U.S. Treasury’s Capital Markets Report Gives Market Regulators Green Light to Streamline Derivatives Regulations

November 14, 2017

This alert examines the derivatives policy recommendations set forth in the U.S. Department of Treasury’s (“Treasury”) report titled A Financial System That Creates Economic Opportunities: Capital Markets[1] (the “Report” or the “Capital Markets Report”), which Treasury released on October 6, 2017.  The Capital Markets Report is the second in a series of reports that Treasury has released or is expected to release in accordance with President Trump’s February 3, 2017, Executive Order on Core Principles for Regulating the United States Financial System[2] (the “Order”).

The Report is particularly relevant to derivatives market participants because it reflects the Trump Administration’s policies on Federal regulation and oversight of derivatives-related activities, bank capital standards, the regulation and supervision of financial market utilities, international aspects of the capital markets’ regulations, and various administrative matters relating to agency rulemaking processes.  Although Treasury’s policy recommendations will not result in wholesale reforms in the immediate term, the Report urges Congress to consider certain legislative proposals and empowers financial regulators to begin the rulemaking process to amend existing regulations with the goal of reducing burdensome compliance obligations.

Section I of this alert provides background on the Capital Markets Report.  Section II discusses key takeaways from the Report that we believe are most pertinent to our clients.  Section III reviews the Report’s policy recommendations related to derivatives markets.  The alert concludes with Section IV, reiterating themes and takeaways from the Report’s recommendations.  Although the Report also includes several other capital markets recommendations that focus on regulatory issues beyond derivatives reform, those recommendations are outside the scope of this alert.

I.     Background

Under the Order, the Secretary of the Treasury is directed to consult with member agencies of the Financial Stability Oversight Council and to report on how existing laws, regulations, and other Government policies promote, support, or inhibit the seven core principles outlined in the Order.[3]  The Order has signaled to financial regulators that the Trump Administration wants a reappraisal of a number of Obama-era regulations imposed on financial institutions and derivatives end users.

To meet its directive under the Order, Treasury has organized its recommendations into a series of reports.  The first report, on banks and credit unions, was released on June 12, 2017.  The second report, and the focus of this alert, was released on October 6, 2017.  Treasury released a report on asset management and insurance companies on October 26, 2017.  Treasury is expected to release a fourth report on non-banks, financial technology, and cybersecurity in financial markets sometime in the first quarter of 2018.

The Capital Markets Report serves as an agenda for many of the issues that the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”, together with the SEC, the “Commissions”) are expected to address in the coming years.  The content of the Report, the range of topics discussed, and the level of detail in the Report’s recommendations demonstrate Treasury’s close collaboration with the Commissions and engagement with industry stakeholders.[4]  Indeed, the Chairmen of both Commissions indicated that staff from their respective agencies engaged with Treasury in preparing the Report.  SEC Chairman Jay Clayton expressed appreciation for “Treasury’s willingness to seek the SEC’s input during the drafting process[,]” and that the Report “will be of immediate and lasting value.”[5]  Similarly, CFTC Chairman J. Christopher Giancarlo indicated that the CFTC “was actively engaged with Treasury in the preparation of this [R]eport,” and that the CFTC was “pleased to see our perspective incorporated in the final product.”[6]  He further stated that “if implemented, the recommendations provided within this [R]eport will help foster financially sound markets in a way that encourages broad-based economic growth and American prosperity and respects the American taxpayer.”[7]

II.     Key Takeaways

We believe that there are four key takeaways from the Capital Markets Report of which derivatives market participants should be cognizant.  First, the Capital Markets Report outlines an ambitious agenda for the Commissions with a focus on streamlining and harmonizing regulations to lower costs for market participants, promoting capital formation, keeping U.S. markets competitive, and fostering economic growth.  In the near term, we anticipate that the CFTC may quickly propose rulemakings in the spirit of the Report’s recommendations.  In fact, there has already been momentum in that regard.  The CFTC has taken steps towards modernizing existing rules, regulations, and practices through soliciting comments as part of Project KISS,[8] and improving reporting rules for products and swap data responsibilities through its reform efforts.[9]  These proposals and efforts to modernize existing rules, regulations, and practices, however, will take some time to be finalized and implemented by the industry.  In contrast, the SEC has not been as focused on Title VII reforms given the volume of additional non-derivatives related recommendations for the SEC to consider.  It is unclear therefore how quickly the SEC will focus on derivatives reforms.

