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SEC Approves Cross-border Swaps Rules

This is a link to an article in the Wall Street Journal regarding the SEC’s approach to the regulation of cross-border derivatives transactions.  Yesterday, the SEC unanimously approved a rule which allows overseas branches of U.S.-based dealers trading in equity or credit-default swaps to adhere to a foreign jurisdiction’s rules, rather than US regulation, if the relevant transaction is concluded with:

  • a non-US entity, or
  • a US entity, but is subject to rules which are “broadly comparable with U.S. requirements”.

This approach is in contrast to that adopted by the CFTC last year, which requires all swaps involving a U.S. bank or its foreign affiliates to adhere to U.S. rules.

The SEC ruling will no doubt please EU regulators which had already expressed concerns as to the possibility of market participants being subjected to largely duplicative regulatory regimes as a result of the CFTC ruling.  It also seems likely to increase pressure on the CFTC to revise its approach or extend its July 12th deadline for overseas firms to begin complying with U.S. rules.  The proposal will now undergo a public comment process for 90 days.

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