AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF 1934.

SEC. 763. AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF 1934.(a) Clearing for Security-based Swaps.—The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 3B (as added by section 717 of this Act):“SEC. 3C. CLEARING FOR SECURITY-BASED SWAPS.“(a) In General.—“(1) Standard for clearing.—It shall be unlawful for any person to engage in a security-based swap unless that person submits such security-based swap for clearing to a clearing agency that is registered under this Act or a clearing agency that is exempt from registration under this Act if the security-based swap is required to be cleared.“(2) Open access.—The rules of a clearing agency described in paragraph (1) shall—“(A) prescribe that all security-based swaps submitted to the clearing agency with the same terms and conditions are economically equivalent within the clearing agency and may be offset with each other within the clearing agency; and“(B) provide for non-discriminatory clearing of a security-based swap executed bilaterally or on or through the rules of an unaffiliated national securities exchange or security-based swap execution facility.“(b) Commission Review.—“(1) Commission-initiated review.—“(A) The Commission on an ongoing basis shall review each security-based swap, or any group, category, type, or class of security-based swaps to make a determination that such security-based swap, or group, category, type, or class of security-based swaps should be required to be cleared.“(B) The Commission shall provide at least a 30-day public comment period regarding any determination under subparagraph (A).“(2) Swap submissions.—“(A) A clearing agency shall submit to the Commission each security-based swap, or any group, category, type, or class of security-based swaps that it plans to accept for clearing and provide notice to its members (in a manner to be determined by the Commission) of such submission.“(B) Any security-based swap or group, category, type, or class of security-based swaps listed for clearing by a clearing agency as of the date of enactment of this subsection shall be considered submitted to the Commission.“(C) The Commission shall—“(i) make available to the public any submission received under subparagraphs (A) and (B);“(ii) review each submission made under subparagraphs (A) and (B), and determine whether the security-based swap, or group, category, type, or class of security-based swaps, described in the submission is required to be cleared; and“(iii) provide at least a 30-day public comment period regarding its determination whether the 124 STAT. 1763 clearing requirement under subsection (a)(1) shall apply to the submission.“(3) Deadline.—The Commission shall make its determination under paragraph (2)(C) not later than 90 days after receiving a submission made under paragraphs (2)(A) and (2)(B), unless the submitting clearing agency agrees to an extension for the time limitation established under this paragraph.“(4) Determination.—“(A) In reviewing a submission made under paragraph (2), the Commission shall review whether the submission is consistent with section 17A.“(B) In reviewing a security-based swap, group of security-based swaps or class of security-based swaps pursuant to paragraph (1) or a submission made under paragraph (2), the Commission shall take into account the following factors:“(i) The existence of significant outstanding notional exposures, trading liquidity and adequate pricing data.“(ii) The availability of rule framework, capacity, operational expertise and resources, and credit support infrastructure to clear the contract on terms that are consistent with the material terms and trading conventions on which the contract is then traded.“(iii) The effect on the mitigation of systemic risk, taking into account the size of the market for such contract and the resources of the clearing agency available to clear the contract.“(iv) The effect on competition, including appropriate fees and charges applied to clearing.“(v) The existence of reasonable legal certainty in the event of the insolvency of the relevant clearing agency or 1 or more of its clearing members with regard to the treatment of customer and security-based swap counterparty positions, funds, and property.“(C) In making a determination under subsection (b)(1) or paragraph (2)(C) that the clearing requirement shall apply, the Commission may require such terms and conditions to the requirement as the Commission determines to be appropriate.“(5) Rules.—Not later than 1 year after the date of the enactment of this section, the Commission shall adopt rules for a clearing agency’s submission for review, pursuant to this subsection, of a security-based swap, or a group, category, type, or class of security-based swaps, that it seeks to accept for clearing. Nothing in this paragraph limits the Commission from making a determination under paragraph (2)(C) for security-based swaps described in paragraph (2)(B).“(c) Stay of Clearing Requirement.—“(1) In general.—After making a determination pursuant to subsection (b)(2), the Commission, on application of a counterparty to a security-based swap or on its own initiative, may stay the clearing requirement of subsection (a)(1) until the Commission completes a review of the terms of the security-based swap (or the group, category, type, or class of security-based swaps) and the clearing arrangement.124 STAT. 1764“(2) Deadline.—The Commission shall complete a review undertaken pursuant to paragraph (1) not later than 90 days after issuance of the stay, unless the clearing agency that clears the security-based swap, or group, category, type, or class of security-based swaps, agrees to an extension of the time limitation established under this paragraph.“(3) Determination.—Upon completion of the review undertaken pursuant to paragraph (1), the Commission may—“(A) determine, unconditionally or subject to such terms and conditions as the Commission determines to be appropriate, that the security-based swap, or group, category, type, or class of security-based swaps, must be cleared pursuant to this subsection if it finds that such clearing is consistent with subsection (b)(4); or“(B) determine that the clearing requirement of subsection (a)(1) shall not apply to the security-based swap, or group, category, type, or class of security-based swaps.“(4) Rules.—Not later than 1 year after the date of the enactment of this section, the Commission shall adopt rules for reviewing, pursuant to this subsection, a clearing agency’s clearing of a security-based swap, or a group, category, type, or class of security-based swaps, that it has accepted for clearing.“(d) Prevention of Evasion.—“(1) In general.—The Commission shall prescribe rules under this section (and issue interpretations of rules prescribed under this section), as determined by the Commission to be necessary to prevent evasions of the mandatory clearing requirements under this Act.“(2) Duty of commission to investigate and take certain actions.—To the extent the Commission finds that a particular security-based swap or any group, category, type, or class of security-based swaps that would otherwise be subject to mandatory clearing but no clearing agency has listed the security-based swap or the group, category, type, or class of security-based swaps for clearing, the Commission shall—“(A) investigate the relevant facts and circumstances;“(B) within 30 days issue a public report containing the results of the investigation; and“(C) take such actions as the Commission determines to be necessary and in the public interest, which may include requiring the retaining of adequate margin or capital by parties to the security-based swap or the group, category, type, or class of security-based swaps.