Commissioner J. Christopher Giancarlo

A Pro-Reform Reconsideration of the CFTC Swaps Trading Rules

The following post is taken from an address by CFTC Commissioner J. Christopher Giancarlo before the ABA Business Law Section, Derivatives & Futures Law Committee Winter Meeting and is dated January 23, 2015.  Commissioner Giancarlo’s address may be accessed here.

Thank you for the kind introduction.

Let me begin with the disclaimer that my remarks today reflect my own views and do not necessarily reflect the views of the Commodity Futures Trading Commission (CFTC or Commission), my fellow Commissioners or the CFTC staff.

It is an honor to speak to you today. I see so many truly distinguished members … Read more

Powell

Comments on the Fair and Effective Markets Review

I want to thank the Brookings Institution for inviting me to comment today on Martin Wheatley’s presentation on the Fair and Effective Markets Review (Review).[1] The Review is an ambitious and important initiative. Although London is perhaps the leading center for many fixed-income, currency, and commodities (FICC) markets, these markets are global, and the United States and the largest U.S. firms play key roles in them. So the Review addresses issues that affect our markets as well.

The Review looks to identify further steps that should be taken to restore public confidence in FICC markets in the wake of the … Read more

Goncharov Igor and Peter Caspar

Greater Disclosure Harms Cartels

The U.S. Department of Justice estimates that breaking up illegal cartels leads to consumer savings of at least 10% of annual sales in the relevant market. However, from the regulator’s perspective it is notoriously difficult to identify cartels. Even more difficult is to prove that some illegal conspiracy actually occurred: Do companies coordinate their actions by means of informal meetings in a hotel room in some remote location? Or do companies act after observing each other’s actions without exchanging a word or a text message? Both ways to coordinate actions may reduce consumer welfare, while only the former is punishable … Read more

ZavvosKaltsouni

The Single Resolution Mechanism in the European Banking Union

With the adoption of the Single Resolution Mechanism (SRM) the European Union (EU) established the second crucial pillar of the European Banking Union (EBU), further promoting the financial stability and efficiency of the European banking system. The EU made this significant progress not by design but by the force of necessity – the crisis rendered compelling the centralization of powers for the supervision and resolution of banks at the EU (‘federal’) level. This article briefly introduces the structural components of SRM, as well as discusses the decision-making process for the placement of a bank … Read more

Morrison & Foerster discusses EU Bank Recovery and Resolution Directive and European Single Resolution Mechanism

2014 was a very active year for financial regulation in the European Union (EU). There was a push to finalise much of the outstanding primary legislation on the regulatory reform agenda in advance of the European Parliamentary elections in May 2014. This resulted in the adoption of many EU Regulations and Directives in the first half of the year. However, much still remains in the in-box of EU legislators and regulators. Most of the legislation that has been adopted envisages a significant amount of further legislation and rulemaking regulation in the form of delegated regulations to be adopted

Read more

BCG discusses the “Brave New Era” of Comprehensively Regulated Banks

Global banking has entered a new era in which every region, product, and legal entity is going to be closely regulated.

To assess the current status and future effects of regulatory reform, we have classified the entire spectrum of regulatory reforms, grouping them into three clusters: financial stability, prudent operations, and resolution and separation. (See Exhibit 1.)

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Financial Stability: Expectations Exceed Regulators’ Intent

Since the crisis began, establishing and safeguarding global and local financial stability have been regulators’ highest priorities. As a result, financial stability is the most developed area of reform. Fundamental requirements have been revised or reinstated, primarily … Read more

sarah paterson

Rethinking the Role of the Law of Corporate Distress in the Twenty-First Century

Thomas Jackson famously described the role of all bankruptcy law as reducing the incentive for individual enforcement against the assets of a distressed company.[1] Although scholars have debated other aspects of Jackson’s thesis, most have continued to identify with this as a central tenet of bankruptcy law. In a recent working paper, Rethinking the Role of the Law of Corporate Distress in the Twenty-First Century, I propose a new taxonomy: the law of corporate distress comprised of insolvency law and restructuring law. I suggest that Thomas Jackson’s description remains apt for part of that taxonomy but draw a distinction … Read more

elizabeth.howell

Short Selling Reporting Rules in the EU and the US: A Greenfield Area

The following post comes from Elizabeth Howell, a doctoral student in law at the University of Oxford and a visiting scholar at Columbia Law School in the Fall Semester 2014. It is related to her paper, ‘Short Selling Reporting Rules in the EU and the US: A Greenfield Area’ that is forthcoming in the European Company Law Journal. Further details are available here http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2536523.

