Key Points:
Jeff Chen, a partner at the leading US law firm Cadwalader, Wickersham & Taft LLP, joins Clayton Utz partner Louise McCoach in this special collaboration to outline a recent development in the Dodd-Frank regime and its effect on Australian companies.
The Australian OTC derivatives market has welcomed the US Commodity Futures Trading Commission's (CFTC) 20 December 2013 announcement that it has approved a series of broad comparability determinations with respect to regulatory frameworks for OTC derivatives enacted in Australia, Canada, the EU, Hong Kong, Japan and Switzerland.
The determinations mean that major Australian banks who are registered as swap dealers with the CFTC (ANZ, Commonwealth Bank, Macquarie Bank, National Australia Bank and Westpac) can comply with the Australian regulatory regime for OTC derivatives in a number of areas, instead of complying with the relevant provisions of the US Dodd-Frank Act. This decision is expected to significantly reduce the Dodd-Frank compliance burden for Australian swap dealers and result in cost savings. More detailed information in relation to the substituted compliance determinations is available here.
Notwithstanding this welcome development, the Dodd-Frank Act still raises complicated cross-border issues which Australian swap dealers need to be aware of. One of the most debated is the potential application of the Dodd-Frank transaction-level requirements to swaps entered into between a non-US swap dealer (with involvement of its personnel or agents located in the United States) and another non-US person.
There has been some movement on this front with the release of a CFTC Staff Advisory on 14 November 2013. This states that a non-US swap dealer would be required to comply with the transaction-level requirements for transactions "arranged, executed or negotiated by personnel or agents" of non-US swap dealers located in the United States with non-US persons (Covered Transactions). Subsequent to the Staff Advisory, the Commission provided non-US swap dealers with no-action relief from certain of the transaction-level requirements for Covered Transactions until 15 September 2014.
The CFTC has opened this issue up for comment until 10 March 2014 before finalising its policy on this point. In a dissenting statement of Commissioner Scott D. O'Malia, comments are also being sought on more fundamental jurisdictional issues relating to the CFTC's cross-border final guidance and on the applicability to non-US swap dealers of transactional-level requirements generally.
We encourage all Australian swap dealers to respond to the CFTC's request for comments. If you would like any assistance with preparing a response or if you have any questions about the impact of the above developments on your business, please contact Jeff Chen on +852 2946 1100 or Louise McCoach on +61 2 9353 4679.
You might also be interested in...
- How will new margin requirements affect securitisation transactions which utilise OTC derivatives?
- Mandatory central clearing for foreign currency-denominated derivatives the next step for Australia?
- Mandatory OTC derivatives reporting now a reality
- Australian OTC derivatives reforms passed – with some changes to meet electricity market concerns
- ADIs welcome transitional relief to Basel III counterparty credit risk measures implementation
- Regulators support industry-led move to OTC central clearing for now, and broad mandatory reporting
- Derivatives Developments – A New World Order
- Government introduces derivatives reform Bill into Parliament
- One month left to shape APRA's implementation of Basel III OTC derivatives capital requirements
- FIA-ISDA Addendum for cleared derivatives transactions released
- ISDA publishes Tri-Party IA Notices
- ISDA Dodd-Frank Protocol opens for adherence
- ISDA Eurozone Contingency Planning - New Illegality/Force Majeure Protocol
- ASIC looks at relaxing financial requirements for issuers of electricity derivatives
- English court upholds ISDA's interpretation of ISDA Master Agreement
- Government consults on new OTC derivatives framework for Australia
- CAMAC releases report on derivatives regulation
- ISDA publishes draft Appendix to the 2011 ISDA Equity Derivatives Definitions
- Documentation developments: Section 2(a)(iii) of the ISDA Master Agreement
- Where to now for OTC derivatives – lessons from ISDA's AGM
Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.
