SIFMA, ISDA and IIB file legal complaint against CFTC's "Cross-Border Rule"

05 December 2013

SIFMA, ISDA and IIB have filed a legal challenge against the CFTC's Interpretive Guidance and Policy Statement Regarding Compliance With Certain Swap Regulations, and against the cross-border aspects of related rules.

The lawsuit alleges that the CFTC:

• Unlawfully circumvented the requirements of the Administrative Procedure Act and the Commodity Exchange Act by characterising its regulations as “guidance”;
• Failed to conduct any cost-benefit analysis as required by law;
• Conducted a flawed rulemaking process; and
• Imposed a series of rules that are contrary to the spirit and the letter of international
• cooperation and may harm global markets.

The Associations believe that the agency did not appropriately follow the laws enacted by Congress in issuing regulations  related to the cross-border application of certain aspects of the Dodd-Frank Act. The route it chose circumvented the normal rulemaking process set by the Administrative Procedure Act and Commodity Exchange Act. The end result is that market participants will face rules that are duplicative, overlapping and contradictory. SIFMA, ISDA and IIB see the Cross-Border Rule as contravening existing agreements between global policymakers.

Furthermore, the CFTC’s overreach could cause fragmentation of global markets which will result in reduced liquidity, significant harm to market participants and the impairment market-based financing. “It could also create significant financial, legal and administrative burdens on market participants that could harm liquidity and the ability of end-users to manage their risks", the Associations’ joint statement reads.

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