Statement of Commissioner J. Christopher Giancarlo on the Comparability Determination for Japan: Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants

September 8, 2016

When the Commission issued its rule addressing the cross-border application of margin requirements for uncleared swaps in May of this year1 I expressed my disagreement with the approach the Commission established as overly complex and unduly narrow.2 I also expressed my concern that the Commission’s “element-by-element” methodology for determining when substituted compliance with a foreign regulator’s margin regime would be permitted is contrary to the principles-based, holistic analysis the Commission has used in the past in certain circumstances3 and could result in an impracticable patchwork of U.S. and foreign regulations for cross-border transactions.4

My concerns were realized last week when Asian swaps markets ground to a halt amidst confusion about the application of new margin rules to major market participants. Once again, there were reports of counterparties avoiding trading with U.S. persons. I believe this rule’s subjectivity and complexity will continue to be a source of regulatory uncertainty at the expense of U.S. financial firms, their employees and the American businesses they serve.

I nevertheless support the comparability determination for Japan. In this instance, the Commission has appropriately recognized that certain differences between the U.S. margin regime and Japan’s margin regime achieve comparable outcomes. Wrong approach; right outcome. I therefore vote in favor of the determination.

1 See Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants—Cross-Border Application of the Margin Requirements, 81 FR 34818, May 31, 2016.

2 Id. at 34853-54.

3 As I noted in my dissent, the Commission employs a principles-based, holistic approach for substituted compliance determinations under Commission Regulation 30.10 and for purposes of permitting direct access by U.S. customers to foreign boards of trade. Id. at 34853 n.5.

4 Id. at 34853-54.

Last Updated: September 8, 2016