Short selling reporting obligations can be helpful to regulators, particularly in relation to deterring abusive behavior. Following the recent financial crisis, the European Short Selling Regulation (the ‘Regulation’)[1] introduced a common framework for short … Read more

Matthias Lehmann Photo

Structural Reform of Banking Systems: The Global Impact of Legal Fragmentation

One of the key issues in the on-going overhaul of the global financial system is the structural reform of banking systems. Legislatures in different states, e.g. the United States, France, Germany, and the United Kingdom, have all taken measures to protect individual depositors’ assets against losses from risky bank activities. On 29 January 2014, the European Commission joined the transnational effort by publishing its own proposal on the subject. Each measure is slightly different. There are good reasons to wonder about the effect that this type of legal fragmentation will have on the global financial system. In a recent paper … Read more

Baker Botts discusses the Reach of the Sherman Act

In a decision that could have far-reaching implications for U.S. companies and consumers, the Seventh Circuit Court of Appeals recently reiterated that the U.S. antitrust laws stop at the border and do not reach conduct that causes damages in the first instance outside the United States.

In Motorola Mobility LLC v. AU Optronics Corp., No. 14-8003, 2014 WL 6678622 (7th Cir. Nov. 26, 2014), issued shortly before Thanksgiving, the Court dismissed a Sherman Act Section 1, 15 U.S.C. § 1, claim brought by Motorola against members of the liquid crystal display (“LCD”) cartel and affirmed summary judgment for defendants.… Read more

Commissioner Mark Wetjen

Ensuring the Promise of a Centrally Cleared, Global Swaps Market: Next Steps

These remarks were made by Commissioner Mark P. Wetjen before the Futures Industry Association Asia Derivatives Conference

Thank you for that kind introduction, and my thanks as well to the Futures Industry Association for having me here to speak at this year’s Asia Derivatives Conference. I am honored to be with you in Singapore. I want to give a special thanks to my good friend, Walt Lukken, who has shown tremendous leadership in his role at the FIA.

While traveling in Asia this week and meeting with members of the derivatives community, I’ve been struck by both the vastness and … Read more

Erica Gorga (Yale)

The Impact of the Financial Crisis on Nonfinancial Firms: The Case of Brazilian Corporations and the “Double Circularity” Problem in Transnational Securities Litigation

This Article discusses the impact of the international financial crisis on Brazilian capital markets. While the banking industry was not significantly affected, leading nonfinancial corporations experienced severe financial turmoil. Two Brazilian corporations cross-listed in the United States — Sadia S.A. and Aracruz Celulose S.A. — suffered billion-dollar losses when the Brazilian real unexpectedly plummeted in relation to the dollar. These great losses were found to be the result of their highly speculative trading in currency derivatives, despite earlier disclosure that these companies had engaged only in pure hedging activity. Consequently, several private lawsuits were filed both in the United States … Read more

PwC discusses Basel’s Final Net Stable Funding Ratio

On October 31st, the Basel Committee on Banking Supervision (BCBS) issued its final Net Stable Funding Ratio (NSFR), which was originally introduced by BCBS in 2010 and re-proposed in January 2014. The NSFR compares the amount of a firm’s available stable funding (ASF, the ratio’s numerator) to its required stable funding (RSF, the ratio’s denominator) to measure how the firm’s asset base is funded. The NSFR is seen by BCBS as a complement to its previously finalized Liquidity Coverage Ratio (LCR) – recently implemented in the US as a final rule[1] – which is intended to promote short term resilience … Read more

