US eyes deal on foreign swap rules

 WASHINGTON: The top securities regulator is urging international market regulators to find a compromise as they struggle to agree on how to apply new rules for cross border over-the-counter derivatives trades.

Speaking via video conference at the Australian Securities and Investment Commission’s annual forum on Sunday, SEC chairman Elisse Walter pressed for a regime that would largely rely on foreign regulation for cross-border trades, and would only apply US rules in cases where no comparable regulations existed. 

A text of her remarks was released by the Securities and Exchange Commission.

“In my view, that happy medium has its foundation in an approach that recognises comparable foreign regulation to the maximum extent possible, consistent with domestic policy goals,” Walter said in prepared remarks, which were delivered yesterday morning.

“This approach would permit a market participant to comply with a set of domestic requirements in a particular arena – capital or risk management, say – by complying with the comparable foreign regulation,” Walter said. 

“At the same time, the domestic regulator would continue to have the ability to apply certain key policy requirements of local law when foreign law does not impose comparable requirements.”

Walter’s comments yesterday struck a different tone than those of Gary Gensler, her counterpart who heads the US Commodity Futures Trading Commission.

The two agencies won broad new powers to police the over-the-counter market in the 2010 Dodd-Frank Wall Street reform law, which imposes capital and margin charges on riskier trades and forces many swaps to be traded on regulated platforms and centrally cleared.

The CFTC, which oversees the lion’s share of the roughly US$650 trillion market, has been ahead of the SEC on many of its rules. 

But the CFTC’s aggressive proposal for how to apply US derivatives rules abroad has provoked strong criticism from foreign regulators.

The CFTC’s proposal would force foreign banks to stick to the same rules as their US peers when dealing with a US person, which includes companies, if their swap trading volume exceeds US$8 billion a year. – Reuters