“(3) Effect on authority.—Nothing in this subsection—“(A) authorizes the Commission to adopt rules requiring a clearing agency to list for clearing a security-based swap or any group, category, type, or class of security-based swaps if the clearing of the security-based swap or the group, category, type, or class of security-based swaps would threaten the financial integrity of the clearing agency; and“(B) affects the authority of the Commission to enforce the open access provisions of subsection (a)(2) with respect to a security-based swap or the group, category, type, or class of security-based swaps that is listed for clearing by a clearing agency.124 STAT. 1765“(e) Reporting Transition Rules.—Rules adopted by the Commission under this section shall provide for the reporting of data, as follows:“(1) Security-based swaps entered into before the date of the enactment of this section shall be reported to a registered security-based swap data repository or the Commission no later than 180 days after the effective date of this section.“(2) Security-based swaps entered into on or after such date of enactment shall be reported to a registered security-based swap data repository or the Commission no later than the later of—“(A) 90 days after such effective date; or“(B) such other time after entering into the security-based swap as the Commission may prescribe by rule or regulation.“(f) Clearing Transition Rules.—“(1) Security-based swaps entered into before the date of the enactment of this section are exempt from the clearing requirements of this subsection if reported pursuant to subsection (e)(1).“(2) Security-based swaps entered into before application of the clearing requirement pursuant to this section are exempt from the clearing requirements of this section if reported pursuant to subsection (e)(2).“(g) Exceptions.—“(1) In general.—The requirements of subsection (a)(1) shall not apply to a security-based swap if 1 of the counterparties to the security-based swap—“(A) is not a financial entity;“(B) is using security-based swaps to hedge or mitigate commercial risk; and“(C) notifies the Commission, in a manner set forth by the Commission, how it generally meets its financial obligations associated with entering into non-cleared security-based swaps.“(2) Option to clear.—The application of the clearing exception in paragraph (1) is solely at the discretion of the counterparty to the security-based swap that meets the conditions of subparagraphs (A) through (C) of paragraph (1).“(3) Financial entity definition.—“(A) In general.—For the purposes of this subsection, the term ‘financial entity’ means—“(i) a swap dealer;“(ii) a security-based swap dealer;“(iii) a major swap participant;“(iv) a major security-based swap participant;“(v) a commodity pool as defined in section 1a(10) of the Commodity Exchange Act;“(vi) a private fund as defined in section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80–b–2(a));“(vii) an employee benefit plan as defined in paragraphs (3) and (32) of section 3 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002);“(viii) a person predominantly engaged in activities that are in the business of banking or financial in 124 STAT. 1766 nature, as defined in section 4(k) of the Bank Holding Company Act of 1956.“(B) Exclusion.—The Commission shall consider whether to exempt small banks, savings associations, farm credit system institutions, and credit unions, including—“(i) depository institutions with total assets of $10,000,000,000 or less;“(ii) farm credit system institutions with total assets of $10,000,000,000 or less; or“(iii) credit unions with total assets of $10,000,000,000 or less.“(4) Treatment of affiliates.—“(A) In general.—An affiliate of a person that qualifies for an exception under this subsection (including affiliate entities predominantly engaged in providing financing for the purchase of the merchandise or manufactured goods of the person) may qualify for the exception only if the affiliate, acting on behalf of the person and as an agent, uses the security-based swap to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity.“(B) Prohibition relating to certain affiliates.—The exception in subparagraph (A) shall not apply if the affiliate is—“(i) a swap dealer;“(ii) a security-based swap dealer;“(iii) a major swap participant;“(iv) a major security-based swap participant;“(v) an issuer that would be an investment company, as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a–3), but for paragraph (1) or (7) of subsection (c) of that Act (15 U.S.C. 80a–3(c));“(vi) a commodity pool; or“(vii) a bank holding company with over $50,000,000,000 in consolidated assets.“(C) Transition rule for affiliates.—An affiliate, subsidiary, or a wholly owned entity of a person that qualifies for an exception under subparagraph (A) and is predominantly engaged in providing financing for the purchase or lease of merchandise or manufactured goods of the person shall be exempt from the margin requirement described in section 15F(e) and the clearing requirement described in subsection (a) with regard to security-based swaps entered into to mitigate the risk of the financing activities for not less than a 2-year period beginning on the date of enactment of this subparagraph.“(5) Election of counterparty.—“(A) Security-based swaps required to be cleared.—With respect to any security-based swap that is subject to the mandatory clearing requirement under subsection (a) and entered into by a security-based swap dealer or a major security-based swap participant with a counterparty that is not a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant, the counterparty shall have the 124 STAT. 1767 sole right to select the clearing agency at which the security-based swap will be cleared.“(B) Security-based swaps not required to be cleared.—With respect to any security-based swap that is not subject to the mandatory clearing requirement under subsection (a) and entered into by a security-based swap dealer or a major security-based swap participant with a counterparty that is not a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant, the counterparty—“(i) may elect to require clearing of the security-based swap; and“(ii) shall have the sole right to select the clearing agency at which the security-based swap will be cleared.“(6) Abuse of exception.—The Commission may prescribe such rules or issue interpretations of the rules as the Commission determines to be necessary to prevent abuse of the exceptions described in this subsection. The Commission may also request information from those persons claiming the clearing exception as necessary to prevent abuse of the exceptions described in this subsection.“(h) Trade Execution.—“(1) In general.—With respect to transactions involving security-based swaps subject to the clearing requirement of subsection (a)(1), counterparties shall—“(A) execute the transaction on an exchange; or“(B) execute the transaction on a security-based swap execution facility registered under section 3D or a security-based swap execution facility that is exempt from registration under section 3D(e).“(2) Exception.—The requirements of subparagraphs (A) and (B) of paragraph (1) shall not apply if no exchange or security-based swap execution facility makes the security-based swap available to trade or for security-based swap transactions subject to the clearing exception under subsection (g).“(i) Board Approval.