Notice of Potential Change To Increase Maximum Fixed-Dollar Amount for Alternative Compliance Mechanism for Security-Based Swap Dealers That Are Registered as Swap Dealers and Have Limited Security-Based Swap Activities

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<title>Federal Register, Volume 91 Issue 210 (Monday, November 2, 2026)</title>
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[Federal Register Volume 91, Number 210 (Monday, November 2, 2026)]
[Notices]
[Pages 69026-69028]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-22272]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-106759; File No. S7-2026-38]


Notice of Potential Change To Increase Maximum Fixed-Dollar 
Amount for Alternative Compliance Mechanism for Security-Based Swap 
Dealers That Are Registered as Swap Dealers and Have Limited Security-
Based Swap Activities

October 28, 2026.
    On October 26, 2026, Mizuho Capital Markets LLC (``MCM'') requested 
that the Securities and Exchange Commission (``Commission'') increase 
the maximum fixed-dollar amount of an security-based swap dealer's 
(``SBSD'') aggregate gross notional outstanding security-based swap 
(``SBS'') positions to qualify for Rule 18a-10's \1\ alternative 
compliance mechanism (``ACM'') from $50 billion to $100 billion.\2\ 
After considering the levels of SBS activity of SBSDs operating under 
Rule 18a-10, the Commission determines that it may be appropriate to 
change the maximum fixed-dollar amount for any SBSD eligible for Rule 
18a-10 to $100 billion. Pursuant to Rule 18a-10(f)(2), the Commission 
is publishing this notice of the potential change to provide interested 
persons with an opportunity to comment.
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    \1\ See 17 CFR 240.18a-10 (``Rule 18a-10'').
    \2\ The request is attached as an Appendix to this notice 
(``Request''). MCM is registered with the Commodity Futures Trading 
Commission (``CFTC'') as a swap dealer and is registered with the 
Commission as an SBSD.
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I. Background

    In 2019, the Commission adopted Rule 18a-1 and Rules 18a-3 through 
18a-9 establishing capital, margin, segregation, recordkeeping, 
reporting, notification, and security count requirements applicable to 
SBSDs that are not banks and are not registered as broker-dealers 
(``stand-alone SBSDs'').\3\

[[Page 69027]]

