Dodd-Frank and Selected
International Aspects
OTC Derivatives – Reporting Standards
Shannon Rhoten
April 16, 2014
Executive Summary
• The Dodd-Frank Act was passed in 2010 as a reaction to the
Financial Crisis of 2007-2009; its goals were to promote
transparency and stability within the financial system. DoddFrank’s regulation of reporting standards of OTC derivatives
aims to improve transparency, but these new transaction
reporting provisions have proved to be costly and burdensome
to many companies and banking institutions. Thus,
subsidiaries and branches of U.S. banks in other countries
should be able to follow swap rules of foreign nations under
the “substituted compliance” rule of the Dodd-Frank Act in
order to remain competitive in a global market while
maintaining transparency.
Dodd-Frank Wall Street Reform and
Consumer Protection Act (2010)
• Overhaul of the U.S. financial system after the Financial Crisis
• Largest since the Great Depression
• Aimed to promote stability and transparency within the
financial sector
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Improved banking provisions
Built upon the Bank Holding Company Act of 1956
Closer regulation of insurance sector
Uniform standards of risk management
Greater governance and oversight of institutions
Anti-predatory lending
Dodd-Frank and Extraterritorial Issues
• Derivatives regulation
• Instruments that derive their values from other assets (indexed or
interest rate)
• Swaps, options, futures
• OTC derivatives
• “Unlisted stock”
• Smaller companies or those with bad credit ratings
• Under Dodd-Frank, those wishing to enter into contracts over
a specified amount must register with the CFTC and follow
Dodd-Frank rules
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Reporting of transactions
Applies to all branches
Exception made for “substituted compliance”
Seen by some as a burden
Proposal
• Subsidiaries and branches of U.S. banks in other countries
should be able to follow swap laws of foreign nations under
the “substituted compliance” rule of Dodd-Frank
• Enhance the ability to compete while maintaining transparency
• Compliance with G-20 and Basel Accord provisions on swap
agreements
• Regulation of swaps is becoming more of an international
norm
• European Union - EMIR
Sources
• The CFTC’s webpage about Dodd-Frank and its impact on futures
trading provides a great wealth of information on the requirements
of swaps participants.
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http://www.cftc.gov/lawregulation/doddfrankact/index.htm
• PwC released a helpful brief for companies that describes
application of the derivative guidance by the CFTC.
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http://www.pwc.com/en_US/us/financial-services/regulatory-services/publications/assets/pwc-cftc-cross-borderderivatives-regulation.pdf
• The Bank of International Settlements released summary
description of margins for OTC derivative transactions.
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http://www.bis.org/publ/bcbs261.pdf
• This article from Jones Day provides commentary on swaps
requirements under Dodd-Frank.
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http://www.mondaq.com/unitedstates/x/277256/Commodities+Derivatives+Stock+Exchanges/Application+O
f+Dodd+Frank+Requirements+To+Swaps+Between+NonUS+Swap+Dealers+And+NonUS+Counterparties
• This article from Great Britain’s Financial Conduct Authority gives
information about EMIR, the E.U.’s version of the Dodd-Frank
regulations as a point of comparison.
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http://www.fca.org.uk/firms/being-regulated/meeting-your-obligations/firm-guides/emir