“There is going to be enormous pressure for him to compromise,” Christian A. Johnson, professor at the University of Utah law school and author of a paper on the potential for regulatory arbitrage because of cross-border rules, said in a telephone interview on Nov. 5. “Industry will turn on him and international regulators have already turned on him. I don’t know how he will continue to stonewall them.”
The lack of coordination has already led to changes in how overseas firms trade with U.S. companies, according to a Nov. 2 letter from the Japan Financial Markets Council. “Some are looking at ways to avoid any transaction that might lead to a requirement to register with the CFTC. Others are simply refraining from trading,” the group said in a letter representing firms including Morgan Stanley, Bank of Tokyo- Mitsubishi UFJ and Deutsche Bank.
DBS Group Holdings Ltd, based in Singapore, and Nordea Bank AB, the Nordic region’s largest lender, have said they won’t need to register in the U.S. under Dodd-Frank rules. “We do not intend to register as a swap dealer in the U.S. because we expect our trading volumes with U.S.-based counterparties to stay below the threshold which triggers the CFTC registration requirement,” Karen Ngui, a Singapore-based spokeswoman for DBS, said in an Oct. 24 e-mail statement.
Nordea spokesman Erik Durhan said by telephone from Stockholm yesterday that the bank’s trading volumes are also below the U.S. registration requirements. “This gives us the opportunity to continue our trade without registering,” he said.
The CFTC guidance was published in two documents, including an exemptive order preventing Dodd-Frank rules from applying to certain institutions through Dec. 31.
“We need to make sure that we’re giving relief where relief is needed to market participants until we can confirm that the entire world globally is on the same page on cross- border regulations,” Sommers said.
The $648 trillion measure of the global swaps market represents the total notional amounts outstanding of over-the- counter derivativesthrough December 2011, according to the Bank of International Settlements, a Basel, Switzerland-based organization that promotes global financial collaboration and serves as a bank for central banks.