MINUTES OF THE 

FOURTEENTH MEETING OF THE 

U.S. COMMODITY FUTURES TRADING COMMISSION'S 

GLOBAL MARKETS ADVISORY COMMITTEE 

NOVEMBER 7, 2012 

The Global Markets Advisory Committee (GMAC or Committee) convened for a public meeting 

on Wednesday, November 7, 2012, at 9:30a.m. at the U.S. Commodity Futures Trading 

Commission's (CFTC or Commission) Headqumiers Conference Center, located at Three 

Lafayette Center, 1155 21st St. NW, Washington, DC. The meeting consisted of two panels. 

Panel I featured U.S. and international regulators who provided updates regarding their 

respective jurisdiction's implementation of over-the-counter (OTC) derivatives reform and 

discussed their cross-border implications. Panel II featured GMAC members who discussed 

issues concerning the current state of OTC derivatives reform. 

GMAC Members in Attendance 

Ronald H. Filler, Director of the Center for Financial Services Law, New York Law School 

Richard Berliand, Member, Supervisory Board, Deutsche Borse AG 

George Crappie, Co-Chahman and Co-Chief Executive Officer, The Millburn Corporation 

David Downey, Chief Executive Officer, OneChicago 

BryanT. Durkin, Chief Operating Officer, CME Group 

Robert F. Klein, Managing Director and Associate General Counsel, Citigroup Global Markets, 

Inc. 

Bonnie Litt, Managing Director and Associate General Counsel, Goldman, Sachs & Co. 

James F. Lubin, Managing Director, CBOE Futures Exchange 

Stephen O'Connor, Chairman, International Swaps and Derivatives Association 

Jiro Okochi, Chief Executive Officer and Co-Founder, Reval 

Dan Roth, President and Chief Executive Officer, National Futures Association 

Chuck Vice, President and Chief Operating Officer, IntercontinentalExchange, Inc. (for Jeffrey 

Sprecher, Chaitman and Chief Executive Officer, Intercontinental Exchange, Inc.) 

CFTC Commissioners and Staff in Attendance 

Chairman Gary Gensler 

Commissioner Scott O'Malia 

Commissioner Jill Sommers 

Commissioner Mark Wetjen 

Dan M. Berkovitz, General Counsel 

Carlene Kim, Deputy General Counsel, Regulatory 

U.S. and International Regulators in Attendance 

Brian Bussey, Associate Director, Division of Trading and Markets, Securities and Exchange 

Commission 

Robert Cook, Director, Division of Trading and Markets, Securities and Exchange Commission 

Daphne Doo, Director of Supervision of Markets, The Securities and Futures Commission, Hong 

Kong 

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Kenneth Gay, Lead Economist, Macroeconomic Surveillance Depatiment, Monetary Authority 

of Singapore 

Oliver Harvey, Senior Executive Leader, Financial Market Infrastructure, Australian Securities 

and Investment Commission 

Peter Kersten, First Counselor Economics and Finance, European Commission 

Christian Lachaussee, Director, Derivatives Oversight, Quebec, Canada 

Ryan Ko, Associate Director of Supervision of Markets, The Securities and Futures 

Commission, Hong Kong 

Masamichi Kono, Vice Commissioner for International Affairs Financial Services Agency, Japan 

Financial Services Authority 

Jun Mizuguchi, Assistant Commissioner for International Affairs Financial Services Agency, 

Japan Financial Services Authority 

Ken Nagatsuka, Assistant DireCtor, Capital Markets Policy Division, Monetary Authority of 

Singapore 

Hidetaka Nishizawa, Deputy Director for International Financial Markets, International Affairs 

Financial Services Agency, Japan Financial Services Authority 

Emil Paulis, Director of Financial Markets, European Commission 

Patrick Pearson, Head of Unit, Financial Market Infrastructure, European Commission 

Nathalie Piscione, Senior Officer, Post-trading, European Securities and.Markets Authority 

Fabrizio Planta, Senior Officer, Post-trading, European Securities and Markets AuthorityDerek 

West, Senior Director, Derivatives Oversight, Canadian Securities Administrators 

I. Opening Remarl<.s 

Commissioner Jill Sommers called the fomieenth GMAC meeting to order at 9:30a.m. 

She welcomed attendees and introduced Ronald H. Filler of New York Law School as the newly 

appointed GMAC Committee Chair. Commissioner Sommers noted that the Commission has 

been working diligently with domestic and international regulators to coordinate regulation of 

the global swaps market. She also noted that the Commission had issued a proposed Interpretive 

Guidance (I G) for the cross-border enforcement of the Dodd-Frank swaps provisions, as well as 

a proposed Exemptive Order (EO), and that the Commission had received numerous comments 

regarding these. Commissioner Sommers fmiher noted that global coordination is the key to 

regulating the OTC derivatives market. 

Chairman Gensler made his opening remarks next. He first thanked Commissioner 

Sommers for her leadership on international issues and of the Committee, and noted the progress 

that the CFTC and other international regulators have made in bringing reform to the swaps and 

OTC derivatives marketplace since the 2009 Pittsburgh meeting which set a December 2012 

reform deadline. Chairman Gensler also noted that the Commission was working to complete an 

exemptive relief order so that certain rules would not take effect until the Commission sorted 

through the substituted compliance issues. He further noted that the Commission was working to 

finalize key parts of the IG, particularly the definition of a "U.S. person" and definitions 

involving what might be entity level versus transaction level requirements. 

