In this report, we assess CFTC Chairman Giancarlo’s appearance today before House Agriculture during which he reiterated his commitment to maintain the CFTC-EC CCP equivalency agreement. Describing proposed EU legislation as “ludicrous” for attempting to subject U.S. CCPs to European rules, he told a supportive committee that the U.S. will not renegotiate. If the CFTC-EC agreement is abandoned and the EU demands that U.S. CCPs be subject to EU law, the CFTC chairman indicated that EU firms will be cut off from U.S. CCP services. While Mr. Giancarlo admitted that U.S.-EU trade disputes have raised the “heat” during equivalency negotiations, he argued that the treatment of U.S. CCPs has been caught up in larger EU-U.K. Brexit negotiations. Nonetheless, if the EU stands by its proposal, the CFTC chairman made it very clear that the U.S. will retaliate. He said that a disorderly Brexit poses systemic risks to the global economy because billions of dollars of bilateral swap contracts could be thrown into legal jeopardy.
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