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“The derivatives markets are critical to the efficient functioning of the global financial system and the economies of the world. The risk-management and price-discovery functions of these markets have become integral to businesses across the spectrum, from agricultural producers to global manufacturers. To be effective, the approach to regulating these markets must always be appropriately harmonised across legal jurisdictions. The paramount objectives of derivatives regulations must be to support a global market structure that promotes open, transparent, and liquid markets and sound risk-management practices at the firms operating within those markets.
In continued pursuit of more open, transparent, and liquid derivatives markets, I have directed staff to develop regulations to set forth a process for recognising foreign clearinghouses and foreign trading venues under authority provided by Congress in Dodd-Frank. Global regulators can and should remain faithful to the outcomes-based approach described in the CFTC’s cross-border guidance, avoiding an insistence on the exact language of US regulations to the precise letter and comma. But the details will often matter, too.
With respect to the former proposal, the Commission may consider a rulemaking next month that will set forth certain standards for, and a process to permit, some types of clearing arrangements through foreign clearinghouses. The policy judgments in that proposal were in some respects simplified by the widespread adoption of the Principles for Financial Market Infrastructures and the international dialogue on clearing. The PFMIs appear to reflect a consensus view on certain aspects of clearing regulation, and in general, stand in contrast to the more varied views on swap execution across the globe.“