—Exemptions from the requirements of this section to clear a security-based swap or execute a security-based swap through a national securities exchange or security-based swap execution facility shall be available to a counterparty that is an issuer of securities that are registered under section 12 or that is required to file reports pursuant to section 15(d), only if an appropriate committee of the issuer’s board or governing body has reviewed and approved the issuer’s decision to enter into security-based swaps that are subject to such exemptions.“(j) Designation of Chief Compliance Officer.—“(1) In general.—Each registered clearing agency shall designate an individual to serve as a chief compliance officer.“(2) Duties.—The chief compliance officer shall—“(A) report directly to the board or to the senior officer of the clearing agency;“(B) in consultation with its board, a body performing a function similar thereto, or the senior officer of the registered clearing agency, resolve any conflicts of interest that may arise;124 STAT. 1768“(C) be responsible for administering each policy and procedure that is required to be established pursuant to this section;“(D) ensure compliance with this title (including regulations issued under this title) relating to agreements, contracts, or transactions, including each rule prescribed by the Commission under this section;“(E) establish procedures for the remediation of noncompliance issues identified by the compliance officer through any—“(i) compliance office review;“(ii) look-back;“(iii) internal or external audit finding;“(iv) self-reported error; or“(v) validated complaint; and“(F) establish and follow appropriate procedures for the handling, management response, remediation, retesting, and closing of noncompliance issues.“(3) Annual reports.—“(A) In general.—In accordance with rules prescribed by the Commission, the chief compliance officer shall annually prepare and sign a report that contains a description of—“(i) the compliance of the registered clearing agency or security-based swap execution facility of the compliance officer with respect to this title (including regulations under this title); and“(ii) each policy and procedure of the registered clearing agency of the compliance officer (including the code of ethics and conflict of interest policies of the registered clearing agency).“(B) Requirements.—A compliance report under subparagraph (A) shall—“(i) accompany each appropriate financial report of the registered clearing agency that is required to be furnished to the Commission pursuant to this section; and“(ii) include a certification that, under penalty of law, the compliance report is accurate and complete.” .(b) Clearing Agency Requirements.—Section 17A of the Securities Exchange Act of 1934 (15 U.S.C. 78q–1) is amended by adding at the end the following:“(g) Registration Requirement.—It shall be unlawful for a clearing agency, unless registered with the Commission, directly or indirectly to make use of the mails or any means or instrumentality of interstate commerce to perform the functions of a clearing agency with respect to a security-based swap.“(h) Voluntary Registration.—A person that clears agreements, contracts, or transactions that are not required to be cleared under this title may register with the Commission as a clearing agency.“(i) Standards for Clearing Agencies Clearing Security-based Swap Transactions.—To be registered and to maintain registration as a clearing agency that clears security-based swap transactions, a clearing agency shall comply with such standards as the Commission may establish by rule. In establishing any such standards, and in the exercise of its oversight of such a 124 STAT. 1769 clearing agency pursuant to this title, the Commission may conform such standards or oversight to reflect evolving United States and international standards. Except where the Commission determines otherwise by rule or regulation, a clearing agency shall have reasonable discretion in establishing the manner in which it complies with any such standards.“(j) Rules.—The Commission shall adopt rules governing persons that are registered as clearing agencies for security-based swaps under this title.“(k) Exemptions.—The Commission may exempt, conditionally or unconditionally, a clearing agency from registration under this section for the clearing of security-based swaps if the Commission determines that the clearing agency is subject to comparable, comprehensive supervision and regulation by the Commodity Futures Trading Commission or the appropriate government authorities in the home country of the agency. Such conditions may include, but are not limited to, requiring that the clearing agency be available for inspection by the Commission and make available all information requested by the Commission.“(l) Existing Depository Institutions and Derivative Clearing Organizations.—“(1) In general.—A depository institution or derivative clearing organization registered with the Commodity Futures Trading Commission under the Commodity Exchange Act that is required to be registered as a clearing agency under this section is deemed to be registered under this section solely for the purpose of clearing security-based swaps to the extent that, before the date of enactment of this subsection—“(A) the depository institution cleared swaps as a multilateral clearing organization; or“(B) the derivative clearing organization cleared swaps pursuant to an exemption from registration as a clearing agency.“(2) Conversion of depository institutions.—A depository institution to which this subsection applies may, by the vote of the shareholders owning not less than 51 percent of the voting interests of the depository institution, be converted into a State corporation, partnership, limited liability company, or similar legal form pursuant to a plan of conversion, if the conversion is not in contravention of applicable State law.“(3) Sharing of information.—The Commodity Futures Trading Commission shall make available to the Commission, upon request, all information determined to be relevant by the Commodity Futures Trading Commission regarding a derivatives clearing organization deemed to be registered with the Commission under paragraph (1).“(m) Modification of Core Principles.—The Commission may conform the core principles established in this section to reflect evolving United States and international standards.”.(c) Security-based Swap Execution Facilities.—The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 3C (as added by subsection (a) of this section) the following:“SEC. 3D. SECURITY-BASED SWAP EXECUTION FACILITIES.“(a) Registration.—124 STAT. 1770“(1) In general.—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.“(2) Dual registration.—Any person that is registered as a security-based swap execution facility under this section shall register with the Commission regardless of whether the person also is registered with the Commodity Futures Trading Commission as a swap execution facility.“(b) Trading and Trade Processing.—A security-based swap execution facility that is registered under subsection (a) may—“(1) make available for trading any security-based swap; and“(2) facilitate trade processing of any security-based swap.“(c) Identification of Facility Used To Trade Security-based Swaps by National Securities Exchanges.—A national securities exchange shall, to the extent that the exchange also operates a security-based swap execution facility and uses the same electronic trade execution system for listing and executing trades of security-based swaps on or through the exchange and the facility, identify whether electronic trading of such security-based swaps is taking place on or through the national securities exchange or the security-based swap execution facility.“(d) Core Principles for Security-based Swap Execution Facilities.—“(1) Compliance with core principles.—“(A) In general.