SEA Rule 15Fi-1 and Related Interpretations

Publication Date: February 23, 2023

Interpretations are marked in blue background beneath the rule text to which they relate.

15Fi-1 Definitions.

For the purposes of §§ 240.15Fi-1 through 240.15Fi-5:

15Fi-1(a) The term bilateral portfolio compression exercise means an exercise by which two security-based swap counterparties wholly terminate or change the notional value of some or all of the security-based swaps submitted by the counterparties for inclusion in the portfolio compression exercise and, depending on the methodology employed, replace the terminated security-based swaps with other security-based swaps whose combined notional value (or some other measure of risk) is less than the combined notional value (or some other measure of risk) of the terminated security-based swaps in the exercise.

15Fi-1(b) The term business day means any day other than a Saturday, Sunday, or legal holiday.

15Fi-1(c) Solely for purposes of § 240.15Fi-2, the term clearing agency means a clearing agency as defined in section 3(a)(23) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(23)) that is registered pursuant to section 17A of the Securities Exchange Act of 1934 (15 U.S.C. 78q-1) and provides central counterparty services for security-based swap transactions.

15Fi-1(d) The term clearing transaction means a security-based swap that has a clearing agency as a direct counterparty.

15Fi-1(e) The term day of execution means the calendar day of the counterparty to the security-based swap transaction that ends the latest, provided that if a security-based swap transaction is:

15Fi-1(e)(1) Entered into after 4:00 p.m. in the place of a counterparty; or

15Fi-1(e)(2) Entered into on a day that is not a business day in the place of a counterparty, then such security-based swap transaction shall be deemed to have been entered into by that counterparty on the immediately succeeding business day of that counterparty, and the day of execution shall be determined with reference to such business day.

15Fi-1(f) The term execution means the point at which the counterparties become irrevocably bound to a transaction under applicable law.

15Fi-1(g) The term financial counterparty means a counterparty that is not a security-based swap dealer or a major security-based swap participant and that is one of the following:

15Fi-1(g)(1) A swap dealer;

15Fi-1(g)(2) A major swap participant;

15Fi-1(g)(3) A commodity pool as defined in section 1a(10) of the Commodity Exchange Act (7 U.S.C. 1a(10));

15Fi-1(g)(4) A private fund as defined in section 202(a)(29) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a));

15Fi-1(g)(5) 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); and

15Fi-1(g)(6) A person predominantly engaged in activities that are in the business of banking, or in activities that are financial in nature, as defined in section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843k).

15Fi-1(h) The term fully offsetting security-based swaps means security-based swaps of equivalent terms where no net cash flow would be owed to either counterparty after the offset of payment obligations thereunder.

15Fi-1(h)(i) The term material terms means each term that is required to be reported to a registered security-based swap data repository or the Commission pursuant to § 242.901 of this chapter; provided, however, that such definition does not include any term that is not relevant to the ongoing rights and obligations of the parties and the valuation of the security-based swap.

15Fi-1(j) The term multilateral portfolio compression exercise means an exercise by which multiple security-based swap counterparties wholly terminate or change the notional value of some or all of the security-based swaps submitted by the counterparties for inclusion in the portfolio compression exercise and, depending on the methodology employed, replace the terminated security-based swaps with other security-based swaps whose combined notional value (or some other measure of risk) is less than the combined notional value (or some other measure of risk) of the terminated security-based swaps in the exercise.

15Fi-1(k) The term national securities exchange means an exchange as defined in section 3(a)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(1)) that is registered pursuant to section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f).

15Fi-1(l) The term portfolio reconciliation means any process by which the counterparties to one or more security-based swaps:

15Fi-1(l)(1) Exchange the material terms of all security-based swaps in the security-based swap portfolio between the counterparties;

15Fi-1(l)(2) Exchange each counterparty's valuation of each security-based swap in the security-based swap portfolio between the counterparties as of the close of business on the immediately preceding business day; and

15Fi-1(l)(3) Resolve any discrepancy in valuations or material terms.

15Fi-1(m) The term prudential regulator has the meaning given to the term in section 3(a)(74) of the Act (15 U.S.C. 78c(a)(74)) and includes the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Farm Credit Association, and the Federal Housing Finance Agency, as applicable to the security-based swap dealer or major security-based swap participant.

15Fi-1(n) The term security-based swap execution facility means a security-based swap execution facility as defined in section 3(a)(77) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(77)) that is registered pursuant to section 3D of the Securities Exchange Act of 1934 (15 U.S.C. 78c-4).

15Fi-1(o) The term security-based swap portfolio means all security-based swaps currently in effect between a particular security-based swap dealer or major security-based swap participant and a particular counterparty.

15Fi-1(p) The term trade acknowledgment means a written or electronic record of a security-based swap transaction sent by one counterparty of the security-based swap transaction to the other.

15Fi-1(q) The term valuation means the current market value or net present value of a security-based swap.

15Fi-1(r) The term verification means the process by which a trade acknowledgment has been manually, electronically, or by some other legally equivalent means, signed by the receiving counterparty.