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Federal Register / Vol. 86, No. 19 / Monday, February 1, 2021 / Rules and Regulations
reason of: a Functions performed by such institution as part of customary dealing activities or providing facilities for comparison of data respecting the terms of settlement of securities transactions effected on such registered security-based swap execution facility, respectively, or b acting on behalf of a clearing agency or participant therein in connection with the furnishing by the clearing agency of services to its participants or the use of services of the clearing agency by its participants.
In addition, as noted above, the Commission has granted a temporary exemption from the registration requirement for security-based swap execution facilities. The temporary exemption from the registration requirement for security-based swap execution facilities will expire on the earliest compliance date set forth in any of the final rules regarding registration of security-based swap execution facilities.32 To the extent an entity relying on the temporary exemption from the registration requirement for security-based swap execution facilities also performs the activities of a registered security-based swap execution facility as described in Rule 17Ad24, the Commission notes that it has provided a separate, temporary exemption from clearing agency registration for entities providing certain clearing services for security-based swaps, including trade matching services.33
III. Economic Analysis The Commission is sensitive to the economic consequences and effects of the adopted amendments, including their benefits and costs. Under Section 3f of the Exchange Act, whenever the Commission engages in rulemaking under the Exchange Act and is required to consider or determine whether an action is necessary or appropriate in the public interest, it must consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation.34 Section 23a2 of the Exchange Act also prohibits the Commission from adopting any rule that would impose a burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act.35
The Commission is exempting entities engaging in dealing activity in securitybased swaps and registered security32 See
supra note 1.
Release No. 3464796 July 1, 2011, 76 FR
39963, 39964 July 7, 2011.
34 See 15 U.S.C. 78cf.
35 See 15 U.S.C. 78wa2.
33 See
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based swap execution facilities from inclusion in the term clearing agency under the Exchange Act for the following functions: a Performing customary dealing activities or providing facilities for the comparison of data respecting the settlement of securities transactions; or b acting on behalf of a clearing agency or participant in connection with the furnishing of clearing services.36
Section 3a23B of the Exchange Act excludes national securities exchanges and securities dealers from the definition of clearing agency, to limit the potential for overlapping or duplicative requirements that may otherwise be imposed on these regulated entities. Entities engaging in dealing activity in security-based swaps and security-based swap execution facilities perform similar functions for the security-based swap market as securities dealers and national securities exchanges perform for the general securities industry. Accordingly, new Rule 17Ad24 is intended to avoid imposing requirements on these entities with marginal or no benefit to safeguarding securities and funds and protecting investors by mirroring the existing exemption from the definition of clearing agency for entities engaging in dealing activity in securitybased swaps and security-based swap execution facilities.37 Under new Rule 17Ad24, these entities will not have to expend additional resources determining their registration requirements, registering as a clearing agency, or meeting the standards required of registered clearing agencies as long as their activities do not fall outside the scope of the exemption in new Rule 17Ad24. Excluding either entities engaging in dealing activity in security-based swaps or security-based swap execution facilities from the requirements applicable to clearing agencies should not hinder the DoddFrank Acts goals of greater transparency and financial stability of the securitybased swap market because the Commission has or will have a regulatory framework for these entities targeted to dealing activity in securitybased swaps or the functions performed by security-based swap execution facilities, rather than incidental 36 See supra Part II.C setting forth the final rule text. For purposes of this economic analysis, entities engaging in dealing activity in securitybased swaps includes both registered securitybased swap dealers and entities engaging in dealing activity in security-based swaps that are eligible for an exception under 17 CFR 240.3a712a or subject to the period set forth in 17 CFR 240.3a71
2b.
37 See supra note 5 and accompanying text.

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functions that may be similar to those performed by a clearing agency. Just as de minimis amounts of dealing activity are sufficiently small so as not to warrant registration to address concerns implicated by the regulations governing security-based swap dealers, they are also sufficiently small such that they do not implicate the concerns underpinning the regulations governing clearing agencies.
A. Baseline To assess the economic impact of new Rule 17Ad24, the Commission is using as its baseline the security-based swap market as it exists at the time of this release. This analysis uses existing Commission analyses of security-based swap market in rules adopted pursuant to Title VII of the Dodd-Frank Act, updated using data from the DTCC
Derivatives Repository Limited Trade Information Warehouse TIW to calendar year 2019.38 The data available to the Commission from TIW do not encompass those transactions that both:
i Do not involve U.S. counterparties, and ii are based on non-U.S. reference entities.
The Commission estimates, based on an analysis of TIW data that out of more than 4,000 entities engaged in single name CDS activity worldwide in 2019, potentially 50 entities may engage in dealing activity that would exceed the de minimis threshold, and thus ultimately have to register as securitybased swap dealers.39 Ten entities that engaged in dealing activity had less than $3 billion of notional transacted in single-name credit default swaps, so they could use the de minimis exception for the definition of securitybased swap dealer. 40
In addition, eighteen swap execution facilities have permanent or temporary registration with the Commodity Futures Trading Commission.41 Of those, nine allow trading of credit default swap indices; if these nine allow trading of single-name credit default swaps, they would be required to register as security-based swap 38 See,
e.g., infra note 40; supra note 13.
Release No. 3475611 Aug. 14, 2015, 80
FR 48963, 49000 Aug. 14, 2015. The estimate has been updated for data for calendar year 2019.
40 See Entity Definitions adopting release, supra note 13, at 30636. To identify dealing activity, the Commission counted the number of entities that had three or more counterparties in a calendar year that were not recognized as dealers by the International Swaps and Derivatives Association.
The estimate has been updated with data for calendar year 2019.
41 CFTC, Trading OrganizationsSwap Execution Facilities SEF, https sirt.cftc.gov/SIRT/
SIRT.aspx?Topic=SwapExecutionFacilities.
39 See
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