—To be registered, and maintain registration, as a security-based swap execution facility, the security-based swap execution facility shall comply with—“(i) the core principles described in this subsection; and“(ii) any requirement that the Commission may impose by rule or regulation.“(B) Reasonable discretion of security-based swap execution facility.—Unless otherwise determined by the Commission, by rule or regulation, a security-based swap execution facility described in subparagraph (A) shall have reasonable discretion in establishing the manner in which it complies with the core principles described in this subsection.“(2) Compliance with rules.—A security-based swap execution facility shall—“(A) establish and enforce compliance with any rule established by such security-based swap execution facility, including—“(i) the terms and conditions of the security-based swaps traded or processed on or through the facility; and“(ii) any limitation on access to the facility;“(B) establish and enforce trading, trade processing, and participation rules that will deter abuses and have the capacity to detect, investigate, and enforce those rules, including means—“(i) to provide market participants with impartial access to the market; and“(ii) to capture information that may be used in establishing whether rule violations have occurred; and124 STAT. 1771“(C) establish rules governing the operation of the facility, including rules specifying trading procedures to be used in entering and executing orders traded or posted on the facility, including block trades.“(3) Security-based swaps not readily susceptible to manipulation.—The security-based swap execution facility shall permit trading only in security-based swaps that are not readily susceptible to manipulation.“(4) Monitoring of trading and trade processing.—The security-based swap execution facility shall—“(A) establish and enforce rules or terms and conditions defining, or specifications detailing—“(i) trading procedures to be used in entering and executing orders traded on or through the facilities of the security-based swap execution facility; and“(ii) procedures for trade processing of security-based swaps on or through the facilities of the security-based swap execution facility; and“(B) monitor trading in security-based swaps to prevent manipulation, price distortion, and disruptions of the delivery or cash settlement process through surveillance, compliance, and disciplinary practices and procedures, including methods for conducting real-time monitoring of trading and comprehensive and accurate trade reconstructions.“(5) Ability to obtain information.—The security-based swap execution facility shall—“(A) establish and enforce rules that will allow the facility to obtain any necessary information to perform any of the functions described in this subsection;“(B) provide the information to the Commission on request; and“(C) have the capacity to carry out such international information-sharing agreements as the Commission may require.“(6) Financial integrity of transactions.—The security-based swap execution facility shall establish and enforce rules and procedures for ensuring the financial integrity of security-based swaps entered on or through the facilities of the security-based swap execution facility, including the clearance and settlement of security-based swaps pursuant to section 3C(a)(1).“(7) Emergency authority.—The security-based swap execution facility shall adopt rules to provide for the exercise of emergency authority, in consultation or cooperation with the Commission, as is necessary and appropriate, including the authority to liquidate or transfer open positions in any security-based swap or to suspend or curtail trading in a security-based swap.“(8) Timely publication of trading information.—“(A) In general.—The security-based swap execution facility shall make public timely information on price, trading volume, and other trading data on security-based swaps to the extent prescribed by the Commission.“(B) Capacity of security-based swap execution facility.—The security-based swap execution facility shall be required to have the capacity to electronically capture 124 STAT. 1772 and transmit and disseminate trade information with respect to transactions executed on or through the facility.“(9) Recordkeeping and reporting.—“(A) In general.—A security-based swap execution facility shall—“(i) maintain records of all activities relating to the business of the facility, including a complete audit trail, in a form and manner acceptable to the Commission for a period of 5 years; and“(ii) report to the Commission, in a form and manner acceptable to the Commission, such information as the Commission determines to be necessary or appropriate for the Commission to perform the duties of the Commission under this title.“(B) Requirements.—The Commission shall adopt data collection and reporting requirements for security-based swap execution facilities that are comparable to corresponding requirements for clearing agencies and security-based swap data repositories.“(10) Antitrust considerations.—Unless necessary or appropriate to achieve the purposes of this title, the security-based swap execution facility shall not—“(A) adopt any rules or taking any actions that result in any unreasonable restraint of trade; or“(B) impose any material anticompetitive burden on trading or clearing.“(11) Conflicts of interest.—The security-based swap execution facility shall—“(A) establish and enforce rules to minimize conflicts of interest in its decision-making process; and“(B) establish a process for resolving the conflicts of interest.“(12) Financial resources.—“(A) In general.—The security-based swap execution facility shall have adequate financial, operational, and managerial resources to discharge each responsibility of the security-based swap execution facility, as determined by the Commission.“(B) Determination of resource adequacy.—The financial resources of a security-based swap execution facility shall be considered to be adequate if the value of the financial resources—“(i) enables the organization to meet its financial obligations to its members and participants notwithstanding a default by the member or participant creating the largest financial exposure for that organization in extreme but plausible market conditions; and“(ii) exceeds the total amount that would enable the security-based swap execution facility to cover the operating costs of the security-based swap execution facility for a 1-year period, as calculated on a rolling basis.“(13) System safeguards.—The security-based swap execution facility shall—124 STAT. 1773“(A) establish and maintain a program of risk analysis and oversight to identify and minimize sources of operational risk, through the development of appropriate controls and procedures, and automated systems, that—“(i) are reliable and secure; and“(ii) have adequate scalable capacity;“(B) establish and maintain emergency procedures, backup facilities, and a plan for disaster recovery that allow for—“(i) the timely recovery and resumption of operations; and“(ii) the fulfillment of the responsibilities and obligations of the security-based swap execution facility; and“(C) periodically conduct tests to verify that the backup resources of the security-based swap execution facility are sufficient to ensure continued—“(i) order processing and trade matching;“(ii) price reporting;“(iii) market surveillance; and“(iv) maintenance of a comprehensive and accurate audit trail.“(14) Designation of chief compliance officer.—“(A) In general.—Each security-based swap execution facility shall designate an individual to serve as a chief compliance officer.“(B) Duties.