three-year rolling average GAAP total assets of at least 10 percent of that of the ultimate U.S. parent as of the end of the most recent fiscal year. The Commission is enhancing the effectiveness and the efficiency, in the cross-border context, of rules that implement requirements under Title VII of the Dodd-Frank Act 1. . Found inside – Page 524... 338–9 Commodity Futures Modernization Act (CFMA) 497 Commodity Futures Trading Commission (CFTC) 3 cross-border regulation of EU and US firms, concerns over 509 futures commission merchants (FCMs), trading requirements 400 futures ... 1 The Final Rule adopts a risk-based approach to the cross-border application of the CEA's swap provisions while also deferring substantially to foreign regulators. Our site provides a full range of global and local information. Found inside – Page 133Last year , the CFTC issued proposed interpretive guidance on cross - border application of the swaps provisions of Dodd - Frank , the so - called extraterritoriality guidance . The CFTC guidance received widespread criticism from ... These are the. Found inside – Page 43The CFTC's proposed margin rule excludes nonfinancial end - users from margin requirements for uncleared swaps . ... The CFTC will soon seek public comment on guidance regarding the cross - border application of Title VII rules . Found inside – Page 142As you may know , last year I shared my concern with Chairman Gensler regarding the potential international reach of the CFTC's proposed cross - border rules , particularly as they might impact Europe and Asia . Specifically there was a ... 14 See Final Rule at 112, 294-95 (Final Rule 23.23(b)(1)). Found inside – Page 110In addition to cooperating on joint rules , the CFTC and the SEC are coordinating closely in writing other rules to ... and coordination has been followed with regard to considerations of the cross - border application of Dodd - Frank . 7 See Final Rule at 9 (citing CFTC Staff Letter No. Market participants currently are able to rely on representations from their counterparty regarding their status as a U.S. person. at 215. swap entity” is a Swap Entity that is a U.S. While the Final Guidance merely reflected the “general policy” of the CFTC in interpreting the cross-border application of the swap provisions of the CEA. The Final Rules recategorize the regulatory requirements into three groups - A, B, and C - although the requirements remain largely the same. Found inside – Page 33For the forgoing reasons , we suggest the CFTC revise the Proposed Rules to be consistent with the BCBS - IOSCO Framework and permit the reuse of IM where ( i ) applicable ... B. The CFTC's Cross - Border Guidance The CFTC's cross 33. 23 See Final Rule at 182-88, 297 (Final Rule 23.23(e)(1)(i)). Substituted compliance is the process by which a SD or MSP subject to the rules of a foreign jurisdiction — but whose swap activities bring them within the scope of certain CFTC regulations — may rely on compliance with the rules of the foreign jurisdiction as a substitute for compliance with certain CFTC regulations. 1 The Final Rule represents a significant rulemaking implementing Title VII of the Dodd-Frank Act. On July 23, 2020, the Commodity Futures Trading Commission (the "CFTC"), in a 3 to 2 vote, finalized rules (the "Final Rules") that superseded certain aspects of the CFTC's previous policy with respect to the cross-border application of swaps regulations under Commodity Exchange Act ("CEA") Section 2(i), as set forth in the guidance published by the CFTC in July 2013 (the "2013 . 8210-20] The Commission today also approved an Amendment Order regarding European Union trading facilities. The Commission stated that Group A requirements, which relate to compliance programs, risk management and swap data record-keeping, “cannot be effectively applied on a fragmented jurisdictional basis.” Id. [20] See 17 CFR 3.3, 23.201, 23.203, 23.600, 23.601, 23.602, 23.603, 23.605, 23.606, 23.607, and 23.609. The resulting rulemakings would replace the cross-border guidance issued by the CFTC in 2013 and the cross-border rules proposed by the CFTC in 2016, as well as address certain positions taken in CFTC staff advisories and no-action letters. The requirements apply to all Swap Entities unless an exemption or substituted compliance is available. The guidance took the form of "substituted