Commissioner O'Malia then made his opening remarks. He thanked Commissioner 

Sommers for calling the meeting and the participants for attending. He noted the impmiance of 

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international agreement on the OTC derivatives regulations and also stated that the CFTC cannot 

dictate rules to the world and expect that they be adopted in whole cloth. He then voiced 

concerns regarding competitive imbalances that may be caused by the Commission's rules. 

Commissioner Wetjen also offered opening remarks. He thanked the Commissioners for 

calling the meeting and noted the impmiance of continued coordination between international 

and domestic regulators. He also stated that he looked forward to hearing from the speakers and 

noted that the information from the meeting will be useful to the Commission. 

Finally, Mr. Filler made opening remarks. He first thanked the Commission, especially 

Commissioner Sommers, for his appointment and then thanked the Commission and its staff for 

their work in implementing the Dodd-Frank rules. He next welcomed the international 

regulators and noted that he hoped that the meeting would clearly reflect the varying policy 

differences that exist globally. Following Mr. Filler's remarks, Commissioner Sommers asked 

the international regulators to briefly introduce themselves. 

II. CFTC and SEC Presentations on Cross-Border Rulemakings and Guidance 

A. Presentation by Ms. Kim, CFTC 

Commissioner Sommers next turned to Ms. Carlene Kim for her presentation. Ms. Kim 

began the panel discussion with a broad overview of the IG and the EO proposals. She explained 

that Section 2(i) of the Commodity Exchange Act (CEA) provides that the Dodd-Frank swap 

provisions shall not apply to activities outside the U.S. unless those activities have a direct and 

significant connection with or effect on U.S. commerce. She also explained that the proposed IG 

and policy statement describe the Commission's interpretation of Section 2(i) as it applies to the 

Dodd-Frank provisions in the cross-border context. 

Ms. Kim then noted that the proposed IG addresses when a non-US entity would be 

required to register as a swap dealer (SD) or Major Swap Pmiicipant (MSP) and the extent to 

which Dodd-Frank swap provisions would apply to such registrants. She also noted that the 

proposed IG provides a general framework for a substituted compliance regime under which the 

Commission would permit non-US registrants to comply with the requirements in their home 

jurisdiction, instead of Dodd-Frank. Furthermore, she noted that the proposed IG addresses the 

extent to which Dodd-Frank swap provisions would apply to swap transactions between counter 

pmiies, neither of which are registrants. 

Following the overview, Ms. Kim briefly discussed the legal and policy rationale behind 

the proposed IG and also discussed its key elements: the definition of a "U.S. person" and the 

Commission's tiered approach to the Dodd-Frank swap provisions. Regarding the "U.S. person" 

definition, she explained that it was intended to include entities or persons organized abroad with 

activities that have a direct and significant nexus to U.S. commerce. She also noted that the 

Commission had received comments concerned about the breadth of the definition and that her 

staff is working to address those concerns. As for the Commission's tiered approach, she 

explained that there is an entity-level requirement which would apply fitm-wide and there is a 

transaction level requirement which would apply depending on the nature of the counterparties. 

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Ms. Kim then reported on the aspects of the proposed guidance that would apply to a 

non-U.S. entity. She described when a non-U.S. entity would be required to count swaps 

transaction in determining whether a de minimis threshold is met. Regarding entity-level 

requirements, she noted that non-U.S. registrants would be permitted to exercise substituted 

compliance; however, substituted compliance for swap data repository (SDR) reporting would 

only be permitted if the Commission has direct access to the data. As for transaction level 

requirements, she stated that a non-U.S. entity need not comply with these requirements when 

dealing with other non-U.S. entities unless those counterparties are guaranteed by a U.S. person 

or is an affiliate conduit of a U.S. person. However, even in those instances, Ms. Kim noted that 

the Commission has proposed to recognize substituted compliance. 

Following these discussions, Ms. Kim added a few remarks about affiliate conduits and 

the Commission's concerns regarding them. She also noted that foreign branches of U.S. swap 

dealers and MSPs generally would be subject to the same requirements of its head U.S. office, 

but would not need to comply with external business conduct rules when facing non-U.S. 

counterpmiies and may use substituted compliance. 

Ms. Kim next repmied on substituted compliance. She noted that the Commission's 

proposed guidance broadly described a process for and the factors it would consider in making 

comparability determinations. Specifically, the Commission is not looking for identical 

regulations abroad, but will consider all relevant factors including the scope and objectives of the 

relevant regulatory requirements and the comprehensiveness of the foreign regulators 

supervisory compliance program. In addition, the Commission will be approaching 

comparability assessments on a category by category basis, not a rule by rule analysis. 

Furthermore, non-registrants must generally comply with certain transaction level requirements, 

including reporting, record-keeping, clearing and execution when at least one counterparty is a 

U.S. person. 

Ms. Kim then briefly discussed the proposed temporary relief which would permit nonU.S. registrants to delay compliance with entity level requirements until July of next year. 

Additionally, she noted that non-U.S. counterpatiies would be permitted to delay compliance 

with transaction level requirements until that time. Finally, Ms. Kim noted that the Commission 

is reviewing both the proposed EO and IG, which reflect careful consideration by the staff of 

over 200 comments received on the IG and the nearly 30 comment letters on the proposed EO. 

B. Presentations by Mr. Bussey and Mr. Cook, SEC 

Following Ms. Kim's presentation, Commissioner Sommers turned to Mr. Bussey and 

Mr. Cook from the U.S. Securities and Exchange Commission (SEC) for their presentations. Mr. 

