NEW YORK, Dec 5 (IFR) - The Commodity Futures Trading
Commission has released a statement outlining the results of a
closed-door meeting between international regulators last week
that promises widespread international cooperation in the
implementation of global derivatives market reforms.
The message is likely intended to provide comfort to
derivatives market participants and the rest of the
international regulatory community who have jointly decried the
CFTC's approach to safeguard U.S. markets from abuses in the
derivatives market via newfound regulatory powers provided in
Specifically, the regulators agreed to work together on
resolving four major issues; applying a globally consistent
clearing mandate for over-the-counter products, sharing
constituent information and cooperating on enforcement actions,
working to align implementation schedules and allowing for
temporary exemptions where completion dates are not aligned, and
allowing specific financial entities to substitute compliance
with US rules when home regulators' frameworks are robust and
But the release does not address the upcoming expiration of
a no-action letter provided by the CFTC that essentially exempts
a wide swath of foreign financial institutions from the risk of
receiving enforcement action for dealing in swaps with U.S.
entities without being in Dodd-Frank compliance. The letter
expires at the end of December.
"[This release] really further drives home the need for
something more concrete from the CFTC with respect to 2013,"
said one derivatives lawyer based in New York.
"On a superficial level, the wording in the release with
regard to implementation timing is comforting in that it pledges
cooperation, but the question is how to turn that comforting
vibe into something more concrete. What is that action that is
going to emanate from [the release] between now and the end of
The statement was the result of a meeting last Friday
between a host of international regulators. In attendance were
representatives from Australia, Brazil, the European Commission,
the European Securities and Markets Authority, Hong Kong, Japan,
Canada, Singapore, Switzerland, the CFTC, and the U.S.
Securities and Exchange Commission.
"We also recognize that conflicting or inconsistent
cross-border application of rules to market participants,
intermediaries, infrastructures and products may inhibit the
execution or clearing of certain cross-border transactions or
impose additional compliance burdens," said the release.
"We further recognize that regulatory gaps may present risks
to financial markets and provide the potential for regulatory
The same regulators had met publicly at the beginning of
November, when the goal of international harmony was relayed to
the market without providing much by way of concrete solutions.
Yesterday's release provided some specifics, including the
intention of the informal coalition to follow cooperation
arrangements used by the International Organization of
Securities Commissions for both supervision and enforcement of
the new derivatives rules.
Issues surrounding disclosure requirements were considered a
major problem for European banks who recognised that CFTC
requirements would conflict with European privacy laws,
Banks also feared duplicative enforcement action for the
same offences, a problem addressed in part by the IOSCO
The group plans to meet again in Brussels in January 2013,
according to the release, to "inform each other of the planned
timing of the finalization and implementation of our rules and
advise of possible transition periods and update each other on
progress on the concrete steps being taken in our own
jurisdictions to improve global regulatory oversight in these
The regulators say they will also discuss the other issues
at a meeting in "early 2013", but did not promise January.
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