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CFTC Chair Proposes Alternative Cross-Border Framework

Steven.Lofchie@cwt.com's picture
Commentary by Steven Lofchie

CFTC Chair J. Christopher Giancarlo proposed an alternative cross-border swaps framework to "better balance systemic risk mitigation with healthy swaps market activity in support of broad-based economic growth."

In a new white paper, he previewed weeks ago, Mr. Giancarlo outlined his views on the current CFTC approach to regulating cross-border activities and suggested a new approach that would encourage greater cooperation with non-U.S. jurisdictions. Mr. Giancarlo recommended, among other things:

  • Non-U.S. Central Clearing Parties ("CCPs"): expanding the use of the CFTC's exemptive authority for non-U.S. CCPs that are subject to similar regulations in their home country and do not pose risk to the U.S. financial system;
  • Non-U.S. trading venues: terminating the bifurcation of the global swaps market into separate U.S. person and non-U.S. person marketplaces by exempting non-U.S. trading venues, in regulatory jurisdictions that have adopted similar G20 swaps reform, from having to register with the CFTC as swap execution facilities;
  • Non-U.S. swap dealers: regulating non-U.S. swap dealers whose swap-dealing activity poses a material risk to the U.S. financial system;
  • Clearing and trade execution requirements: allowing non-U.S. persons to rely on substituted compliance as to swap clearing and trade execution requirements in comparable jurisdictions; and
  • Arrange, negotiate, or execute swap transactions: taking a "territorial approach to the U.S. swaps trading activity," as non-incidental swaps trading activity in the United States should be subject to U.S. swaps trading rules.

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