Better Markets Amicus Brief Supports CFTC’s Cross-Border Guidance

Better Markets, Inc. (“Better Markets”), a nonprofit organization that promotes the “public interest” by “argu[ing] extensively for the adoption of appropriately strong rules governing the derivatives markets” and for “broad application of those rules to international or ‘cross-border’ transactions,” submitted an amicus brief in support of the CFTC’s position in the lawsuit filed by ISDA, SIFMA and the Institute of International Bankers (“IIB”) (together, the “Associations”) challenging the legality of the CFTC’s Guidance and Policy Statement Regarding Compliance with Certain Swap Regulations (“Cross-Border Guidance”).

In its amicus brief, Better Markets states that the Associations challenging the Cross-Border Guidance do not acknowledge the financial crisis in 2008, which necessitated the passage of financial reform law such as Dodd-Frank Title VII (“Title VII Rules”), nor do the Associations “acknowledge the role of their own members in causing the crisis.” According to Better Markets, if the Associations’ “assault” on the Cross-Border Guidance and the international application of the Title VII Rules is successful, the result will be “a perpetuation of the deregulatory environment that incubated the financial crisis of 2008.” 

Additionally, Better Markets states that, while the Associations alleged that cross-border application of the rules will impose heavy compliance costs and cause damaging disruptions, “they offer little concrete support for such predictions.” Better Markets argues that past claims of such predictions about the impact of regulation have proved to be groundless.

Better Markets also states that, although the Associations assert that CEA Section 15(a) requires the CFTC to employ a cost-benefit analysis of its actions, it only requires that the CFTC consider “the costs and benefits of the action of the Commission.” Because the decision to extend the protections set forth in the Title VII Rules to international derivatives activities was made by Congress and not the CFTC, Better Markets claims that the CFTC was under no obligation to apply Section 15(a) to the cross-border applications of the rules.

Lofchie Comment:  During the Dodd-Frank rulemaking process, the tango between the CFTC (under former Chairman Gensler) and Better Markets has been interesting to watch.  Regardless of the burden of regulation the CFTC would propose, Better Markets would write a comment letter asserting that the CFTC should impose a greater burden.  Then, in its review of comment letters, the CFTC would quote from Better Markets’ letters extensively.  In reaching its conclusions, the CFTC would then summarize with language suggesting that some people say we should impose less regulation, but Better Markets said we should impose more regulation, so we did something in the middle.  In effect, under former Chairman Gensler, Better Markets served as a device to provide the CFTC with cover for virtually any position.

See: Better Markets Amicus Brief
Related news: CFTC Legal Memorandum to Dismiss Challenge to Its Cross-Border Guidance (March 18, 2014); Market Participants File Lawsuit Challenging CFTC Cross-Border Guidance for Being a Rule Adopted in Violation of the APA (December 4, 2013); Market Participants File Amended Complaint Challenging CFTC Cross-Border Guidance (January 8, 2014); Chamber of Commerce Submits Amicus Brief Regarding Lawsuit against CFTC Cross-Border Rule (February 5, 2014).