Wall Street Pushes Back on CFTC Advisory

Banks complain that last week's CFTC policy, published as a staff advisory, may expose overseas transactions to even more U.S. regulation.

The largest Wall Street banks are mobilizing to fight a new policy by the U.S. Commodity Futures Trading Commission (CFTC) that gives the regulator broader authority in overseas derivatives deals.

The policy, issued Nov. 14, negates a legal interpretation that banks have been using to keep some swaps trades off electronic platforms and away from CFTC rules enacted to make the market less opaque. The firms and their lawyers say the announcement, which the agency published as a “staff advisory,” is written so broadly it could expose their overseas deals to even more U.S. regulation.

Many of the banks’ complaints focused on the CFTC’s process for issuing the policy, which was drafted by staff members and hasn’t been voted on by the commissioners.

The agency also declined the banks’ request to say publicly when the policy would take effect, the people said. Agency staff told financial industry lawyers that Wall Street would be given time to adjust to the new rules.

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