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October 13, 2022

CFTC Must Not Substitute Weaker Foreign Rules on Swap Dealers for U.S. Requirements

WASHINGTON, D.C.— Stephen Hall, Legal Director and Securities Specialist at Better Markets, released the following statement in connection with Better Markets filing a comment letter in response to the Commodity Futures Trading Commission’s proposed order conditionally providing for substituted compliance for nonbank swap dealers organized and domiciled in Japan.

“In response to the 2008 financial crisis, Congress passed the Dodd-Frank Act which included critical reforms to the oversight of the derivative markets.  Those reforms included minimum capital requirements to ensure the stability of nonbank swap dealers and financial reporting obligations to ensure transparency and regulatory oversight. The CFTC’s proposed order finds that the capital and reporting requirements applicable to nonbank swap dealers in Japan are essentially comparable to U.S. requirements.  But in fact, the foreign requirements clearly appear to be weaker and allowing them to substitute for the U.S. rules would undermine the post-crisis reforms that are so important to preventing the next financial crisis.

“Notably at issue are the capital requirements applicable to nonbank swap dealers, perhaps the single most important pillar among the financial reforms adopted in the aftermath of the 2008 financial crisis. The adequacy of those capital requirements, both in the U.S. and in other countries, is critical to preventing another crisis like the one that engulfed the U.S. and the world just a decade and a half ago. Moreover, this is the first time the Commission is formally applying its substituted compliance framework to the capital rules. Setting the right precedent, one that ensures the application of robust capital requirements to foreign swap dealers, is vital to the protection of the American people.

“Based upon the current record, the capital and financial reporting requirements adopted in Japan do not appear comparable to those under the Commodities Exchange Act (CEA). Absent further disclosure, specifically relating to the treatment of capital between the two regimes, Better Markets believes the proposed order cannot be granted consistent with the law.”

You can find our full public comment letter here.


Better Markets is a non-profit, non-partisan, and independent organization founded 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

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