CFTC published a proposed rule addressing the cross-border application of certain swap provisions of the Commodity Exchange Act. The proposed rule addresses the cross-border application of the registration thresholds and certain requirements applicable to swap dealers and major swap participants and establishes a formal process for requesting comparability determinations for such requirements from CFTC. CFTC is proposing a risk-based approach that would advance the goals of the swap reform under the Dodd-Frank Act while fostering greater liquidity and competitive markets, promoting enhanced regulatory cooperation, and advancing the global harmonization of swap regulation. Comments must be received on or before March 09, 2020.
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
Previous ArticleISDA, GFMA, and IIF Respond to BCBS Proposal on CVA Risk Framework
The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.
The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.
As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.
The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.
The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.
The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.
The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.