On 25 February 2019, the UK and US authorities issued a joint statement on continuity of derivatives trading and clearing post Brexit.
The joint statement covers the following issues:
- Continued supervisory cooperation. The Bank of England (BoE) and the Commodity Futures Trading Commission (CFTC) are in the process of updating, in connection with the UK’s forthcoming recognition of CFTC-registered central counterparties (CCPs), their Memorandum of Understanding (MoU) covering clearing activity. Meanwhile, the FCA and CFTC are in the process of updating their MoUs covering certain firms in the derivatives and the alternative investment fund industry.
- Extension of existing CFTF relief and comparability for the UK. The CFTC intends that existing regulatory relief granted by it to EU firms, including UK firms, will be extended to UK firms at the point of the UK’s withdrawal from the EU by way of:
- The CFTC will issue new no-action letters to UK market participants confirming the continued application of existing no-action letters directed at EU market participants;
- The CFTC intends to grant new substituted compliance and exemption orders to confirm that existing orders directed at the EU also will be accompanied by new orders directed at the UK; and
- The CFTC has confirmed that UK CCPs currently registered with the CFTC will be able to continue providing services in the US on the same basis they do now.
- UK equivalence for the US. UK authorities have confirmed that US trading venues, firms and CCPs will be able to continue providing services in the UK. UK firms will continue to be able to access these entities on the same basis as EU firms do currently through the following:
- HM Treasury has confirmed that the European Commission’s equivalence decisions on the CFTC regulatory framework equivalent in relation to risk mitigation requirements, and in relation to trading venues will continue to apply as a matter of UK law after Brexit;
- HM Treasury, the BoE and the CFTC are co-operating closely on the process of making equivalence and recognition decisions in relation to CFTC-registered CCPs; and
- The BoE has confirmed that, if the UK withdraws from the EU with no deal, US CCPs will be able to continue providing services in the UK and to UK firms on the same basis as they do now using the UK’s ‘temporary recognition regime’ for non-UK CCPs.