Comprehensive EU and US measures to regulate over the counter (“OTC”) derivatives are progressing closer to full implementation. EMIR entered into force in the EU on 16 August 2012, with the clearing obligation expected to take effect in 2013. In the US, the Dodd-Frank Act requirements are being implemented, with dealer registration commencing as of year-end 2012 and mandatory clearing to begin in March 2013. Both measures by their terms have some degree of extraterritorial application. The CFTC has proposed guidance on the Dodd-Frank Act’s extraterritorial scope and granted temporary exemptive relief from the application of some requirements to non-US persons. In the absence of agreement between the US and EU regulators, however, extraterritoriality has the potential to cause intractable and irreconcilable conflicts for the derivatives industry. This note sets out certain situations in which extraterritoriality is likely to result in such conflicts.
View full memo, "OTC Derivatives Regulation and Extraterritoriality III"