The second area of interest is in the clearing mandate. Although the DFA envisions both a top-down and bottom-up process for applying a clearing mandate, the agencies have so far opted for the bottom-up approach, where central counterparties apply to the regulator for the clearing mandate. The European Union envisions a top-down process (in addition to the bottom-up process) where the European Commission could determine that certain derivatives must be cleared, even if no CCP has applied to clear them. Hong Kong also envisions a top-down process, but other jurisdictions have given no indication of their plans. It is not yet clear whether any of these jurisdictions will automatically accept CCPs domiciled (and regulated) outside their borders as satisfying their own clearing mandate.

The third area of interest is the execution mandate. The DFA requires that any derivative with mandatory clearing must be executed on one of the trading facilities (designated contract market or swap execution facility) unless it isn’t listed anywhere, or unless the trade is end-user-exempt or over the block threshold. Here, other jurisdictions are all over the lot, if they’ve indicated anything at all. Canada has not decided whether to require DCM/SEF execution for any swaps, the EU appears to have a liquidity threshold for required execution and the other jurisdictions have not indicated their plans.

The final area of interest is the reporting mandate. The DFA mandates reporting of all trades in derivatives, whether listed or OTC, and the agencies have required enhanced reporting for major participants and end users who are claiming an exemption. Every other jurisdiction has a similar requirement, that trades be reported to a trade repository. The difficulties may occur in 1) determining whether reporting to a TR in one jurisdiction satisfies the requirements in another jurisdiction and 2) what determines where a trade takes place so as to determine which TR to report to.

An area covered in the U.S. section of the report but not in every other jurisdiction is business conduct. The CFTC’s final rule in this area has several suitability requirements for swap dealers and major swap participants. The EU proposals appear to address risk management requirements but not necessarily suitability while other jurisdictions have nothing, or almost nothing, in this area.

The effort by the CFTC and SEC to coordinate their regulations with their global counterparts is certainly commendable and this report is a good start. It points out some areas where they are already coordinating, and some where more coordination is needed. There is however, a much bigger regulatory cloud on the global horizon.

No other jurisdiction has passed a version of the Volcker Rule and it’s very hard to coordinate with something that isn’t there. So maybe the regulators are looking at second base while the ball is going to first.