Determining Dodd-Frank conformance obligations is a little like gambling at the roulette table; every spin yields a different result. Releases by the CFTC over the last several months – and days – have left industry participants and platforms alike re-evaluating what they have to comply with and when. Not only has each release introduced its own particular ambiguities regarding the extraterritorial reach of Dodd-Frank, but collectively they have raised a larger question, namely: when will the wheel stop turning?
The CFTC’s most recent round of cross-border interpretation has caused confusion and consternation among market participants. For relief, some have started placing their bets on a recently filed lawsuit that seeks to undo much of the CFTC’s cross-border regime. Three key regulatory pronouncements at issue are the following:
The flurry of documents was undoubtedly intended to provide the industry with the CFTC’s view of the scope of its jurisdiction. The reality, however, is that rather than fostering clarity, each new piece of guidance has raised new issues, making uncertainty and fragmented liquidity the new normal. See “Division of Market Oversight Guidance on Application of Certain Commission Regulations to Swap Execution Facilities” (Nov. 15, 2013).
These latest releases re-confirm three important lessons that are perhaps fairly obvious by now: First, the CFTC is not afraid to flex its jurisdictional muscle, even if its reach appears too far to some. Second, the fits-and-starts approach to regulatory guidance continues. Third, it is dangerous to bet the bank on the ultimate significance of any of these ever-moving compliance dates.
This Financial Services Regulatory Brief analyzes each of the three key CFTC releases since July, and suggests where your chips should be placed with these lessons in mind.