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MFA Submits Comment Letter to SEC on Public Disclosure of Security-Based Swap Positions Proposal

MFA submitted a comment letter to the U.S. Securities and Exchange Commission (SEC)’s regarding it’s proposed Rule 10B-1, which requires public disclosure of significant security-based swap (SBS) positions. MFA commissioned an expert analysis from NERA Economic Consulting (NERA), which found serious flaws in the SEC’s Division of Economic and Risk Analysis (DERA) analysis. The NERA report argues that the DERA analysis does not adequately support the establishment of a publicly attributed reporting system for SBS positions, as proposed in Rule 10B-1.

In the letter, MFA asserts that adopting Rule 10B-1 solely based on the DERA analysis would fail to meet the requirements of the Administrative Procedure Act (APA) and the SEC’s own guidelines for economic analysis in rulemaking. MFA also contends that the proposed rule would constitute an unprecedented intervention in the SBS market without explicit authorization from Congress, potentially harming market liquidity and participants.

Additionally, MFA proposes an alternative approach, suggesting aggregated and anonymized public reporting for positions exceeding reasonable thresholds. This would achieve the SEC’s objectives without negatively impacting market participants or liquidity. The NERA analysis highlights the inadequacies of the DERA analysis, including significant data limitations and analytical flaws that undermine its ability to guide the necessity or appropriateness of reporting SBS positions or determine appropriate reporting thresholds.