establish the basis
for compliance with the applicable law, or incorporate information
contained in such documentation, with appropriate citations to data
sources.
---------------------------------------------------------------------------

    Furthermore, paragraph (a) of Proposed Rule 805, modeled on Sec.
40.3(a), would require the SBSEF to include, if requested by Commission
staff, additional evidence, information, or data demonstrating that the
SBS meets, initially or on a continuing basis, the requirements of the
SEA, or other requirement for registration under the SEA, or the
Commission's rules or policies thereunder. The SBSEF would be required
to submit the requested information by the open of business on the date
that is two business days from the date of request by Commission staff,
or at the conclusion of such extended period agreed to by Commission
staff after timely receipt of a written request from the SBSEF.
Paragraph (a) of Proposed Rule 805, like Sec.  40.3(a), would permit
the submitting SBSEF to include a request for confidential
treatment.\122\ Finally, paragraph (a) of Proposed Rule 805, like Sec.
40.3(a), would require the SBSEF to certify that it posted a notice of
its request for Commission approval of the new product and a copy of
the submission, concurrent with the filing of a submission with the
Commission, on the SBSEF's website.\123\
---------------------------------------------------------------------------

    \122\ Section 40.3(a), like Sec.  40.2(a)(3), instructs filers
to make any request for confidential treatment pursuant to Sec.
40.8 of the CFTC's rules, which in turn cross-references Sec.
145.9. As noted previously, the Commission proposes instead to
direct filers to make any request for confidential treatment
pursuant to SEA Rule 24b-2. See supra note 51.
    \123\ Information that the SBSEF seeks to keep confidential
could be redacted from the documents published on the SBSEF's
website but would have to be republished consistent with any
determination made pursuant to SEA Rule 24b-2.
---------------------------------------------------------------------------

    Paragraph (b) of Proposed Rule 805, like Sec.  40.3(b), would
provide that the Commission shall approve a new product unless the
terms and conditions of the product violate the SEA or the Commission's
rules thereunder.
    Paragraph (c) of Proposed Rule 805, modeled on Sec.  40.3(c), would
provide that a product submitted for Commission approval under Rule 805
shall be deemed approved by the Commission 45 days after receipt by the
Commission, or at the conclusion of an extended period as provided
under Rule 805(d), unless notified otherwise within the applicable
period, if the submission complies with the requirements of Rule 805(a)
and the SBSEF does not amend the terms or conditions of the product or
supplement the request for approval, except as requested by the
Commission or for correction of typographical errors, renumbering, or
other non-substantive revisions, during that period. Paragraph (c)
would also provide that any voluntary, substantive amendment by the
SBSEF would be treated as a new submission under Rule 805.
    Paragraph (d) of Proposed Rule 805, modeled on Sec.  40.3(d), would
provide that the Commission may extend the 45-day review period in
paragraph (c) for an additional 45 days, if the product raises novel or
complex issues that require additional time to analyze, in which case
the Commission shall notify the SBSEF within the initial 45-day review
period and briefly describe the nature of the specific issue(s) for
which additional time for review is required. Paragraph (d) would also
provide that the Commission may extend the 45-day review period for any
length of time to which the SBSEF agrees in writing.
    Paragraph (e) of Proposed Rule 805 would provide that the
Commission may, at any time during its review, notify the SBSEF that it
will not, or is unable to, approve the product. This notification would
have to briefly specify the nature of the issues raised and the
specific provision of the SEA or the Commission's rules thereunder,
including the form or content requirements of Rule 805(a), that the
product violates, appears to violate, or potentially violates but which
cannot be ascertained from the submission.
    Paragraph (f) of Proposed Rule 805, like Sec.  40.3(f), would
provide that a notification of the Commission's determination not to
approve a product does not prejudice the SBSEF from subsequently
submitting a revised version of the product for Commission approval, or
from submitting the product as initially proposed pursuant to a
supplemented submission. Furthermore, the notification would be
presumptive evidence that the entity may not truthfully certify under
Rule 804 that the same, or substantially the same, product does not
violate the SEA or the Commission's rules thereunder.
    The Commission did not receive any comments on this proposed rule.
It is reasonable and appropriate to supplement the product
certification procedures in Rule 804 by also including in Regulation
SE, as Rule 805, procedures for voluntary submission of new products
for Commission review and approval. Providing this approval process, as
the CFTC does, can be valuable to an SBSEF seeking the Commission's
concurrence that a new product does not violate the SEA or the
Commission's rules thereunder prior to listing it. The CFTC's
procedures in this regard are well articulated and well understood by
SEFs, and that closely harmonizing with these procedures would yield
comparable regulatory benefits while minimizing burdens on SBSEFs.\124\
Therefore, the Commission is adopting Rule 805 as proposed, with the
exception of the proposed Inline XBRL and EDGAR filing requirements,
and with minor technical modifications.\125\
---------------------------------------------------------------------------

