In a letter last week to the U.S. Treasury, several lawmakers expressed concern regarding the development of cross-border derivatives rules, saying the SEC and CFTC have issued “somewhat conflicting approaches” to regulating the global derivatives market.
“Properly regulated multi-jurisdictional trading in the derivatives market plays an important role in the global financial system,” the lawmakers said. “Congress has made it clear that the foundation on which cross-border rules should be based is to prevent against risks to our financial systems. The most effective way to mitigate these risks is to have all domestic and international regulators cooperating and working together.”
Parties to the letter, which included Sens. Kristen Gillibrand (D-N.Y.); Thomas Carper (D-Del.); Kay Hagan (D-N.C.); Heidi Heitkamp (D-N.D.); Michael Bennet (D-Colo.); and Charles Schumer (D-N.Y.), said, however, that the current framework does not provide the certainty necessary to ensure “multi-jurisdictional compliance.”
“Creating an overly complicated compliance system for market participants will result in conflicting, duplicative or inconsistent rules that could foster new and unforeseen risks and lead to international regulatory arbitrage,” the letter said.
The lawmakers also said the CFTC and SEC “can and should” work with international regulators to ensure transparency, risk mitigation and efficiency in the global derivatives market.
“To achieve this coordination, more time is needed for domestic harmonization and sequencing with regulations that occur abroad,” the lawmakers said.