I respectfully concur with the notice of proposed order and request for comment on an application for a capital comparability determination submitted on behalf of nonbank swap dealers subject to regulation by the Mexican Comision Nacional Bancaria y de Valores (CNBV).

Today’s proposed order and request for comment on a comparability determination for three nonbank swap dealers by Mexican CNBV marks yet another important step for cross-border harmonization.  It is worth reiterating the progress that the world has made since the 2008 financial crisis in implementing this, among other, G20 global derivatives reforms.[1]  I would like thank staff in the CFTC’s Market Participants Division for their hard work, continued engagement with our global counterparts, and commitment to providing substituted compliance to continue implementing these reforms.

The proposed determination and order would permit, subject to several proposed conditions, CFTC registered nonbank swap dealers domiciled in Mexico to satisfy certain Commission SD capital and financial reporting requirements via substituted compliance with certain capital and financial reporting requirements established by the Mexican Banking and Securities Commission (“Mexican Commission”).  CFTC staff met with Mexican CNBV staff on several occasions to discuss the application process and capital and financial reporting requirements.

One of my guiding principles throughout my career, both as a regulator and in the private sector, is that markets work best when there are clear and simple rules with common standards.  Ensuring that these rules are harmonized minimizes operational complexity that can otherwise increase risks and costs.  Without an approach that appropriately recognizes the home country regulations, trading and clearing becomes more complex and therefore costlier and less efficient for all market participants.  Through the hard work of MPD, today’s order takes a step in mitigating these potential negative effects on the global and U.S. markets.  I am also pleased that the proposed order recognizes that Mexico has implemented rules that are consistent with the Basel Committee for Banking Supervision Framework for International Bank Based Capital Standards.  We must continue to appropriately adhere to international standards, because our markets are global and we are not regulating in a vacuum.

I continue to believe that the CFTC should take an outcomes-based approach to substituted compliance, one that strikes a balance of both recognizing the nature of cross-border regulation of global markets and that preserves access for U.S. persons to other markets.[2]  From my hands on perspective implementing policies, procedures, and processes to comply with our rules, I welcome comments, particularly on operational issues with additional reporting requirements given local governance and regulatory requirements, differences in financial reporting, or anything else anticipated by market participants. 

There’s just one small example that I wanted to mention.  Specifically, I’m unsure as to how an entity can file a notice within 24 hours of when it “should have known” about a books and records issue.  When you are designing an escalation and self-reporting process and have to start the clock ticking, either you have identified an issue or you have not.  There is a specific time, and then the deadline is 24 hours later.  I am not sure how you count 24 hours from “should have known” because there is no specific time from which to start the clock ticking.  Perhaps we mean knows or “reasonably suspects” there is an issue.  That is one of the reasons I am concurring in today’s proposal. 

Nonetheless, I appreciate the careful consideration by the staff and the Commission of how to take a practical approach to achieving appropriate oversight and mitigation of risk to the United States and the markets.  I urge a pragmatic approach with sufficient time to implement conditions before any compliance date, and I appreciate the thought that the staff have been putting into that.