Mayer Brown discusses “Separate Entity” Rule in New York

In a much anticipated decision, New York’s highest court, the Court of Appeals, confirmed on October 23, 2014, that the so-called “separate entity” rule continues to exist as a vibrant doctrine in the State of New York. Under the separate entity rule, a bank’s branches in different jurisdictions are treated as “separate entities” for various purposes, including judgment enforcement.[1] The court’s decision in Motorola Credit Corp. v. Standard Chartered Bank,[2] clears up some of the uncertainties created by that court’s 2009 decision in Koehler v. Bank of Bermuda Ltd., and marks an important victory for the banking community.… Read more

Latham & Watkins discusses US Law Enforcement Efforts to Combat Offshore Fraud

On September 9, 2014, in US v. Robert Bandfield, et al., federal prosecutors in the Eastern District of New York announced the indictment of a US citizen and others, including offshore corporate service providers (CSPs) and investment managers, for conspiring with numerous US citizens to violate securities and tax laws, including evading reporting obligations under the recently implemented Foreign Account Tax Compliance Act (FATCA).[1] According to US prosecutors, the defendants engaged in a US$500 million offshore securities fraud, tax avoidance and money laundering scheme. The indictment describes a sophisticated multi-agency undercover operation and clearly demonstrates the United States’ … Read more

PwC discusses Margin Requirements for Uncleared Swaps

On September 3rd, the prudential regulators (including the Federal Reserve, FDIC, and OCC) re-proposed the second major element of derivatives reform – mandatory margin on uncleared swaps. The re-proposed rule is designed to end years of debate that began with the release of the proposed rule in April 2011 and reflects the international guidelines for uncleared margin finalized by the Basel Committee of Banking Supervision and the International Organization of Securities Commissions (BCBS/IOSCO) in September 2013. See PwC’s Regulatory Brief, Margin on uncleared swaps: Global agreement in theory but not yet in practice (September 2013).

The US re-proposal is largely … Read more

Sullivan & Cromwell discusses Second Circuit’s Application of Morrison v. National Australia Bank

SUMMARY

On August 15, 2014, in a case of first impression involving cross-border securities-based swap transactions, the Second Circuit held that the presumption against the extraterritorial application of Section 10(b), announced by the U.S. Supreme Court in Morrison v. National Australia Bank, 561 U.S. 247 (2010), applies even to claims involving supposedly “domestic” securities-based swap transactions if those claims are “so predominantly foreign as to be impermissibly extraterritorial.” In this case, where the claims against a non-U.S. company were based on statements made abroad and were based on swap transactions that referenced securities trading “only on foreign exchanges,” the … Read more

Andrew Verstein

The Law and Economics of Benchmark Manipulation

The following post comes to us from Andrew Verstein, Assistant Professor of Law at Wake Forest University School of Law. It is based on his recent article, “The Law and Economics of Benchmark Manipulation,” which is forthcoming in the Boston College Law Review and is available here.

This is a period of unremitting market manipulation. Allegations have rocked the markets in interest rates, foreign currency, gold, palladium, milk, oil, biofuels, natural gas, and aluminum, to say nothing of the inexorably rising tide of stock price manipulation. By all accounts, manipulation … Read more

PwC discusses Foreign Bank Compliance with Fed’s Enhanced Prudential Standards

More than five months since the Federal Reserve (Fed) issued its final Enhanced Prudential Standards[1] (EPS) for foreign banking organizations (FBOs), a considerable number of critical questions remain unanswered despite guidance from regulators. The June 26th publication of frequently asked questions (FAQs) primarily repeated or reinforced the EPS rule’s text; however, some additional clarity on key issues such as the level of detail needed for FBOs’ required implementation plans was provided.[2]

We believe the key takeaway is that details matter – both in what has been explained by the Fed and what has yet to be clarified. The Fed … Read more

White & Case discusses DC Circuit’s CFIUS Ruling

On July 15, 2014, the US Court of Appeals for the District of Columbia (DC Circuit) ruled that if the President, pursuant to his powers under the Exon-Florio Amendment to the Defense Production Act of 1950 (DPA), deprives a foreign acquirer or investor in the United States of its constitutionally protected property interests, the foreign acquirer or investor must be accorded certain due process protections. The case at issue, Ralls Corp. v. CFIUS et al, is the first-ever challenge to the review process conducted by the Committee on Foreign Investment in the United States (CFIUS), an inter-agency committee within … Read more