Better Markets Applauds CFTC Decision Not to Encourage Regulatory

Arbitrage through Expansive Exemptions for Foreign Clearinghouses

Washington, D.C.  –  Joseph R. Cisewski, Senior Derivatives Consultant and Special Counsel for Better Markets, issued the following statement regarding the Commodity Futures Trading Commission’s (CFTC) framework for exempting certain foreign clearinghouses from U.S. derivatives clearing organization (DCO) registration:

“Although our comment letter to the exempt DCO proposal raised significant legal and policy issues that continue to be relevant and concerning, the CFTC’s final exemptive framework heeds our most critical concerns and contemplates a far more measured approach than the agency proposed in 2019. Most importantly, the CFTC’s final framework limits the exemption to certain foreign clearinghouses accepting non-customer (‘proprietary’) positions cleared directly or indirectly by U.S. clearing members, much as the CFTC has passively allowed for years pursuant to ad hoc staff actions.

“We therefore commend the CFTC for abandoning the worst elements of its 2019 proposal and for its determination not to further enable regulatory arbitrage, not to further complicate U.S. customer recovery efforts in the event of a clearing-member bankruptcy, and not to enact yet another regulation designed to support development of parallel derivatives markets outside of the United States.”

For additional thoughts on the CFTC’s exemptive framework for foreign clearinghouses, read our blog post.

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.com.