[Federal Register Volume 77, Number 144 (Thursday, July 26, 2012)]
[Notices]
[Pages 43878-43879]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-18194]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67480; File No. S7-24-11]
Order Extending Temporary Conditional Exemption in Connection
With the Effectiveness of the Definition of Eligible Contract
Participant
July 20, 2012.
I. Background
Title VII of the Dodd Frank Wall Street Reform and Consumer
Protection Act (``Dodd-Frank Act'') \1\ amended the definition of the
term ``eligible contract participant'' in the Commodity Exchange Act
(``CEA'').\2\ This amended definition was incorporated by reference
into the Securities Exchange Act of 1934 (``Exchange Act'').\3\ Section
6(l) of the Exchange Act,\4\ which was added by the Dodd-Frank Act,\5\
made it unlawful, as of the July 16, 2011 effective date of Title VII
(360 days after enactment of the Dodd-Frank Act), 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
section 6(b) of the Exchange Act.\6\
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\1\ Public Law 111-203 (July 21, 2010).
\2\ Section 721(a) of the Dodd-Frank Act redesignated section
1a(12) of the Commodity Exchange Act, which contained the pre-Dodd-
Frank Act definition of eligible contract participant, as section
1a(18), 7 U.S.C. 1a(18), and amended certain provisions of that
definition.
\3\ Exchange Act section 3(a)(65), 15 U.S.C. 78c(a)(65). Section
761(a) of the Dodd-Frank Act added section 3(a)(65) to the Exchange
Act.
\4\ 15 U.S.C. 78f(l).
\5\ Section 761(e) of the Dodd-Frank Act.
\6\ 15 U.S.C. 78f(b).
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In June 2011, the Securities and Exchange Commission
(``Commission'') granted a temporary conditional exemption from section
6(l) of the Exchange Act to certain persons.\7\ This temporary
conditional exemption allowed those persons that met the definition of
eligible contract participant as set forth in section 1a(12) of the
Commodity Exchange Act (as in effect on July 20, 2010),\8\ but that
could potentially be considered non-eligible contract participants
under the definition of eligible contract participant as amended by
Title VII of the Dodd-Frank Act, to continue to be treated as eligible
contract participants until the term eligible contract participant was
further defined in final rulemaking. The Commission specified in the
Effective Date Relief that the temporary exemption would expire on the
effective date for the final rules further defining the term eligible
contract participant.
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\7\ Order Pursuant to Sections 15F(b)(6) and 36 of the
Securities Exchange Act of 1934 Granting Temporary Exemptions and
Other Temporary Relief, Together With Information on Compliance
Dates for New Provisions of the Securities Exchange Act of 1934
Applicable to Security-Based Swaps, and Request for Comment, 76 FR
36287 (June 22, 2011) (``Effective Date Relief'').
\8\ 7 U.S.C. 1a(12) (as in effect on July 20, 2010).
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II. Discussion
A. Post-Exemption Developments
Subsequent to the Commission's publication of the Effective Date
Relief in June 2011, the Commission adopted, jointly with the Commodity
Futures Trading Commission (``CFTC''), rules further defining the term
eligible contract participant, which will be effective July 23,
2012.\9\ In the Entity Definitions Adopting Release, the Commission
reiterated that the temporary conditional exemption from section 6(l)
of the Exchange Act would expire upon the effectiveness of the Entity
Definitions Adopting Release.\10\ The Commission provided further
notice of the July 23, 2012 expiration of section 6(l) relief in its
June 2012 policy statement regarding implementation of the Dodd-Frank
Act (the ``Implementation Policy Statement'').\11\
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\9\ See Further Definition of ``Swap Dealer,'' ``Security-Based
Swap Dealer,'' ``Major Swap Participant,'' ``Major Security-Based
Swap Participant'' and ``Eligible Contract Participant'', 77 FR
30596 (May 23, 2012) (``Entity Definitions Adopting Release'').
