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…And Others Seek Cross Border Rules Delay

In a separate request to CFTC chairman Gary Gensler, the American Bankers Association, ABA Securities Association, Futures Industry Association, Institute of International Bankers, International Swaps and Derivatives Association, and the  Securities Industry and Financial Markets Association, have written to seek a six month extension to the CFTC’s Final Exemptive Order Regarding Compliance With Certain Swap Regulations.

The associations say they believe that a six-month extension of the Exemptive Order would be helpful because it would provide sufficient time for swap market participants and for CFTC itself to consider the potential implications of the Securities and Exchange Commission’s recent proposals relating to its regulation of cross-border security-based swap activities. The letter also notes that representatives of the European Commission has written to Gensler arguing that failing to extend the Exemptive Order in the absence of final cross-border guidance could increase uncertainty for international market participants. That letter also says that expiration of the Exemptive Order, or the premature replacement of the Exemptive Order with final cross-border guidance, could jeopardise the productive and cooperative efforts underway towards meeting G20 commitments on an international basis.

The SEC issued new interpretive guidance for cross border swaps trading and extended a comment period that now runs beyond the July 12 deadline for the CFTC rule to come into effect.

The letter urges Gensler and the CFTC to harmonise their views with the SEC, it also points out that the original congressional directive stated that CFTC should consult and coordinate with SEC.

They associations also note they share the concern raised in the European Commission Letter that the expiration of the Exemptive Order would introduce uncertainty to firms in the swap markets, highlighting how several offshore firms have previously stated they will no longer trade with offshore entities of US institutions. Although the CFTC has issued a “no action letter” to allay the problem, the associations claim that adoption of the rule on July 12 would “not provide sufficient time for international market participants to understand and implement the requirements of new final guidance.”

In the letter, the associations state that they agree with the European Commission Letter that the Exemptive Order was a “helpful step” towards international coordination on achieving the G20 commitments worldwide. “We continue to believe that the international nature of the swap markets makes international coordination, in addition to domestic coordination, critical to achieve an appropriate level of oversight of swaps activities,” they state. “We appreciate the CFTC’s recent efforts and progress in this regard, including as described in public releases issued by the CFTC and foreign regulators. We believe that adoption of final cross-border guidance by the CFTC while these productive discussions remain ongoing would threaten their continued progress. In addition, like the European Commission, we are concerned that expiration of the Exemptive Order at this time could jeopardise this progress. We believe that an extension of the Exemptive Order for six months would provide the necessary time for beneficial international conversations to continue towards resolution.”

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