WASHINGTON — The failure to harmonize the cross-border application of derivative rules “will be damaging,” according to IntercontinentalExchange Chairman and CEO Jeffrey Sprecher, who testified Tuesday on Capitol Hill at a hearing on the future of the Commodity Futures Trading Commission.
Sprecher argued that recent financial reform efforts put forth by the CFTC leave substantial disparities between the U.S. regulations and those in Europe and Asia. “In order to make long-term business decisions, market participants require certainty that their transactions will not be judged on conflicting standards,” Sprecher said.
Sprecher estimated that 50 percent of the Atlanta-based IntercontinentalExchange’s ICE -1.17% revenues come from entities outside the United States.
“We enjoy sitting in the United States and having the world come to us,” he said. “I think if we start denying access of global market participants to the U.S. it will have broad consequences on keeping these markets here. We have benefitted from localization of commodities.”
Stephen O’Connor, chairman of the International Swaps and Derivatives Association said the U.S. requirement for swaps dealers to register with the CFTC is also harmful to cross-border coordination.
“What has happened is many international banks have stopped trading with U.S. banks in the swaps markets because of the burden association with such registration,” said O’Connor, who believes in a globally harmonized approach. “The U.S. can no longer access liquidity provided by overseas banks.”
O’Connor suggested that the CFTC and Securities and Exchange Commission work together “to achieve consensus with global regulators.”
The deadline for synchronization is fast approaching as the European Securities and Markets Authority prepares to begin the process of deeming the U.S. “equivalent or nonequivalent” under its regulations starting in June.
“The deadlines are frightening in their immediacy,” Sprecher said.