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CFTC Chair J. Christopher Giancarlo emphasized the need for the CFTC to act with deference toward non-U.S. markets and offered recommendations on a new approach to cross-border swaps reform.
In remarks delivered at FIA Japan, Mr. Giancarlo said that his intention to update the CFTC's cross-border approach is guided by three primary objectives: (i) to increase the CFTC's cooperation with other global regulators, (ii) to explain the agency's demanding regulations and (iii) to curtail "dangerous market fragmentation and foster deep and consolidated liquidity pools."
In jurisdictions that have adopted G20 swaps reforms that are consistent with the CFTC swaps rules, Mr. Giancarlo recommended that liquidity pools be "consolidated trading markets under one sovereign regulator and one set of comparable swaps rules" (i.e., each jurisdiction would have (i) one undivided trading market, (ii) one regulator and (iii) one set of trading rules tailored to the local market conditions). Further, he recommended that the CFTC should exempt:
- non-U.S. central counterparties ("CCPs") from registration as derivatives clearing organizations, provided that the non-U.S. CCPs are "comprehensively" regulated in jurisdictions that have "comparable" regulations to the CFTC and do not pose substantial risk to U.S. markets; and
- non-U.S. trading venues from registering as swap execution facilities if they are subject to "comparable and comprehensive" regulation elsewhere.
Commentary / Nihal Patel
Mr. Giancarlo's speech in Tokyo largely repeats the concepts he introduced in a speech in London last week.
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