Second, we anticipate that the Commissions will begin more fully addressing some of the rulemaking procedural criticisms raised in the Report, such as the recommendation that the Commissions perform more robust cost-benefit and economic analyses for their rulemakings and the recommendation to rely less heavily on staff action.  With respect to cost-benefit and economic analyses, we have observed that the CFTC has recently taken steps to address this criticism.  The CFTC’s Chief Economist, Bruce Tuckman—who was appointed to the position last August—stated that he looked forward to working with Chairman Giancarlo on “increasingly guiding CFTC rule-making and risk monitoring with cutting-edge economic analysis and empirical work.”[10]  Chairman Giancarlo has spoken publicly about the need for the CFTC to apply “rigorous cost benefit analysis” in its rulemaking,[11] and recently requested additional funds from Congress for fiscal year 2018 so the Commission can “enhance economic cost benefit analysis capabilities.”[12]  With respect to the Commissions’ reliance on staff action, the Chairmen of the Commissions have made public statements to the effect that the agencies will work more collaboratively with the industry during the rulemaking consultation process and rely less heavily on the issuance of staff no-action letters and interpretations.  Indeed, Chairman Giancarlo has emphasized the need to ensure that market participants and affected parties do not experience significant implementation issues when complying with the CFTC’s rulemakings.[13]

Third, market participants should expect the Commissions to engage in efforts to harmonize their derivatives regulations and to cooperate with international regulators.  With respect to the rulesets of the two agencies, the Report clearly favors domestic harmonization over merging the Commissions.  With respect to international cooperation, the Commissions already have engaged in two examples following the issuance of the Report.  The first example is the SEC’s adoption of measures to facilitate the cross-border implementation of the European Union’s Markets in Financial Instruments Directive II (“MiFID II”) research provisions.[14]  The second example, discussed below in Section III(2) of this alert, is the CFTC’s two recent actions on harmonization with the European Commission (“EC”).[15]

Fourth and finally, market participants should expect Congress to consider legislative proposals that would, if adopted, result in targeted amendments to Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) in order to address some of its more over-bearing provisions.  While most of Treasury’s recommendations call for regulatory action, there are certain areas in the Report where Treasury acknowledges the need for Congress to take action, in particular with respect to the definition of “financial entity” as well as harmonizing rulemaking among agencies.  Because Congress currently is focused on legislative matters such as tax reform, health care, and infrastructure, the timing and vehicles for implementing the Report’s legislative recommendations remain unclear.

III.     Capital Markets Report Derivatives-Related Recommendations

The Capital Markets Report makes ninety-one recommendations in nine topic areas.[16]  The derivatives-related topic areas include: (1) derivatives legislative recommendations; (2) derivatives regulatory recommendations; (3) bank capital and margin; (4) financial market utilities; and (5) administrative matters (i.e., regulatory structure and process).  Across those topic areas, we discuss below the most important recommendations to derivatives market participants and derivatives market reform.

(1)  Legislative Recommendations

In its preparation of the Capital Markets Report, Treasury generally expressed widespread support for the broad derivatives regulatory changes enacted under Title VII of Dodd-Frank.  The Report recommends, however, three legislative amendments relating to the derivatives title of Dodd-Frank.