Cook first noted that he would be providing information on where the SEC is in the overall 

process of implementing the securities-based swamp provisions of Title VII and also on how the 

SEC expects to address the cross-border issues. Mr. Cook also noted that the views he would be 

expressing at the meeting are his own and do not necessarily reflect the views of the SEC, the 

Commissioners, or staff as the SEC, as a matter of policy, disclaims responsibility for statements 

by SEC employees. 

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Mr. Cook then reported that the SEC has now proposed all of the major rules required by 

Title VII for securities-based swaps and has adopted some final rules, including those related to 

clearing as well as joint definitional rules related to swap dealers and MSPs with the CFTC. He 

also repmied that the SEC had issued a policy statement in June requesting comments on the 

sequencing of compliance dates for when the Title VII rules would take effect. Mr. Cook 

explained that in the process of proposing these rules, the SEC has generally not addressed their 

cross-border implications, and this is because the SEC intends to address the international 

applications of Title VII in a single proposing release, rather than in a piecemeal fashion. 

Mr. Cook next informed the Committee that the cross-border release will be published in 

the next few months, before the substantive rules take effect, so that the SEC can consider 

comments received on cross-border. He also noted that the preparation of the cross-border 

release has been difficult and substantial for a number of reasons: 1) the SEC is doing this as a 

rulemaking proposal rather than an interpretive guidance, 2) the scope of the rulemaking 

proposal is very broad, and 3) there are challenges associated with imposing a new regulatory 

regime on a preexisting market. 

Mr. Cook then noted the global nature of the securities-based swaps market and stated 

that in addition to thinking about reducing system risk and protecting investors, regulators need 

to consider foreign regulatory frameworks and intemational comity. In addition, they need to 

avoid cross-border regulatory arbitrage or competitive imbalances, as well as the duplication of 

rules or creation of conflicting requirements. He further explained that the SEC has been 

considering these factors by working with foreign regulators and CFTC staff and by preparing 

and sharing detailed charts on Title VII. 

III. Panel 1: Regulatory Updates from International Regulators Regarding CrossBorder Implications of Each Respective Jurisdiction's OTC Derivatives Reform 

A. Presentation by Mr. Kono, Japan Financial Services Authority 

Following Mr. Cook's presentation, the intemational regulators presented on the crossborder implications of their OTC derivatives reforms. Mr. Kono presented first noting that his 

comments should only be attributed to him, and not necessarily to the Japan Financial Services 

Authority (JFSA) or the International Organization of Securities Commission (IOSCO) Board, 

on which he serves as the chair. He then noted the collective commitment that the G20 

countries made in Pittsburgh relating to the OTC derivatives markets and commended the CFTC 

for its efforts to comply with the end of2012 deadline. 

Mr. Kono next repmied that Japan is also working to meet the G20 commitments. In 

May 2010, Japan enacted a law that requires clearing with Central Counterpmiy Clearing Houses 

(CCPs) and reporting to trade repositories (TR), and in September 2010, Japan enacted 

legislation that will require the use of electronic trading platforms. 

Mr. Kono then turned to a discussion of the Commission's proposed reforms. He noted 

that Japanese market participants would like more clarity regarding CFTC's registration 

requirements for Japanese firms when they eventually register as swap dealers. With respect to 

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substituted compliance, he noted that he would also like to see more clarity and some assurances 

that Japanese regulations would qualify as being equivalent on OTC derivatives transactions. 

Mr. Kono also voiced concerns about duplicative requirements for central clearing and data 

reporting in cross-border transactions and stated that Japan will refrain from applying its rules to 

cross-border transactions until international agreements are in place. Mr. Kono then noted he 

would like to see Japan's CCP be licensed by the CFTC, and would also like to see common 

rules applied by both the CFTC and SEC 

Mr. Kono next reported that the JFSA and Banlc of Japan submitted joint comments in 

August 2012 which raised concerns regarding overlapping and conflicting regulations and the 

need for international coordination in cross-border regulation. In addition, he stated that the joint 

comments requested clarification on substituted compliance, procedures, and timing, and also 

requested a deferral of the application of CFTC's regulations with regard to non-U.S. persons. 

He fmiher noted that the comments requested exclusion of cetiain transactions from the 

calculation of swaps transaction with regard to the de minimis threshold for non-U.S. person. 

Mr. Kono then stated that he would like to see more clarity regarding the Commission's 

rules before they come into force, and that the challenges non-U.S. persons are facing in terms of 

preparations, potential conflicts and inconsistencies, could result in major reductions in market 

liquidity and/or shifts in transaction venues. He also noted the necessity of having a CCP 

licensed in both Japan and the U.S. so that market participants can complete swaps without being 

in conflict with both U.S. and Japanese regulations. Mr. Kono then noted that international 

cooperation is necessary to avoid duplicative and conflicting regulation at both entity and 

transaction-levels. 

B. Presentation by Mr. Planta, European Securities and Marl{ets Authority 

Mt. Planta began with an update on the European Union's (EU) regulatory reforms. He 

repmied that the legislation implementing the G20 mandate went into force on September 16, 

2012. He also repotied that the European Securities and Markets Authority (ESMA) delivered 

technical standards necessary for the regulations to take effect to the European Commission (EC) 

in late September, and that the EC is expected to endorse the technical standards by the end of 

the year. Mr. Planta also noted that of the more than fmiy technical standards, the ESMA did not 

deliver two to the EC and chose to postpone these instead. 

Mr. Planta then turned to a discussion about the European approach to third countries. 

