CFTC to finalise cross-border approach soon, Gensler says
First Published 29th October 2012
CFTC Chairman says regulator has track record of respecting other countries' regulations.
Washington - Commodity and Futures Trading Commission (CFTC) Chairman Gary Gensler said the US regulator would soon finalise its approach to cross-border trading and phased-compliance of the regulation, adding that the CFTC has a track record of respecting other countries' home country regulations where that makes sense.
"In consultation with the international regulatory community, the CFTC will move shortly to finalise the cross-border and phased-compliance releases," Gensler said in remarks to an Ontario Securities Commission dialogue, which he was prevented from attending in person due to Hurricane Sandy.
"The CFTC has a consistent record of relying on comparable home country regulation where appropriate," Gensler added.
Gensler had stirred concerns with remarks earlier this year that suggested the CFTC would be taking a hard line about ensuring that all overseas US entities or entities doing business with US firms would be subject directly to Dodd-Frank legislation.
Many other regulators prefer a principle-based application of what is known as substitute compliance. That is where an entity outside of the United States could be governed by local regulation when doing business with US-based firms so long as the local regulation in principle was designed to achieve the same outcomes as Dodd-Frank.
"To give financial institutions and market participants operating outside the U.S. guidance on the cross-border application of Dodd-Frank, the CFTC in June sought public consultation on an interpretation of these provisions," Gensler said.
"This guidance says that Dodd-Frank swaps market reform covers transactions with overseas branches, overseas affiliates guaranteed by U.S. entities, and overseas affiliates operating as conduits for U.S. entities' swaps activity. Failing to do so would otherwise mean that U.S. financial institutions might simply move their swaps activity offshore, but, particularly in times of crisis, that risk would still come crashing back to our economy."
But the recent remarks signal more dialogue between the CFTC and other regulators.
"In addition, the CFTC proposed an approach to phased compliance for foreign swap dealers," Gensler said. "Such phased compliance would allow time for appropriate implementation of substituted compliance, or allowing market participants to comply with Dodd-Frank through comparable and comprehensive foreign regulatory requirements."
He said the CFTC also is collaborating on a global approach to margin requirements for uncleared swaps through the Basel Committee on Banking Supervision and IOSCO. "I would anticipate the CFTC, in coordination with domestic prudential regulators, would take up the final rules on margin early next year, so as to benefit from this international work."