    \124\ As stated in the Proposing Release, the Commission does
not discount the possibility that an entity might elect to register
as an SBSEF with the SEC but not as a SEF with the CFTC. In such
case, the SEC-only registrant would not have any familiarity with
the CFTC's rules and filing procedures. Nevertheless, because most
if not all entities that will seek SBSEF registration with the SEC
are or will also be registered as SEFs with the CFTC, such dual
registrants would benefit from harmonized rules. Furthermore,
because the Commission is adopting these procedures substantially as
proposed, is unnecessary to establish and apply one set of
procedures for dual registrants and a different set for SEC-only
SBSEFs. See Proposing Release, supra note 1, 87 FR at 28956 (stating
that if the Commission ``establishe[d] different or additive
requirements, dually registered entities and their market
participants might need to incur costs and burdens to modify their
systems, policies, and procedures to comply with the SEC-specific
rules''). See also Bloomberg Letter, supra note 18, at 10 (``[A]
harmonized framework has the potential to lower compliance costs by
allowing SBSEFs and market participants to integrate with existing
operational and compliance frameworks. Any potential differences
would require SBSEF registrants to devote resources toward assessing
the potential gaps and consequences of regulatory divergence.'').
    \125\ See supra note 32. As described in further detail in the
discussion of electronic filing systems and structured data, the
Commission will require all rule and product filings required by
Rules 804 through 807 and 816 to be filed in unstructured format
through EFFS, rather than in Inline XBRL through EDGAR. See infra
section XIII.A.
---------------------------------------------------------------------------

C. Rule 806--Voluntary Submission of Rules for Commission Review and
Approval

    Proposed Rule 806 is closely modeled on Sec.  40.5 of the CFTC's
rules and would set forth procedures by which an SBSEF may voluntarily
submit rules, rule amendments, or dormant rules for Commission review
and approval.
    Paragraph (a) of Proposed Rule 806 would provide that an SBSEF may
request that the Commission approve a new rule, rule amendment, or
dormant rule prior to implementation of the rule. First, an SBSEF must
file its submission electronically with the Commission using the EDGAR
system as an Interactive Data File in accordance with Rule 405 of
Regulation S-T. The filing would be required to include a copy of the
submission cover sheet and to set forth the text of the rule or rule
amendment (in the case of a rule amendment, deletions and additions
must be indicated). Further, the SBSEF would be required to describe
the proposed effective date of the rule or rule amendment and any
action taken or anticipated to be taken to adopt the proposed rule by
the SBSEF or by its governing board or by any committee

