/Vol. 78, No. 4/Monday, January 7, 2013/Proposed Rules
These include rules under CEA section 4s(e), 7U.S.C. 6s(e) (governing capital and marginrequirements for SDs and MSPs).
‘‘Cross-Border Application of Certain SwapsProvisions of the Commodity Exchange Act,’’ 77 FR41214, Jul. 12, 2012.
7 U.S.C. 1a(49).
‘‘Further Definition of ‘Swap Dealer,’‘Security-Based Swap Dealer,’ ‘Major SwapParticipant,’ ‘Major Security-Based SwapParticipant’ and ‘Eligible Contract Participant,’’’ 77FR 30596, May 23, 2012 (‘‘Final Entities Rules’’).
7 U.S.C. 1a(33).
‘‘Exemptive Order Regarding Compliance WithCertain Swap Regulations,’’ 77 FR 41110 Jul. 12,2012.
Some of the commenters submitted a singlecomment letter addressing both the Proposed Orderand the Proposed Guidance. The comment letterssubmitted in response to the Proposed Order andProposed Guidance may be found on theCommission’s Web site at
Approximately 200 individuals submittedsubstantially identical letters to the effect thatoversight of the $700 trillion global derivativesmarket is the key to meaningful reform. The lettersstated that because the market is inherently global,risks can be transferred around the world with thetouch of a button. Further, according to theseletters, loopholes in the Proposed Guidance couldallow foreign affiliates of Wall Street banks toescape regulation. Lastly, the letters requested thatthe Proposed Guidance be strengthened to ensurethat the Dodd-Frank derivatives protections willdirectly apply to the full global activities of allimportant participants in the U.S. derivativesmarkets.
The records of these meetings andcommunications can be found on the Commission’sWeb site at:
In addition to differences in the applicablestatutory provisions, there are also differences inthe markets and products overseen by each agency,which may lead to divergent approaches to cross- border activities.
This is one aspect of the Commission’s on-going bilateral and multilateral efforts to promoteinternational coordination of regulatory reform. TheCommission staff is engaged in consultations withEurope, Japan, Hong Kong, Singapore, Switzerland,Canada, Australia, Brazil, and Mexico onderivatives reform. In addition, the Commissionstaff is participating in several standard-settinginitiatives, co-chairs the IOSCO Task Force on OTCDerivatives, and has created an informal workinggroup of derivatives regulators to discussimplementation of derivatives reform.
JointPress Statement of Leaders on Operating Principlesand Areas of Exploration in the Regulation of theCross-border OTC Derivatives Market, included inCFTC Press Release 6439–12, Dec. 4, 2012.
applicable to SDs and MSPs have beenproposed but not finalized.
Further, the Commission publishedfor public comment the ProposedGuidance,
which set forth the mannerin which it proposed to interpret section2(i) of the CEA as it applies to therequirements under the Dodd-Frank Actand the Commission’s regulationspromulgated thereunder regardingcross-border swap activities.Specifically, in the Proposed Guidance,the Commission described the generalmanner in which it proposed toconsider: (1) Whether a non-U.S.person’s swap dealing activities aresufficient to require registration as a‘‘swap dealer’’,
as further defined in ajoint release adopted by the Commissionand the Securities and ExchangeCommission (‘‘SEC’’) (collectively, the‘‘Commissions’’);
(2) whether a non-U.S. person’s swap positions aresufficient to require registration as a‘‘major swap participant,’’
as furtherdefined in the Final Entities Rules; and(3) the treatment of foreign branches,agencies, affiliates, and subsidiaries of U.S. SDs and of U.S. branches of non-U.S. SDs. The Proposed Guidance alsogenerally described the policy andprocedural framework under which theCommission may permit compliancewith a comparable regulatoryrequirement of a foreign jurisdiction tosubstitute for compliance with therequirements of the CEA. Last, theProposed Guidance set forth the mannerin which the Commission proposed tointerpret section 2(i) of the CEA as itapplies to the clearing, trading, andcertain reporting requirements underthe Dodd-Frank Act with respect toswaps between counterparties that arenot SDs or MSPs.Contemporaneously with theProposed Guidance, the Commissionpublished the Proposed Order pursuantto section 4(c) of the CEA,
in order tofoster an orderly transition to the newswaps regulatory regime and to providemarket participants greater certaintyregarding their obligations with respectto cross-border swap activities duringthe pendency of the Proposed Order.The Proposed Order would granttemporary relief from certain swapprovisions of Title VII of the Dodd-Frank Act.The public comment periods on theProposed Order and the ProposedGuidance ended on August 13, 2012 andAugust 27, 2012, respectively. TheCommission received approximately 26letters on the Proposed Order andapproximately 288 letters on theProposed Guidance from a variety of market participants and other interestedparties, including major U.S. and non-U.S. banks and financial institutionsthat conduct global swaps business,trade associations, clearingorganizations, law firms (representinginternational banks and dealers),individual citizens, and foreignregulators.
The Commission staff alsoheld numerous meetings anddiscussions with various marketparticipants, domestic bank regulators,and other interested parties to discussthe Proposed Order and the ProposedGuidance.
Further, the Commission staff closelyconsulted with the staff of the SEC in aneffort to increase understanding of eachother’s regulatory approaches and toharmonize the cross-border approachesof the two agencies to the greatest extentpossible, consistent with theirrespective statutory mandates.
TheCommission expects that thisconsultative process will continue aseach agency works towardsimplementing its respective cross- border policy.The Commission also recognizes thecritical role of international cooperationand coordination in the regulation of derivatives in the highly interconnectedglobal market, where risks aretransmitted across national borders andmarket participants operate in multiplejurisdictions. Close cooperativerelationships and coordination withother jurisdictions take on even greaterimportance given that, prior to therecent reforms, the swaps market haslargely operated without regulatoryoversight and many jurisdictions are indiffering stages of implementing theirregulatory reform. To this end, theCommission staff has actively engagedin discussions with their foreigncounterparts in an effort to betterunderstand and develop a moreharmonized cross-border regulatoryframework. The Commission expectsthat these discussions will continue asit finalizes the cross-border interpretiveguidance and as other jurisdictionsdevelop their own regulatoryrequirements for derivatives.
The Commission has determined notto take further action on the ProposedGuidance at this time. The Commission believes it will be beneficial to havefurther consultations with otherdomestic and international regulators inan effort to harmonize cross-borderregulatory approaches prior to takingaction with respect to the ProposedGuidance. The Commission also believes that further consideration of public comments, including thecomments that may be received on theFurther Proposed Guidance regardingthe Commission’s interpretation of theterm ‘‘U.S. person,’’ and its guidanceregarding aggregation for purposes of SDregistration, will be helpful to theCommission in issuing final interpretiveguidance.Nonetheless, the Commission hasseparately determined to finalize theProposed Order as a final, time-limitedexemptive order (‘‘Final Order’’) that issubstantially similar to the ProposedOrder, except for the addition of provisions regarding registration andcertain modifications and clarifications
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