compliance" determinations and no-action relief for swap dealers (and major swap participants) located in certain non-US jurisdictions. The CFTC further indicated in its discussion of the Final Rules that the DSIO is withdrawing the ANE Staff Advisory. CFTC ADOPTS CROSS-BORDER RULES TO REPLACE THE CROSS-BORDER GUIDANCE By Julian E. Hammar Julian Hammar is a partner with FisherBroyles LLP and may be reached at Julian.Hammar@ fisherbroyles.com. In addition, Title VII imposes certain Just yesterday, the Commission approved a final rule on capital requirements for swap dealers and major swap participants, closing out all required rulemakings under Section 731 of the Act. [7] Accordingly, to the extent that market participants have obtained such representations from counterparties through the Cross-Border Representation Letter or otherwise, those market participants do not need to refresh those representations to reflect the requirements of the Final Rules until December 31, 2027. CEA section 5h(g) provides that the CFTC may grant an exemption from SEF registration if it determines that a foreign facility is subject to comparable supervision and regulation by the appropriate governmental authorities in the facility’s home country. Based on the principles set forth in this white paper, Chairman Giancarlo intends to direct the CFTC staff to put forth new rule proposals to address a range of cross-border issues in swaps reform. Chairman Heath P. Tarbert and commissioners Brian D. Quintenz and Dawn DeBerry Stump voted in favor of approving the Final Rule, while commissioners Rostin Behnam and Dan M. Berkovitz dissented. The Final Rule creates several groups of swaps requirements for purposes of determining the availability of certain exceptions from, or substituted compliance for, those requirements. Found inside – Page 47-6Even where no formal agreements exist , there has been informal cooperation between CFTC staff and foreign regulators in addressing crossborder regulatory and enforcement concerns . In a related program , 17 countries have ... branch” is a branch or agency of a non-U.S. banking organization that (i) is located in the United States; (ii) maintains accounts independently of the home office with profit and loss determined separately for each U.S. branch; and (iii) engages in the business of banking and is subject to substantive banking regulation in the state or district where located. 34818, 34823-24 (May 31, 2016). Tailor your perspective of our site by selecting your location and language below. 13, 2014)). 952 (Jan. 8, 2020) [Proposed Rule]. Person to count swap dealing toward its de minimis threshold if its counterparty is a Guaranteed Entity. OCC-2020-0002] RIN 1557-AE67; Federal Reserve System 12 CFR Part 248 [Docket No. allows the Commission to base comparability on a foreign jurisdiction’s regulatory standards instead of regulatory requirements. 8211-20, CFTC Approves Final Cross-Border Swaps Rule and an Exempt SEF Amendment Order at July 23 Open Meeting, (July 23, 2020). The Final Rule allows a non-U.S. swap entity to satisfy any applicable Group A requirement on an entitywide basis by complying with the applicable standards of a foreign jurisdiction.27 The Final Rule also allows a non-U.S. swap entity or foreign branch of a U.S. swap entity to use substituted compliance for Group B requirements in certain circumstances, depending on the nature of its counterparty. The views expressed in this article are those of the author only and do not necessarily reflect the views of FisherBroyles LLP, its attorneys, or its . Found inside – Page 142In the same month , the CFTC issued a final interpretive . guidance and policy statement regarding the application of the CFTC's swap regulatory regime lo cross - border activities . In December 2013 , the CFTC issued broad ... 8211-20, CFTC Approves Final Cross-Border Swaps Rule and an Exempt SEF Amendment Order at July 23 Open Meeting, (July 23, 2020). The Final Rules include a definition of “U.S. The term “guarantee” is expressly defined in in Final Rules as “an arrangement pursuant to which one party to a swap has rights of recourse against a guarantor, with respect to a counterparty’s obligations under the swap.”