CFTC Chair J. Christopher Giancarlo called on European Union (“EU”) regulators to “commit to an equivalence determination process that focuses on achieving comparable regulatory outcomes and not rule-by-rule exactitude.” In a speech at the Eurofi Financial Forum, Mr. Giancarlo highlighted the importance of U.S. deference toward non-U.S. regulators as to their control over markets and market participants within their jurisdiction; he called on EU policymakers and regulators to adopt a similarly deferential approach to the cross-border application of European swaps regulation to U.S. markets and market participants.
Mr. Giancarlo previewed a forthcoming white paper that will offer recommendations on the application of the agency’s swap rules to cross-border activities. He criticized current EU legislative proposals that raise doubts with respect to the continuance of the policy of cross-border deference and cautioned that failing to adopt an approach of cross-border deference would “turn [global regulation] down that very different path of overlapping and confounding cross-border regulation with its high regulatory cost and constraints on economic growth.”
Lofchie Comment: When he was the CFTC’s Chair, Mr. Gensler asserted that the United States would adopt rules governing the global derivatives markets and market participants, and that Europe would just have to accept that reality. Europe didn’t. Asia didn’t. Joint Cautionary Letter from the EU, France, Japan and the UK to the CFTC on U.S. Cross-Border Swaps Regulation (with Lofchie Comment). Mr. Gensler was being very aggressive. The hand he played was not helped by the fact that the CFTC’s regulations were not so great. The rest of the world responded with a collective no thanks.
Current CFTC Chair Giancarlo is reversing course. It does not make sense for the CFTC to attempt to regulate European and Asian markets. But how will Europe react? Chair Giancarlo suggests that, however Europe acts, the United States will respond in kind.