Enhance integrity of U.S. markets by engaging in cross-border cooperation, promoting strong international regulatory standards, and encouraging ongoing convergence of laws and regulation worldwide.
FY 2012 INVESTMENT
Net Cost: $6.9 Million
Staffing: 23 FTE
The implementation of comprehensive regulations under the Dodd-Frank Act legislation marks a new era in the swaps marketplace by mandating, among other things, the regulation of swap dealers, clearing of swaps, and transparency with respect to those transactions. However, regulation in the United States alone will not be sufficient to protect the financial system.
Because the swaps market is conducted on a global basis, it is possible for swaps executed offshore by U.S. financial institutions to transmit the risk of those transactions back to the United States. This happened with the offshore affiliates of AIG, Lehman Brothers, Citigroup, Bear Stearns, and Long Term Capital Management and most recently when JPMorgan Chase executed swaps through its London branch.
Recognizing this risk, the United States joined with other G20 leaders in 2009 to require that all major market jurisdictions bring swaps under regulation. Since that date, the Commission has been engaged in an unprecedented outreach to major market jurisdictions and expanded involvement in numerous international working groups to encourage the adoption of robust swaps regulation.
This added emphasis is in addition to the Commission's long-standing engagement with foreign regulators to establish customer and market protection arrangements in futures trading. It is also in addition to the Commission's strong role in international standard setting organizations such as IOSCO, which recently recognized the Commission's long history of contributions by voting to make the Commission a full member.
Finally, the CFTC also provides technical assistance to emerging and recently-emerged markets to help these jurisdictions in establishing and implementing laws and regulations that foster global market integrity. The Commission's international training symposium has consistently attracted wide attendance by foreign regulators who look to the Commission as a global standard setter in derivatives regulation.
Goal Four Key Results
The Commission's international staff coordinated the Commission's engagement with the European Commission and Parliament with the objective of encouraging harmonization of European regulatory development with Dodd-Frank Act policies. The Commission initiated similar discussions with other foreign regulators. Additionally, the OIA organized a roundtable on the cross-border application of the Dodd-Frank Act.
The CFTC exceeded its performance target for international working group participation as it continued its engagement in technical level working groups on OTC derivatives with global regulatory authorities, such as the European Commission, European Securities Markets Authority, and regulatory authorities in Australia, Canada, Japan, Singapore, and Hong Kong. Commission staff participated in the OTC Derivatives Regulators Forum, which has created new subgroups for FX and Commodity Derivatives repositories. The Commission also participated in the Financial Stability Board (FSB) OTC derivatives working group, which is monitoring progress by countries in implementing the G20's OTC derivatives mandates and the FSB legal identifier task force. The Commission, as co-chair of an IOSCO-CPSS task force on OTC derivatives regulation, authored a report on data reporting and aggregation requirements.
The Commission's international staff participated in Dodd-Frank Act rulemakings in order to provide input on the cross-border implications of those rulemakings, continued to coordinate a review of cross-border arrangements that will be needed under the Dodd-Frank Act with major market jurisdictions such as the European Union, and developed draft memoranda of understanding on the supervision of dually-regulated cross-border clearinghouses. The Commission led a joint CFTC-SEC study on swap and clearing regulation in the United States, Asia, and Europe.
The Commission successfully advocated for the CFTC to be considered as an Ordinary member with full voting rights, thus ending decades of being considered an Associate member. This will allow the Commission to have a greater voice in shaping international policies within IOSCO. Commission staff continued to participate actively in the various IOSCO working groups: Standing Committee 2 on secondary markets, Standing Committee 3 on intermediaries, the OTC derivatives task force, and the newly established Assessment Committee. Commission staff are participating in a working group to issue a report regarding effective and practical access by regulators and other official international authorities to trade repository data.
The Commission also co-chaired the IOSCO committee on commodity futures markets and in that capacity took a leading role in developing a final report that established principles for price reporting agencies in oil. This report was requested by IOSCO and the G-20 as a means to enhance transparency in global oil markets. The Commission also co-chaired an international study on the extent of derivatives regulators' implementation of the IOSCO principles for commodity derivatives markets.
The Commission participated in several bilateral meetings with European Financial regulators led by the U.S. Department of Treasury to discuss, among other things, the E.U. Data Protection Directive, crisis management, Basel II and III, the Volcker rule and OTC derivatives, China Strategic and Economic dialogues with China and India, dialogues under North American Free Trade Agreement, and U.S. Treasury-led dialogues with the European Commission. The Commission participated in a G-20 study groups on commodities and on fossil fuel volatility.
The Commission met its performance target of training at least 65 non-U.S. regulators in FY 2012 primarily through the annual symposium for foreign regulators organized by the Commission. Additionally, Commission staff provided technical assistance training to authorities in Brazil and Jamaica. The Commission also coordinated the annual international regulatory conference at Boca Raton, Florida.
International data on position limits, accountability levels, reporting levels, and aggregated contracts data for U.S. and International Exchanges is now being shared with surveillance and enforcement staff to increase awareness of cross-border activity.