CFTC Consults on Cross-Border Application of Certain Swap Provisions

The proposed rule addresses which cross-border swaps or swap positions a person would need to consider when determining whether it needs to register with CFTC as a swap dealer or major swap participant as well as related classifications of swap market participants and swaps. Additionally, CFTC is proposing exceptions from, and a substituted compliance process for, certain regulations applicable to registered swap dealers and major swap participants. The proposed rule would also create a framework for comparability determinations that emphasizes a holistic, outcomes-based approach that is grounded in the principles of international comity. Finally, the proposed rule would require swap dealers and major swap participants to create a record of their compliance with the proposed rule and to retain such records.

CFTC has sought to target those classes of entities whose activities—due to the nature of their relationship with a U.S. person or U.S. commerce—most clearly present the risks addressed by the Dodd-Frank Act provisions and the related regulations covered by the proposed rule. The proposed rule is designed to limit opportunities for regulatory arbitrage by applying the registration thresholds in a consistent manner to differing organizational structures that serve similar economic functions or have similar economic effects. CFTC is mindful of the impact of its choices on market efficiency and competition as well as the importance of international comity when exercising its authority. CFTC believes that the proposed rule reflects a measured approach that advances the goals underlying swap dealer and major swap participant regulation, consistent with the statutory authority of CFTC, while mitigating market distortions and inefficiencies and avoiding fragmentation.

Related Link: Federal Register Notice

Comment Due Date: March 09, 2020

Keywords: Americas, US, Banking, Securities, Cross-Border, Swaps, Commodity Exchange Act, Dodd Frank Act, Risk-Based Approach, Swaps Reform, CFTC