Swaps Regulation - Comment Letters

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Comment letters pertaining to other swaps topics can be found below.

International Swaps Regulation - Comment Letters[edit]

Association of Financial Guaranty Insurers - September 19, 2011[edit]

Acceptance of Public Submissions for a Study on International Swap Regulation
September 19, 2011

From the comment letter:

"...AFGI urges the CFTC and SEC to work with regulators abroad to ensure a consistent global approach to the regulation of financial guaranty insurance by generally exempting insurance contracts from regulation as derivatives. In particular, AFGI strongly encourages the Commissions to work to promote consistency between the European Commission’s (“EC”) European Market Infrastructure Regulations (“EMIR”) and the Commissions’ regulations, including the scope of the definitions for 'swap,' 'security-based swap,' and 'mixed swap.'"

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Consortium of International Banks - September 20, 2011[edit]

Acceptance of Public Submissions for a Study on International Swap Regulation
September 20, 2011

This comment letter was submitted by the following banking institutions:

  • Bank of America Merrill Lynch
  • Barclays Capital
  • BNP Paribas
  • Citi
  • Crédit Agricole Corporate and Investment Bank
  • Credit Suisse Securities (USA)
  • Deutsche Bank AG
  • HSBC
  • Morgan Stanley
  • Nomura Securities International, Inc.
  • Société Générale
  • UBS Securities LLC

The letter offers the following recommendations regarding international harmonization of rules:

  • The agencies should adopt a "consistent definition of 'U.S. person' based on SEC Regulation S" in order to decide whether parties to a swap transaction are subject to Dodd-Frank provisions.
  • The agencies should clarify application of swap dealers and major swap participants definitions to non-U.S. activities such as non-U.S. persons dealing with U.S. registered swap dealers, and swaps transactions inter-affiliated entities.
  • The agencies should address the fact that many firms "conduct their swap dealing businesses through a variety of structures, based on multiple and in many cases interdependent legal, strategic and business considerations that pre-date Dodd-Frank," and that "transaction-level requirements should generally apply only to transactions with a U.S. person."
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Financial Supervisory Service of Korea - September 21, 2011[edit]

Acceptance of Public Submissions for a Study on International Swap Regulation
September 21, 2011

In the comment letter, the author explains the regulatory structure in Korea and, in particular:

  • The Financial Investment Services and Capital Markets Act (“FSCMA”) that came into effect in February 2009;
  • The Korean Financial Services Commission (FSC) and the Financial Supervisory Service (FSS);
  • The state of CCP cleared and uncleared swaps; and
  • Regulation of cross-border swap transactions.
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Alternative Investment Management Association - September 26, 2011[edit]

Acceptance of Public Submissions for a Study on International Swap Regulation
September 26, 2011

Summary of key points from the comment letter:

  • AIMA supports the full and prompt implementation of Title VII of the Dodd-Frank Act.
  • There is insufficient certainty around the territorial scope of Title VII and formal rulemaking or guidance is requested from the Commissions in this regard.
  • Asset management firms act as intermediaries for their investors and, therefore, the location of their trading office, operations office or the fund vehicle is not relevant for determining the territorial scope of Title VII and its application to those firms.
  • Relevant considerations for determining what will impact the ‘commerce of the United States’ include the location of the underlying investors, the counterparty to a trade and the underlying of a swap.
  • ‘Evasion’ of the Dodd-Frank Act should be the subject of a clear definition, which should carve out legitimate business conducted outside of the United States for, inter alia, reasons of efficiency and compliance with fiduciary obligations.
  • The Commissions should make further efforts to ensure consistency of the Title VII rulemaking with similar provisions in Europe and Asia. Doing so will create significant benefits for all parties, including the reduction of costs, reduction of systemic risk and the ability of market regulators to effectively oversee the global markets.
  • The Commissions should provide for recognition of OTC derivative regulatory regimes which have equivalent effect to that of Title VII.
  • Key areas where greater consistency is desirable include: the features of swaps trading venues; segregation models for client collateral; and CCP ownership and governance.
  • The Commissions should proceed promptly to implement the Title VII rules. However, due consideration must be given to the timing of equivalent regulation outside the US that will impact US counterparties and the US markets.
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Eurex - September 26, 2011[edit]

Acceptance of Public Submissions for a Study on International Swap Regulation
September 26, 2011

In the letter, Eurex Clearing comments on two items - regulatory comparison and swap market information.

  • Regarding regulatory comparison: "We focus our answers on those aspects of OTC derivatives regulation covered by the

September 2009 G20 commitment on OTC derivatives. This includes: clearing obligations, trading obligations, reporting obligations to trade repositories, and differential capital requirements between CCP cleared and non-CCP cleared transactions. As most of these aspects are not covered under existing laws or regulations within the European Union or individual member states of the European Union, in the EU context our answers relate for the most part to emerging legislation and regulation."

The letter also details Eurex Clearing's participation in swaps markets, including margin requirements for credit default swaps.

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ISDA - September 26, 2011[edit]

Acceptance of Public Submissions for a Study on International Swap Regulation
September 26, 2011

In the comment letter, ISDA provides a chart detailing swaps regulations, existing and pending, in the U.S., the European Union, Japan, Hong Kong, and Singapore. Items include:

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Markit - September 19, 2011[edit]

CFTC and SEC Staff Roundtable on International Issues
September 19, 2011

Summary of recommendations from the comment letter:

  1. "ensure that important aspects of real-time reporting regimes, including the data to be reported, are in harmony with those required by foreign regulators;
  2. permit market participants to use third party providers that operate internationally for valuation and scenario analysis services because these entities would use internationally valid standards and inputs;
  3. permit market participants to delegate initial margin (“IM”) calculation to third parties that operate internationally because they could provide would-be counterparties with estimates of IM based on different national requirements;
  4. ensure that any unique identifier systems used for reporting purposes are used consistently across the globe in order to enable data to be properly aggregated, and that the creation of such systems is open to input from all stakeholders; and
  5. permit market participants to obtain a legal entity identifier (“LEI”) through a self-registration process or from a counterparty who would act as their agent in the registration process."
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MarkitSERV - September 19, 2011[edit]

CFTC and SEC Staff Roundtable on International Issues
September 19, 2011

Summary of recommendations from the comment letter:

  1. "limit the amount of duplicative reporting and data fragmentation by:
  • allowing counterparties to use Independent Verification Services (“IVS’”) for processing as well as reporting purposes, and
  • providing additional flexibility in their reporting requirements to reflect specific challenges in the international context;
  1. permit counterparties to use international third party providers for their connectivity needs;
  2. explicitly state that international third party providers, whether or not they are United States-based, will not be required to comply with any DFA requirements for activities wholly outside of the United States; and
  3. clarify the extraterritorial reach of the DFA and the Commissions’ regulations in order to reduce uncertainty and avoid overlapping and inconsistent regulations with foreign regulators."
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References[edit]

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