June 2012 offered the first serious insight into how international regulators intended to apply their new derivatives regulatory regimes to cross-border issues. On 29th June 2012, the Commodity Futures Trading Commission (CFTC) published its proposed guidance on the extraterritorial application of key provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”).
Earlier the same week, the European Securities and Markets Authority (ESMA) published its consultation paper relating to the array of technical standards to be developed and implemented under the European Market Infrastructure Regulation (“EMIR”), including a summary of specific technical guidance that is being developed on the extraterritorial effect of EMIR.
In parallel, although on different time-frames, Japan, Australia, Canada, Hong Kong and Singapore (among others) are phasing in their own reforms to derivative markets. While several Dodd-Frank deadlines loom at year end, we still have no final guidance on cross-border issues from the CFTC. The comment periods for the CFTC guidance and the ESMA consultation paper both closed in August 2012. The largely opaque nature of these processes, together with the different time-frames for implementation, has resulted in confusion, uncertainty and an increasing demonstrable friction between national regulators.