thereof, and to cite the rules of the SBSEF that authorize the adoption
of the proposed rule. The SBSEF would be required to provide an
explanation and analysis of the operation, purpose, and effect of the
proposed rule or rule amendment and its compliance with applicable
provisions of the SEA, including the Core Principles relating to SBSEFs
and the Commission's rules thereunder, and, as applicable, a
description of the anticipated benefits to market participants or
others, any potential anticompetitive effects on market participants or
others, and how the rule fits into the SBSEF's framework of regulation.
    Additionally, if a proposed rule affects, directly or indirectly,
the application of any other rule of the SBSEF, the pertinent text of
any such rule would be required to be set forth and the anticipated
effect described. The SBSEF would also be required to provide a brief
explanation of any substantive opposing views expressed to the SBSEF by
governing board or committee members, members of the SBSEF, or market
participants that were not incorporated into the rule, or a statement
that no such opposing views were expressed.
    The SBSEF could, as appropriate, include a request for confidential
treatment as permitted under SEA Rule 24b-2. Finally, the SBSEF would
be required to certify that it posted a notice of the pending rule with
the Commission and a copy of the submission, concurrent with the filing
of a submission with the Commission, on the SBSEF's website.\126\
---------------------------------------------------------------------------

    \126\ Information that the SBSEF seeks to keep confidential
could be redacted from the documents published on the SBSEF's
website but would have to be republished consistent with any
determination made pursuant to SEA Rule 24b-2.
---------------------------------------------------------------------------

    Paragraph (b) of Proposed Rule 806, modeled on Sec.  40.5(b), would
provide that the Commission shall approve a new rule or rule amendment
unless the rule or rule amendment is inconsistent with the SEA or the
Commission's rules thereunder. Paragraph (c) of Proposed Rule 806, like
Sec.  40.5(c), would provide that a rule or rule amendment submitted
for Commission approval under Rule 806 shall be deemed approved by the
Commission 45 days after receipt by the Commission, or at the
conclusion of such extended period as provided under paragraph (d) of
this section, unless the SBSEF is notified otherwise within the
applicable period, if the submission complies with the requirements of
Rule 806(a) and the SBSEF does not amend the proposed rule or
supplement the submission, except as requested by the Commission,
during the pendency of the review period, other than for correction of
typographical errors, renumbering, or other non-substantive revisions.
Paragraph (c) would also provide that any amendment or supplementation
not requested by the Commission would be treated as the submission of a
new filing under Rule 806.
    Paragraph (d) of Proposed Rule 806, modeled on Sec.  40.5(d), would
provide that the Commission may further extend the review period in
paragraph (c) for an additional 45 days, if the proposed rule or rule
amendment raises novel or complex issues that require additional time
for review or is of major economic significance, the submission is
incomplete, or the requestor does not respond completely to Commission
questions in a timely manner, in which case the Commission shall notify
the submitting SBSEF within the initial 45-day review period and shall
briefly describe the nature of the specific issues for which additional
time for review shall be required. Paragraph (d) would also allow an
extension to which the SBSEF agrees in writing.
    Paragraph (e) of Proposed Rule 806, like Sec.  40.5(e), would
provide that, at any time during its review, the Commission may notify
the SBSEF that it will not, or is unable to, approve the new rule or
rule amendment. This notification would have to briefly specify the
nature of the issues raised and the specific provision of the SEA or
the Commission's rules thereunder, including the form or content
requirements of Proposed Rule 806, with which the new rule or rule
amendment is inconsistent or appears to be inconsistent with the SEA or
the Commission's rules thereunder.
    Paragraph (f) of Proposed Rule 806, like Sec.  40.5(f), would
provide that such a notification to an SBSEF would not prevent the
SBSEF from subsequently submitting a revised version of the proposed
rule or rule amendment for Commission review and approval or from
submitting the new rule or rule amendment as initially proposed in a
supplemented submission. Paragraph (f) would further provide that the
revised submission would be reviewed without prejudice. Finally,
paragraph (f) would provide that such a notification to an SBSEF of the
Commission's determination not to approve a proposed rule or rule
amendment shall be presumptive evidence that the SBSEF may not
truthfully certify the same, or substantially the same, proposed rule
or rule amendment under Rule 807(a).
    Paragraph (g) of Proposed Rule 806, like Sec.  40.5(g), would
provide that, notwithstanding Rule 806(c), changes to a proposed rule
or a rule amendment, including changes to terms and conditions of a
product that are consistent with the SEA and the Commission's rules
thereunder, may be approved by the Commission at such time and under
such conditions as the Commission shall specify in the written
notification; provided, however, that the Commission may, at any time,
alter or revoke the applicability of such a notice to any particular
product or rule amendment.
    The Commission received no comments on Proposed Rule 806 and the
Commission is adopting Rule 806 as proposed, with the exception of the
proposed Inline XBRL and EDGAR filing requirements, and with minor
technical modifications, for the reasons stated in the Proposing
Release.\127\
---------------------------------------------------------------------------

