In a testimony before the U.S. House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, Chairman Gensler gave a speech on the New Era of Swaps Market Reform. He generally repeated statements, or portions of statements, that he had made in the past.
Lofchie Comment: One part of the speech that I thought an interesting development were Chairman Gensler’s statements as to the regulation of non-U.S. entities. He said, “For firms that do register with the CFTC, we are very committed to allowing for substituted compliance, or permitting market participants to comply with Dodd-Frank through complying with comparable and comprehensive foreign regulatory requirements.” This would suggest that the CFTC is abandoning its initially stated policy of looking rule-by-rule at the regulatory regimes of other countries to determine whether substituted compliance should be permitted as to any firm, and is moving towards a policy of permitted very broad substituted compliance. As we had previously stated, this is a welcome reassessment given the very adamant opposition of non-U.S. regulators to the CFTC’s initial policies.
That said, if broad substituted compliance is permitted, the question for U.S. firms is whether the regulatory requirements to which they are subject are so burdensome by comparison to non-U.S. firms that their competitive position is materially eroded.
Click here to view testimony in full (links externally to CFTC website).