Regulators in the UK, Japan, and the EU are demanding that the CFTC scale back extraterritoriality rules that would broaden American oversight of the $640 trillion swaps market.
“For all its past faults, the derivatives market has allowed financial counterparties across the globe to come together to conduct more effective risk management and, as a result, support economic development,” read a letter from foreign regulators to the CFTCs Gary Gensler.
The letter, written by George Osborne, the UKs chancellor of the exchequer, Michel Barnier, internal market commissioner of the EU, and counterparts in France and Japan, argued that extended American oversight of the international swaps market could lead to market isolationism.
New CFTC rules mandate that swaps trades by U.S. firms be cleared by a central counterparty, and that these firms register with the agency by years’ end. Gary Gensler, the CFTCs chairman, and commission Bart Chilton, have routinely argued that the CFTCs extraterritoriality rules are necessary to prevent another financial collapse. The CFTC has also stated that these rules could be scaled back if a firm’s domestic regulation is “tough” enough.
No process for negotiating extraterritoriality has yet been enumerated.
“We would urge you before finalising any rules, or enforcing any deadlines, to take the time to ensure that US rulemaking works not just domestically but also globally,” the letter added.
The letter comes during a heated American election season that has seen the CFTC routinely under fire from House Republicans, the derivatives industry, and, now. foreign regulators.