Trade Associations - Comments on ET Guidance

ABA, et al.: ABA, The Clearing House, FSF, FSR, FIA, IIB, ISDA, ICI/ICI Global, MFA and SIFMA submitted a joint comment letter requesting that the CFTC extend the comment deadline on the cross-border proposed interpretive guidance and proposed exemptive order.

Association for Financial Markets in Europe (AFME): AFME addressed whether the substituted compliance process is the most effective way to achieve the goals as set forth in Title VII of the Dodd-Frank Act.

Association of German Banks: The Association stated its concerns that such regulatory efforts by the CFTC may lead to unnecessary fragmentation of global derivative markets and to burdening internationally active banks and non-bank participants in derivative markets with extraterritorial, duplicative or even contradictory regulations by different jurisdictions.

Australian Bankers' Association: The Association stated its view that the proposed guidance does not go far enough in ameliorating the far-reaching scope of Title VII of the Dodd-Frank Act. Specifically, the Association addressed the vagueness of the concept of substituted compliance and the lack of clarity on the effect of the final cross-border guidance prior to registration.

Futures and Options Association Ltd.: The Association identified several cross-border consequences of the Proposed Guidance in terms of increased regulatory complexity, cost and legal risk, and the likely confusion of customers over applicable standards of investor protection. Such consequences include the limited coverage of the Commission's proposed "substituted compliance" regime, particularly in relation to transaction-level requirements, potentially duplicative and inconsistent regulatory requirements, and the potentially inconsistent and unpredictable application of Dodd-Frank compliance requirements to non-U.S. swap market participants.

Global Financial Markets Association (GFMA): GFMA expressed its concern that the substituted compliance process may not be the most effective way to achieve the CFTC's goals that swap dealers and major swap participants organized outside the U.S. will, in many cases, be subject to home country regulation that seeks to achieve the regulatory objectives as Title VII of the Dodd-Frank Act. Specifically, GFMA stated that it will often be more appropriate not to extend the extraterritorial reach of U.S. regulation to such entities.

Hong Kong Association of Banks (HKAB): "While HKAB welcomes the proposed recognition of offshore substituted compliance by the Commission, it believes that the Commission should evaluate the comparability of a particular foreign jurisdiction based solely on its compliance with G20 commitments."

Investment Company Institute (ICI) and ICI Global: Both Institutes expressed the concern that the CFTC's proposed extraterritorial approach extends the swaps provisions of the CEA beyond what was originally intended under Title VII of the Dodd-Frank Act, and may result in the imposition of the swaps provisions on entities that have only a nominal nexus to the U.S. Specifically, ICI and ICI Global are concerned that the CFTC's approach could disadvantage U.S.-registered investment companies and certain non-U.S. investment companies that engage in derivatives transactions around the world.

Investment Industry Association of Canada (IIAC): The IIAC addressed certain specific areas of the Proposed Guidance which it believes the Commission should clarify, including the definitions of U.S. Person, swap dealer and MSP. The IIAC also provided comments on the CFTC's proposed cross-border application of the swaps regulations, and the limited scope for a "substituted compliance" regime for non-U.S. swap dealers and MSPs.

ISDA (August 10, 2012): ISDA urged the CFTC to begin its reconsideration of the proposed guidance and order, making several substantive recommendations.

ISDA(August 27, 2012): ISDA submitted another comment letter, advising the CFTC of certain logistical and legal challenges to certain members' compliance with the reporting obligations. The letter reiterated several foreign regulators' concern with the reporting requirements.

Japanese Bankers Association: The Association expressed its opposition to the proposed guidance framework imposing registration and compliance with the U.S. rules based solely on the fact that the non-U.S. Swap Dealer is dealing with a U.S. person.

Korea Federation of Banks (KFB): KFB addressed the potential conflict between the CEA and Korean domestic laws, making suggestions for an enhanced international approach to derivative regulation and on substituted compliance and related processes. KFB also addressed the necessity of delaying the reporting of the compliance plan and compliance with the rule, as well as on how to aggregate the dealing volume of non-U.S.-based affiliates.

MFA: MFA discussed the concern that, in its application, the Proposed Guidance would inappropriately subject certain non-U.S. market participants and transactions to U.S. regulatory requirements. MFA is particularly concerned about the implications for commodity pools, pooled accounts and collective investment vehicles organized outside the U.S.

SIFMA: SIFMA discussed its concern that the proposed regime reaches beyond the Commission's statutory authority and threatens to disrupt the swaps market significantly, both in the U.S. and worldwide. Key concerns include:

• Jurisdictional Limitations;
• Level Playing Field for All Organizational Structures;
• Substituted Compliance and Comity;
• Rulemaking;
• Coordination;
• Over-Regulation of Firms' Internal Risk-Management Strategies;
• Complexity and Lack of Clarity;
• Implementation Issues.

Additional Letters: Available here.

Cross-Reference(s): Dodd-Frank Act Title VII, Sec. 722(d); CEA Sec. 2(i)(1).

View Release in full here (links externally to CFTC website).