The Path Forward statement provided that the US Commodity Futures Trading Commission (CFTC) and the European Commission would work together on extending appropriate, time-related transitional relief to certain multilateral trading facilities (MTFs) in the event that the CFTC’s trade execution requirement was triggered before 15 March 2014. Such transition relief would be provided if these platforms were subject to, among other things, sufficient pre- and post-trade price transparency requirements, comparable provisions providing for non-discriminatory access by market participants, and appropriate governmental oversight.
The CFTC and the Commission have now published a further statement explaining that they have engaged in further dialogue and that as a result the CFTC has issued two no-action letters that provide relief to certain EU-regulated MTFs.
The CFTC has issued a:
- Conditional No-Action letter which provides no-action relief for: (1) qualifying MTFs from the SEF registration requirement under section 5h(a)(1) of the Commodity Exchange Act (CEA); (2) parties executing swap transactions on qualifying MTFs from the trade execution mandate under section 2(h)(8) of the CEA; and (3) swap dealers and major swap participants executing swap transactions on qualifying MTFs from certain requirements under the CFTC’s business conduct rules and for which these registrants otherwise would receive or be subject to similar regulatory treatment if executing swap transactions on swap execution facilities (SEFs); and
- Short-Term No-Action letter to provide limited relief for all registered MTFs through 24 March 2014, in order to provide sufficient time for MTFs to identify themselves to the CFTC as a condition to the relief and comply with certain other conditions for obtaining relief pursuant to the Conditional No-Action letter.
The Conditional No-Action letter’s relief is based on an MTF meeting certain reporting and clearing-related requirements and a number of conditions previously discussed in the original Path Forward statement. This includes having a multilateral trading scheme, a sufficient level of pre-trade and post-trade price transparency, non-discriminatory access by market participants and an appropriate level of oversight.
The CFTC’s Division of Market Oversight is also currently developing rulemaking to set out a process under section 5h(g) of the Commodity Exchange Act for foreign-based swap trading platforms to seek appropriate regulatory treatment under US law.