For instance, the losses incurred from JPMorgan’s “London Whale” trades affected the United States even though they took place in England. When Lehman Brothers went bankrupt, it had more than 3,300 different entities.
“Risk knows no geographic boundary,” he said.
The CFTC announced a deal on the complex international transactions in July, at the eleventh hour before a deadline.
Before the rules, foreign branches of American institutions were not subjected to the same rules as their counterparts in the U.S.
The new guidance institutes a system of “substituted compliance” to allow European regulators to oversee deals done under their jurisdiction.
The broader regulation was developed as part of the Dodd-Frank financial reform law, which gave regulators the authority to oversee derivatives.
Last week, other rules went into effect requiring derivatives traders to operate on new government-backed swaps execution facilities (SEFs).
“Seventeen SEFs are temporarily registered and operating,” Gensler said, noting that 1,200 trades took place on the platforms the first day they went into effect. “It is truly a paradigm shift.”