According to IFR, CFTC Chairman Gary Gensler reiterated his stance on cross border SEF regulation during a keynote address at the Futures Industry Association’s 2013 Expo in Chicago.
There has been an outpouring of international debate over cross border SEF regulation since the implementation of SEFs in October. While the Dodd-Frank Act was put in place as a means to only regulate US markets, it seems trading isn’t quite so black and white, and many foreign markets who trade with the US are now being forced to either register with SEFs or risk being penalized by the CFTC.
Despite pleas from foreign markets and regulators alike, Gensler refuses to back down. During the address he stated that if a swap dealer, US or non-US, negotiates or executes a swap anywhere in the US, then it falls under Dodd-Frank.
Gensler’s stance on cross border SEF regulation is causing plenty of trouble for the market, as many non-US trading platforms have had to drop US traders due to the rule. Others have been able to use an interpretation of a footnote in the rule (footnote 513) to grant themselves exemption from the rule, at least for now.
Cross border SEF regulation is also making talks for free-trade agreement between the US and EU very difficult. The EU wants to include market regulation in their agreement, but the US is already far ahead of them in terms of implementation.