U.S. derivatives rule completes Dodd Frank, clarifies
regulator's role
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[July 23, 2020] By
Huw Jones
LONDON (Reuters) - A new derivatives rule
should clear up any uncertainty about U.S. regulators' role in
transactions involving foreign banks and foreign counterparties and so
avoid clashes with other watchdogs, a senior U.S. regulatory official
said on Thursday.
The rule is due to be formally adopted later on Thursday and reflects
seven-year old guidance on regulating cross-border derivatives
transactions.
It also marks completion of implementing fundamental reforms set out in
the U.S. Dodd Frank Act passed in the aftermath of the 2007-09 global
financial crisis that was fuelled by opacity in the multitrillion-dollar
derivatives market.
"This week is a big bullet for us to fire in the sense we will have
closed the book on Dodd Frank," said Joshua Sterling, director of swap
dealer and intermediary oversight at the U.S. Commodity Futures Trading
Commission (CFTC).
"I am optimistic that we will have a period of less rule writing and
more oversight," he told Reuters.
The new rule will clear up any confusion over to what extent the CFTC
will regulate a transaction involving traders at a foreign bank in New
York in a swap that has both its counterparties outside the United
States.
"We are now very clear that the involvement of those folks in New York
will not result in that trade triggering more of our swap dealer
requirements," Sterling said.
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The skyline of lower Manhattan is seen before sunrise in New York
City, U.S., July 17, 2019. REUTERS/Brendan McDermid
"I am optimistic that will provide great certainty to non-U.S. financial
services companies that have a real presence in New York."
It is a sign of how the U.S. regulator is willing to defer to regulators outside
the United States, such as in Europe and Japan.
It follows a decision by the European Union to avoid trapping U.S. clearing
houses in the crosshairs of new rules on EU derivatives investors using foreign
clearers. The original rules had provoked a threat of retaliation by the CFTC.
"We are optimistic that all international issues are being handled appropriately
and with good intentions on all sides, and we believe that will continue,"
Sterling said.
(Reporting by Huw Jones; Editing by Mark Potter)
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