10.02.2018
By Rob Daly

Giancarlo Floats One-One-One Swaps Reform

In a little less than a month since the three newest Commodity Futures Trading Commissioner had been sworn in, CFTC Chairman Christopher Giancarlo has come out swinging on cross-border swaps reform.

Speaking before the Securities Industry and Financial Markets Association’s annual meeting, Chairman Giancarlo suggested that individual swaps market should follow one set of rules and fall under the jurisdiction of one competent regulator who has adopted the core reforms from the G20 Pittsburgh Summit.

Those reforms include moving more bi-lateral swaps into a clearing environment, transacting swaps trades on registered and licensed platforms, and reporting swaps traders to swaps data repositories.

Christopher Giancarlo, CFTC

“That is the world in which capital is able to flow through a crisis and is the world we need to get to,” he said.

To reach that state, the CFTC would need to revisit the interpretive guidance on how swaps reform issued by the United States would apply cross-border, which the CFTC staff released in mid-2013.

“What Dodd-Frank said was that US reforms would not apply overseas unless there was a direct and significant impact on the US economy,” said Chairman Giancarlo. “Congress started from a negative saying only when there is a direct and significant impact that it would US CFTC rules would apply abroad.”

As a result, the broader view has bifurcated the market between US persons and non-US persons over the past five years, he added.

Chairman Giancarlo noted that since the CFTC published its interpretive guidance, the eight most significant global swaps markets have implemented the G20 Pittsburgh Summit’s core reforms.

“They are not identical, but they are comparable in many regards,” he added.

To set out his ideas in greater detail, Chairman Giancarlo published a white paper entitled Cross-Border Swaps Regulation Version 2.0: A Risk-Based Approach with Deference to Comparable Non-U.S. Regulation, on Monday.

“In no way is the white paper meant to short-circuit the appropriate method of rulemaking adopted by the Commission, which would be a notice of proposed rulemaking adopted by the Commission and request for comments,” he said.

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