Tim Massad, the new chairman of the Commodity Futures Trading Commission, today offered some insights on the ongoing discussions between the CFTC and European regulators on the issue of clearinghouse recognition.
In a statement given during an open meeting at the CFTC to discuss two unrelated rulemakings, Massad said he was "hopeful" that the two sides could reach an agreement soon. On the other hand, he reaffirmed the CFTC's view that "dual registration" is the right approach and urged European regulators to recognize U.S. clearinghouses "to avoid any potential for market disruption."
As required by the European Market Infrastructure Regulation, European regulators are assessing whether the regulation and oversight of clearinghouses in foreign jurisdictions is "equivalent" to the regulatory regime in Europe. If equivalence is not granted for the U.S. by Dec. 15, European banks that are members of U.S. clearinghouses will become subject to much higher capital requirements, which may cause some of these clearing firms to pull back from the U.S. markets. European regulators have indicated that the decision to grant equivalence to the U.S. is tied to a corresponding willingness by the U.S. to recognize European clearinghouses without requiring those clearinghouses to register with the CFTC or comply with duplicative CFTC rules.
Massad explained that in his view the dual registration approach is necessary in order to meet Dodd-Frank requirements and that this approach has worked well to protect customers. He also noted that two European clearinghouses are already registered with the CFTC, and he commented that dual registration has not prevented them from becoming globally important or attracting U.S. customers.
The main issue that is now being discussed, he said, is to make sure that dual registration "does not create conflicts and inconsistencies." He added that the talks are focused specifically on how to achieve the EMIR requirement for "effective recognition" within the dual registration framework.
"We are looking at whether particular regulatory objectives that we have can be met through the regulation and oversight of the home country regulator," Massad said. "We are also exploring ways to enhance cooperation in the joint supervision of dually registered clearinghouses. I am hopeful we can reach agreement soon."