—The chief compliance officer shall—“(i) report directly to the board or to the senior officer of the facility;“(ii) review compliance with the core principles in this subsection;“(iii) in consultation with the board of the facility, a body performing a function similar to that of a board, or the senior officer of the facility, resolve any conflicts of interest that may arise;“(iv) be responsible for establishing and administering the policies and procedures required to be established pursuant to this section;“(v) ensure compliance with this title and the rules and regulations issued under this title, including rules prescribed by the Commission pursuant to this section;“(vi) establish procedures for the remediation of noncompliance issues found during—“(I) compliance office reviews;“(II) look backs;“(III) internal or external audit findings;“(IV) self-reported errors; or“(V) through validated complaints; and“(vii) establish and follow appropriate procedures for the handling, management response, remediation, retesting, and closing of noncompliance issues.“(C) Annual reports.—“(i) In general.—In accordance with rules prescribed by the Commission, the chief compliance officer shall annually prepare and sign a report that contains a description of—124 STAT. 1774“(I) the compliance of the security-based swap execution facility with this title; and“(II) the policies and procedures, including the code of ethics and conflict of interest policies, of the security-based security-based swap execution facility.“(ii) Requirements.—The chief compliance officer shall—“(I) submit each report described in clause (i) with the appropriate financial report of the security-based swap execution facility that is required to be submitted to the Commission pursuant to this section; and“(II) include in the report a certification that, under penalty of law, the report is accurate and complete.“(e) Exemptions.—The Commission may exempt, conditionally or unconditionally, a security-based swap execution facility from registration under this section if the Commission finds that the facility is subject to comparable, comprehensive supervision and regulation on a consolidated basis by the Commodity Futures Trading Commission.“(f) Rules.—The Commission shall prescribe rules governing the regulation of security-based swap execution facilities under this section.” .(d) Segregation of Assets Held as Collateral in Security-based Swap Transactions.—The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 3D (as added by subsection (b)) the following:“SEC. 3E. SEGREGATION OF ASSETS HELD AS COLLATERAL IN SECURITY-BASED SWAP TRANSACTIONS.“(a) Registration Requirement.—It shall be unlawful for any person to accept any money, securities, or property (or to extend any credit in lieu of money, securities, or property) from, for, or on behalf of a security-based swaps customer to margin, guarantee, or secure a security-based swap cleared by or through a clearing agency (including money, securities, or property accruing to the customer as the result of such a security-based swap), unless the person shall have registered under this title with the Commission as a broker, dealer, or security-based swap dealer, and the registration shall not have expired nor been suspended nor revoked.“(b) Cleared Security-based Swaps.—“(1) Segregation required.—A broker, dealer, or security-based swap dealer shall treat and deal with all money, securities, and property of any security-based swaps customer received to margin, guarantee, or secure a security-based swap cleared by or though a clearing agency (including money, securities, or property accruing to the security-based swaps customer as the result of such a security-based swap) as belonging to the security-based swaps customer.“(2) Commingling prohibited.—Money, securities, and property of a security-based swaps customer described in paragraph (1) shall be separately accounted for and shall not be commingled with the funds of the broker, dealer, or security-based swap dealer or be used to margin, secure, or guarantee 124 STAT. 1775 any trades or contracts of any security-based swaps customer or person other than the person for whom the same are held.“(c) Exceptions.—“(1) Use of funds.—“(A) In general.—Notwithstanding subsection (b), money, securities, and property of a security-based swaps customer of a broker, dealer, or security-based swap dealer described in subsection (b) may, for convenience, be commingled and deposited in the same 1 or more accounts with any bank or trust company or with a clearing agency.“(B) Withdrawal.—Notwithstanding subsection (b), such share of the money, securities, and property described in subparagraph (A) as in the normal course of business shall be necessary to margin, guarantee, secure, transfer, adjust, or settle a cleared security-based swap with a clearing agency, or with any member of the clearing agency, may be withdrawn and applied to such purposes, including the payment of commissions, brokerage, interest, taxes, storage, and other charges, lawfully accruing in connection with the cleared security-based swap.“(2) Commission action.—Notwithstanding subsection (b), in accordance with such terms and conditions as the Commission may prescribe by rule, regulation, or order, any money, securities, or property of the security-based swaps customer of a broker, dealer, or security-based swap dealer described in subsection (b) may be commingled and deposited as provided in this section with any other money, securities, or property received by the broker, dealer, or security-based swap dealer and required by the Commission to be separately accounted for and treated and dealt with as belonging to the security-based swaps customer of the broker, dealer, or security-based swap dealer.“(d) Permitted Investments.—Money described in subsection (b) may be invested in obligations of the United States, in general obligations of any State or of any political subdivision of a State, and in obligations fully guaranteed as to principal and interest by the United States, or in any other investment that the Commission may by rule or regulation prescribe, and such investments shall be made in accordance with such rules and regulations and subject to such conditions as the Commission may prescribe.“(e) Prohibition.—It shall be unlawful for any person, including any clearing agency and any depository institution, that has received any money, securities, or property for deposit in a separate account or accounts as provided in subsection (b) to hold, dispose of, or use any such money, securities, or property as belonging to the depositing broker, dealer, or security-based swap dealer or any person other than the swaps customer of the broker, dealer, or security-based swap dealer.“(f) Segregation Requirements for Uncleared Security-based Swaps.—“(1) Segregation of assets held as collateral in uncleared security-based swap transactions.—“(A) Notification.—A security-based swap dealer or major security-based swap participant shall be required to notify the counterparty of the security-based swap dealer or major security-based swap participant at the beginning of a security-based swap transaction that the counterparty 124 STAT. 1776 has the right to require segregation of the funds of other property supplied to margin, guarantee, or secure the obligations of the counterparty.“(B) Segregation and maintenance of funds.—At the request of a counterparty to a security-based swap that provides funds or other property to a security-based swap dealer or major security-based swap participant to margin, guarantee, or secure the obligations of the counterparty, the security-based swap dealer or major security-based swap participant shall—“(i) segregate the funds or other property for the benefit of the counterparty; and“(ii) in accordance with such rules and regulations as the Commission may promulgate, maintain the funds or other property in a segregated account separate from the assets and other interests of the security-based swap dealer or major security-based swap participant.