Public Statements & Remarks

Concurring Statement of Commissioner Caroline D. Pham on Japan Substituted Compliance Order for Swap Dealer Capital and Financial Reporting

June 25, 2024

I respectfully concur with the order granting conditional substituted compliance in connection with certain capital and financial reporting requirements applicable to nonbank swap dealers subject to regulation by the Financial Services Agency of Japan (JFSA) (Japan Final Order) because I believe the order imposes a condition relating to financial reporting that exceeds the scope of CFTC Regulation 23.105.

I would like to thank Amanda Olear, Thomas Smith, Rafael Martinez, Warren Gorlick, Liliya Bozhanova, Joo Hong, and Justin McPhee from the CFTC’s Market Participants Division for their truly hard work on the Japan Final Order and for addressing some of my concerns. I commend the staff for their tireless efforts for over a decade to finalize the CFTC’s capital comparability determinations. I would also like to thank the JFSA for their assistance and support.

I have repeatedly stated the need for a pragmatic, outcomes-based approach to the CFTC’s capital comparability determinations, based on recognition of the Basel Committee for Banking Supervision (BCBS) Framework for International Bank Based Capital Standards,[1] that mitigates market fragmentation while promoting financial stability. However, the Japan Final Order overreaches on its conditions relating to financial reporting requirements. 

The International Bankers Association of Japan (IBAJ) requested that the CFTC limit the financial information required to be filed by Japanese nonbank swap dealers with the CFTC and National Futures Association (NFA) to the types of financial information required of U.S. nonbank swap dealers under CFTC Regulation 23.105.[2] By requiring the filing of the full home regulator report, the CFTC and NFA will receive information from Japanese nonbank swap dealers that exceeds the scope of Regulation 23.105. For example, IBAJ stated that the out-of-scope information the CFTC and NFA would receive includes information on client assets segregation status, mutual fund and deemed securities transaction volumes, the status of the deemed securities, and other various asset management business status reports that do not relate to swap dealing activity.[3] Accordingly, the CFTC is not entitled to that information. By way of another example, the CFTC does not receive information regarding the consumer banking activity of bank swap dealers.

Instead of taking the common-sense approach of requiring the same information in Regulation 23.105 that is applicable to U.S. entities, the CFTC is requiring more information from Japanese nonbank swap dealers. The CFTC’s justification for exceeding the scope of Regulation 23.105 in the Japan Final Order is so that the CFTC can see the totality of the home regulator report to better determine whether there is extraneous information that is not necessary and can be eliminated.

Mere curiosity is not a sufficient justification to contravene principles of international comity and respect for other sovereign nations that is the foundation of the global financial system. Not only did the IBAJ identify the specific extraneous information that is outside the scope of the CFTC’s regulations, but also, I do not understand why the CFTC would set ourselves up to have to amend the Japan Final Order to address this overreach in the future.

Regrettably, this is not the only time that the CFTC appears to take a less deferential approach to Japanese law and, therefore, a more punitive approach to Japanese entities in contrast to other jurisdictions. I question the inequity that is inherent in the CFTC’s view of Japan, which has certain banking and financial services laws that are stricter than the United States. Japan is a member of the G7, and its regulators are members of the Financial Stability Board (FSB), BCBS, International Organization of Securities Commissions (IOSCO), and many other international fora dedicated to safeguarding the global financial system. The CFTC has entered into multiple Memorandum of Understanding (MOU) with the JFSA. It goes without saying that Japan protects Japanese citizens and their assets. The Commission must show the same respect for Japanese laws that it provides to other jurisdictions, particularly because Japan is a key international partner and ally to the United States.

On May 25, 2024, the G7 Finance Ministers and Central Bank Governors’ Communiqué stated: “We also reiterate our strong commitment to a free, fair, and rules-based multilateral system. Building on the legacy of the Japanese G7 Presidency, we will advance our cooperation to enhance global economic resilience and economic security and protect our economies from systemic shocks and vulnerabilities.”[4] I urge the Commission to honor this commitment by the United States.

[1] Concurring Statement of Commissioner Caroline D. Pham Regarding Proposed Swap Dealer Capital and Financial Reporting Comparability Determination (July 27, 2022),; Bank for International Settlements Basel Committee on Banking Supervision, The Basel Framework,

[2] International Bankers Association of Japan, Letter Re: Japan Swap Dealer Capital Comparability Determination, 87 Fed. Reg. 48092 (August 8, 2022) (Oct. 6, 2022), 3-4.

[3] Id.

[4] G7 Finance Ministers and Central Bank Governors’ Communiqué, Stresa, 23-25 May 2024,