He repmied that the EC had mandated that the ESMA issue technical advice for assessing the 

equivalence of different jurisdictions in three areas: OTC derivatives, risk mitigation techniques, 

and trade repository requirements. He also emphasized the benefits of an equivalence approach 

compared to a registration and substituted compliance approach and expressed his concerns 

about the U.S. approach, noting high compliance costs and the difficulty in concluding cetiain 

transactions because of rule conflicts. Mr. Planta concluded his presentation by stating that 

international regulators have the responsibility to find mutually acceptable, workable issues to 

resolve these concerns. 

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C. Presentation by Mr. Paulis, European Commission 

Mr. Paulis presented next and reported that the EU has a comprehensive regulatory 

framework in place and is on track to fully implement the G20 commitments. He also noted that 

in many instances, EU rules are quite often stricter than U.S. rules. Mr. Paulis then reported that 

the derivatives market is a hugely impmiant global market and that it is impmiant for the EU to 

deliver in the areas of banking and derivatives. He also stressed that no one foreign regulator can 

succeed in controlling the market by itself and that the EU' s goal is not about extending its laws 

beyond its borders but about closing loopholes through cooperation among regulators. 

Mr. Paulis then explained that the EU has within its statute a full system of substituted 

compliance in place. He repmied that the mandatory clearing imposed by the G20 is a novelty 

and that it is impmiant that regulators refrain from adding obligations which are not absolutely 

necessary. This means that regulators should try to avoid the application of multiple rules where 

possible. He also echoed Mr. Planta's remarks of the impmiance of having one set of applicable 

rules, and he noted that the issue with multiple rules is that they can create an undue burden 

which is not necessarily required to ensure financial stability in the markets. 

Following this, Mr. Paulis expressed his concerns about the reach of U.S. and 

international laws. Specifically, he stated that regulators should try to reduce this reach to a 

minimum and he provided the registration requirement as an example. Mr. Paulis also voiced his 

concern about substituted compliance, noting that it should only be available if comparable 

standards are vigorously enforced. He explained that substituted compliance is not a blank check 

and that it must go hand-in-hand with cooperation between regulators. Further, he noted that in 

the case of substituted compliance, equivalence, or recognition to a third country regime, there 

needs to be a claw back power. Finally, Mr. Paulis stated that substituted compliance should not 

be equivalent to soft enforcement and that if there is no substituted compliance in the area of 

mandatory clearing, then the system is simply not workable. 

D. Presentation by Mr. Pearson, European Commission 

Mr. Pearson delivered his presentation next. He first noted that the EU has assessed 

CFTC's and the EU's derivatives regulations and has concluded that these rules will result in 

global inconsistencies, conflicts, and gaps. He also voiced concern that many of the G20 

expectations and requirements will not be met. Mr. Pearson then provided examples detailing 

how the proposed approaches are problematic. For example, he noted that conflicting clearing 

requirements will prevent some trades from being executed in either jurisdiction, which will have 

adverse effects on the economy. Mr. Pearson also highlighted potential conflicts between EU 

and U.S. swap data reporting requirements. Finally, Mr. Pearson noted that the CFTC's 

registration requirements, definition of "U.S. persons", and the scope of substituted compliance 

are problematic, but that these and other issues can be resolved through cooperation. 

E. Joint Presentation by Mr. Harvey, Australian Securities and Investment 

Commission; Mr. Ko, The Securities and Futures Commission, Hong Kong; and 

Mr. Nagatsuka, Monetary Authority of Singapore 

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1. Presentation by Mr. Harvey, Australian Securities and Investment 

Commission 

Mr. Harvey presented next and noted that the Australians have a framework in place for 

regulating what the CFTC would consider as swap dealers at the entity level. At the 

transactional level, he reported that there is legislation moving through the Australian Parliament 

that will provide the government and regulators the power to mandate trade repmiing, clearing, 

and trading on the platform. He also reported that Australian Securities and Investment 

Commission (ASIC) has licensing agreements in place for clearing facilities and for trading 

platforms, and that the ASIC recently published a market oversight assessment report on the 

Australian OTC market that included recommendations in expectation of the legislation moving 

through Parliament. 

2. Presentation by Mr. Ko, The Securities and Futures Commission, Hong 

Kong 

Mr. Ko then delivered his presentation. He first informed the Commission that the 

Securities and Futures Commission (SFC) is finalizing a consultation paper it issued in October 

2010 to the public regarding the Hong Kong OTC derivatives markets. Mr. Ko then explained 

that the SFC needs to amend its securities and futures ordinances to implement reform of the 

Hong Kong OTC derivatives market and that the amendments which will consist of two stages 

will be completed by the third quarter of 2013. 

Mr. Ko next discussed the cross-border application of the OTC derivatives rules. He 

noted that there may be circumstances in which Hong Kong regulations will apply to transactions 

outside of their jurisdiction, such as a transaction involving a foreign subsidiary of a Hong Kong 

bank. He also explained that third country trading venues and CCPs may offer services in Hong 

Kong if approved by the SFC. As to mandatory reporting, Mr. Ko explained that trades must be 

repmied to ATR. 

