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May 2, 2013

SEC proposal: Has the ET common sense eagle landed in the US?

The SEC announced its ET proposal – the first rule-making since Mary Jo White took the helm.  See articles in Risk (subs.), Bloomberg and the 650 page proposal. In particular, SECs proposal is already being welcomed as a sensible approach to substituted compliance without CFTC's rule by rule comparison which would exempt permanently US banks overseas subsidiaries, branches and firms they may guarantee from being subject to US regulations if not trading with US parties provided a comparable regime would cover them (e.g. ESMAs, JFSAs). Whilst the direct impact is restricted largely to single name CDS (including single names) and equity OTC derivatives, the influence this may or may not have on CFTC is perhaps of more interest.  CFTC is due to handle the identical issue but for interest rate swaps, index CDS, FX and commodities when its exemptive relief expires in July.  Taking a similar approach to SEC would evidently largely make its current exemptive relief permanent.


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