CFTC Requests Comment on Comparability Determination for German and French Capital Requirements

The CFTC requested comment on an application submitted by the Institute of International Bankers, ISDA and SIFMA (collectively, the "Trade Associations") to determine that German and French capital and financial reporting requirements are comparable to the CFTC’s requirements for swap dealers.

A determination of substituted compliance would include:

• the scope and objective of relevant capital and financial reporting requirements;
• outcomes of comparable requirements with the CFTC’s corresponding financial reporting and capital requirements;
• the ability to supervise and enforce compliance; and
• a memorandum of understanding with the CFTC, if relevant.

The proposed order would allow swap dealers in France and Germany to satisfy capital requirements under CEA Sections 4s(e) ("Registration: Capital and margin requirements") and (f) ("Reporting and Recordkeeping") and CFTC Regulations 23.101 ("Minimum financial requirements for swap dealers") and 23.105 ("Financial recordkeeping, reporting and notification requirements for swap dealers") by complying with relevant requirements under European Union laws and regulations.

Comments on the proposed order must be submitted within 60 days of publication in the Federal Register.

Statements

CFTC Commissioners provided the following statements on the proposed order:

• CFTC Commissioner Caroline D. Pham. Ms. Pham said the proposed order "strik[es] the appropriate balance" in (i) achieving market access to foreign market participants seeking to conduct business on a cross-border basis, (ii) ensuring protections for market participants and (iii) managing systemic risks.
• CFTC Commissioner Christy Goldsmith Romero. Ms. Goldsmith Romero said that the CFTC substituted compliance framework should only recognize other frameworks with comparable (i) outcomes and (ii) supervision and enforcement. She said that substituted compliance determinations should not allow for "regulatory arbitrage for swap dealers to escape strong U.S. capital rules."
• CFTC Commissioner Kristin N. Johnson. Ms. Johnson stated that the proposed order "reflect[s] careful and thoughtful evaluation of the comparability of relevant standards and an attempt to coordinate [the CFTC’s] efforts to bring transparency to the swaps market and reduce its risks to the public."