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CFTC signals a cross-border climbdown

CFTC Acting Chairman Mark Wetjen yesterday delivered a largely unremarkable speech to a specialised committee of the DC Bar. Continuing the recent shift from faith-based regulation to a more nuanced blend of pragmatism and humility; the speech refers to recent actions having been  “issued in a deliberative and methodical way, and intentionally without haste or lack of notice to those whom they affect”, and a confidence that “we will have workable rules “.

The speech laid particular emphasis on progress made and to be made on cross border regulation, with a slight echo of the Agency’s recently imperial attitude, “Substituted compliance for swaps incentivizes foreign jurisdictions to harmonize their risk management, reporting, clearing, and execution standards with U.S. standards under Dodd-Frank”, ostensibly implying decree rather than dialogue. Given that it was largely a review of recent CFTC initiatives, a lack of novelty was to be expected; his after-speech comments however, were of considerable interest.

In response to a question regarding the contentious, sub-judice[1] Footnote 513, Wetjen said “I don’t think it was the right decision. If you’ve got equally comparable, comprehensive regulations in Europe, as an example, then what’s the reason why we wouldn’t allow for substituted compliance in that situation?”  Although clearly a rhetorical question, “Consistency” might be the obvious answer.  However, Wetjen’s comments represent a clear indication of the Agency’s willingness to revisit, and perhaps repudiate, a large portion of the Gensler legacy. He joins his voice to Commissioner Scott O’Malia, who has been unstinting in his criticism of the Agency’s inflexibility and perceived cross-border regulatory overreach. Substantive details of the revised policy are likely to await Senate confirmation of Chairman-in-waiting Timothy Massad in early June.

[1] SIFMA v. U.S. CFTC, 13-cv-1916, U.S. District Court, District of Columbia

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