In a previous client alert we provided an overview of the recent report, the second of four, issued by the U.S. Department of the Treasury (“Treasury”) and titled “A Financial System that Creates Economic Opportunities, Capital Markets” (the “Report”). Issued as a response to Presidential Order 13772, “Core Principles for Regulating the United States Financial System,” the Report sets out core principles that should, its authors believe, guide the regulation of the U.S. financial system. The Report addressed numerous aspects of the U.S. capital markets, including the equity and debt markets, the Treasury securities market, securitization, financial market utilities, clearinghouses and derivatives.

Of these areas, it may be derivatives that were most deeply affected by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which subjected those instruments, famously lightly regulated before 2010, to comprehensive regulation. Title VII of the Dodd-Frank Act, and the voluminous regulations issued thereunder, represented the pendulum swinging decisively away from light-touch regulation of derivatives and toward heavy-handed oversight, a regulatory regime at once thick with detail, impervious to commercial needs and, to market participants outside the United States, by turns imponderable and alarming.