In a white paper, FIA outlined principles to guide the regulation of derivatives market cross-border activity. FIA characterized its report as a response to the threat of market fragmentation as a result of “more insulated, national approaches [to regulation] that favor direct oversight of both domestic and foreign entities.”

FIA highlighted recent developments that prompted such reconsideration, including:

• the London financial center’s dissociation with the EU;
• supervisory concerns with respect to OTC markets and clearinghouses;
• China’s expanded engagement with global financial markets; and
• plans to establish digital asset regulatory structures.

FIA underscored the importance of international regulatory cooperation. The organization noted a consensus favoring reliance on deference to home country regulation, and asked that regulators consider a number of factors, including:

• determining whether the activity necessitates local regulation;
• the ability to employ international standards as benchmarks;
• if the outcome of a regulation is substantively comparable to results within the regulated entity’s home jurisdiction;
• establishing communication between the domestic regulator and relevant foreign regulator; and
• putting in place mechanisms for regulatory collaboration and cooperation.