  • Definition of “Financial Entity.”  The Report recommends a legislative amendment to finally address the numerous proposals since Dodd-Frank’s passage to modify the definition of “financial entity” and clarify the scope of the exception for nonfinancial end users’ affiliates.  It recommends that Congress amend the Commodity Exchange Act (“CEA”) Section 2(h)(7) to provide the CFTC with rulemaking authority to modify and clarify the scope of the financial entity definition and the treatment of affiliates, and provide the SEC analogous rulemaking authority under the Securities Exchange Act of 1934 (“Exchange Act”) Section 3C(g) for security-based swaps.
  • Harmonization.  The Report focuses heavily on the harmonization of existing and forthcoming rules among the agencies and recommends that Congress consider further action to aid in this goal, particularly in relation to the regulation of swaps and security-based swaps.
  • Streamline and Formalize Rulemakings.  The Report recommends that the Commissions streamline regulation by avoiding imposing substantive new requirements by interpretation or other guidance.  However, it suggests that Congress restore the Commissions’ authority to provide exemptions to requirements when necessary to facilitate market innovation.  The Report says that regulators should also conduct reviews of existing agency rules in order to decrease regulatory burdens and ensure relevance, and should fully solicit comments and input from the public.

(2)  Significant Regulatory Recommendations

Most of Treasury’s recommendations are regulatory in nature and come under the rulemaking authority of the Commissions.  Following Treasury’s release of the Report, the CFTC issued a comprehensive statement explaining what it views as the Report’s key recommendations on derivatives.[17]  The CFTC’s statement emphasizes recommendations on capital treatment in support of central clearing; swap execution facilities; the SEC-CFTC merger debate; SEC-CFTC harmonization; cross-border issues; economic analysis; swap data reporting; and central counterparties’ (“CCPs”) “skin in the game.”  We highlight seven of the most significant regulatory recommendations on derivatives below.

