Under the 2010 Dodd-Frank Act, U.S. regulators are writing rules that regulate international financial markets, including rules that would ultimately restrict some types of foreign securities trading and impose increased restrictions on overseas U.S. subsidiaries, The Wall Street Journal reports.
Some U.S. banks warn that the increased regulation would hurt their ability to compete internationally, and critics of the strategy say that the rules would force some financial institutions to take their business abroad.
Chairman Gary Gensler of the CFTC recently said that he supported a phased-in approach to compliance for international swaps, though details of the phase-in process and extensions granted to foreign firms were not discussed, according to The Wall Street Journal.
Foreign branches of U.S. banks and financial institutions could be granted an exemption from immediate registration only if their customers are not in the U.S. swaps market. Following the commission’s passage of rules that regulate financial institutions with $8 billion or more in assets, some policymakers are concerned about how U.S. subsidiaries abroad will be treated under the new rules.
CFTC Commissioner Scott O’Malia warned that subjecting U.S. firms abroad to domestic rules would undermine their ability to compete against foreign firms, which may not be subject to the same constraints, The Wall Street Journal reports.
The U.S. is currently ahead of the European Union in issuing derivatives rules after the two entities signed a Group of 20 nations agreement to regulate derivatives by the end of the year. The CFTC’s proposal may subject foreign markets to the same regulations if the EU does not issue a set of similar regulations.