Reviewing DERA Report and Providing Memorandum on Security-Based Swaps

In December 2021, the Securities and Exchange Commission (SEC) proposed a new rule, 10B-1 (proposed Rule 10B-1), that would establish reporting and disclosure requirements for certain security-based swaps (SBS) positions. Specifically, proposed Rule 10B-1 would require market participants with a SBS position exceeding a certain threshold to promptly file Schedule 10B, which includes information on the reporting person’s identity and notional amount of SBS positions. Following a report by the Division of Economic and Risk Analysis (DERA) on the anticipated economic effects of proposed Rule 10B-1, the SEC reopened the comment period in June 2023.

NERA was retained by the Managed Funds Association (MFA) to review and comment on the DERA report. Specifically, we prepared a memorandum that discussed data relied upon and quantitative analysis presented in the DERA report. In addition, we noted the SEC’s statutory requirements under the Administrative Procedure Act and its own recommended guidance for economic analysis in rulemaking, should the SEC adopt a final Rule 10B-1 in exclusive reliance on the economic analysis in the DERA report.

On 21 August 2023, MFA submitted a comment letter with NERA’s memorandum.