Treasury recommends that the CFTC and the SEC undertake and give high priority to a joint effort to review their respective rulemakings in each key Title VII reform area. The goals of this exercise should be to harmonize rules and eliminate redundancies to the fullest extent possible and to minimize imposing distortive effects on the markets and duplicative and inconsistent compliance burdens on market participants.
Treasury recommends that Congress consider further action to achieve maximum harmonization in the regulation of swaps and security-based swaps.
Treasury recommends that U.S. regulators take steps to harmonize their margin requirements for uncleared swaps domestically and cooperate with non-U.S. jurisdictions that have implemented the Basel Committee on Banking Supervision-International Organization of Securities Commissions (BCBSIOSCO) framework to promote a level playing field for U.S. firms.
Treasury recommends that the CFTC take steps to simplify and formalize all outstanding staff guidance and no-action relief that has been used to smooth the implementation of the Dodd-Frank swaps regulatory framework. This should include, where necessary and appropriate, amendments to any final rules that have proven to be infeasible or unworkable, necessitating broadly applicable or multiyear no-action relief.
Cross-border Application and Scope: Treasury recommends that the CFTC and the SEC provide clarity around the cross-border scope of their regulations and make their rules compatible with non-U.S. jurisdictions where possible to avoid market fragmentation, redundancies, undue complexity, and conflicts of law. Examples of areas that merit reconsideration include:
Substituted Compliance: Treasury recommends that effective cross-border cooperation include meaningful substituted compliance programs to minimize redundancies and conflicts.
ANE Transactions: Treasury recommends that the CFTC and the SEC reconsider any U.S. personnel test for applying the transaction-level requirements of their swaps rules.
Treasury recommends that regulators properly balance the post-crisis goal of moving more derivatives into central clearing with appropriately tailored and targeted capital requirements.
Treasury recommends that the CFTC maintain the swap dealer de minimis registration threshold at $8 billion, and establish that any future changes to the threshold will be subject to a formal rulemaking and public comment process.
To provide regulatory certainty and better facilitate appropriate exceptions from the swaps clearing requirement for commercial end users engaged in bona fide hedging or mitigation of commercial risks, Treasury would support a legislative amendment to CEA Section 2(h)(7) providing the CFTC with rulemaking authority to modify and clarify the scope of the financial entity definition and the treatment of affiliates.
Any legislative amendment should provide the SEC analogous rulemaking authority under Exchange Act Section 3C(g) with respect to exceptions from the clearing requirement for security-based swaps.
Treasury recommends that the CFTC complete its position limits rules, as contemplated by its statutory mandate, with a focus on detecting and deterring market manipulation and other fraudulent behavior. Among the issues to consider in completing a final position limits rule, the CFTC should:
Treasury recommends that the CFTC:
Treasury supports the CFTC’s newly launched “Roadmap” effort, as announced in July 2017, to standardize reporting fields across products and SDRs, harmonize data elements and technical specifications with other regulators, and improve validation and quality control processes.