SIFMA, IIB, ISDA, and FIA recommended changes to CFTC-proposed cross-border regulations concerning registration thresholds and certain requirements applicable to swap dealers and major swap participants.
As previously covered, the CFTC proposal would, among other things: (i) add a new definition of "U.S. person" intended to be harmonized with SEA Rule 3a71-3; (ii) significantly change the counting requirements for non-U.S. subsidiaries of U.S. firms, including by adding a new category called "significant risk subsidiary"; (iii) provide "full relief" for transactions "arranged, negotiated or executed" in the United States by non-U.S. persons; (iv) add a definition of "guarantee" that requires the "explicit recourse" of a counterparty to a U.S. person; and (v) revise the standards for substituted compliance determinations.
SIFMA and IIB
In a joint letter, SIFMA and the IIB recommended, among other things: (i) removing the concept of "significant risk subsidiaries," which, they argued, exceeds the scope of CEA Section 2(i); (ii) aligning the swap dealer registration requirements for non-guaranteed non-U.S. persons to the 2013 cross-border guidance; (iii) expanding the approach to transactions to include mandatory clearing, trade execution and real-time public reporting requirements for swap executions with a non-U.S. person (a/k/a "ANE Transactions"); (iv) making various clarifications to the categories of certain requirements; and (v) expanding the scope of exceptions relating to exchange-trading, and for transactions entered into by non-U.S. persons swap dealers and foreign branches of U.S. swap dealers.
ISDA
ISDA urged the CFTC to, among other things: (i) confirm that ANE Transaction requirements do not attach to clearing, trading and real-time reporting; (ii) provide an exemption for certain non-U.S. persons for counting swaps with guaranteed affiliates of swap dealers for de minimis purposes; (iii) make Category B requirements not applicable to U.S. branches of non-U.S. swap entities and "Guaranteed Entities"; and (iv) verify that making or receiving payments does not constitute a "swap conducted through a U.S. branch."
In addition, ISDA asked the CFTC to address three additional cross-border matters not addressed in the proposal: (i) real-time reporting and SEC execution requirements; (ii) the application of regulatory reporting requirements; and (iii) a safe harbor to allow U.S. and non-U.S. swap entities to use previously established counterparty representations concerning U.S. individuals or Guaranteed Entities.
FIA
The FIA encouraged the CFTC to clarify that the scope under the definition of a "U.S. Person" does not extend to requirements applicable to activities of a future commission merchant ("FCM") as to cleared swaps and listed futures.
A full list of comment letters on the CFTC proposal is available here.
Primary Sources
- SIFMA and IIB Comment Letter: Cross-Border Application of the Registration Thresholds and Certain Requirements Applicable to Swap Dealers and Major Swap Participants
- ISDA Comment Letter: Cross-Border Application of the Registration Thresholds and Certain Requirements Applicable to Swap Dealers and Major Swap Participants
- FIA Comment Letter: Cross-Border Application of the Registration Thresholds and Certain Requirements Applicable to Swap Dealers and Major Swap Participants
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.