The Commission also adopted Rule 18a-10, which establishes an ACM 
pursuant to which a stand-alone SBSD that is registered as a swap 
dealer and predominantly engages in a swaps business may elect to 
comply with the capital, margin, segregation, recordkeeping, and 
reporting requirements of the Commodity Exchange Act (``CEA'') and the 
CFTC's rules in lieu of complying with Rules 18a-1 and Rules 18a-3 
through 18a-9.\4\
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    \3\ See Capital, Margin, and Segregation Requirements for 
Security-Based Swap Dealers and Major Security-Based Swap 
Participants and Capital and Segregation Requirements for Broker-
Dealers, Securities Exchange Act (``Exchange Act'') Release No. 
86175 (June 21, 2019), 84 FR 43872 (Aug. 22, 2019) (``Capital, 
Margin, and Segregation Release'') (adopting, among other things, 17 
CFR 240.18a-1 (``Rule 18a-1'') (capital requirements), 17 CFR 
240.18a-3 (``Rule 18a-3'') (margin requirements), and 17 CFR 
240.18a-4 (segregation requirements)). See Recordkeeping and 
Reporting Requirements for Security-Based Swap Dealers, Major 
Security-Based Swap Participants, and Broker-Dealers, Exchange Act 
Release No. 87005 (Sept. 19, 2019), 84 FR 68550 (Dec. 16, 2019) 
(adopting, among other things, 17 CFR 240.18a-5 (record making 
requirements), 17 CFR 240.18a-6 (record preservation requirements), 
17 CFR 240.18a-7 (reporting requirements), 17 CFR 240.18a-8 
(notification requirements), and 17 CFR 240.18a-9 (``Rule 18a-9'') 
(security count requirements)).
    \4\ See id. See also 17 CFR 240.18a-10.
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    The Capital, Margin, and Segregation Release explains the rationale 
for the ACM as follows: ``In light of the differences between the rules 
of the Commission and the CFTC, the Commission believes it is 
appropriate to permit such firms to comply with the capital, margin, 
and segregation requirements of the CEA and the CFTC's rules, provided 
the firm's [SBS] business is not a significant part of the [SBS] market 
and predominantly involves dealing in swaps as compared to [SBS]. In 
this circumstance, the CFTC's regulatory interest in the firm will 
greatly exceed the Commission's regulatory interest given the relative 
size of its swaps business as compared to its [SBS] business.'' \5\
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    \5\ See Capital, Margin, and Segregation Release, 84 FR at 
43944.
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    To qualify to operate pursuant to Rule 18a-10, the stand-alone SBSD 
must: (1) be registered as an SBSD pursuant to section 15F(b) of the 
Exchange Act and the rules thereunder, (2) be registered as a swap 
dealer pursuant to section 4s of the CEA and the rules thereunder, (3) 
not be registered as a broker or dealer pursuant to section 15 of the 
Exchange Act and the rules thereunder, and (4) meet the conditions to 
be exempt from paragraph (f) of Exchange Act rule 18a-4.\6\ In addition 
to these other conditions, the aggregate gross notional amount of the 
firm's outstanding SBS positions must not exceed the lesser of a 
maximum fixed-dollar amount or 10% of the combined aggregate gross 
notional amount of the firm's SBS and swap positions.\7\
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    \6\ See 17 CFR 240.18a-10(a)(1)-(a)(4).
    \7\ See 17 CFR 240.18a-10(a)(5).
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    The maximum fixed-dollar amount was set at a transitional level of 
$250 billion for the first 3 years after the compliance date of the 
rule and then dropped to $50 billion thereafter unless the Commission 
issues an order: (1) maintaining the $250 billion maximum fixed-dollar 
amount for an additional period of time or indefinitely; or (2) 
lowering the maximum fixed-dollar amount to an amount between $250 
billion and $50 billion.\8\ In explaining the $50 billion fixed-dollar 
amount, the Commission stated its belief that ``a stand-alone SBSD with 
a gross notional amount of outstanding [SBS] of no more than $50 
billion will not be a significant participant in the [SBS] market.'' 
\9\ In contrast, the transitional $250 billion fixed dollar-amount was 
adopted to provide stand-alone SBSDs predominantly engaged in a swaps 
business ``with a substantial amount of leeway to develop their [SBS] 
business without managing the level of that business to the lower $50 
billion threshold,'' as well as ``additional time to transition from 
the $250 billion threshold to the $50 billion threshold or another 
threshold.'' \10\
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    \8\ See 17 CFR 240.18a-10(f)(1).
    \9\ See Capital, Margin, and Segregation Release, 84 FR at 
43944-45.
    \10\ See Capital, Margin, and Segregation Release, 84 FR at 
43945.
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    Since more than 3 years have passed since the compliance date for 
Rule 18a-10, the current maximum fixed-dollar amount is $50 billion. 
For context, the gross notional amount of SBS outstanding on December 
26, 2025 was approximately $7,265.144 billion.\11\ The Capital, Margin, 
and Segregation Release stated that ``[t]he Commission intends to 
analyze how significant . . . [SBSDs] are to the [SBS] market and 
broader securities markets based on their levels of their [SBS] 
activity. The analysis will consider the firm's individual and 
collective impact on the [SBS] market.'' \12\ The Commission is 
considering increasing the maximum fixed-dollar amount in paragraph 
(f)(1) of Rule 18a-10 from $50 billion to $100 billion. Rule 18a-
10(f)(2) provides that if, after considering the levels of SBS activity 
of the SBSDs operating under the ACM, the Commission determines that it 
may be appropriate to change the maximum fixed-dollar amount, the 
Commission will publish a notice of the potential change.\13\
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    \11\ See Commission, Report on Security-Based Swaps Pursuant to 
Section 13(m)(2) of the Securities Exchange Act of 1934 (June 26, 
2026), available at <a href="https://www.sec.gov/files/tm/report-security-based-swaps-062626.pdf">https://www.sec.gov/files/tm/report-security-based-swaps-062626.pdf</a> (adding $5,221,757 from the Depository Trust 
and Clearing Corporation Data Repository--gross notional amount 
outstanding table on page 3 of the report and $2,043,387 from the 
ICE Trade Vault--gross notional amount outstanding table from page 5 
of the report).
    \12\ See Capital, Margin, and Segregation Release, 84 FR at 
43945.
    \13\ See 17 CFR 240.18a-10(f)(2).
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II. Summary of the Request

