CEO Scott O'Malia Discusses ISDA's Wish List for the CFTC in 2015 (Energy Metro Desk) (with Lofchie Comment)
In the latest installment of Energy Metro Desk, former CFTC Commissioner and current ISDA CEO, Scott O'Malia, discussed his priorities for the financial industry in 2015.
Mr. O'Malia said that harmonizing rules in the OTC derivatives market tops his list for 2015. In implementing the principles agreed upon by the Group of 20 in 2009, Mr. O'Malia explained that regulators created rules and regulations that focused on specific jurisdictions with "little thought" as to how the regulations would harmonize with other cross-border jurisdictions.
According to Mr. O'Malia, the lack of regulatory coordination has resulted in fragmentation, reduced liquidity, and duplicative or contradicting rules. Therefore, users prefer to trade with counterparties within their own jurisdiction in order to avoid conflicting regulatory requirements.
Mr. O'Malia stated that a priority for ISDA in 2015 is to work with regulators to create a practical substituted compliance regime. Specifically, Mr. O'Malia encouraged regulators to "defer to equivalent regulations in other jurisdictions" and cooperatively base decisions on principles and outcomes. Mr. O'Malia emphasized ISDA's commitment to creating harmonized cross-border rules, and stated that ISDA is prepared to provide data and analysis in order to help better inform regulators.
Lofchie Comment: Proponents of Dodd-Frank asserted that the new regulations would make the U.S. financial system so safe and attractive that non-U.S. investors would flock to the U.S. markets. Opponents argued that the statute placed significant burdens on both buy- and sell-side market participants, and that the regulatory burdens would discourage non-U.S. investors from trading in U.S. markets, with a resulting loss to the U.S. economy. As Mr. O'Malia points out, the numbers prove that the opponents were right: Dodd-Frank makes the U.S. markets unattractive. It is clear that the regulatory costs are burdensome to U.S. corporations which cannot elect to escape them by trading outside of the United States. In the new year, it will be time to re-examine both the statute and the implementing rules.
Click here to view the article.The above link is to an excerpt from the most recent issue of Energy Metro Desk, which is published biweekly by Scudder Publishing Group, an energy trade news publishing company based in the Washington, D.C. metropolitan area. Those who are interested in learning more about Energy Metro Desk may do so by visiting www.energymetro.com or by sending an e-mail to [email protected]. Reprinted with permission of the publisher, Scudder Publishing Group, LLC. Copyright 2014.
Related news: ISDA CEO Scott O'Malia Remarks on ISDA Priorities, Stresses Cross-Border Harmonization (October 2, 2014); CFTC Commissioners Discuss and Differ on CFTC's Swaps Trading Rules (with Lofchie Comment) (November 12, 2014); OTC Derivatives Regulators Issue Report to the G20 Leaders (November 7, 2014); CFTC and Manitoba Securities Commission Sign Counterpart to MOU to Enhance Supervision of Cross-Border Regulated Entities (October 21, 2014); G-18 Banks Agree to Sign ISDA Resolution Stay Protocol (October 13, 2014); Streetwise Professor Craig Pirrong on Cross-Border Issues at the CFTC (with Lofchie Comment) (October 6, 2014); OTC Derivatives Regulators Group Issues Report to G20 on Cross-Border Implementation Issues (with Lofchie Comment) (September 10, 2014); CFTC Issues Conditional No-Action Relief with Respect to Swaps Trading on Multilateral Trading Facilities on European Exchanges (CFTC Letter 14-46) (April 9, 2014).