CFTC considers exemptions for overseas swap participants from Dodd-Frank swaps rules

The Commodity Futures Trading Commission has drafted a proposed exemptive order that would extend relief to foreign financial institutions and U.S. subsidiaries from some Dodd-Frank-mandated swaps regulations.

The banking industry has made repeated claims that over-regulation by the CFTC could conflict with or duplicate rules already established by foreign regulators, as well as damage the ability of some firms to compete in the global economy, CFTCLaw reports.

In order to qualify for the delay, foreign institutions would be required to register with the CFTC and submit a plan to the National Futures Association to comply with either CFTC regulations or those of their national regulator.

The CFTC is expected to vote on the proposal on June 21, and the delay is expected to last at least one year. The CFTC will vote at the same time on proposed guidance that would establish which swaps rules apply to foreign affiliates and which transactions would be subject to U.S. supervision, according to CFTCLaw.

Firms deemed as “swap dealers” or “major swap participants” must increase capital and collateral levels as mandated by the 2010 Dodd-Frank Act. Swaps rules finalized in April will label those firms with $8 billion or more in swaps transactions within a 12-month period as “swaps dealers,” though the threshold is expected to fall.

If the proposed exemptive order is passed, international banks would able to avoid compliance with “transaction level” requirements, including margin rules for transactions with foreign counterparties, though foreign firms would still be required to report all swaps data to data repositories.

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