Under the guidelines being considered, Dodd-Frank collateral and clearing rules would not apply to those trades between U.S. and foreign firms that are not guaranteed by a U.S. firm. CFTC Commissioner Scott O’Malia said that the guidance should undergo a cost-benefit analysis.
“The commission should ensure that its registrants and registered entities remain competitive in global financial markets,” O’Malia said, according to Bloomberg.
Several large financial institutions, including Goldman Sachs and JPMorgan, said that the application of Dodd-Frank swaps rules to the overseas market may damage their ability to compete with foreign firms.
JPMorgan Associate General Counsel Don Thompson said during a House hearing in February that the implementation of margin requirements on overseas swaps would “eviscerate our ability to serve clients overseas and cede the global market to foreign competitors,” Bloomberg reports.
CFTC Chairman Gary Gensler said that JPMorgan Chase & Co.’s $2 billion-plus trading losses last month reflect the need to extend swaps rules to the overseas market.
“We’ve had another stark reminder of how trades overseas can quickly reverberate with losses coming back to the United States,” Gensler said, according to Bloomberg.