The top U.S. derivatives regulator is cracking down on Wall Street banks' ability to evade Dodd-Frank Act restrictions by moving some of their swaps trades overseas.
The Commodity Futures Trading Commission in a 2-to-1 vote gave final approval to a rule that broadens the circumstances in which banks' foreign units must adhere to U.S. collateral requirements, according to a statement released Tuesday. The CFTC took action after some of Wall Street's biggest swaps dealers had stopped guaranteeing some trades booked overseas, meaning they didn't have to fully comply with Dodd-Frank.
"The interconnected nature of the global swaps market means that risks created across the globe have the potential to flow back into the United States," CFTC Chairman Timothy Massad said in a call with reporters. The new rule clarifies how earlier requirements approved by the CFTC and bank regulators will add protections to cross-border trades.
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