[6] The CFTC clarified in the Final Rules that a “guarantee” need not be a written instrument as long as the recipient has a legally enforceable right to receive payments from the guarantor in connection with the non-U.S. person’s obligations under a swap. In July 2012, the CFTC proposed guidance on the cross-border application of its swaps rules.3 The guidance generally analyzed this issue by dividing those rules into two types - Entity Level Requirements, which apply to swap dealers and major swap participants, and Transaction Level Requirements, which apply at the level of individual trades. Found inside – Page 205... liquidity, and leverage rules Implementation of OTC derivatives reforms (including cross-border issues) Orderly ... staff describe finalized rules for security-based swaps that focus on certain cross-border rules Commission and CFTC ... 13-69, “Applicability of Transaction-Level Requirements to Activity in the United States” (Nov. 14, 2013)). For further information about these entities and DLA Piper's structure, please refer to the Legal Notices page of this website. Table of ContentsAudienceThis report provides an overview of the U.S. capital markets. The new no-action letter provides relief to non-U.S. SDs from TLRs for ANE Transactions — to the extent those requirements are not addressed in the Final Rule — until the CFTC addresses whether a particular unaddressed requirement is applicable to the transactions. 34,818 (May 31, 2016)). branch” is a branch or agency of a non-U.S. banking organization that (i) is located in the United States; (ii) maintains accounts independently of the home office with profit and loss determined separately for each U.S. branch; and (iii) engages in the business of banking and is subject to substantive banking regulation in the state or district where located. 20 Washington, D.C. — The Commodity Futures Trading Commission at its open meeting today approved a final rule on the cross-border application of certain swap provisions under the Commodity Exchange Act (CEA). A “swap conducted though a foreign branch” occurs if (i) payments and deliveries are made and received through the branch and the related documentation specifies that branch as such office; (ii) the foreign branch enters into the swap in its normal course of business (ie, not for evasion); and (iii) the swap is reflected in the local accounts of the foreign branch. “Other Non-U.S. Person” refers to a non-U.S. person that is neither a Guaranteed Entity nor a significant risk subsidiary. 2 “Statement of Chairman Heath P. Tarbert in Support of Final Cross-Border Swap Rule,” CFTC (July 23, 2020) [hereinafter “Statement of Chairman Heath P. Tarbert”]. The Final Rules include the new defined terms “foreign-based swap,” “foreign counterparty,” “non-U.S. swap entity” and “U.S. See 17 C.F.R. Analytical cookies help us improve our website by providing insight on how visitors interact with our site, and necessary cookies which the website needs to function properly. [17] A “U.S. A “significant risk subsidiary” is “any non-U.S. significant subsidiary of an ultimate U.S. parent entity where the ultimate U.S. parent entity has more than $50 billion in global consolidated assets, as determined in accordance with U.S. GAAP at the end of the most recently completed fiscal year,” with certain exceptions. [13] A “swap booked through a U.S. branch” occurs if it is entered into by the U.S. branch and is reflected in the local accounts of the U.S. 45,292 (July 26, 2013)). Group A requirements comprise the following: (i) chief compliance officer; (ii) risk management, (monitoring compliance with position limits, conflicts of interest, diligent supervision, business continuity and disaster recovery programs, information availability); (iii) swap data recordkeeping, and (iv) antitrust considerations. 20-21, “Withdrawal of Staff Advisory and No-Action Relief: Transaction-Level Requirements for Non-U.S. Swap Dealers” (July 23, 2020). Shanny Basar June 11, 2019. Certain transaction-level requirements, such as swap data reporting, are purposely not addressed in the Final Rules. 