SIFMA today released the following statement from President and CEO Tim Ryan in response to proposed guidance issued by the Commodity Futures Trading Commission (CFTC) that addresses cross-border treatment of derivatives rules under the Dodd-Frank Act.
“Our financial system is global. Business is conducted across different firm offices through different time zones on multiple continents. That’s why it’s important for regulators in different jurisdictions to work together to ensure rulemakings work in sync, and implementation within separate sovereign jurisdictions is coordinated and, to the greatest extent possible, harmonized.
“The CFTC released proposed guidance today that will have a broad impact on how the global derivatives markets will be regulated. It is troubling that this cross-border release was not issued as a rule proposal, but was rather issued as proposed guidance. Issuing cross-border rules, rather than guidance, will provide market participants with greater certainty regarding the likelihood of, and process for, changes to these critical rules that could have significant repercussions on worldwide swap activity and swap entity structuring.
“We’re also concerned that the CFTC’s process was not coordinated with the SEC. The extraterritorial reach of US law should be consistent across all derivatives products, and it is in situations like this where the FSOC should play an important coordinating role. Indeed, Commissioners Sommers and O’Malia highlighted the need for better coordination in their own statements accompanying the release of this guidance.
“Additionally, we are disappointed that the CFTC has issued proposed guidance in an attempt to circumvent the requirement for a cost-benefit analysis. We continue to believe these are necessary requirements for these important rules.
“Finally, given that many of the CFTC’s other Dodd-Frank rulemakings depend on the cross-border rule to specify how new requirements apply to multinational and foreign firms, the CFTC should delay the implementation of related compliance requirements until a final cross-border rule is adopted, as the SEC has rightly proposed doing for its rules. Proceeding with compliance deadlines before the cross-border rule is finalized will introduce unnecessary uncertainty into international financial markets.
“While we will need to fully assess how this new guidance will affect our member firms, it will be important for the CFTC to respect regulations taking root in the EU and other jurisdictions.”