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Statement at an Open Meeting on Cross-Border Security-Based Swap Rules Regarding Activity in the United States

Commissioner Michael S. Piwowar

April 29, 2015

Thank you, Chair White.

And thanks to all of the staff who worked so hard to develop this thoughtful proposal.

The rulemaking before us today represents another key step in the Commission’s ongoing effort to implement Title VII of the Dodd-Frank Act, which gives the Commission regulatory oversight of the security-based swap market. Each time the Commission gathers to vote on a Title VII rulemaking, we highlight the complexity of the security-based swap market and the difficulty of crafting rules to effectively regulate its products and participants. This difficulty and complexity is nowhere more evident than in the subject matter of today’s rulemaking, the application of our rules to the personnel of non-U.S. persons located in the United States.

This rulemaking addresses a common dealer model utilized by many non-U.S. entities. These dealers often rely on personnel operating within the United States to not only interact with U.S. persons, but also to transact with other non-U.S. counterparties. Global derivatives dealers developed this model as an efficient method of client engagement in a marketplace nearly devoid of regulation and without regard to national boundaries.

The question confronting us now is how this dealer model should be treated in the post-Dodd-Frank world of comprehensive derivatives regulation. The Commission has struggled with this question for nearly two years dating back to the proposed definition of “conduct within the United States” in our original cross-border proposing release. Our ultimate answer to the question must balance a number of relevant considerations, including how to effectively implement our regulatory authority, the potential market impact of any rules we put in place, and concerns related to competition between market participants.

The difficulty of finding the appropriate balance between these considerations led us to defer action on regulation of this type of dealer activity when we adopted our initial cross-border rules last June. Since that time the staff has been diligently working to gain a greater understanding of how this dealer model operates and to refine our approach to the regulation of these activities. I am grateful for their efforts, and believe that the release before us today is proof that their time has been well spent.

I am pleased to support this rule proposal, and I look forward to reviewing the comments that it elicits. In particular, I hope that we will receive comments from all relevant market participants, as these rules will impact not just the non-U.S. dealers operating under this model, but also their counterparties and U.S. competitors. We rely heavily on the public comment process to get our rules right, and that will certainly be the case with the rules we propose today.

I have no questions.

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