George Osborne (UK Chancellor of the Exchequer), Michel Barnier (European Commissioner for Internal Market and Services), Ikko Nakatsuka (Government of Japan Minister of State for Financial Services) and Pierre Moscovici (Government of France Minister of Finance) submitted a joint letter to CFTC Chairman Gensler expressing concern as to the CFTC's cross-border swaps rules. The gist of the letter is to the effect that the CFTC must recognize compliance by non-U.S. firms with non-U.S. rules as satisfying U.S. requirements.
Lofchie Comment: This is an understated letter to the CFTC saying that the CFTC's cross-border rules do not work, and that they should not be adopted until harmonized with the rules of non-U.S. regulators and that the CFTC's final rules must recognize that non-U.S. firms should be deemed to have complied with any U.S. rules by virtue of compliance with home-country rules. In earlier letters, the non-U.S. regulators had sounded a harsher tone, albeit with the same message: the CFTC needs to back off on regulation of non-U.S. swaps dealers.
As I have previously stated, I simply do not see how the CFTC can disregard these non-U.S. regulators. If the CFTC does not acknowledge them, the CFTC must be prepared for the possibility (certainty?) that the non-U.S. regulators will respond in kind to the CFTC and subject U.S. swap dealers to full double regulation abroad.
On the other hand, I think that the CFTC is likely stuck between a rock and a hard place in that the CFTC's proposed regulation of U.S. swaps dealers is so burdensome that I suspect that any non-U.S. firm able to avoid such regulation will have a great competitive advantage over U.S. firms. In short, if the CFTC is to recognize that compliance with non-U.S. regulation constitutes compliance with U.S. regulation, I think that the CFTC will have to (or at least should) rethink the burdens it has imposed on U.S. firms.
The fact that this letter is directed solely at the CFTC, and not at the SEC, further emphasizes the difference in the approaches that the two agencies have taken to cross-border regulation, with the SEC seeming to be much more concerned with seeking input from non-U.S. regulators. Compare, by way of example, this speech by SEC Commissioner Walter with this speech byCFTC Commissioner Chilton.