The European Commission and the US Commodity Futures Trading Commission (CFTC) have announced a common approach regarding certain derivatives trading venues authorised in the EU and in the United States of America.
The aim of the common approach is to ensure that EU counterparties are able to comply with the trading obligation under article 28 of the Markets in Financial Instruments Regulation (MiFIR) by executing mandated derivatives on EU authorised trading venues or CFTC-authorised swap execution facilities (SEFs) and designated contract markets (DCMs), while ensuring that US counterparties can comply with the trade execution requirements under section 2(h)(8) of the Commodity Exchange Act (CEA) by executing swaps on certain EU authorised trading venues that are exempted from SEF registration pursuant to CEA section 5h(g), as well as on SEFs and DCMs.
The Commission proposes that it will adopt an equivalence decision to recognise CFTC-authorised SEFs and DCMs that operate in the United States as eligible venues for the execution of those derivatives transactions that will be subject to the EU trading obligation, provided that the requirements in MiFIR, the Markets in Financial Instruments Directive (recast) (MiFID II) and the Market Abuse Regulation (MAR) are met.
CFTC staff intend to propose, and the chairman will support putting before his fellow Commissioners for a vote, the exemption by the CFTC of EU authorised swap trading venues (for this purpose, multilateral trading facilities and organised trading venues) from the requirement to register with the CFTC as SEFs, provided that they satisfy the standard set out in CEA section 5h(g). This will render the exempt EU venues operating in the EU eligible venues for the purposes of complying with the CFTC trade execution requirement.
The next steps foreseen are:
- CFTC staff will notify the Commission of its list of eligible SEFs and DCMs while the Commission will notify the CFTC of its list of eligible MiFID II/MiFIR and MAR compliant trading venues; and
- CFTC staff and the staff of relevant national competent authorities under the coordination of the Commission will work towards concluding cooperation arrangements to ensure the effective exchange of information and coordination of supervisory activities.
The Commission has also adopted an Implementing Decision on the recognition of the legal, supervisory and enforcement arrangements of the United States for derivative transactions supervised by the CFTC as equivalent to certain requirements of Article 11 of the European Market Infrastructure Regulation. The Implementing Decision also determines that US rules on obligations on the exchange of collateral (margins) between counterparties are equivalent to EU rules. The Implementing Decision will enter into force on the twentieth day following its publication in the Official Journal of the EU.