\10\ See 77 FR at 30700.
\11\ See Statement of General Policy on the Sequencing of the
Compliance Dates for Final Rules Applicable to Security-Based Swaps
Adopted Pursuant to the Securities Exchange Act of 1934 and the
Dodd-Frank Wall Street Reform and Consumer Protection Act, 77 FR
35625, 35631 (June 14, 2012).
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On July 13, 2012, in response to the request for comment in the
Implementation Policy Statement, the Financial Services Roundtable
(``Roundtable'') submitted a comment
[[Page 43879]]
letter \12\ requesting an extension of this relief until the effective
date of the final rules defining the terms ``swap'' and ``security-
based swap.'' \13\
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\12\ Letter from Richard M. Whiting, Executive Director and
General Counsel, Financial Services Roundtable, to Elizabeth M.
Murphy, Secretary, Commission (July 13, 2012) (``Roundtable
Extension Request''), available at: http://www.sec.gov/comments/s7-05-12/s70512-9.pdf.
\13\ The Commission and the CFTC have approved the final rules
(``Product Definitions Adopting Release''). See http://sec.gov/rules/final/2012/33-9338.pdf.
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B. Roundtable Request
In support of its request for an extension of section 6(l) relief,
the Roundtable stated that the extension is necessary in order to give
the industry more time to ``review the requirements and implement the
systems necessary to conform to the newly finalized definition of
[eligible contract participant].'' \14\ The Roundtable further stated
that linking the expiration of the section 6(l) relief to the effective
date of the Product Definitions Adopting Release will be more efficient
for market participants due to the large number of CFTC Title VII
provisions that are already tied to the effectiveness of that
release.\15\ Finally, the Roundtable stated that the requested
extension would result in harmonization with the CFTC.\16\
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\14\ Roundtable Extension Request at 2.
\15\ Id. at 3.
\16\ Id. The CFTC's existing relief from the CEA analogue to
section 6(l) expires on the effective date of the Product
Definitions Adopting Release. See Second Amendment to July 14, 2011
Order for Swap Regulation, 77 FR 41260, 41263 n.42 (July 13, 2012).
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In light of the concerns expressed by the commenter, the Commission
finds that it is necessary or appropriate in the public interest, and
is consistent with the protection of investors, to extend the section
6(l) relief provided in the Effective Date Relief for the limited time
requested, that is, until the effective date of the Product Definitions
Adopting Release. Specifically, pursuant to the Commission's authority
under Section 36 of the Exchange Act,\17\ the Commission is extending
the temporary conditional exemption provided in the Effective Date
Relief from section 6(l) of the Exchange Act for persons that meet the
definition of eligible contract participant as set forth in section
1a(12) of the CEA (as in effect on July 20, 2010). This temporary
conditional exemption will expire on the effective date of the Product
Definitions Adopting Release.
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\17\ 15 U.S.C. 78mm. Subject to certain exceptions, section 36
of the Exchange Act authorizes the Commission, by rule, regulation,
or order, to conditionally or unconditionally exempt any person,
security, or transaction, or any class or classes of persons,
securities, or transactions, from any provision or provisions of the
Exchange Act or any rule or regulation thereunder, to the extent
that such exemption is necessary or appropriate in the public
interest, and is consistent with the protection of investors.
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III. Conclusion
It is hereby ordered, pursuant to section 36(a) of the Exchange
Act, that the temporary conditional exemption from section 6(l) of the
Exchange Act provided in the Effective Date Release for persons that
meet the definition of eligible contract participant as set forth in
section 1a(12) of the Commodity Exchange Act (as in effect on July 20,
2010) is extended until 60 days after publication of the Product
Definitions Adopting Release (Rel. No. 33-9338, 34-67453; File No. S7-
16-11) in the Federal Register.
By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-18194 Filed 7-25-12; 8:45 am]
BILLING CODE 8011-01-P