Statement of CFTC Commissioner J. Christopher Giancarlo Comparability Determination for the European Union: Dually-Registered Derivatives Clearing Organizations and Central Counterparties
March 16, 2016
I support the comparability determinations issued by the Commodity Futures Trading Commission (CFTC).
Today’s action furthers the commitment to a common approach for transatlantic central clearing counterparties (CCPs) announced on February 10, 2016 by my colleague, CFTC Chairman Timothy Massad, and Commissioner Jonathan Hill of the European Commission (EC). Under the comparability determinations, CCPs that are authorized in the European Union (EU) under the European Market Infrastructure Regulation (EMIR) and registered with the CFTC may comply with certain CFTC requirements for financial resources, risk management, settlement procedures, and default rules and procedures by complying with corresponding requirements under the EMIR framework. Today’s notice also provides for a streamlined approach for EU CCPs that may wish to register with the CFTC in the future.
As I said when it was announced, the agreement reached between the EC and the CFTC avoids unacceptable changes to four decades of U.S. clearinghouse margin policy and higher costs of hedging risk for America’s farmers, ranchers, financial institutions, energy firms and manufacturers.
Yet, as I have observed, the protracted process for reaching this compromise was made needlessly complex because both the EC and the CFTC insisted on a line-by-line rule analysis contrary to the flexible, outcomes-based approach advocated by the OTC Derivatives Regulators Group. While the end result is a good one, the approach taken to get here was needlessly circuitous and uncertain.
The CFTC and its global counterparts must now recommit themselves to work together to implement an equivalence and substituted compliance process, particularly for swaps execution and the cross-border activities of swap dealers and major swaps participants, based on common principles in order to increase regulatory harmonization and reduce market balkanization.1 The future of the global swaps marketplace depends on it.
1 See, e.g., IOSCO Task Force on Cross-Border Regulation, Final Report (Sept. 2015) (advocating for an outcomes-based approach as opposed to a line-by-line comparison of rules).
Last Updated: March 16, 2016