“(2) Applicability.—The requirements described in paragraph (1) shall—“(A) apply only to a security-based swap between a counterparty and a security-based swap dealer or major security-based swap participant that is not submitted for clearing to a clearing agency; and“(B)(i) not apply to variation margin payments; or“(ii) not preclude any commercial arrangement regarding—“(I) the investment of segregated funds or other property that may only be invested in such investments as the Commission may permit by rule or regulation; and“(II) the related allocation of gains and losses resulting from any investment of the segregated funds or other property.“(3) Use of independent third-party custodians.—The segregated account described in paragraph (1) shall be—“(A) carried by an independent third-party custodian; and“(B) designated as a segregated account for and on behalf of the counterparty.“(4) Reporting requirement.—If the counterparty does not choose to require segregation of the funds or other property supplied to margin, guarantee, or secure the obligations of the counterparty, the security-based swap dealer or major security-based swap participant shall report to the counterparty of the security-based swap dealer or major security-based swap participant on a quarterly basis that the back office procedures of the security-based swap dealer or major security-based swap participant relating to margin and collateral requirements are in compliance with the agreement of the counterparties.“(g) Bankruptcy.—A security-based swap, as defined in section 3(a)(68) shall be considered to be a security as such term is used in section 101(53A)(B) and subchapter III of title 11, United States Code. An account that holds a security-based swap, other than a portfolio margining account referred to in section 15(c)(3)(C) shall be considered to be a securities account, as that term is defined in section 741 of title 11, United States Code. The definitions 124 STAT. 1777 of the terms ‘purchase’ and ‘sale’ in section 3(a)(13) and (14) shall be applied to the terms ‘purchase’ and ‘sale’, as used in section 741 of title 11, United States Code. The term ‘customer’, as defined in section 741 of title 11, United States Code, excludes any person, to the extent that such person has a claim based on any open repurchase agreement, open reverse repurchase agreement, stock borrowed agreement, non-cleared option, or non-cleared security-based swap except to the extent of any margin delivered to or by the customer with respect to which there is a customer protection requirement under section 15(c)(3) or a segregation requirement.” .(e) Trading in Security-based Swaps.—Section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by adding at the end the following:“(l) Security-based Swaps.—It shall be unlawful for any person to effect a transaction in a security-based swap with or for a person that is not an eligible contract participant, unless such transaction is effected on a national securities exchange registered pursuant to subsection (b).”.(f) Additions of Security-based Swaps to Certain Enforcement Provisions.—Section 9(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78i(b)) is amended by striking paragraphs (1) through (3) and inserting the following:“(1) any transaction in connection with any security whereby any party to such transaction acquires—“(A) any put, call, straddle, or other option or privilege of buying the security from or selling the security to another without being bound to do so;“(B) any security futures product on the security; or“(C) any security-based swap involving the security or the issuer of the security;“(2) any transaction in connection with any security with relation to which such person has, directly or indirectly, any interest in any—“(A) such put, call, straddle, option, or privilege;“(B) such security futures product; or“(C) such security-based swap; or“(3) any transaction in any security for the account of any person who such person has reason to believe has, and who actually has, directly or indirectly, any interest in any—“(A) such put, call, straddle, option, or privilege;“(B) such security futures product with relation to such security; or“(C) any security-based swap involving such security or the issuer of such security.”.(g) Rulemaking Authority To Prevent Fraud, Manipulation and Deceptive Conduct in Security-based Swaps.—Section 9 of the Securities Exchange Act of 1934 (15 U.S.C. 78i) is amended by adding at the end the following:“(j) It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange, to effect any transaction in, or to induce or attempt to induce the purchase or sale of, any security-based swap, in connection with which such person engages in any fraudulent, deceptive, or manipulative act or practice, makes any fictitious quotation, or engages in any transaction, practice, or course of business which operates as a fraud or deceit upon any person. The Commission 124 STAT. 1778 shall, for the purposes of this subsection, by rules and regulations define, and prescribe means reasonably designed to prevent, such transactions, acts, practices, and courses of business as are fraudulent, deceptive, or manipulative, and such quotations as are fictitious.”.(h) Position Limits and Position Accountability for Security-based Swaps.—The Securities Exchange Act of 1934 is amended by inserting after section 10A (15 U.S.C. 78j–1) the following:“SEC. 10B. POSITION LIMITS AND POSITION ACCOUNTABILITY FOR SECURITY-BASED SWAPS AND LARGE TRADER REPORTING.“(a) Position Limits.—As a means reasonably designed to prevent fraud and manipulation, the Commission shall, by rule or regulation, as necessary or appropriate in the public interest or for the protection of investors, establish limits (including related hedge exemption provisions) on the size of positions in any security-based swap that may be held by any person. In establishing such limits, the Commission may require any person to aggregate positions in—“(1) any security-based swap and any security or loan or group of securities or loans on which such security-based swap is based, which such security-based swap references, or to which such security-based swap is related as described in paragraph (68) of section 3(a), and any other instrument relating to such security or loan or group or index of securities or loans; or“(2) any security-based swap and—“(A) any security or group or index of securities, the price, yield, value, or volatility of which, or of which any interest therein, is the basis for a material term of such security-based swap as described in paragraph (68) of section 3(a); and“(B) any other instrument relating to the same security or group or index of securities described under subparagraph (A).“(b) Exemptions.—The Commission, by rule, regulation, or order, may conditionally or unconditionally exempt any person or class of persons, any security-based swap or class of security-based swaps, or any transaction or class of transactions from any requirement the Commission may establish under this section with respect to position limits.“(c) SRO Rules.—“(1) In general.—As a means reasonably designed to prevent fraud or manipulation, the Commission, by rule, regulation, or order, as necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this title, may direct a self-regulatory organization—“(A) to adopt rules regarding the size of positions in any security-based swap that may be held by—“(i) any member of such self-regulatory organization; or“(ii) any person for whom a member of such self-regulatory organization effects transactions in such security-based swap; and124 STAT. 1779“(B) to adopt rules reasonably designed to ensure compliance with requirements prescribed by the Commission under this subsection.