In a white paper, FIA outlined principles to guide the regulation of derivatives market cross-border activity. FIA characterized its report as a response to the threat of market fragmentation as a result of "more insulated, national approaches [to regulation] that favor direct oversight of both domestic and foreign entities."
FIA highlighted recent developments that prompted such reconsideration, including:
- the London financial center's dissociation with the EU;
- supervisory concerns with respect to OTC markets and clearinghouses;
- China's expanded engagement with global financial markets; and
- plans to establish digital asset regulatory structures.
FIA underscored the importance of international regulatory cooperation. The organization noted a consensus favoring reliance on deference to home country regulation, and asked that regulators consider a number of factors, including:
- determining whether the activity necessitates local regulation;
- the ability to employ international standards as benchmarks;
- if the outcome of a regulation is substantively comparable to results within the regulated entity's home jurisdiction;
- establishing communication between the domestic regulator and relevant foreign regulator; and
- putting in place mechanisms for regulatory collaboration and cooperation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
