The Committee on Capital Markets Regulation (CCMR) issued a letter to derivatives regulators for the European Securities and Markets Authority (ESMA), the European Commission, and the Commodity Futures Trading Commission (CFTC), cited the need for a resolution of differences between E.U. and U.S. Clearinghouse requirements.
The committee’s letter recommends two solutions: dual registration and foreign recognition of swaps clearing under ESMA and CFTC rules, so market participants do not have to register in both jurisdictions or post separate margin payments for sets of exposures.
The committee also cited a need for the CFTC extend its temporary exemption of foreign branches of U.S. banks from the definition of “U.S. person” until extraterritorial issues
such time as issues of jurisdictional overlap have been conclusively resolved.
The CCMR indicated a need for the CFTC to extend temporary exemption for foreign branches of US banks from the ‘US person’ definition until extraterritorial issues are resolved. According to the letter, “If these differences are not resolved and foreign recognition proves infeasible, then EMIR should be revised to permit US clearing houses to register and comply with the more stringent requirements of either regime.”
CFTC rules indicate that trades between U.S. firms and foreign firms are cleared through a CFTC-certified clearing house. EMIR requires trades between EU-based firms and overseas entities are cleared through a party authorized by ESMA.
In their current form, the CFTC rules indicate that trades conducted between a US firm and foreign firm must be cleared through a CFTC-certified clearing house. EMIRrequires trades between EU-based firms and overseas entities to be cleared through a central counterparty authorized by ESMA.
The Committee on Capital Markets Regulation is an independent research group focused on improving the regulation of U.S. Capital markets.