With less than one month to go before expiration of the Commodity Futures Trading Commission’s (CFTC) cross-border relief (Exemptive Order), anxiety is growing among global derivatives market participants. While there are plenty of views regarding how best to regulate cross-border transactions, consensus has not emerged among international regulators, although some progress has been reported.
Market participants, therefore, face several uncertainties over the next few weeks: what sets of rules will apply to their cross-border swap transactions; whether compliance with home country rules will suffice for foreign based dealers; and whether the status quo under the Exemptive Order will continue pending further negotiations among international regulators. If the Exemptive Order expires without additional relief from the CFTC, swaps market participants will be left without a compass to navigate the regulatory landscape.
This Financial Services Regulatory Brief describes the state of play and provides our view of various possible regulatory outcomes over the next few weeks. To be sure, the path to compliance is not well marked.