CFTC Chair J. Christopher Giancarlo warned European Union regulators that the agency does not approve of and will oppose any proposed cross-border legislation that is conflicting or overly burdensome.
In remarks at the Futures Industry Association Expo, Mr. Gianacarlo warned that, if the EU imposed such policies, he would see that the CFTC took material responsive measures. If any foreign jurisdiction were to adopt measures to the detriment of U.S. firms, Mr. Giancarlo stated, the CFTC could delay or withdraw existing exemptions from entities based in "particular overseas jurisdictions." He said that "[o]ther effective options are available in conjunction with fellow U.S. regulatory agencies" and that "the CFTC will not allow U.S. market participants to be put in the completely untenable position of having to choose between violating domestic laws and regulations or violating foreign laws and regulations."
Citing his recent white paper on cross-border regulation, Mr. Giancarlo stated that he is committed to establishing a CFTC cross-border framework that is risk-based and also offers deference to comparable non-U.S. regulations. He stated that he directed CFTC staff to begin the rulemaking process, and he intends to publish "certain proposed and final regulations" in the first half of next year.
In addition, Mr. Giancarlo said that it was unfortunate that a number of the proposed 2017 amendments to the European Market Infrastructure Regulation ("EMIR") would increase the costs to clear at U.S. central counterparties operating in the EU. He said that certain amendments would be "devastating to the FCM industry and to American agriculture" and that the proposed amendments to EMIR raise questions about Europe's commitment to a policy of mutual regulatory deference.
Finally, Mr. Giancarlo reiterated his opposition to (and decision not to move forward on) proposed Regulation Automated Trading ("Reg. AT"), an undertaking he described as an initiative of his predecessor. Mr. Giancarlo acknowledged the possibility and even likelihood of automation causing trading disruptions, however he asserted the (i) the CFTC does not have the resources to implement Reg. AT and (ii) even if the CFTC did, Reg. AT would not be effective in achieving its stated goals.
Commentary / Steven Lofchie
Chair Giancarlo explained that his predecessor had taken a very aggressive stance as to the scope of U.S. regulation. Former Chair Gensler effectively asserted that the Europeans would have to implicitly consent to complying with CFTC regulations if they wanted to do any business involving U.S. businesses or markets. The Europeans appropriately, and successfully, pushed back on this proposition.
When Mr. Giancarlo assumed the role of CFTC Chair, he completely, and appropriately, reversed the stance of the CFTC, saying that he would be accepting of the Europeans being generally responsible for the regulation of their home country firms, so long as the Europeans were likewise accepting of U.S. regulators being generally responsible for the regulation of U.S. firms. That outreach to the Europeans was, in Chair Giancarlo's view, met with a "Gensler-like" response.
Mr. Giancarlo has now said, in a no-nonsense tone, he is disappointed, angry, and prepared to respond in kind. There is no reason to believe he will back down.
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