SIFMA, along with the ABA, ABA Securities Association, FIA, IIB, and ISDA submitted comments to the CFTC requesting a six-month extension of the Commission’s Final Exemptive Order Regarding Compliance with Certain Swap Regulations. The associations believe an extension would be helpful for the following reasons:
- First, an extension would provide sufficient time for swap market participants and the CFTC to consider the potential implications of recent SEC proposals relating to its regulation of cross-border security-based swap activities.
- Second, failing to extend the Exemptive Order without final cross-border guidance could increase uncertainty for international market participants.
- Third, as described by the European Commission Letter, expiration of the Exemptive Order, or the premature replacement of the Exemptive Order with final cross-border guidance, might jeopardize the productive and cooperative efforts underway to meet G20 commitments on an international basis.
Lofchie Comment: The fundamental issue is set out in CFTC Commissioner O’Malia’s speech which is linked to the following news article: “CFTC Commissioner O’Malia on Ensuring a Backup Plan on Cross-Border Guidance to Give Markets Certainty.”
CFTC Chairman Gensler now faces a difficult choice: he must either (i) try to force through a final rule, for which he does not have a majority currently, against criticism from regulators around the globe, as well as market participants and, implicitly, the SEC, which has taken the approach of working with global regulators, (ii) concede to an extension, which means that a final rule will likely not be adopted until after his term as Chairman is finished or (iii) simply allow the existing exemptive order to expire, which Commissioner O’Malia describes as the “nuclear option” in light of the confusion that it would cause to global financial markets.
Click here to view letter in full (links externally to SIFMA website).
See also: “SIFMA President Bentsen Takes a Side on Cross-Border Conflict“.