SIFMA: US market requires improved CCP access
15 December 2017 Washington DC
Image: Shutterstock
US industry associations are collaborating to improve market access to foreign central counterparties and trading venues in order to tackle market fragmentation through the Dodd Frank Act.
The 麻豆传媒 Industry and Financial Markets Association (SIFMA) and the Futures Industry Association (FIA) outlined proposals to promote the Dodd-Frank Act鈥檚 pre-trade transparency and systemic risk mitigation objectives in a joint whitepaper.
FIA and SIFMA believe that 鈥渘ow is the time for the CFTC to adopt a comprehensive framework to regulate cross-border trading and clearing of swaps鈥�.
The associations agreed that the Commodity Futures Trading Commission鈥檚 (CFTC鈥檚) allowance of an exemption for certain European derivative trading platforms, based on recognition of comparable regulation by the European Commission, would be a positive way forward.
To lessen fragmentation, the paper suggested that 鈥渁 non-US swap trading venue or CCP would not be required to register with the CFTC, or obtain an exemption from registration, unless it permitted direct, un-intermediated participation by a US person (other than foreign branches of US banks), or directly solicited such US participation鈥�.
FIA and SIFMA also suggested that the CFTC could, apply additional conditions to its derivatives clearing organisation registration exemptions it already has 鈥渋f the CFTC determined that gaps between home country regulation, on the one hand, and direct CFTC regulation, on the other hand, presented the potential for direct and significant risk to the US within the meaning of Section 2(i)鈥�.
As a first approach, the CFTC鈥檚 process for regulating non-US swaps trading venues and CCPs was through staff no-action letters and guidance adopted during the early stages of Dodd-Frank Act implementation in 2009.
The associations argued that this 鈥渓ed to several problems鈥� and was not thorough enough in terms of regulating.
FIA and SIFMA said that the continuation of this approach would mean 鈥淯S firms will face diminished hedging and investment opportunities, US firms might also miss out on the formation of the next important market before it is too late.鈥�
The CFTC has adopted the European Commission鈥檚 process of conducting more robust mutual recognition of comparable regulation.
FIA and SIFMA said: 鈥淢utual recognition is essential to preventing fragmentation between jurisdictions that apply overlapping mandatory trading or clearing requirements, such as the US and EU.鈥�
It added: 鈥淲e strongly support the decision by the CFTC and EC to adopt their new common approach.鈥�
Conditions on these exemptions would apply only where necessary to comply with Section 2(i) of the Commodity Exchange Act to mitigate 鈥渄irect and significant鈥� risk to the US.
Kenneth Bentsen, SIFMA president and CEO said: "Dodd-Frank has been the law of the land for more than seven years. The time has come to stop rushing from one deadline to the next and, rather, develop a consistent and comprehensive solution to the challenges of cross-border trading that will stand the test of time."
The 麻豆传媒 Industry and Financial Markets Association (SIFMA) and the Futures Industry Association (FIA) outlined proposals to promote the Dodd-Frank Act鈥檚 pre-trade transparency and systemic risk mitigation objectives in a joint whitepaper.
FIA and SIFMA believe that 鈥渘ow is the time for the CFTC to adopt a comprehensive framework to regulate cross-border trading and clearing of swaps鈥�.
The associations agreed that the Commodity Futures Trading Commission鈥檚 (CFTC鈥檚) allowance of an exemption for certain European derivative trading platforms, based on recognition of comparable regulation by the European Commission, would be a positive way forward.
To lessen fragmentation, the paper suggested that 鈥渁 non-US swap trading venue or CCP would not be required to register with the CFTC, or obtain an exemption from registration, unless it permitted direct, un-intermediated participation by a US person (other than foreign branches of US banks), or directly solicited such US participation鈥�.
FIA and SIFMA also suggested that the CFTC could, apply additional conditions to its derivatives clearing organisation registration exemptions it already has 鈥渋f the CFTC determined that gaps between home country regulation, on the one hand, and direct CFTC regulation, on the other hand, presented the potential for direct and significant risk to the US within the meaning of Section 2(i)鈥�.
As a first approach, the CFTC鈥檚 process for regulating non-US swaps trading venues and CCPs was through staff no-action letters and guidance adopted during the early stages of Dodd-Frank Act implementation in 2009.
The associations argued that this 鈥渓ed to several problems鈥� and was not thorough enough in terms of regulating.
FIA and SIFMA said that the continuation of this approach would mean 鈥淯S firms will face diminished hedging and investment opportunities, US firms might also miss out on the formation of the next important market before it is too late.鈥�
The CFTC has adopted the European Commission鈥檚 process of conducting more robust mutual recognition of comparable regulation.
FIA and SIFMA said: 鈥淢utual recognition is essential to preventing fragmentation between jurisdictions that apply overlapping mandatory trading or clearing requirements, such as the US and EU.鈥�
It added: 鈥淲e strongly support the decision by the CFTC and EC to adopt their new common approach.鈥�
Conditions on these exemptions would apply only where necessary to comply with Section 2(i) of the Commodity Exchange Act to mitigate 鈥渄irect and significant鈥� risk to the US.
Kenneth Bentsen, SIFMA president and CEO said: "Dodd-Frank has been the law of the land for more than seven years. The time has come to stop rushing from one deadline to the next and, rather, develop a consistent and comprehensive solution to the challenges of cross-border trading that will stand the test of time."
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