Statement of Chairman J. Christopher Giancarlo on Amendment to Japan Comparability Determination: Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants

March 26, 2019

Washington, DC – Today the Commission is amending its previous comparability determination for Japan with respect to margin requirements for uncleared swaps published on September 15, 2016.[1]  The amendment makes a positive determination of comparability with respect to the scope of entities subject to margin requirements and the treatment of inter-affiliate transactions.  All other findings and determinations contained in the original comparability determination remain unchanged and in full force and effect.

When the Commission issued its rule addressing the cross-border application of margin requirements for uncleared swaps in 2016,[2] I expressed my disagreement with the approach the Commission established as overly complex and unduly narrow.[3]  I also expressed my concern that the Commission’s “element-by-element” methodology for determining when substituted compliance with a foreign regulator’s margin regime would be permitted is contrary to the principles-based, holistic analysis the Commission has used in the past.

This overly complex and unduly narrow approach was reflected in the original comparability determination for Japan, which left firms subject to an impractical patchwork of U.S. and foreign regulations for cross-border transactions.  I am pleased that the Commission has reconsidered its original finding and now finds that the remaining Japanese margin transaction requirements are comparable in outcome to the Commission’s own requirements. 

Substituted compliance helps preserve the benefits of an integrated, global swap market by reducing the degree to which market participants will be subject to multiple sets of regulations.  Further, substituted compliance builds on international efforts to develop a global margin framework.  Today’s comparability determination is further evidence that the Commission is committed to showing deference to foreign jurisdictions that have comparable regulatory and supervisory regimes.