3. Presentation by Mr. Nagatsuka, Monetary Authority of Singapore 

Mr. Nagatsuka delivered his presentation next. He first noted that Singapore is 

committed to implementing the G20 reforms and also explained that over the course of two years 

it conducted policy consultations on OTC derivatives, trade repositories, and mandatory clearing 

and repmiing obligations. Mr. Nagatsuka then repmied that these consultations have resulted in 

a set of draft laws which will be implemented in two phases. The first phase consists of passing 

legislation implementing mandatory clearing and reporting requirements, as well as the 

supplementary regulatory framework for OTC derivatives clearing facilities and trade 

repositories by the end of 2012. As for the regulation of OTC derivative market platforms and 

market intermediaries, Mr. Nagatsuka explained that these OTC reforms are being considered 

and that the Monetary Authority of Singapore (MAS) will consult on them later in 2013. 

Mr. Nagatsuka then repmied on cross-border concerns. He explained that generally the 

mandatory clearing and repmiing obligations will be applicable as long as there is a Singapore 

counterpatiy to the transaction. Mr. Nagatsuka also repmied that foreign clearing facilities and 

8 
trade repositories can seek licensing from MAS if it determines that the entities are subject to 

regulations comparable to those in Singapore and there are adequate anangements for 

cooperation between MAS and the foreign regulator. In closing, he noted that Singapore has put 

a foundation in place for smoothing the edges where Singapore's laws and foreign laws overlap 

and that there still may be other cross-border implementation issues. 

4. Presentation by Mr. Gray, Monetary Authority of Singapore 

Mr. Gray then delivered his presentation. He explained that the cross-border concerns 

are twofold and are similar to those raised by Europe and Japan. The first concern is that entities 

outside the U.S. may be subject to the requirements of multiple jurisdictions which creates the 

potential for overlapping and conflicting requirements. The second concern is that there is 

uncetiainty over the meanings of key tetms in the proposed cross-border guidance. 

Mr. Gray then explained that six issues with CFTC's proposed cross-border guidance 

have been identified. Regarding the first two issues, he reported that there is uncetiainty 

regarding the scope of the "U.S. person" definition and that the regulators in the joint 

presentation suppoti an outcomes-based approach t0 substituted compliance assessments. Mr. 

Gray then informed the Committee that Ms. Doo from the SFC would report on the next two 

ISSUeS. 

5. Presentation by Daphne Doo, The Securities and Futures Commission, Hong 

Kong 

Ms. Doo noted that the third issue with the proposed IG is client confidentiality. She 

explained that there is a potential problem when the counterpmiy whose information is being 

repmied is located outside the jurisdiction that requires the reporting and that compliance with 

U.S. reporting requirements may be hampered by conflicts in local privacy or bank secrecy laws. 

Ms. Doo then noted that the fourth issue with the proposed IG is U.S. affiliation. Under the 

proposed guidance, non-U.S. swap dealers and major swap pmiicipants can delay compliance on 

certain entity level and transaction level requirements through temporary exemptive relief 

provided that the entities are not affiliated with or subsidiaries of U.S. swap dealers. Regarding 

this condition, Ms. Doo explained that there are circumstances under which a U.S. person and 

non-U.S. person actually operate independent of each other and that these entities are affiliated 

purely because of a common parent located outside the U.S. Therefore, Ms. Doo suggested that 

the Commission remove or modify the definition of affiliation. 

6. Presentation by Mr. Harvey, Australian Securities and Investment 

Commission 

Mr. Harvey presented again on the final two issues. He briefly noted that timing of the 

implementation of the proposed cross-border guidance is an issue and that there is strong support 

for any available flexibility. As for the final issue, he urged that the mechanics regarding the 

registration of a domestic CCP happen swiftly, if the need arises. 

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F. Presentation by Mr. West, Derivatives Oversight Quebec, Canada 

Mr. West delivered his presentation next. He first noted that FSB had issued a statement 

yesterday urging regulators to pursue further discussions before the close of2012. He then 

explained that the majority of the Canadian derivatives contracts between its financial 

institutions are with foreign counterparties, patiicularly the U.S. and that the Canadian Securities 

Administrators (CSA), the umbrella group for Canada's provisional securities commissions, and 

that the CSA has been working diligently to meet the G20 objectives. He fmiher explained that 

the rules regarding the derivatives markets are not harmonized, but that model rules that can be 

adapted in the provinces are being drafted. CSA hopes to publish trade repository rules by 

January 2013 and clearing rules afterwards. 

Mr. West then raised concerns about the timelines for the implementation of the rules in 

other jurisdictions. For example, he explained that until the trade repository repmiing rules are 

in place, there is no privacy protection for those individuals who are reporting. Mr. West also 

spoke briefly on a few other issues and concerns. He noted that substituted compliance should 

be done on a holistic basis, rather than a rule-by-rule or line-by-line basis, and that regulators 

should take international initiatives, such as the Basel Committee on Banking Supervision 

(BCBS) and IOSCO working group on margin requirements, into consideration. Mr. West also 

informed the Committee that the development of a trading mandate for electronic trading is not 

currently being contemplated until there is more to review the TR data. 

In closing, Mr. West stated that progress has been made with regard to implementing the 

G20 objectives and that the CSA looks forward to ongoing cooperation with the international 

regulators. 

G. Questions and Answers 

Following the presentations by the international regulators, Commissioner Sommers 

noted that she was encouraged by each jurisdiction's progress towards meeting the G20 

commitments and that while there are a number of challenges and concerns expressed by the 

international regulators, they are committed to resolving any existing conflicts. Commissioner 

Sommers then asked the international regulators to comment on next steps so as to ensure 

coordinated effmis and protection of the markets. 

