“US firms will suffer from swaps-collateral rules” says CFTC Commissioner

The FSB has pressed global regulators to adopt initial margin rules as soon as possible.

The US derivatives regulator’s decision to press on with collateral rules for OTC derivatives, despite global delays, will harm US companies, a commissioner for the Commodity Futures Trading Commission (CFTC) warned.

Christopher Giancarlo, a frequent critic of his own agency, slammed the CFTC’s decision to implement initial margin rules for uncleared derivatives on 1 September, as it will make the cost of doing business in the US unnecessarily higher.

 “What makes the U.S. regulators’ decision not to delay so astonishing is its blindness to commercial reality. American markets will now have a higher margin structure than most of the rest of the world giving major overseas derivatives markets a competitive advantage over American markets,” said commissioner Giancarlo.

“The decision ensures that overseas competitors will profit handsomely to the tune of likely tens of billions of dollars in new customer business taken from American firms,”

The statement from commissioner Giancarlo comes days after the Financial Stability Board (FSB) released its own review of the global implementation of the rules, urging countries that have delayed adopting the rules to do so as soon as possible.

Last week, regulators from Australia, Hong Kong and Singapore announced it would delay the collateral rules, as did Europe in June.

Currently only the US, Canada and Japan are set to adopt initial margin rules in September.

Market participants fear that a fragmented timetable across jurisdictions will increase complexity and could disrupt cross-border trading activity. With further ambiguity over when these rules will be adopted in certain countries, firms may be faced with a last minute scramble to implement systems and comply.