After years of anticipation, the U.S. Commodity Futures Trading Commission in July 2013 issued more than 300 pages of “guidance” ostensibly to assist market participants in understanding the breadth of the extraterritorial application of swap provisions of the Dodd-Frank Act.

The genesis of the CFTC’s cross-border guidance – and the Dodd-Frank Act itself – arose out of the swap market reforms agreed to by G20 leaders at their September 2009 summit in Pittsburgh. At that summit, G20 leaders agreed to wholesale reforms of the swap market, which, to that date, had consisted primarily of off-exchange bilateral transactions: the clearing of standardized OTC derivative contracts, the reporting of such transactions, and the trading of such contracts on exchanges or electronic trading platforms, where appropriate. The details required to reach these broad goals, however, were left to individual member countries (and, with respect to many European countries, the European Union), with a skeletal, but aspirational, institutional framework to harmonize differing rules that might be adopted by different countries. Harmonization of varying rules, of course, is essential, because the swap market is profoundly global ? swaps between parties in different jurisdictions are more the rule than the exception. Results of a failure to harmonize rules in different jurisdictions have been well documented and could include fragmented liquidity, regulatory arbitrage, and disproportionate compliance costs for market participants.

Originally published in The Review of Securities & Commodities Regulation, Vol. 47, No. 10 on May 21, 2014.