A cross-border representation letter.

A methodology for regulatory comparisons.

A list of examples of common principles for substituted compliance analysis.

An effective framework should be grounded in the declarations from the G-20 meetings in Pittsburgh and Cannes. In 2009 and 2011, the G-20 set five goals for derivatives regulation:

Because these goals embody the internationally shared concerns resulting from the global financial crisis, ISDA believes they are the ideal basis for derivatives regulatory reform. ISDA also believes that the G-20 goals should be met through regional or national efforts of sufficient consistency to avoid fragmenting global markets. With these goals in mind, the Methodology proposes that the future regulatory framework utilize a substituted compliance/cross-border system, which would permit market participants to meet the requirements of several jurisdictions via compliance with the requirements of another jurisdiction.

In order to minimize burdens on regulators and markets, maintain global markets and avoid market fragmentation, regional and national regulators should evaluate each other's regimes to allow for a principles-based approach to cross-border compliance. The G-20 established broad regulatory goals not tailored to the legal and regulatory regime of a specific jurisdiction. ISDA believes that a "principles-based approach" (see Common Principles for Substituted Compliance - Examples) is the best way to view and reconcile national differences.

Comparisons of one jurisdiction's requirements to another may use various analytical methods, starting with a set of common principles that encompass the G-20 goals. To achieve the goal of substituted compliance, ISDA proposes that jurisdictions compare another jurisdiction's regulatory framework by first identifying a set of general common principles based on the G-20's broad goals. Although ISDA mentioned a regime-based approach, under which comparability would exist if a jurisdiction implemented regulations that met the G-20 goals, it emphasized another approach in which jurisdictions would examine broad, functional grouping of rules that underlie most jurisdictions' responses to the G-20 goals.

Decisions regarding comparability require a transparent process. The Methodology stresses that ultimate decisions regarding comparability should require both bilateral dialogue between regulators and a "transparent process in which the views of market participants are considered."

Regulators should consult and cooperate with each other before implementing their derivatives regulations. The deadline for the achievement of the G-20 goals has passed. This is most likely due to the fact that different jurisdictions require different amounts of time to achieve the G-20 goals. The Methodology suggests that jurisdictions that could more readily achieve the G-20 goals should not race to impose their regulatory frameworks on other jurisdictions. Instead, they should be willing to present their work to other jurisdictions as only a model of what could be achieved.