    \127\ See supra note 32. As described in further detail in the
discussion of electronic filing systems and structured data, the
Commission will require all rule and product filings required by
Rules 804 through 807 and 816 to be filed in unstructured format
through EFFS, rather than in Inline XBRL through EDGAR. See infra
section XIII.A.
---------------------------------------------------------------------------

D. Rule 807--Self-Certification of Rules

    Proposed Rule 807 is closely modeled on Sec.  40.6 of the CFTC's
rules and would set forth procedures by which an SBSEF may self-certify
changes to its rules. Paragraph (a) of Proposed Rule 807, modeled on
Sec.  40.6(a), would set forth the conditions that an SBSEF must comply
with before implementing a rule or rule amendment via self-
certification. Like Sec.  40.6(a), Proposed Rule 807(a) would permit an
SBSEF to implement a rule or rule amendment without obtaining the
Commission's prior approval under Rule 806, but only if it ``self-
certifies'' the rule or rule amendment in compliance with the
conditions set forth in Rule 807. Proposed Rule 807(a) would also
permit an SBSEF to self-certify a rule or rule amendment that the
Commission had previously approved under Rule 806, or that the SBSEF
had previously self-certified under Rule 807, but that in the interim
had become a dormant rule (i.e., unimplemented for 12 consecutive
calendar months).\128\
---------------------------------------------------------------------------

    \128\ Also, like Sec.  40.6(a), Proposed Rule 807(a) would
include an exception that would allow an SBSEF to implement a
certain kind of rule without having to comply with the full set of
conditions set forth in paragraphs (a)(1) through (8) of Rule 807,
the details of which are discussed below. Specifically, the
exception would provide that, when submitting a rule delisting or
withdrawing the certification of a product with no open interest, an
SBSEF would only be required to meet the conditions of paragraphs
(a)(1), (a)(2), and (a)(6) of Rule 807. The introductory language in
paragraph (a) of Proposed Rule 807 would generally track the
language of Sec.  40.6(a), with slight changes for clarity. However,
Proposed Rule 807(a) would not include an equivalent of the
reference in Sec.  40.6(a) to submissions under Sec.  40.10, which
concerns only systemically important derivatives clearing
organizations and thus is not relevant to SBSEFs.

---------------------------------------------------------------------------

    Paragraph (a)(1) of Proposed Rule 807 would require the SBSEF to
file its submission electronically with the Commission using the EDGAR
system as an Interactive Data File in accordance with Rule 405 of
Regulation S-T. Paragraph (a)(2) would require the SBSEF to provide a
certification that the SBSEF posted a notice of the self-certification
with the Commission and a copy of the submission, concurrent with the
filing of a submission with the Commission, on the SBSEF's
website.\129\ Paragraph (a)(3) would provide that the Commission must
have received the submission not later than the open of business on the
business day that is 10 business days before the SBSEF's implementation
of the rule or rule amendment. Paragraph (a)(4) would provide that the
SBSEF may not implement the rule or rule amendment if the Commission
has stayed it pursuant to Rule 807(c).
---------------------------------------------------------------------------

    \129\ Information that the SBSEF seeks to keep confidential
could be redacted from the documents published on the SBSEF's
website but must be republished consistent with any determination
made pursuant to SEA Rule 24b-2.
---------------------------------------------------------------------------

    Paragraph (a)(5) of Proposed Rule 807 would set out procedures for
emergency rule certifications. Paragraph (a)(5)(i) would require a new
rule or rule amendment that establishes standards for responding to an
emergency \130\ to be submitted pursuant to Rule 807(a). Paragraph
(a)(5)(ii) would provide that a rule or rule amendment implemented