Mr. Paulis commented among other things that the patiies should identify the conflicts 

and inconsistencies in the regulations and then cooperate to reach agreement on those issues. He 

also stated that substituted compliance and equivalence can resolve conflicts, inconsistencies, 

and overlaps in the regulations, and that work on substituted compliance and the definition of a 

person whether U.S., E.U., Hong Kong, etc., can resolve regulatory gaps. Mr. Kono agreed with 

Mr. Paulis and also emphasized the impmiance of resolving particularly conflicting parts of the 

rules or the most contentious issues in the near term. 

Commissioner Sommers next asked the Commissioners in attendance for any comments. 

Chairman Gensler noted that the Commission is working on the urgent matters discussed by Mr. 

Paulis and Mr. Kono and that the Commission will consider the comments it has received 

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regarding the definition of a "U.S. person." He next commented that there will be gaps as a 

result of the regulations as each of the regulators have different political systems and cultures, as 

well as histories that animate the inclusion of specific language in a patiicular regulator's statute, 

and that for the U.S. the registration regime for swap dealers in Dodd-Frank is one such example. 

Chairman Gensler also commented that the registration regime is partly the result of the global 

nature and structure of modern financial institutions and the risks associated with these 

institutions should one of these fail overseas, nothing as examples AIG, Long-Term Capital 

Management, and Citicorp among others. 

Chairman Gensler then addressed some of the other comments raised by the international 

regulators by noting that the Commission would tighten the "U.S. Person" definition and the 

aggregation rules. He also noted that the Commission is considering substituted compliance and 

that the Commission is fine with clearinghouses. Finally, Chairman Gensler noted that all the 

regulators were grappling together to enhance transparency and oversight as a result of the 

financial system failure that affected people across the globe. 

Commissioner O'Malia commented that he would like additional information on the 

"direct and significant test." Specifically, what it is and whether the EU had any thoughts on 

solving the transaction-level requirements in light of the test. Mr. Pearson commented that risks 

flow from the Atlantic to both the EU and the UK. He next noted that the EU has recognized 

that they do not have the resources or ability to regulate the thousands of EU financial institution 

affiliates in other jurisdictions around the world. Mr. Pearson then fmiher noted that the only 

solution is substituted compliance, and that EU cannot decipher the scope of a direct and 

significant impact on the EU until it sees how other jurisdictions apply the scope. 

Following this, Chairman Gensler briefly commented that in his view, the Commission is 

going to rely on substituted compliance. He fmiher noted among other things that the 

Commission too is a small agency and that the Commission and other regulatory bodies are inline with key requirements, such as clearing and margin. 

In response to Commissioner O'Malia's question, Mr. Paulis noted that the EU has not 

yet implemented the "direct and significant test", but that where there is equivalence, there won't 

be a need to apply the test. Mr. Paulis then provided his view of substituted compliance in the 

context of Dodd-Frank and EU law, and the registration of swap dealers. Ms. Kim then 

commented that the transaction-level repmiing requirements are designed in part to add 

transparency to the market and noted that in many foreign transactions where the home 

jurisdictions supervisory interests are superseding, substituted compliance will be available. 

Commissioner Wetj en then asked the panel: 1) the reason for the heightened concern 

regarding the registration requirement and 2) the difference between registration under the 

substituted compliance regime and the historic "recognition" system. In response, Mr. Pearson 

and Mr. Kono commented among other things that the definition of a "U.S. Person" is too broad 

and the consequences of registration are unceliain at this point. Commissioner Wetjen next 

asked whether more meetings like the GMAC one would be helpful to the foreign regulators. In 

response, Mr. Paulis noted that additional meetings to fmiher discuss a common interpretation of 

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a foreign person, a broadening of the application of substituted compliance, and timing of 

requirements would be beneficial. 

Commissioner Sommers next turned to Committee Chairman Ron Filler for questions. 

Mr. Filler asked the panelists which of the following was the higher priority : 1) reducing 

systemic risk with regard to swaps clearing or 2) having a substituted compliance type regime in 

place. Mr. Pearson stated that the international regulators present have voiced their commitment 

to international clearing, but it must be done on an international basis. Mr. Pearson also stressed 

the need to act quickly because the year is almost over. 

Commissioner O'Malia then asked the panel ifthere are privacy concerns implicated by 

data repmiing and sharing. In response, Ms. Doo commented that the International Swaps and 

Derivatives Association (ISDA) had surveyed twenty-three jurisdictions and identified seven 

with privacy concerns that need to be resolved. 

Commissioner Sommers then asked the GMAC members whether they had any 

questions. Mr. O'Connor commented that ISDA strongly agrees with the G20 goals and that the 

regulators must work to avoid overlaps in regulations, inconsistencies, timing differences, and 

inefficiencies among other things. He also added from a market perspective the impmiance of 

having a level playing field for market pmiicipants, of reducing the implementation burden, and 

deferring the application of CFTC rules to non-U.S. persons. Mr. O'Conner then asked whether 

it would be helpful to create a group under IOSCO to resolve cross-border issues. Mr. Kono 

commented that IOSCO had already decided to create a new work stream to deal with cross 

border issues, but that work at IOSCO may not be quick enough to deal with the issues that will 

be arising by the end of the year. However, Mr. Kono fmiher noted that he would raise these 

issues with IOSCO again. 

Commissioner Sommers next informed the Committee members that GMAC would be 

breaking for lunch. She also thanked the panelists, Committee members, and staff for attending 

the meeting and discussing the cross-border issues 

IV. Panel II: GMAC Members' Panel 

The second pmiion of the GMAC meeting continued with Committee Chair Filler leading 

the discussions. 

