On October 5, 2010, the U.S. Commodity Futures Trading Commission’s (CFTC) Global Markets Advisory Committee (GMAC) hosted senior personnel from the European Commission (EC) and the Japanese Financial Services Authority (JFSA), to discuss their respective approaches to over-the-counter (OTC) derivatives reform.
Mr. Patrick Pearson, Head of the EC’s Financial Markets Infrastructure Unit, and Mr. Chikahisa Sumi, the JFSA’s Deputy Commissioner for Internal Affairs, each confirmed the commitment of their respective countries to OTC derivatives reform. The EC’s proposed regulation and the Japanese amendments to the Japanese Financial Instruments and Exchange Act 2010 (FIEA) mirror the Dodd-Frank Act in many respects. (See the chart prepared by the CFTC comparing key aspects of each regime.) Both focus on enhancing market protections and transparency by requiring central clearing, exchange trading platform and the reporting of swap transaction data to trade repositories. For more information on the EC proposals, see EU Financial Reform.
CFTC Staff also addressed its position with respect to the extraterritorial reach of the Dodd-Frank Act. Consistent with its long-standing interpretation of the Commodity Exchange Act (CEA), Staff expressed its view that the CFTC has broad authority to enforce the amended CEA extraterritorially. Staff explained that Section 722 of the Dodd-Frank explicitly grants the CFTC extraterritorial authority. Staff takes the position that this provision requires the CFTC to enforce the Dodd-Frank Act extraterritorially with limited exceptions. In fact, the CFTC is considering whether it has any authority to exempt certain activity occurring outside the U.S. In its view, it only has express exemptive authority with respect to swap execution facilities (SEFs) and designated clearing organizations (DCOs) that are found to be regulated by a comprehensive regime.
The CFTC also is considering to what extent it will allow foreign regulators access to information reported to swap data repositories. These, along with many other issues linked to the implementation process, likely will be topics of discussion between the respective regulators over the coming months.