On July 12, 2013, the CFTC adopted long-anticipated final cross-border guidance (the “Final Guidance”) that provides guidelines for the application of the CFTC’s swap regulatory regime to cross-border swap activities. At the same time, the CFTC adopted a phase-in compliance schedule (the “Exemptive Order”) that extends, with material changes, the cross-border exemptive order issued by the CFTC in January 2013 (the “January Order”).
The Final Guidance and the Exemptive Order address several important topics, including:
- the final definition of U.S. person for purposes of the CFTC’s swap regulatory regime;
- guidance on which swaps a non-U.S. person must include in, and can exclude from, its swap dealer de minimis and major swap participant (“MSP”) threshold calculations;
- guidance on the types of offices the CFTC would consider to be a “foreign branch” of a U.S. swap dealer or MSP and the circumstances in which a swap transaction would be considered to be “with” such a foreign branch;
- guidance on how swap-related requirements will be applied to cross-border swap transactions and when substituted compliance would be available if the CFTC determines that a foreign jurisdiction’s rules are comparable to its own; and
- phased-in compliance periods for many of the swap regulatory regime’s requirements.
These documents contain many inconsistencies and ambiguities that create significant uncertainty for market participants and will likely require clarification from the CFTC. Some key examples are discussed below.
Comments on the Exemptive Order are due on August 21, 2013.
The full memo published by Davis Polk on July 30, 2013 is available here.
1. Interpretive Guidance and Policy Statement Regarding Compliance with Certain Swap Regulations, 78 Fed. Reg. 45,292 (July 26, 2013), available here; Exemptive Order Regarding Compliance with Certain Swap Regulations, 78 Fed. Reg. 43,785 (July 22, 2013), available here.
2. Final Exemptive Order Regarding Compliance With Certain Swap Regulations, 78 Fed. Reg. 858 (Jan. 7, 2013), available here.