A. Definition of a "U.S. Person" 

Mr. Filler noted that the first topic for discussion would be the definition of a "U.S. 

person." He asked the panelists whether 1) the "U.S. Person" definition in an October 12 NoAction letter issued by the CFTC should be the final definition and (2) whether the definition 

should be consistent across CFTC regulations. Ms. Litt noted that there currently isn't a "U.S. 

Person" definition in the futures markets and expressed her concerns regarding the use of this 

definition under the CEA. 

12 
Mr. Berliand then addressed three main issues emerging in the European markets: 1) end 

users are facing unce1iainty regarding the rules and registration requirements; 2) market 

participants are feeling constrained by the timing requirements, even in cases where defenals 

have been issued; and (3) regulations will affect the markets, including a temporary drop in 

liquidity and the potential for many transactions to become futurized in order to avoid DoddFrank. Mr. Filler then asked whether Mr. Berliand had spoken to clients about moving to swapfutures. In response, Mr. Berliand indicated that while some market pmiicipants would accept a 

transition to futures, others would not because futures do not address their specific riskmanagement requirements. Mr. Durkin echoed Mr. Berliand's sentiments. Mr. Durkin also 

added that market participants are facing confusion regarding whether or not they qualify as a 

"U.S. Person," and that the October 12th definition offered by the CFTC added some clarity. 

Commissioner Wetjen next asked whether there are specific issues relating to the October 

12th "U.S. Person" definition. Mr. Durkin commented that there is a general confusion among 

market pmiicipants as to whether they must register with the CFTC and whether they will be able 

to engage in substituted compliance. Mr. Klein stated that the No-Action definition issued on 

October 12th did address some customer concerns, but that there is still confusion amongst 

market participants. 

Commissioner Wetjen then asked whether the confusion Mr. Klein identified stems from 

the meaning of the exact words in the October 12 No-Action relief. In response, Mr. Klein stated 

that the confusion has to do with what the rule will shape up to look like. Ms. Litt agreed that 

market participants will face unce1iainty until a definition of"U.S. Person" is finalized. Mr. 

O'Connor then noted that the final definition of a "U.S. Person" should be very precise in order 

to prevent uncertainty and expressed his support for phasing in the regulatory regime once the 

rule is finalized. Mr. Vice next stated that market participants in the energy market would prefer 

that swaps transactions be transitioned to futures contracts and that a broader "U.S. person" 

definition may be appropriate. He also added that the futures market relies on doctrines of 

equivalence and that may be the best approach for swaps as well. Mr. Berliand noted that if 

foreign firms are required to register with the CFTC, they will likely have to be monitored by the 

National Futures Association (NFA) and it remains unclear what rules they will have to comply 

with. 

Mr. Filler then asked the Committee whether they believe registration or substituted 

compliance is the more important issue. Mr. Berliand noted that there is a perception of fear 

regarding registration for market pmiicipants as they do not know what things may follow after 

registration. Mr. Roth then commented on the vetting aspect of registration and noted that he did 

not see what additional benefit registration serves if a comparable foreign regulatory regime has 

some form of vetting as well. 

Mr. Okochi, returning to the "U.S. person" definition, noted among other things that the 

definition is causing a drop in cross-border liquidity. He also asked whether Legal Entity 

Identifiers (LEI) could be used to track who qualifies as a "U.S. Person." In response, Ms. Litt 

indicated that the LEI can only be used once and some entities may change their status as a "U.S. 

Person" over time. 

13 
Mr. Downey commented that new derivatives regulatory regimes will spur product 

innovation in the futures market to meet customer concerns. He also highlighted customer 

challenges presented by moving the OTC derivatives markets onto exchanges and noted that it 

would be useful for all domestic financial regulators to settle on a common "U.S. Person" 

definition. 

Following this, the panelists discussed what type of non-U.S. commodity fund should or 

should not fall with the definition of a "U.S. person." Mr. Crappie first noted among other things 

that the eventual futurization of swap transactions will solve many issues, including taxation 

concerns. Ms. Litt commented that, in her opinion, the U.S. person definition is motivated by 

legitimate CFTC concerns of Dodd-Frank evasion, but that CFTC has many anti-evasion policies 

which bring in many entities that should not be within Dodd-Frank. Mr. Klein added that it will 

be difficult for market patiicipants to evaluate and track counterparties in order to determine 

whether they are "U.S. Persons." 

Mr. Filler next asked whether a Pmi-30 type regime (of the CEA) should apply to swaps. 

Among the various comments, Mr. Klein noted that this could be a workable regime under a 

holistic and a not a rule-by-rule, requirement-by-requirement approach. Mr. Filler then asked 

whether a "consent to jurisdiction" approach with no registration is an acceptable standard. Mr. 

Downey stated among other things that "consent to jurisdiction" is an obligation, not a right. 

Ms. Litt then commented on a Part-30 type approach and discussed substituted compliance in 

terms of a mle-by-rule analysis. 

Commissioner Wetjen then asked Ms. Litt ifthere was any legal reason that a Pati 30-like 

approach couldn't be applied to Title VII of Dodd-Frank. In response, Mr. Klein and Ms. Litt 

contrasted Part 30 and the proposed IG. Mr. Klein added that the Commission is capable of 

reaching a similar result through No-Action letters and exemptive relief. 

Mr. Lubin, on the "U.S. person" definition, noted that he envisions product innovation by 

futures exchanges to meet new customer demand. Mr. O'Connor added that an exemption for 

foreign banks that would not require them to count on-shore transactions with U.S. banks would 

cure the cunently fractured nature of the interbank market. 

