"Non-U.S. Regulators and the CFTC’s Proposed Interpretive Guidance on Cross-Border Regulation of Swaps"

In connection with Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), on July 12, 2012, the Commodity Futures Trading Commission (the "CFTC") published in the Federal Register proposed interpretive guidance and a proposed policy statement (the "Guidance") regarding the extraterritorial application of the Dodd-Frank Act's requirements regarding swap dealers ("SDs") and major swap participants ("MSPs"). On the same day, the CFTC issued a proposed exemptive order (the "Proposed Order") that would allow SDs and MSPs to postpone compliance with certain of the Dodd-Frank Act's swaps requirements.  

By the time the CFTC's comment period on the Guidance and Proposed Order had expired, the CFTC had received an unusual number of strongly-worded comments from non-U.S. regulatory authorities about the effects that the Guidance and Proposed Order would have in their proposed form. Non-U.S. authorities have been generally concerned about substantial inconsistencies and duplication between U.S. and non-U.S. regulation of the derivative markets that will result if the CFTC moves ahead with finalizing its interpretations of the Dodd-Frank Act's cross-border reach before other jurisdictions finalize, in many cases jointly, their own regulation of these markets. These regulatory authorities have also made numerous specific comments about problematic aspects of the CFTC's proposal.  

This Stroock Special Bulletin summarizes key points of the Guidance and Proposed Order in light of the concerns that non-U.S. regulators have expressed, and includes a discussion of the CFTC's related No-Action Letter of October 12, 2012.