8 See Statement of Chairman Heath P. Tarbert (citing Letter from Steven Maijoor, Chair, European Securities and Markets Authority to Acting CFTC Chairman Regarding the CFTC Staff’s “ANE Advisory,” No. In late July 2020, the Commodity Futures Trading Commission (the CFTC or the Commission) approved a final rule (the Rule) on the cross-border application of certain swap provisions under the Commodity Exchange Act (CEA), superseding the CFTC's previous cross-border guidance from 2013. In May 2016, the CFTC adopted the Cross Border Margin Rules, which supersede the 2013 Guidance with respect to the cross- border application of margin . The Commodity Futures Trading Commission and the Securities and Exchange Commission both addressed cross-border swap activity last week. Reg. Share. Group B requirements essentially track the transaction level requirements in the Final Guidance related to risk mitigation and recordkeeping, namely: (i) swap trading relationship documentation; (ii) portfolio reconciliation; (iii) trade confirmation; and (iv) daily trading records. 17 CFR 3.3, 23.201, 23.203, 23.600, 23.601, 23.602, 23.603, 23.605, 23.606, 23.607, and 23.609. person” is narrower in scope than the definition in the 2013 guidance, “any person designated as a ‘U.S. Certain transaction-level requirements, such as swap data reporting, are purposely not addressed in the Final Rules. 2 See Cross-Border . It addressed circumstances under which certain SDs and MSPs would be eligible for substituted compliance, and established a framework for determining the comparability of foreign jurisdictions’ margin requirements.9, October 2016: The CFTC proposed rules regarding the cross-border application of certain CEA swaps provisions under Dodd-Frank, including registration requirements, business conduct standards and ANE Transactions.10, January 2020: The CFTC withdrew the October 2016 proposal and proposed a new rulemaking to address the cross-border application of registration thresholds and certain requirements for SDs and MSPs, and establish a process for requesting comparability determinations for those requirements from the CFTC.11. Found insideCFTC , SEC F , G CFTC , SEC D , E , F , G Treasury believes that the CFTC and the SEC should continue their joint outcomes - based effort to harmonize their respective rules and requirements , as well as cross - border application of ... 1347, 1348-49 (Jan. 8, 2014)). § 2(i)) [hereinafter “Final Rule”]. 2019-263. [See CFTC Press Release No. New rules aim to lower banks' swap burdens. On July 23, 2020, the U.S. Commodity Futures Trading Commission (the CFTC) voted to approve final rules (the Final Rules) regarding the cross-border application of various requirements under the U.S. Commodity Exchange Act (the CEA) applicable to swap dealers (SDs) and major swap participants (MSPs; SDs and MSPs collectively being Swap Entities). Person’ under the Guidance definition,” and “market participants may ... rely on representations previously obtained using the ‘U.S. See Final Rule at 291 (Final Rule 23.23(a)(13)). The overarching objective of the cross-border margin framework is to further the congressional mandate to ensure the safety and soundness of CSEs in order to offset the greater risk to CSEs and the financial system arising from the use of swaps that are not cleared. Key Considerations in the Cross-Border Application of the Margin Regulations. The SRS replaces the concept of a “conduit affiliate” (also referred to as “affiliate conduit”) in the Final Guidance. Proposed Rules. Found inside – Page 91Contrary to the expectations of market actors, the “Proposed Interpretative Guidance” of Dodd-Frank's cross-border regulation published by the CFTC in July 2012 further expanded the extraterritorial scope of the US regulation.34 The ... Found inside – Page 154In December 2013, four international trade associations, representing the world's largest banks, filed suit against the CFTC in federal court, attempting to invalidate the agency's “Cross-Border Guidance” on the regulation of swaps and ... 45292, 45297 (July 23, 2013). [9] 17 CFR 23.23(a)(14); see also 17 CFR 210.1-02(w). In addressing the remaining Title VII Rules, the District Court found that the CFTC had not adequately performed a cost-benefit analysis with respect to the cross-border application of the . allows the Commission to consider any factor it deems appropriate in assessing comparability; allows the Commission to find a foreign jurisdiction’s standards comparable if, viewed holistically, those standards achieve a regulatory outcome that adequately serves the same regulatory purposes as the Group A or B requirements as a whole; and. Finalization won't come until 2020. 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