Saturday, February 25, 2012

SEC Chair Says Cross-Border Issues of Dodd-Frank Derivatives Regulation Will Be Addressed in Single Proposal

In the near term, said SEC Chair Mary Schapiro at the PLI SEC Speaks seminar, the Commission will address the most salient international issues of Dodd-Frank OTC derivatives regulation in a single proposal. This will give interested parties an opportunity to consider, as an integrated whole, the SEC’s approach to cross-border transactions and the registration and regulation of foreign entities engaged in derivatives transactions with U.S. parties. Overall regarding implementation of Title VII of Dodd-Frank, the SEC staff is continuing to develop a plan for how the derivatuves regulations will be put into effect. The plan should establish an appropriate timeline and sequence for implementation and avoid a disruptive and costly “big bang” approach.

While some international regulation issues are stand-alone concerns, said the SEC Chair, certain issues cut across the entirety of the implementation of Title VII. Among the most important, given the global nature of the derivatives market, is the international impact of the SEC regulations. Chairman Schapiro said that the SEC is working to coordinate with its foreign counterparts to help achieve consistency among approaches to derivatives regulation. There has been significant progress on the international level. This cross-border approach must strike a balance between sufficient domestic regulatory oversight and the realities of the global market. In that context, she emphasized that a one-size-fits-all approach is neither feasible nor desirable.

On the overall implementation of Title VII, the Chair said that, in the near term, the SEC will complete the last remaining proposals regarding capital, margin, segregation and recordkeeping requirements. And, the agency is already beginning to transition to the adoption phase. As a first step, Commission will soon finalize rules that further define who will be covered by the new derivatives regulatory regime and, next, what will constitute a security-based swap. Finalizing these definitions will be a foundational step, she noted, defining the scope of the new regulatory regime and letting market participants know whether their current activities will subject them to the substantive requirements being adopted. Chairman Schapiro assured that at all stages of implementation those subject to the new regulatory requirements will be given adequate time to comply.