CFTC Chairman Proposes Cross-Border Swaps Regulation Version 2.0

On October 1, 2018, Chairman J. Christopher Giancarlo of the Commodity Futures Trading Commission released a white paper entitled “Cross-Border Swaps Regulation Version 2.0: A Risk-Based Approach with Deference to Comparable Non-U.S. Regulation.”

The White Paper focuses on five areas: (1) registration of non-U.S. central counterparties; (2) registration of non-U.S. trading venues; (3) registration of non-U.S. swap dealers; (4) cross-border application of mandatory clearing and trade execution requirements; and (5) regulation of swap transactions between non-U.S. counterparties that are arranged, negotiated, or executed by U.S.-located personnel or agents (“ANE Transactions”).  Although the White Paper touches on some other rules as well, such as reporting rules, it does not make specific recommendations outside of these five areas.

Relative to cross-border guidance published by the CFTC in July 2013 and subsequent CFTC rulemakings, staff advisories, and staff no-action letters, the White Paper’s recommendations would make significant changes in a few key respects:

• Comparable Jurisdictions.  The CFTC would generally exercise greater deference to regulations in foreign jurisdictions that have adopted reforms comparable to the CFTC’s regime; 
• Non-Comparable Jurisdictions.  The CFTC would, however, expand its regulation of U.S.-related entities transacting in foreign jurisdictions lacking reforms comparable to the CFTC’s regime, although the White Paper’s recommendations in this regard are more mixed and circumspect than its recommendations relating to comparable jurisdictions; and 
• ANE Transactions.  The CFTC would, in certain circumstances, apply clearing, trade execution, and swap dealer registration requirements to ANE Transactions.

In addition, the White Paper rejects several aspects of an October 2016 proposal by the CFTC to expand the extraterritorial application of swap dealer and major swap participant registration requirements.