The US regulator implementing tough new derivatives reforms has won a legal battle against three trade associations accusing it of overstepping its boundaries on overseas transactions.
The Commodity Futures Trading Commission (CFTC) is responsible for implementing new rules around swaps and is aiming to apply them both domestically and outside of the US.
Outlining how the rules would be rolled out overseas in July last year, the CFTC ended up facing legal action from three industry trade bodies.
They believed the CFTC’s overreach “could cause fragmentation of global markets which will result in reduced liquidity, significant harm to market participants and the impairment of market-based financing.”
The lawsuit has now been thrown out by a Judge in the US, which said any action would be "unnecessarily disruptive to the CFTC's mission and the purposes of the Dodd-Frank Act."
The decision clears the way for the CFTC to resolve its differences with European regulators and come to an agreement on the cross-border application of rules.
“I am pleased the court upheld the Commission’s July 2013 policy statement on the cross-border application of Title VII swaps provisions, and rejected a sweeping injunction of the rules that are at the heart of Dodd-Frank’s overhaul of the swaps markets,” said new CFTC chairman Tim Massad.
“I am committed to continuing our efforts to reform the swaps markets, including addressing Congress's concerns that risks undertaken abroad might threaten the health of the US economy.”
The three trade associations which took action against the CFTC were The Securities Industry and Financial Markets Association, the International Swaps and Derivatives Association, and the Institute of International Bankers.