    In the Request, MCM asks the Commission to increase the maximum 
fixed-dollar amount of the aggregate gross notional outstanding SBS 
positions for any SBSD eligible for Rule 18a-10 from $50 billion to 
$100 billion.\14\
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    \14\ See Request at 1.
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    In support of its Request, MCM states that it is one of two stand-
alone SBSDs operating pursuant to the ACM in Rule 18a-10. MCM 
represents that its SBS activity represents only a small fraction of 
its overall derivatives business. From 2022 to 2024, its SBS activity 
represented less than 0.25% of the firm's total gross notional across 
SBS and swaps, and only 1.47% of the total active trade count. MCM 
states that the substantial majority of MCM's derivatives activity is 
conducted through its swap dealing business, which deals principally in 
interest rate and foreign exchange derivatives. MCM conducts a 
significant amount of business with commercial end users not required 
to post margin to MCM. Only roughly $0.4 billion of MCM's total $2.0 
billion tier 1 capital is currently allocated to support SBS 
activity.\15\
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    \15\ See Request at 4.
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    MCM provides the following reasons for increasing the maximum 
fixed-dollar amount in Rule 18a-10 to $100 billion: \16\
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    \16\ See Request at 4-6.
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    <bullet> Consistent with the Design of Rule 18a-10 and the 
Commission's Reserved Discretion: The Commission expressly built 
flexibility into Rule 18a-10 to adjust the maximum fixed-dollar amount 
between $50 billion and $250 billion after reviewing the levels of SBS 
activity of firms operating under the ACM. Granting MCM's request would 
be a straightforward exercise of that authority.
    <bullet> Minimal Impact on the Broader SBS Market: Because only a 
small number of firms operate under the ACM, and because MCM's SBS 
activity is a small fraction of its overall derivatives business, 
increasing the fixed-dollar amount would not distort the broader SBS 
market. The relief would also reflect the premise underlying the ACM--
that, for a firm predominantly engaged in a swaps business, the CFTC's 
regulatory interest greatly exceeds the Commission's.\17\ While 
granting relief

[[Page 69028]]

will likely have a small impact on the market, choosing not to grant 
relief is likely to subject MCM to substantial costs that could further 
incentivize migration of SBS activities into an already smaller cluster 
of the market, leading to decreased choice for counterparties. 
Additionally, since much of MCM's SBS activity is related to hedging 
and internal risk management, it is likely that counterparties and MCM 
and its affiliates as a whole will face substantial costs and 
difficulties when mitigating counterparty and hedging risks.
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    \17\ Id. at 44039.
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    <bullet> Promotes Regulatory Comparability: Permitting MCM to 
continue to comply through the CEA and the CFTC's rules advances the 
Dodd-Frank Act's goal, of establishing and maintaining comparable 
minimum capital requirements across the Commission, the CFTC, and the 
prudential regulators to the maximum extent practicable.\18\ Rule 18a-
10 provides a unique ability to ease a regulatory burden while 
fostering harmonization across the securities industry. Relief in this 
instance furthers regulatory consistency by expanding existing coverage 
for similar derivatives products in a manner that is inherently 
coherent.\19\
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    \18\ 15 U.S.C. 78o-10(e)(3)(D)(ii); see Adopting Release at 
44035, 44036 (describing the Commission's aim to promote a 
harmonized regulatory environment for SBSDs).
    \19\ Providing relief by increasing the maximum fixed-dollar 
amount is also consistent with the CFTC's and SEC's commitment to 
harmonization in areas of common regulatory interest. In a 
memorandum of understanding published in March 2026, the SEC and 
CFTC agreed to coordinate and collaborate between agencies to 
promote innovation with a ``minimum effective dose of regulation.'' 
Among those explicit areas of discussion was a commitment to remove 
regulatory obstacles and to generally enhance the derivatives 
market, with an aim at lowering compliance frictions and ensuring 
that the U.S. markets remain competitive. Memorandum of 
Understanding Between the Commission and the CFTC Regarding 
Harmonization in Areas of Common Regulatory Interest (Mar. 26, 
2026), available at <a href="https://www.sec.gov/newsroom/press-releases/2026-26-sec-cftc-announce-historic-memorandum-understanding-between-agencies">https://www.sec.gov/newsroom/press-releases/2026-26-sec-cftc-announce-historic-memorandum-understanding-between-agencies</a>.
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    <bullet> Preserves Safety, Soundness, and Liquidity While Reducing 
Duplicative Costs: MCM would remain subject to the CFTC's comprehensive 
capital, margin, segregation, and risk management requirements, 
including its liquidity risk management requirements, so the relief 
would not compromise MCM's financial soundness. At the same time, the 
relief would spare MCM the cost and inefficiency of maintaining 
duplicative capital, margin, and segregation calculations under two 
regulatory regimes, reducing burdens on both MCM and the Commission's 
limited resources.\20\
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    \20\ See 17 CFR 23.600 (CFTC risk management program 
requirements for swap dealers, including requirements addressing 
liquidity risk).
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III. Solicitation of Comments