“(2) Requirement to aggregate positions.—In establishing the limits under paragraph (1), the self-regulatory organization may require such member or person to aggregate positions in—“(A) any security-based swap and any security or loan or group or narrow-based security index of securities or loans on which such security-based swap is based, which such security-based swap references, or to which such security-based swap is related as described in section 3(a)(68), and any other instrument relating to such security or loan or group or narrow-based security index of securities or loans; or“(B)(i) any security-based swap; and“(ii) any security-based swap and any other instrument relating to the same security or group or narrow-based security index of securities.“(d) Large Trader Reporting.—The Commission, by rule or regulation, may require any person that effects transactions for such person’s own account or the account of others in any securities-based swap or uncleared security-based swap and any security or loan or group or narrow-based security index of securities or loans as set forth in paragraphs (1) and (2) of subsection (a) under this section to report such information as the Commission may prescribe regarding any position or positions in any security-based swap or uncleared security-based swap and any security or loan or group or narrow-based security index of securities or loans and any other instrument relating to such security or loan or group or narrow-based security index of securities or loans as set forth in paragraphs (1) and (2) of subsection (a) under this section.” .(i) Public Reporting and Repositories for Security-based Swaps.—Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) is amended by adding at the end the following:“(m) Public Availability of Security-based Swap Transaction Data.—“(1) In general.—“(A) Definition of real-time public reporting.—In this paragraph, the term ‘real-time public reporting’ means to report data relating to a security-based swap transaction, including price and volume, as soon as technologically practicable after the time at which the security-based swap transaction has been executed.“(B) Purpose.—The purpose of this subsection is to authorize the Commission to make security-based swap transaction and pricing data available to the public in such form and at such times as the Commission determines appropriate to enhance price discovery.“(C) General rule.—The Commission is authorized to provide by rule for the public availability of security-based swap transaction, volume, and pricing data as follows:“(i) With respect to those security-based swaps that are subject to the mandatory clearing requirement described in section 3C(a)(1) (including those security-based swaps that are excepted from the requirement 124 STAT. 1780 pursuant to section 3C(g)), the Commission shall require real-time public reporting for such transactions.“(ii) With respect to those security-based swaps that are not subject to the mandatory clearing requirement described in section 3C(a)(1), but are cleared at a registered clearing agency, the Commission shall require real-time public reporting for such transactions.“(iii) With respect to security-based swaps that are not cleared at a registered clearing agency and which are reported to a security-based swap data repository or the Commission under section 3C(a)(6), the Commission shall require real-time public reporting for such transactions, in a manner that does not disclose the business transactions and market positions of any person.“(iv) With respect to security-based swaps that are determined to be required to be cleared under section 3C(b) but are not cleared, the Commission shall require real-time public reporting for such transactions.“(D) Registered entities and public reporting.—The Commission may require registered entities to publicly disseminate the security-based swap transaction and pricing data required to be reported under this paragraph.“(E) Rulemaking required.—With respect to the rule providing for the public availability of transaction and pricing data for security-based swaps described in clauses (i) and (ii) of subparagraph (C), the rule promulgated by the Commission shall contain provisions—“(i) to ensure such information does not identify the participants;“(ii) to specify the criteria for determining what constitutes a large notional security-based swap transaction (block trade) for particular markets and contracts;“(iii) to specify the appropriate time delay for reporting large notional security-based swap transactions (block trades) to the public; and“(iv) that take into account whether the public disclosure will materially reduce market liquidity.“(F) Timeliness of reporting.—Parties to a security-based swap (including agents of the parties to a security-based swap) shall be responsible for reporting security-based swap transaction information to the appropriate registered entity in a timely manner as may be prescribed by the Commission.“(G) Reporting of swaps to registered security-based swap data repositories.—Each security-based swap (whether cleared or uncleared) shall be reported to a registered security-based swap data repository.“(H) Registration of clearing agencies.—A clearing agency may register as a security-based swap data repository.“(2) Semiannual and annual public reporting of aggregate security-based swap data.—124 STAT. 1781“(A) In general.—In accordance with subparagraph (B), the Commission shall issue a written report on a semiannual and annual basis to make available to the public information relating to—“(i) the trading and clearing in the major security-based swap categories; and“(ii) the market participants and developments in new products.“(B) Use; consultation.—In preparing a report under subparagraph (A), the Commission shall—“(i) use information from security-based swap data repositories and clearing agencies; and“(ii) consult with the Office of the Comptroller of the Currency, the Bank for International Settlements, and such other regulatory bodies as may be necessary.“(C) Authority of commission.—The Commission may, by rule, regulation, or order, delegate the public reporting responsibilities of the Commission under this paragraph in accordance with such terms and conditions as the Commission determines to be appropriate and in the public interest.“(n) Security-based Swap Data Repositories.—“(1) Registration requirement.—It shall be unlawful for any person, unless registered with the Commission, directly or indirectly, to make use of the mails or any means or instrumentality of interstate commerce to perform the functions of a security-based swap data repository.“(2) Inspection and examination.—Each registered security-based swap data repository shall be subject to inspection and examination by any representative of the Commission.“(3) Compliance with core principles.—“(A) In general.—To be registered, and maintain registration, as a security-based swap data repository, the security-based swap data repository shall comply with—“(i) the requirements and core principles described in this subsection; and“(ii) any requirement that the Commission may impose by rule or regulation.“(B) Reasonable discretion of security-based swap data repository.—Unless otherwise determined by the Commission, by rule or regulation, a security-based swap data repository described in subparagraph (A) shall have reasonable discretion in establishing the manner in which the security-based swap data repository complies with the core principles described in this subsection.