  • Swap Dealer De Minimis Threshold.  The Report recommends that CFTC maintain the swap dealer de minimis threshold calculation at $8 billion and establish that any future changes to the threshold will be subject to a formal rulemaking.  The Report found that lowering the threshold to a $3 billion level would result in a tremendous increase in the number of regulated entities but would only capture less than 1 percent of notional activity.  The Report indicates that market participants strongly support maintaining the $8 billion level and that clarification on the topic will reassure markets.On October 26, the CFTC voted to extend the sunset date  of the exception threshold by one year, ensuring that the threshold will stay at $8 billion until December 31, 2019, instead of decreasing to $3 billion on December 31, 2018.[18]  This action was the CFTC’s second order providing such relief.  The CFTC explained in the current order that it needed additional time to complete its analysis of swap data and consider appropriate further action, including potential amendments to the de minimis exception.  It further noted that any such amendments, if implemented, would not become effective until some point in 2018 because the CFTC would have to follow its normal rulemaking process under the Administrative Procedure Act.
  • Formalize Staff Guidance.  In relation to the implementation of the swaps regulatory framework under Title VII of Dodd-Frank, the Report recommends that regulators rely less on no-action letters and take steps to simplify and formalize staff guidance where necessary.  The CFTC has already begun its efforts in this regard by soliciting comments from the public on Project KISS and CFTC staff’s Roadmap to Achieve High Quality Swaps Data (the “Roadmap”), which is discussed below.
  • Finalize Position Limits.  The Report notes that progress on establishing position limits has been a challenge.  The CFTC finalized a position limits rule in November 2011, which was vacated in September 2012 by the U.S. District Court for the District of Columbia after a legal challenge.  The Commission has since had multiple re-proposals of the position limits rules but has not taken final action.  The Report urges the CFTC to finalize its position limits rulemaking as contemplated by the statutory mandate, taking into account, among other things, the appropriate availability of bona fide hedging exemptions for end-users, and finally bring clarity to this important issue.  We anticipate that yet another position limits re-proposal is forthcoming from the CFTC.
  • Swap Data Reporting Reform. The Report supports the CFTC’s Roadmap efforts to standardize and harmonize reporting rules for products and swap data repositories.  The Roadmap effort is directed by the CFTC’s Division of Market Oversight and lays out the tranches of changes to the CFTC’s swap data reporting rules.  The Report recommends the CFTC commit adequate resources to the Roadmap effort, amend its rules through a formal rulemaking process, and implement the new standards within the timeframe outlined in the Roadmap.
  • Cross-Border Jurisdiction. On cross-border issues, the Report highlights the need for U.S. regulators to continue to engage and cooperate with international counterparts and seek notice and comment for rulemakings in an effort to avoid market fragmentation, redundancies, undue complexity, and conflicts of law.  Treasury recommends that the Commissions:  (1) make their swaps and security-based swaps rules compatible with non-U.S. jurisdictions; (2) adopt outcomes-based substituted compliance regimes that minimize redundancies and conflicts by considering the rules of other jurisdictions; and (3) reconsider their approaches to transactions that are arranged, negotiated, or executed by personnel in the United States for applying transaction-level swap requirements.  The CFTC indicated preliminary steps to comply with these recommendations through its October 13, 2017 joint announcement with the EC on harmonizing two key derivatives regulatory requirements.[19]
  • Harmonize Margin Requirements for Uncleared Swaps. The Report recommends that the CFTC and U.S. banking regulators harmonize margin requirements for uncleared swaps domestically and cooperate with non-U.S. jurisdictions so that U.S. bank swap dealers and U.S. firms are not at a disadvantage to domestic and international competitors.  The Report recommends that regulators consider amendments to their rules to allow for more realistic time frames for collecting and posting margin on uncleared swaps; reconsider treating end users all the same for the purposes of margin on uncleared swaps; and that the SEC re-propose its proposed margin rule for uncleared security-based swaps in a manner that is aligned with the margin rules of the CFTC and U.S. prudential regulators.The CFTC and the EC announced on October 13, 2017 that they had adopted substituted compliance uncleared margin determinations for each other’s uncleared margin requirements.[20]  As a result, swap dealers subject to both CFTC’s and European’s uncleared margin rules now have more certainty that they will not have to establish duplicative compliance programs.[21]
  • SEF Execution Methods and MAT Process.  Due to market participants’ concerns that the CFTC’s current mandatory trading protocols (i.e., order book and “RFQ-to-3” requirements) are overly restrictive—a concern also expressed by CFTC Chairman Giancarlo—the Report recommends that the CFTC:  (1) consider rule changes to permit swap execution facilities (“SEFs”) to use any means of interstate commerce to execute swaps subject to trade execution mandates; (2) reevaluate the made available to trade (“MAT”) determination process to ensure liquidity; and (3) consider clarifying or eliminating footnote 88 of the June 2013 CFTC SEF final rules that triggered the exclusion of U.S. participants by most non-U.S. trading platforms and that ultimately has led to a bifurcation of the global interest rate swaps market.[22]One recent step that the CFTC has taken to ameliorate the effects of footnote 88 is the agency’s October 13 joint announcement with the EC regarding an agreement to recognize each other’s authorized trading venues.  Once the terms of their agreement is finalized, European firms operating in the United States will be able to trade derivatives on authorized U.S. trading venues while still complying with EU law in advance of the trading obligation go-live date of Markets in Financial Instruments Directive II.[23]  The agreement, once finalized, also will allow U.S. firms to comply with the CFTC’s trade execution requirement by executing swaps on EU-authorized trading venues.  Since the announcement sets forth only a common plan, both regulators must take additional steps to effectuate recognition of each other’s trading venues.  The timing of the EC’s and the CFTC’s actions to finalize their agreement is uncertain.

(3)  Bank Capital and Margin Recommendations

U.S. banking agencies and the CFTC finalized their respective margin rules for the uncleared swaps and bank-affiliated swap dealers in November 2015 and nonbank swap dealers in January 2016.  The Report recommends that U.S. regulators take steps to harmonize their margin requirements for uncleared swaps domestically and cooperate with non-U.S. jurisdictions to promote a level playing field for U.S. firms. Treasury’s recommendations of particular importance to derivatives market participants are highlighted below.