    The Commission requests and encourages any interested person to 
submit comments regarding the potential change, including whether the 
Commission should increase the maximum fixed-dollar amount of the 
aggregate gross notional outstanding SBS positions for any SBSD 
eligible for Rule 18a-10 from $50 billion to $100 billion. In 
particular, the Commission solicits comment on the following questions:
    1. Do commenters agree with MCM's reasons described in the Request 
for increasing Rule 18a-10's maximum fixed-dollar amount to $100 
billion? Please explain why or why not.
    2. Would increasing Rule 18a-10's maximum fixed-dollar amount to 
$100 billion be consistent with paragraph (f)(2) of Rule 18a-10, which 
requires the Commission to consider the levels of SBS activity of SBSDs 
operating under the rule? Please explain why or why not.
    3. If Rule 18a-10's maximum fixed-dollar amount was increased to 
$100 billion, how significant could SBSDs relying on the ACM be to the 
SBS market and broader securities markets based on their SBS activity 
levels? What would be the individual and collective impact of these 
firms on the SBS market? Please explain.
    4. Is there a maximum fixed-dollar amount that is lower or higher 
than the amount in the Request that the Commission should adopt, that 
accounts for the factors the Commission should consider in changing the 
maximum fixed-dollar amount? If so, please identify the amount and 
explain why it is appropriate.
    Comments should be received on or before December 2, 2026. Comments 
may be submitted by any of the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/comments/s7-2026-38/notice-potential-change-increase-maximum-fixed-dollar-amount-alternative-compliance-mechanism">https://www.sec.gov/comments/s7-2026-38/notice-potential-change-increase-maximum-fixed-dollar-amount-alternative-compliance-mechanism</a>); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#4735322b226a24282a2a222933340734222469202831"><span class="__cf_email__" data-cfemail="9eecebf2fbb3fdf1f3f3fbf0eaeddeedfbfdb0f9f1e8">[email&#160;protected]</span></a>. Please include 
File Number S7-2026-38 on the subject line.

Paper Comments

    <bullet> Send paper comments to Secretary, Securities and Exchange 
Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number S7-2026-38. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method of submission. The Commission will post all 
comments on the Commission's internet website (<a href="https://www.sec.gov/rules-regulations/public-comments/s7-2026-38">https://www.sec.gov/rules-regulations/public-comments/s7-2026-38</a>). Do not include personal 
identifiable information in submissions; you should submit only 
information that you wish to make available publicly. We may redact in 
part or withhold entirely from publication submitted material that is 
obscene or subject to copyright protection.
    For further information, you may contact Raymond A. Lombardo, 
Acting Associate Director, Michelle Danis, Acting Associate Director, 
or Valentina Minak Deng, Special Counsel, Office of Broker-Dealer 
Finances, Division of Trading and Markets, Securities and Exchange 
Commission, 100 F Street NE, Washington, DC 20549-7010.

    By the Commission.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-22272 Filed 10-30-26; 8:45 am]
BILLING CODE 8011-01-P


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