ISDA Releases an Outlined Approach on Cross-Border Issues (with Lofchie Comment)

The ISDA has outlined a set of principles designed to help attain a more harmonized framework of international derivatives regulations. The principles incorporate views expressed by international regulators and market participants to develop a framework through principles-based substituted compliance methodology. Additionally, the ISDA published examples of how the principles will apply to various areas within derivatives regulation. The ISDA suggested the following principles:

• An effective framework should be grounded in the declarations issued by the G-20;
• Regional and national regulators should evaluate each other's regimes to allow for a principles-based approach to cross-border issues in order to maintain global markets and avoid market fragmentation;
• In order to substitute compliance or equivalence, regulators must start by identifying a set of common principles that elaborate on the G-20's regulatory goals;
• Ultimate decisions regarding comparability require not only a bilateral dialogue between regulators, but also a transparent process; and
• Regulators should consult and cooperate with each other before implementing their derivatives regulations.

Lofchie Comment: As previously discussed here (see links below), the considered industry input further suggests that the CFTC cross-border guidance would have benefitted from a more formal comment process.

See: Methodology for Regulatory Comparisons (Substituted Compliance); Common Principles - Examples (Substituted Compliance); ISDA Press Release.See also: ISDA: Additional Provisions Relating to Credit Derivative Transactions with a Restricted Delivery Party (June 25, 2013).See also: IIB Files Comments on CFTC Cross-Border Exemptive Order (with Lofchie Comment) (August 16, 2013); Industry Groups Submit Critical Comments on CFTC Cross-Border Guidance (with Lofchie Comment) (August 13, 2013); SEC Proposal on Cross-Border Security-Based Swaps (with Commissioners' Comments) (with Lofchie Comment) (May 1, 2013); MFA and AIMA Submit Comments on SEC's Proposed Cross-Border Rules for Security-Based Swaps.