CFTC’s Proposed Rules on Cross Border Application
Summary
SIFMA and other associations provided comments to the Commodity Futures Trading Commission (CFTC) on the Commission’s proposed rules regarding the cross-border application of the registration thresholds and external business conduct standards applicable to swap dealers and major swap participants
See also:
Cross-Border Fragmentation of Global Interest Rate Derivatives: Second Half 2015 Update
Excerpt
Christopher Kirkpatrick
Secretary
U.S. Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street N.W.
Washington, DC 20581
Re: Cross-Border Application of the Registration Thresholds and External Business Conduct Standards Applicable to Swap Dealers and Major Swap Participants [RIN 3038–AE54]
On behalf of our respective memberships, American Bankers Association, Coalition for Derivatives End-Users, Financial Services Roundtable, the International Swaps and Derivatives
Association, National Association of Corporate Treasurers, Securities Industry and Financial Markets Association, and the U.S. Chamber of Commerce Center for Capital Markets
Competitiveness (collectively, the “Undersigned”)1 are pleased to provide comments to the U.S. Commodity Futures Trading Commission (the “CFTC”) on its proposed rule titled Cross-Border Application of the Registration Thresholds and External Business Conduct Standards Applicable to Swap Dealers and Major Swap Participants (the “Proposed Cross-Border Rule”).2
The Undersigned represent diverse constituencies within the global swaps market including thousands of market participants ranging from commercial end-users to swap dealers to asset managers to financial entities, as well as market infrastructure providers (such as derivatives clearing organizations and swap execution facilities) and various service providers.
Although the Undersigned may have separately filed their own detailed comments on the Proposed Cross-Border Rule, we have joined together in this letter to express our sincere and unified concerns with the newly introduced foreign consolidated subsidiary (“FCS”) concept in the Proposed Cross-Border Rule. We urge the CFTC to reconsider its proposed approach in using the FCS concept for broad cross-border application beyond the CFTC’s cross-border margin rule3 and specifically in using that concept as part of the swap dealer and major swap participant (“MSP”) registration threshold calculations. In short, we believe that the FCS concept as proposed would (i) have a detrimental impact on U.S. swaps market participants, particularly Main Street businesses seeking to prudently hedge their commercial and market risks when they do business in foreign jurisdictions; (ii) represent an unprecedented approach to regulating financial markets that is inconsistent with principles of international comity; and (iii) be excessively costly to implement without resulting in a commensurate reduction in systemic risks to U.S. financial markets. Accordingly, we respectfully request that the CFTC refrain from moving forward with the application of the FCS concept as described or alluded to in the Proposed Cross-Border Rule.