ISDA has released a paper outlining its suggestions for a general framework to harmonise cross-border regulation- their main theme is concordance with the G20 Pittsburgh/Cannes declarations. Market participants are all too familiar with the solutions advocated by the G20 accord: reporting, collateral, clearing and more capital. The difficulty comes in the interpretation/implementation of these goals by national/supra-national regulators. ISDA also released a methodology, illustrating examples of the principles in practice. The short-form principles are:
- An effective framework should be grounded in the declarations issued by the G‑20 following the Pittsburgh and Cannes meetings.
- In order to minimize burdens on regulators, maintain global markets and avoid market fragmentation, regional and national regulators should evaluate the other’s regimes to allow for a principles-based approach to cross-border compliance.
- For purposes of substitute compliance or equivalence, comparisons of one jurisdiction’s requirements to another’s may use a variety of analytical methods, all of which must start with identification of a set of common principles that elaborate on the G-20 regulatory goals.
- Ultimate decisions regarding comparability require not only a bilateral dialogue between regulators, but also a transparent process.
- Regulators should consult and cooperate with each other before implementing their derivatives regulations.
The average reader may be forgiven for thinking the above constitutes an uncontroversial re-statement of the patently obvious. They would of course be right. However, the recent CFTC rush to the altar of substitutive compliance would seem to have disregarded all but the first of the above principles, so perhaps there is a substantive point to be made.