Next, Mr. Filler asked whether 1) a non-U.S. person that is guaranteed by a U.S. 

company or under a common control falls under the definition of a "U.S. person", and 2) 

assuming mandatory clearing, should these cleared swaps count toward the de minimis test. 

Regarding the first issue, Ms. Litt commented that this type of U.S. person should not be 

included in the definition. Mr. Berliand and Mr. O'Connor expressed concerns about the tight 

deadlines. As for the de minimis test, Mr. Durkin commented from the perspective of energy 

markets. Mr. Crappie noted that foreign exchange swaps should be exempted from the de 

minimis threshold because they are already traded on a fully-margined basis. Mr. Klein 

commented that an entity that only engages in cleared swaps should not be required to register 

because the clearing mechanism will provide disclosure and reduce systemic risk. 

14 
B. Substituted Compliance 

Following the discussion of the definition of a "U.S. person", Mr. Filler turned to the 

topic of substituted compliance and invited comments. Mr. Okochi noted the difficulty of 

establishing a comparable regulatory structure, particularly in light of privacy laws and gaps 

between the different rules. Mr. Roth commented among other things that governments already 

share information about futures transactions and queried why privacy laws are an impediment 

with regard to swaps transactions. He also noted the impmiance of being precise in using the 

term "substituted compliance" as it impacts the monitoring of compliance with substituted 

compliance rules. Mr. Berliand expressed concern about time constraints and commented that if 

the U.S. and Europe could come to an agreement on principles, perhaps through IOSCO, then the 

rest of the world would coalesce around those principles. 

Commissioner Sommers then asked Mr. Bet·liand what role IOSCO could play in drafting 

principles for substituted compliance. In response, Mr. Berliand commented that if the 

regulators had another three years, then IOSCO could play a role. However, because of the 

impending deadline, the starting point should be the general principles that many jurisdictions 

have already been fmming with focus on the areas that these jurisdictions are most concerned 

with. He then again suggested that U.S. and Europe agree bilaterally on these principles. Mr. 

Durkin agreed with Mr. Berliand and noted that he was encouraged by the openness expressed 

by foreign regulators in working together and with the Commission on the issue of substituted 

compliance. 

Commissioner Sommers next asked whether there were any other issues that should be 

discussed this afternoon. Mr. O'Connor asked for clarification on the driving force for the time 

constraint. Mr. Berkovitz commented that the deadline is being driven by a Financial Stability 

Board (FSB) request to identify gaps and inconsistencies and also see ifthere are areas which the 

regulators can agree to; the deadline is not for a solution to all the issues. Mr. Klein then 

expressed his concern that issues discussed today will not be resolved by the registration 

deadline and asked whether the Commission will allow more time for compliance with the 

various rules. Mr. Berkovitz noted that the Commission is internally discussing how to deal with 

the transitional issues and is committed to ensuring a smooth transition. In the past, the 

Commission, where appropriate and needed, has issued No-Action letters and exemptive orders 

when there has been a deadline. Mr. Klein then commented on the impmiance of giving market 

participants sufficient time to comply with the new rules to avoid market disruptions. 

Mr. Filler then invited comments on the "conduit theory" in which one entity negotiates 

. and agrees to the swap transaction and another entity books the transaction. Mr. Klein noted the 

global nature of the derivatives market and commented that it is not necessary to regulate every 

party in a transaction, but that it is necessary to regulate appropriately to achieve the goals for the 

regulation. Ms. Litt commented that the conduit approach is focused on preventing evasion, but 

that Dodd-Frank already has significant anti-evasion authority. Ms. Litt also noted that financial 

institutions use conduits for legitimate reasons, not just evasion. 

Commissioner Wetjen asked for additional information on the impact of registration on 

market patiicipants. Mr. Roth responded that provisional registration would not be a problem. 

15 
Mr. Klein commented that actual registration does not present a problem, but the issue is which 

rules market pmiicipants actually have to comply with. He then noted that the Commission 

should defer its rules until data is gleaned from the swap data repositories. 

Mr. Filler then asked the panelists which rule of the IG proposal that they would like to 

see changed. Ms. Litt commented that she is concerned with all the topics on the agenda- the 

"U.S. persons" definition, substituted compliance, and the conduit approach. Mr. Lubin noted 

that the importance of finding consensus among the leading regulators on the issues and working 

to resolve them. Mr. O'Connor expressed his concern over substituted compliance. Mr. Okochi 

suggested that the timing issue be resolved. Mr. Roth requested that any exemptive relief that 

may be granted be issued at an earlier time. Mr. Vice noted the impmiance of international 

cooperation in drafting rules for clearinghouses and exchanges. Mr. Klein noted that his 

institution had already filed comment letters and pointed to those as his response. Mr. Durkin 

asked for clarity on mutual recognition. Mr. Downey noted the importance of increased 

cooperation between the U.S. and EU. Mr. Crappie commented that exchange traded or 

margined swaps should not be counted toward the de minimis threshold. Mr. Berliand asked for 

a more iterative process. 

Following these comments, Commissioners Sommers, O'Malia, and Wetjen thanked the 

GMAC members for their pmiicipation. Commissioner O'Malia added that the main takeaways 

from the meeting were the committee's and international regulators' concerns regarding the 

"U.S. Person" definition and substituted compliance. Mr. Filler also thanked the pmiicipants and 

adjourned the meeting at 3:53p.m. on November 7, 2012. 

I hereby ce1iify that the foregoi g minutes are accurate: 

16