The SEC on Friday proposed rules to exempt certain clearing agencies from all registration requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934.  The proposal is responsive to the Dodd-Frank Reform Act, which envisioned that certain security-based swaps would be cleared through a clearing agency.  The comments period runs through 7/25/11. 

The rules would also would exempt transactions by clearing agencies in these security-based swaps from all provisions of the Trust Indenture Act, provided certain conditions are met.

A clearing agency generally acts as a middleman between the parties to a transaction, and when providing central counterparty services, assumes the risk should there be a default. When structured and operated appropriately, such a clearing agency can provide benefits such as improving the management of counterparty risk and reducing outstanding exposures through multilateral netting of trades.

Because the current termination date for the temporary rules – 7/16/11 - is expected to pass before the proposed exemptions are adopted, the SEC intends to extend the temporary rules in order to continue facilitating the clearing of certain credit default swaps ("CDS's") by clearing agencies functioning as central counterparties.  The extension of these temporary rules is one part of a multi-step Commission effort to clarify the requirements that will apply to security-based swap transactions as of 7/16.

For further details, go to:   [SEC PR 11-24, 6/10/11]