During a conference last week, CFTC Chairman Gary Gensler reiterated his support for a controversial swaps rule that would require registration of foreign-based trading platforms as swap execution facilities when trading is connected to the U.S. financial system.
“Registration applies whether those persons are U.S. persons or non-U.S. persons whose personnel or agents are located in the U.S.,” Gensler said. “This is regardless of the location where the swap is ultimately booked, including in circumstances where a swap dealer arranges, negotiates, or executes the terms of a swap in a non-U.S. branch, but trades swaps on a multilateral swaps trading platform using personnel or agents of the swap dealer located in the U.S. This will trigger some SEF registrations for foreign-based platforms that are already registered with their home country.”
Some platforms have relied on part of the SEF cross-border guidance that they maintain allows them to book off-SEF swaps if the user is a non-U.S. entity and the trade is booked through a dealer’s non-U.S. entity, IFR reports.
Gensler’s position on the applicability of the rule has caused controversy in the industry, because some non-U.S. platforms with connections to U.S.-based clients have been forced to cut ties with American customers for fear of breaking the CFTC’s rules on SEFs.
When asked about whether the CFTC would issue guidance on the matter, Gensler was non-committal.
“Congress was very clear in their words that if it has a connection to the activities or the commerce here in the US, it’s under Dodd-Frank,” Gensler said, according to IFR. “So I would say if a swap dealer, U.S. or non-U.S., is arranging or negotiating or executing a transaction in New York, Chicago or anywhere located in the U.S., that sure seems like a connection to the activities of the U.S. I think that’s right in the statute.”