Data Centre Securitisation Excluded from Dodd-Frank Risk Retention
The SEC staff has ruled that data centre securitisations fall outside the scope of Dodd-Frank’s risk retention rules. This decision was made in response to a query from Latham & Watkins on July 23, 2026.
The Ruling Context
On July 29, Kayla Roberts, chair of the SEC’s Office of Structured Finance, confirmed the staff’s agreement with Latham’s interpretation. The central question was whether data centre securitisations qualify as asset-backed securities under the Exchange Act.
Latham & Watkins’ Argument
Latham argued that data centres do not meet the definition of a self-liquidating financial asset, a key requirement for asset-backed securities. They pointed out that:
- Data centres are tangible and physical assets that endure beyond the life of the securities.
- They may appreciate in value over time.
- Upon repayment of the notes, the issuer retains ownership of the building.
This argument was compared to a single-asset commercial mortgage deal, where the issuer holds only the loan and has no remaining asset after repayment.
Market Impact and Structure
Latham highlighted the growth of the data centre securitisation market since 2018, reaching $50 billion in cumulative debt issuance. The deals typically involve:
- Loan-to-value ratios up to 70% of appraised value.
- Notes with anticipated repayment dates around five years, extending to final maturities between 25 and 30 years.
- Master trust structures enabling sponsors to issue further securities, add data centres, or dispose of assets.
SEC Staff Response
The SEC response clarifies several points:
- The views expressed are those of the Division of Corporation Finance staff, not the full Commission.
- It has "no legal force or effect."
- The ruling is based on the information provided in Latham’s letter and may change with different facts or conditions.