On July 12, 2012, the CFTC published a proposed interpretive guidance on cross-border application of Dodd-Frank’s Title VII swap provisions. On August 27, 2012, SDUUK issued a comment letter concluding the CFTC’s proposed guidance goes beyond a mere interpretation of the CEA and instead adopts a new regime for cross-border activity that will negatively impact global derivatives business.  Thus, the Proposed Guidance should be modified to provide greater clarity.

More specifically, a careful calibration of the Proposed Guidance is needed to treat market participants similarly, regardless of the structure (branch or entity) or location (U.S. or non-U.S.) they use to serve customers. To achieve these goals, the Proposed Guidance should articulate a more nuanced and risk-based approach to whether a rule is necessary to mitigate a significant risk posed by offshore activities to the U.S. financial system.

Furthermore, the Proposed Guidance would have widespread impact on corporate structure, risk management and efficiency of operations, further evidencing its significant and substantive effect. Based on these impacts, the Proposed Guidance is not substantively different from a material rulemaking, and therefore, SDUUK concludes the Commission should engage in a formal notice of proposed rulemaking.