Stay up-to-date with the latest developments in securities law through access to both news and all statutes and regulations. Find relevant corporate filings through a searchable EDGAR database. And...
By Richard Hill
CFTC Chairman J. Christopher Giancarlo isn’t expected to reach any new agreements during a 10-day trip to meet regulatory counterparts in Europe, but derivatives industry attorneys say an equivalence pact on swap execution rules might be in the offing.
Such an agreement ideally would allow market participants on both sides of the Atlantic to trade swaps on platforms in either the U.S. or Europe. A similar agreement on clearinghouse equivalency was agreed to in 2016 after several years of negotiation by Giancarlo’s two immediate predecessors.
Without an agreement on swaps execution, U.S. and EU swaps trading facilities—known as swap execution facilities in the U.S. and multilateral trading facilities in Europe—could become isolated from one another as soon as January, straining liquidity and making trading more expensive.
The EU is seeking to implement a trade execution mandate, possibly as part of a larger financial reform package set to take effect in January, that would restrict its traders from accessing platforms outside Europe when trading certain swaps. Until such a mandate passes, European traders can access U.S. SEFs; however, U.S. participants already are barred under CFTC rules from using European platforms to trade certain swaps.
Unlike his predecessors, Giancarlo has signaled his intention to rethink Dodd-Frank trade-execution rules. Such a new approach would put them more in line with European regulations and make an equivalence deal more likely. Specifically, the chairman has said he wants to move beyond mandating that trades take place through an order book or a request-for-quote system, as currently is required, and open up trading to other models, including auctions, volume match, and voice brokering.
“In my mind, that’s the single biggest sticking point,” Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, London, told Bloomberg BNA. “Europeans can trade on a SEF now. The challenge is, what happens when they can’t?” said Lalone, who specializes in in the regulation of financial products, financial markets, and derivatives. “If they can reach an agreement on that, a lot of the other stuff goes away or becomes a mopping-up exercise.”
Bloomberg BNA is an affiliate of Bloomberg L.P., which operates Bloomberg SEF.
Although January might be a soft deadline for an equivalence pact, that doesn’t mean the two sides must come to an agreement by that time. Discussions on clearing equivalence carried on for nearly five years.
CFTC spokesman Erica Elliott Richardson described Giancarlo’s current trip as a series of “relationship-building meetings,” and the agency didn’t respond to questions about specific agenda items.
Giancarlo has shown an inclination toward comity that could help in such negotiations. As a commissioner for more than two years and then as acting chairman, “you see him setting out a standard on policy but working with his fellow commissioners and other regulators,” said Micah Green, head of Steptoe & Johnson LLP’s cross disciplinary financial services practice in Washington. “And I think you’ll see him want to work with international regulators much the same way.”
Green also noted Giancarlo’s interest in negotiating with the Europeans. “This is the first non-August week he’s been chairman, and he’s spending it in Europe,” Green said. He predicted Giancarlo’s pragmatic, market-oriented approach to regulation “will be well received by European regulators.”
In a newspaper editorial in Paris’ Les Échos, Giancarlo said cross-border rules harmonization “is fully in the spirit of the historic agreement on financial market reform reached in 2009. In my judgment, increased application of deference is the path forward.”
To contact the reporter on this story: Richard Hill in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Phyllis Diamond at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)