  • Capital Treatment in Support of Central Clearing.  Treasury reiterates its recommendation in the Banking Report that initial margin for centrally-cleared derivatives should be deducted from the supplementary leverage ratio denominator, thereby reducing the cost for banks to provide clearing services and ending the penalization of entities for clearing their swaps.  Additionally, the Report recommends a risk-adjusted approach for valuing options under capital rules, and that banking regulators conduct regular assessments on how capital and liquidity rules impact the incentives to centrally clear derivatives.
  • Exemption from Initial Margin Requirements.  The Report notes that market participants hold the view that U.S. regulators have taken a stricter approach than non-U.S. jurisdictions with respect to many of the particular requirements of the uncleared margin rules.  Accordingly, the Report recommends that U.S. prudential regulators consider providing an exemption to initial margin requirements for derivatives trades between affiliates of the same bank (i.e., inter-affiliate transactions), harmonizing the requirements with those of the CFTC and corresponding non-U.S. requirements, and promoting a level playing field for U.S. firms.

(4)  Financial Market Utilities Recommendations

CCPs, trade repositories, and exchanges are an essential part of the Dodd-Frank derivatives market infrastructure.  The Report states these financial market utilities (“FMUs”) are critical financial infrastructures that are also highly interconnected with other U.S. financial institutions and, therefore, pose a threat of systemic risk.

  • Strengthen Oversight.  To address concerns regarding systemic risk, Treasury recommends additional oversight of FMUs and finalizing strong resolution regimens for these entities in order to limit potential taxpayer-funded bailouts and moral hazard, especially important because FMUs may have access to the Federal Reserve System’s (“Federal Reserve”) discount window.
  • Increase Resources for Regulators.  The Report further recommends that more resources be devoted to the regulators that supervise systemically-important FMUs, in particular for the CFTC to enhance supervision of CCPs, and for the Federal Reserve to review risks related to  account access, strengthen stress testing exercises, and coordinate and complete the development of resolution plans for FMUs.
  • CCP “Skin in the Game.”  The Report also recommends that CCPs and their members work together to strike an appropriate balance between the CCPs’ resources and mutualized resources of clearing members.

(5)  Administrative Recommendations

The Report makes a number of recommendations that are focused on the administrative procedures followed by the Commissions rather than on specific substantive requirements.  Each of the key recommendations in this regard are discussed below.

  • SEC-CFTC Merger Debate.  The Report highlights the need for harmony and cooperation between regulators.  However, Treasury stops short of recommending a merger between the SEC and CFTC, citing the key differences in their underlying regulatory purposes—capital formation and investment versus hedging and risk transfer—and insignificant cost savings of five percent.  Instead, the Report recommends that the Commissions better harmonize rules to avoid increased compliance cost and complexity for market participants.  Specifically, the Report notes that where the CFTC has finalized most of the rulemakings required under Dodd-Frank, there are several “critical rulemakings” that the SEC has not yet finalized or implemented.  Treasury recommends that the Commissions harmonize Title VII of Dodd-Frank reform rules with an eye towards reducing burdens on market participants.
  • Enhance Cost Benefit Analyses.  The Report stresses that the Commissions continue to perform more, and heightened, economic analysis of costs and benefits in rulemaking, including an updated consideration of the effects on small entities, and that the Commissions publish this information where appropriate.
  • Comprehensive Reviews of Self-Regulatory Organizations.  The Report finds that, while self-regulatory organizations (“SROs”) offer many benefits to the capital market, over time they have grown larger, their members have less control, and many have become for-profit publicly traded companies.  As a result, some constituencies told Treasury that SROs have become less transparent while their rules and costs continue to increase, and have created a potential for regulatory duplication with Commissions or other SROs.  Thus, Treasury recommends the Commissions conduct comprehensive reviews of the SROs and make recommendations for operational, structural, and governance improvements of the SRO framework to include, among other things, controlling for conflicts of interest; transparency regarding fee structures; and limitations on regulatory, surveillance, and enforcement responsibilities.  If enhanced oversight of SROs is required, the regulators should take action in this regard.
  • Definition of “Small Entity.”  Under the Regulatory Flexibility Act (“RFA”), Federal agencies are required to consider the impact of rulemaking on small entities.  Rules regarding which entities are considered a “small entity” by the Commissions, however, can be overbroad in some instances and too narrow in others.  The Report recommends that the Commissions review and update these definitions so that the RFA analysis appropriately considers the impact on persons who should be considered small entities.

