The Round Table launches the ‘Transatlantic Cooperation Initiative’ (Initiative), which was entered into on October 21, 2004, by CFTC and the CESR, and is notable for the fact that this is the first multi-lateral discussion and issue identification meeting of its kind among US and European derivatives regulators. The increased transatlantic dialogue between the CFTC and CESR is taking place against the backdrop of substantial undertakings by CESR to develop technical and operational advice to the European Commission on multiple EU initiatives establishing a single market, including the new MiFID which will replace the existing Investment Services Directive. Notable, among the various changes made by the new Directive, is the expansion of the definition of financial instruments to include commodity derivatives. In the US context, the CFTC is also revisiting its cross border arrangements to ensure they are sufficiently robust and flexible to meet today’s market needs.
The purpose of the CFTC-CESR dialogueas inaugurated by this Round Table is to institute regular communication in order to share views on regulatory issues of common operational concern, with respect to facilitating, among other things:
- Cross-border transactions by exchanges and firms through promotion of practical, operational arrangements to ease access to each others markets and to avoid unnecessary obstacles or duplicative supervisory requirements; and
- Early identification, discussion and resolution of regulatory and business issues arising from the CFTC’s and CESR’s regulatory agenda, consistent with applicable law.
As part of the two-day Round Table, chaired by Sharon Brown-Hruska, Acting Chairman of the CFTC and Fabrice Demarigny, Secretary General of CESR, the regulators and industry officials participated in three separate panel discussions covering regulatory issues relevant to intermediaries, issues relating to exchanges and issues relevant to end-users. Each panel was moderated by a senior regulator: Walter Lukken, CFTC Commissioner, Michel Prada, Chairman of the French AMF, and David Lawton, Head of Markets Policy at the UK FSA. Jochen Sanio, Chairman of BAFIN co-chaired the regulators’ segment on Friday. The European Commission and the US Treasury participated as observers.
In each of these panels, participants identified issues they confront in transacting transatlantic business including, for example, their experiences in relation to transparency of rules and access procedures, recognition when operating in multiple jurisdictions, and requirements following recognition. Having listened to these discussions, the CFTC and CESR agreed to establish a task force of senior regulators to follow up on the issues identified by participants. The first public output of this work in March will be a draft work program to enhance transparency of regulatory and market information, to facilitate cross border filings applications, and to improve the efficiency of regulatory oversight overall. This work program will be open to comment from interested parties for a period of six weeks, following which it will be finalized and the task force will set about exploring and, where appropriate, implementing, the various proposals according to the time frame set out in the work program.
The Acting Chairman of the CFTC, Sharon Brown-Hruska, who co-chaired the Round Table, thanked CESR for its substantial efforts in sponsoring the meetings in Paris, and said:
“At a time when our markets are becoming increasingly integrated and complex, I am pleased to be able to inaugurate closer discussions between the US and CESR and its constituent members on issues pertinent to moving toward seamless transatlantic business. I am gratified by the strong interest of the derivatives community to enhance the already strong relationships that exist between derivatives regulators and markets in the United States and Europe. I was pleased to help facilitate useful discussion of many practical issues that affect cross-border business and am optimistic that this Round Table, and the process it has initiated, will lead to practical steps that will expand the efficient execution of business on both sides of the Atlantic while also promoting stronger and more operational regulatory contacts. I look forward to working closely with my European colleagues going forward.”
Arthur Docters van Leeuwen, Chairman of CESR, who was unable to attend due to unforeseen circumstances noted:
‘The development of a regular dialogue with the CFTC is essential given the interdependency of our markets and the very dynamic nature of derivative markets. The outcome of implementing the framework introduced by the Financial Services Action Plan (FSAP), which includes a large number of legislative initiatives, should not only facilitate the integration of markets within Europe, but must also take into account and work effectively in the global context. This dialogue therefore reflects regulators commitment to keep pace with the fast moving nature of these markets and a strong willingness to ensure our regulatory approaches reflect the international dimension of our markets.’