The CFTC has drafted a proposed exemptive order that would give foreign banks and overseas affiliates of U.S. banks temporary relief from some of the swap regulations being drawn up by the agency as required by the Dodd-Frank Act, according to sources familiar with the matter.
The exemptive order would apply to entity-level rules, such as those dictating capital requirements. For foreign firms, the order would also include transaction-level rules, such as margin requirements. Relief is expected to be extended by at least one year after cross-border swap regulation comes into effect.
A vote on the order has been tentatively scheduled for June 21st.
Dodd-Frank’s Section 722(d) states that U.S. regulators have a legitimate interest in regulating trading overseas of it has “a direct and significant connection with activities in, or effect on, commerce in the United States.” The proposed exemptive order may be an attempt to compromise with critics who claim that cross-border swap regulation will hurt U.S. competitiveness and drive trading overseas.