CFTC Proposes Cross-Border Swaps Rule: CFTC Cross-Border Swaps Rule Proposal Addresses Registration Thresholds, ANE Transactions, and Substituted Compliance

Sullivan & Cromwell LLP - January 16, 2020

On December 18, the Commodity Futures Trading Commission voted 3-2 (Commissioners Rostin Behnam and Dan Berkovitz dissenting) to publish for comment a proposed rule regarding the cross-border application of the registration thresholds and certain requirements applicable to swap dealers. This proposal, if finalized, would replace interpretive guidance released by the Commission in 2013 and the never-finalized cross-border swap rules the Commission proposed in October 2016. The new proposal addresses the cross-border swaps a person would need to consider when determining whether it needs to register as a swap dealer and introduces classifications for non-U.S. swap market participants relevant to the applicability of the Commission’s existing and proposed swap rules. Further, the proposal, if adopted, would provide rule-based exceptions from, and a substituted compliance process for, certain regulations applicable to registered swap dealers both at the entity and transaction-specific levels. It would also establish a framework for seeking comparability determinations with respect to applicable foreign regulatory regimes, for those rules that would otherwise be applicable to non-U.S. registered swap dealers. Due largely to the development of the global swaps supervisory landscape, the new proposal generally represents a more limited U.S. approach to the cross-border reach of Title VII (as compared to the 2013 and 2016 releases) and would allow market participants increased opportunities to take advantage of substituted compliance with foreign regulatory regimes.