IV.     Conclusion 

Each of the derivatives-related recommendations in the Capital Markets Report conform with the Order’s seven core principles, which essentially seek to foster U.S. economic growth through right-sizing regulatory obligations.  To reach this goal, Treasury urges regulatory agencies and Congress to focus on streamlining and harmonizing regulations, something we anticipate the Commissions—whose input was incorporated into the Report—will address by making procedural changes to rulemaking and working more closely with each other and international regulators.  Legislative amendments to some provisions of Title VII of Dodd-Frank should also be expected.  Ultimately,  Treasury’s proposed agenda will take a significant amount of time to develop and implement, so the impact of these recommendations likely will not be felt by market participants in the near term.

   [1]   U.S. Dep’t of the Treas., A Financial System That Creates Economic Opportunities: Capital Markets (2017), available at https://www.treasury.gov/press-center/press-releases/Documents/A-Financial-System-Capital-Markets-FINAL-FINAL.pdf.

   [2]   Exec. Order No. 13,772, 82 Fed. Reg. 9965 (Feb. 8, 2017).

   [3]   The seven core principles in the Order are:

(a) empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth;

(b) prevent taxpayer-funded bailouts;

(c) foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry;

(d) enable American companies to be competitive with foreign firms in domestic and foreign markets;

(e) advance American interests in international financial regulatory negotiations and meetings;

(f) make regulation efficient, effective, and appropriately tailored; and

(g) restore public accountability within Federal financial regulatory agencies and rationalize the Federal financial regulatory framework.

For further information, see our Client Alert, President Trump Issues Executive Order on Financial Regulation, and Memorandum on Department of Labor Fiduciary Rule (Feb. 6, 2017), available at http://www.gibsondunn.‌com‌‌‌‌/publications/Pages/President-Trump-Issues-Executive-Order-on-Financial%20Regulation–DOL-Fiduciary-Rule.aspx.

   [4]   In addition to collaborating with the Commissions, Appendix A to the Report contains a list of market participants, think tanks, trade groups, regulators, consumer advocates, and academics that engaged with Treasury in preparing the recommendations in the Report.

   [5]   Statement attributed to Chairman Jay Clayton (Oct. 6, 2017) (on file with U.S. Sec. & Exch. Comm’n).

   [6]   U.S. Commodity Futures Trading Comm’n, Statement of Chairman Giancarlo on Treasury Report on Capital Markets (Oct. 6, 2017), available at http://www.cftc.gov/PressRoom/SpeechesTestimony/‌giancarlostatement100617.

   [7]   Id.

   [8]   Project KISS is the CFTC’s initiative to seek public input on simplifying and modifying the CFTC’s rules.  In particular, the CFTC requested comments on five key initiatives:  (1) Registration; (2) Reporting; (3) Clearing; (4) Executing; and (5) Miscellaneous.  The comment period for providing comments on these initiatives closed on September 30, 2017.  See U.S. Commodity Futures Trading Comm’n, CFTC Requests Public Input on Simplifying Rules (May 3, 2017), available at http://www.cftc.gov/PressRoom/PressReleases/pr7555-17.

   [9]   See Section III(2) Swap Data Reporting Reform.

[10]   U.S. Commodity Futures Trading Comm’n, Chairman Giancarlo Appoints Bruce Tuckman CFTC’s Chief Economist (Aug. 21, 2017), available at http://www.cftc.gov/PressRoom/PressReleases/pr7604-17.

[11]   See, e.g., U.S. Commodity Futures Trading Comm’n, Remarks of CFTC Commissioner J. Christopher Giancarlo before the U.S. Chamber of Commerce (Nov. 20, 2014), available at http://www.cftc.gov/PressRoom/SpeechesTestimony/opagiancarlos-2.  

