IIB - Exemptive Order Request Regarding Compliance with Certain Swap Regulations

The Institute of International Bankers (the “IIB”) has submitted comments to the Commodities Future Trading Commission (the “CFTC”) in response to the CFTC’s proposed Exemptive Order concerning compliance with certain swap regulations. The Order, issued July 12, proposed granting temporary relief to non-U.S. swap dealers and non-U.S. MSPs from certain entity-level and transaction-level requirements, and also proposed granting temporary transaction-level relief to the foreign branches of U.S. swap dealers and MSPs. In submitting their comments on the Order, the IIB expressed several underlying concerns: a fast approaching deadline for provisional registration, overbreadth of certain elements of the CFTC’s recently proposed cross-border guidance, and gaps in the proposed Order. The IIB suggests that the final Exemptive Order be issued as soon as possible, and modified from its proposed form in the following respects: (a) the Exemptive Order should modify the definition of “U.S. person” to implement a staged approach, which will allow market participants to adjust to having to identify their counterparties’ U.S. person status; (b) the Exemptive Order should adopt a transitional swap dealer registration regime that reduces the confusion surrounding the initial registration process; (c) the Exemptive Order should not require detailed compliance plans; and (d) the Exemptive Order should modify SDR and Large Trader reporting requirements for transactions facing U.S. persons.

[Steven Lofchie comment: As I have previously written, the CFTC's assertion of regulatory authority outside the United States is unprecedented and, in my view, does not represent good policy. As they become aware of the extent of authority that the CFTC is asserting, non-U.S. regulators are bound to push back. Further, the CFTC's assertion that it may regulate as "MSPs" non-U.S. customers of U.S. swap dealers will simply discourage non-U.S. customers from doing business with U.S. institutions. For my general comments on the CFTC's jurisdictional reach, see my prior article, "The Sun Never Sets on Dodd-Frank".]

View letter here (links externally to IIB website).