ISDA issued a comment letter to CFTC regarding the proposal on cross-border application of registration thresholds and certain requirements applicable to swap dealers and major swap participants. The proposal was published in the Federal Register in January 2020. ISDA has commended the efforts of CFTC to recalibrate its cross-border regime through the rulemaking process and has identified four aspects of the proposal that warrant additional consideration by CFTC.
ISDA supports the proposed holistic, outcomes-based approach to issuing comparability determinations. It agrees that CFTC should assess the laws of foreign jurisdictions based on a common set of principles, with an understanding that jurisdictions may have implemented the G-20 derivatives reforms from slightly different perspectives. It also agrees that CFTC should look to adopt a substituted compliance regime based on comparable, rather than identical, approaches to derivatives regulations. To further refine the cross-border regime, ISDA has identified four aspects of the proposal that warrant additional consideration by CFTC:
- ANE Transactions—ANE transactions refer to transactions between non-U.S. swap entities and non-U.S. persons that are arranged, negotiated, or executed by U.S. personnel. In the final rule, ISDA requests CFTC to confirm that other Title VII requirements, including clearing, trading, and real-time reporting rules will not apply to ANE transactions and Foreign Branch ANE Transactions.
- Cross-Border Application of the Swap Dealer De Minimis Threshold—Consistent with the current treatment of non-U.S. persons, ISDA requests that CFTC, for purposes of registration requirements, exempt Other Non-U.S. Persons from counting swaps toward their de minimis threshold when trading swaps with a Guaranteed Entity that is an affiliate of an swap dealer.
- Application of Category B and C Requirements—As a general matter, Category B requirements should not apply to U.S. branches of non-U.S. swap entities and Guaranteed Entities when they are transacting with Other Non-U.S. Persons.
- Definition of Swap Conducted through a U.S. Branch—CFTC should clarify that making or receiving payments alone would not trigger the definition of a “swap conducted through a U.S. branch.”
ISDA also requests CFTC, in the final rule, to address three issues not included in the proposal that are intrinsic to the overall cross-border framework. These are related to cross-border application of real-time reporting and swap execution facility execution requirements, cross-border application of regulatory reporting requirements, and counterparty representations.
Keywords: Americas, US, Banking, Securities, Cross-Border, Swaps, Commodity Exchange Act, Swaps Reform, CFTC, ISDA
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