20 December 2013

CFTC approves comparability determinations for six jurisdictions for substituted compliance purposes

The Commodity Futures Trading Commission (Commission) approved a series of broad comparability determinations that would permit substituted compliance with non-US regulatory regimes as compared to certain swaps provisions of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and the Commission’s regulations.

Substituted compliance describes the circumstances where the Commission’s general policy would be to permit non-US swap dealers or non-US. MSPs whose swaps activities might bring them within the scope of certain Commission regulations, to use compliance with regulations in their home jurisdiction as a substitute for compliance with the relevant Commission regulations. This approach builds on the Commission’s long-standing policy of recognizing comparable regulatory regimes based on international coordination and comity principles with respect to cross-border activities involving futures and options.

In accordance with the Commission’s general policy and procedural framework described in its Interpretative Guidance and Policy Statement Regarding Compliance with Certain Swap Regulations published on July 26, 2013 (the Cross-Border Guidance), the comparability determinations are part of substituted compliance with respect to Commission regulations applicable to swaps activities outside the US.

This approval by the Commission also reflects a collaborative effort with authorities and market participants from each of the six jurisdictions that has registered swap dealers. Working with authorities in Australia, Canada, the European Union (EU), Hong Kong, Japan, and Switzerland, the Commission was able to issue comparability determinations for a broad range of entity-level requirements.

As jurisdictions outside the US continue to strengthen their regulatory regimes, the Commission may determine that additional foreign regulatory requirements are comparable to and as comprehensive as certain requirements under the CEA and the Commission’s regulations.

Full-CFTC press release

Michael Kemmer, General Manager of the Association of German Banks, commented as follows: “As much as we welcome the steps that have now been taken, we still miss a broad understanding between the US and the EU as well as other countries on internationally consistent application of their derivatives regulation. The partial recognition of European derivatives regulation now achieved can therefore only be a first step. For the global derivatives markets, internationally consistent rules are particularly important. Without such rules, the derivatives market regulation adopted by the G20 threatens to remain a patchwork. Conflicting national rules are not only inefficient but also endanger the safety and stability of the financial markets. So regulators should continue to work towards fully recognising regulation of foreign banks in their home countries”.

AGB-press release, 27.12.13

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