[12]   U.S. Commodity Futures Trading Comm’n, Testimony of J. Christopher Giancarlo, Acting Chairman, Commodity Futures Trading Commission, before the U.S. Senate Committee on Appropriations Subcommittee on Financial Services and General Government (June 27, 2017), available at http://www.cftc.gov/PressRoom/SpeechesTestimony/opagiancarlo-26.

[13]   U.S. Commodity Futures Trading Comm’n, Testimony of J. Christopher Giancarlo, Chairman, Commodity Futures Trading Commission, before the U.S. House Committee on Agriculture (Oct. 11, 2017), available at https://agriculture.house.gov/uploadedfiles/testimony_for_j._chris_giancarlo_before_house_ag__10.11.17.pdf.

[14]   U.S. Securities and Exchange Comm’n, SEC Announces Measures to Facilitate Cross-Border Implementation of the European Union’s MiFID II’s Research Provisions (Oct. 26, 2017), available at https://www.sec.gov/news/press-release/2017-200-0.

[15]   For further information, see our Client Alert, Ready? Set? Harmonize: The CFTC and EC Announce Two Actions to Harmonize Their Derivatives Regulations ( Oct. 27, 2017), available at http://gibsondunn.com/publications/Pages/CFTC-and-EC-Announce-Two-Actions-to-Harmonize-Their-Derivatives-Regulations.aspx.

[16]   Appendix B of the Report contains a table of recommendations outlining in detail each recommendation, the branch or regulator responsible for the related policy, and the core principle that applies.

[17]   U.S. Commodity Futures Trading Comm’n, CFTC Backgrounder on the Department of Treasury’s Report on Capital Markets, available at http://www.cftc.gov/idc/groups/public/@newsroom/documents/file/

[18]     U.S. Commodity Futures Trading Comm’n, CFTC Issues Order Extending Current Swap Dealer De Minimis Threshold to December 2019 (Oct. 26, 2017), available at http://www.cftc.gov/PressRoom/PressReleases/pr7632-17.

[19]   For further information, see our Client Alert, Ready? Set? Harmonize: The CFTC and EC Announce Two Actions to Harmonize Their Derivatives Regulations ( Oct. 27, 2017), available at http://gibsondunn.com/publications/Pages/CFTC-and-EC-Announce-Two-Actions-to-Harmonize-Their-Derivatives-Regulations.aspx.

[20]   Id.

[21]   Swap dealers that are subject to the U.S. prudential regulators’ uncleared margin rules, however, are not covered by the Uncleared Margin Determinations and, as a result, are unable to rely on this substituted compliance relief.

[22]   See CFTC, Final Rule, Core Principles and Other Requirements for Swap Execution Facilities, 78 Fed. Reg. 33476 (June 4, 2013).

[23]   For further information, see our Client Alert, Ready? Set? Harmonize: The CFTC and EC Announce Two Actions to Harmonize Their Derivatives Regulations (Oct. 27, 2017), available at http://gibsondunn.com/publications/Pages/CFTC-and-EC-Announce-Two-Actions-to-Harmonize-Their-Derivatives-Regulations.aspx

Gibson Dunn’s lawyers  are available to assist in addressing any questions you may have regarding these developments.  Please contact any member of the Gibson Dunn team, the Gibson Dunn lawyer with whom you usually work in the firm’s Financial Institutions practice group, or the following:

Michael D. Bopp – Washington, D.C. (+1 202-955-8256, mbopp@gibsondunn.com)
Arthur S. Long – New York (+1 212-351-2426, along@gibsondunn.com)
Stephanie L. Brooker – Washington, D.C. (+1 202-887-3502, sbrooker@gibsondunn.com)
Amy Kennedy – London (+44 (0)20 7071 4283, akennedy@gibsondunn.com)
Carl E. Kennedy – New York (+1 212-351-3951, ckennedy@gibsondunn.com)
Jeffrey L. Steiner – Washington, D.C. (+1 202-887-3632, jsteiner@gibsondunn.com)

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