26 July 2013
On July 12, 2013, the US Commodity Futures Trading Commission ("CFTC") approved final interpretive guidance on the cross-border application of its swap regulations, available here (the "Guidance"). Simultaneously, the CFTC approved a new exemptive order, available here (the "Exemptive Order"), to provide temporary relief from compliance with certain of the CFTC's regulatory requirements for swaps. The Exemptive Order includes relief that allows swap dealers ("SDs") and major swap participants ("MSPs") who are not US persons, as well as non-US branches of SDs and MSPs who are US persons ("Foreign Branches"), to delay compliance with certain entity-level requirements and transaction level requirements.
The Guidance generally expands the definition of US Person. It also provides that certain transaction-level and entity-level requirements will not apply to swaps activity outside the United States, although in some cases that exemption will apply only if the CFTC determines that "substituted compliance" with regulation comparable to US regulation is applicable. The CFTC has received, and will be considering, substituted compliance applications from six jurisdictions: Australia, Canada, the European Union, Hong Kong, Japan and Switzerland (the "Six Jurisdictions"). The Exemptive Order offers some phase-in periods for the application of the requirements of the Guidance. The Guidance also includes significant unanticipated changes to the CFTC's treatment of bank branches. In a footnote (fn. 513) the CFTC takes the view that a US branch of a non-US SD or MSP would be subject to transaction-level requirements. The Guidance also sets out a new set of conditions to determine when a trade is made by a Foreign Branch of a US bank.