“(4) Standard setting.—“(A) Data identification.—“(i) In general.—In accordance with clause (ii), the Commission shall prescribe standards that specify the data elements for each security-based swap that shall be collected and maintained by each registered security-based swap data repository.“(ii) Requirement.—In carrying out clause (i), the Commission shall prescribe consistent data element standards applicable to registered entities and reporting counterparties.124 STAT. 1782“(B) Data collection and maintenance.—The Commission shall prescribe data collection and data maintenance standards for security-based swap data repositories.“(C) Comparability.—The standards prescribed by the Commission under this subsection shall be comparable to the data standards imposed by the Commission on clearing agencies in connection with their clearing of security-based swaps.“(5) Duties.—A security-based swap data repository shall—“(A) accept data prescribed by the Commission for each security-based swap under subsection (b);“(B) confirm with both counterparties to the security-based swap the accuracy of the data that was submitted;“(C) maintain the data described in subparagraph (A) in such form, in such manner, and for such period as may be required by the Commission;“(D)(i) provide direct electronic access to the Commission (or any designee of the Commission, including another registered entity); and“(ii) provide the information described in subparagraph (A) in such form and at such frequency as the Commission may require to comply with the public reporting requirements set forth in subsection (m);“(E) at the direction of the Commission, establish automated systems for monitoring, screening, and analyzing security-based swap data;“(F) maintain the privacy of any and all security-based swap transaction information that the security-based swap data repository receives from a security-based swap dealer, counterparty, or any other registered entity; and“(G) on a confidential basis pursuant to section 24, upon request, and after notifying the Commission of the request, make available all data obtained by the security-based swap data repository, including individual counterparty trade and position data, to—“(i) each appropriate prudential regulator;“(ii) the Financial Stability Oversight Council;“(iii) the Commodity Futures Trading Commission;“(iv) the Department of Justice; and“(v) any other person that the Commission determines to be appropriate, including—“(I) foreign financial supervisors (including foreign futures authorities);“(II) foreign central banks; and“(III) foreign ministries.“(H) Confidentiality and indemnification agreement.—Before the security-based swap data repository may share information with any entity described in subparagraph (G)—“(i) the security-based swap data repository shall receive a written agreement from each entity stating that the entity shall abide by the confidentiality requirements described in section 24 relating to the information on security-based swap transactions that is provided; and124 STAT. 1783“(ii) each entity shall agree to indemnify the security-based swap data repository and the Commission for any expenses arising from litigation relating to the information provided under section 24.“(6) Designation of chief compliance officer.—“(A) In general.—Each security-based swap data repository shall designate an individual to serve as a chief compliance officer.“(B) Duties.—The chief compliance officer shall—“(i) report directly to the board or to the senior officer of the security-based swap data repository;“(ii) review the compliance of the security-based swap data repository with respect to the requirements and core principles described in this subsection;“(iii) in consultation with the board of the security-based swap data repository, a body performing a function similar to the board of the security-based swap data repository, or the senior officer of the security-based swap data repository, resolve any conflicts of interest that may arise;“(iv) be responsible for administering each policy and procedure that is required to be established pursuant to this section;“(v) ensure compliance with this title (including regulations) relating to agreements, contracts, or transactions, including each rule prescribed by the Commission under this section;“(vi) establish procedures for the remediation of noncompliance issues identified by the chief compliance officer through any—“(I) compliance office review;“(II) look-back;“(III) internal or external audit finding;“(IV) self-reported error; or“(V) validated complaint; and“(vii) establish and follow appropriate procedures for the handling, management response, remediation, retesting, and closing of noncompliance issues.“(C) Annual reports.—“(i) In general.—In accordance with rules prescribed by the Commission, the chief compliance officer shall annually prepare and sign a report that contains a description of—“(I) the compliance of the security-based swap data repository of the chief compliance officer with respect to this title (including regulations); and“(II) each policy and procedure of the security-based swap data repository of the chief compliance officer (including the code of ethics and conflict of interest policies of the security-based swap data repository).“(ii) Requirements.—A compliance report under clause (i) shall—“(I) accompany each appropriate financial report of the security-based swap data repository that is required to be furnished to the Commission pursuant to this section; and124 STAT. 1784“(II) include a certification that, under penalty of law, the compliance report is accurate and complete.“(7) Core principles applicable to security-based swap data repositories.—“(A) Antitrust considerations.—Unless necessary or appropriate to achieve the purposes of this title, the swap data repository shall not—“(i) adopt any rule or take any action that results in any unreasonable restraint of trade; or“(ii) impose any material anticompetitive burden on the trading, clearing, or reporting of transactions.“(B) Governance arrangements.—Each security-based swap data repository shall establish governance arrangements that are transparent—“(i) to fulfill public interest requirements; and“(ii) to support the objectives of the Federal Government, owners, and participants.“(C) Conflicts of interest.—Each security-based swap data repository shall—“(i) establish and enforce rules to minimize conflicts of interest in the decision-making process of the security-based swap data repository; and“(ii) establish a process for resolving any conflicts of interest described in clause (i).“(D) Additional duties developed by commission.—“(i) In general.—The Commission may develop 1 or more additional duties applicable to security-based swap data repositories.“(ii) Consideration of evolving standards.—In developing additional duties under subparagraph (A), the Commission may take into consideration any evolving standard of the United States or the international community.“(iii) Additional duties for commission designees.—The Commission shall establish additional duties for any registrant described in section 13(m)(2)(C) in order to minimize conflicts of interest, protect data, ensure compliance, and guarantee the safety and security of the security-based swap data repository.“(8) Required registration for security-based swap data repositories.—Any person that is required to be registered as a security-based swap data repository under this subsection shall register with the Commission, regardless of whether that person is also licensed under the Commodity Exchange Act as a swap data repository.“(9) Rules.—The Commission shall adopt rules governing persons that are registered under this subsection.”.