CFTC Extends Relief to UK Firms on Brexit Transition
- The move means that UK firms can qualify for time-limited relief from certain regulatory requirements.
The US regulator effectively extended an existing no-action and exemptive relief for European institutions to their UK equivalents in anticipation of a no-deal Brexit Brexit Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades. The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minister Boris Johnson was elected Prime Minister the following month, who was well-known as a headstrong Brexit supporter. While the United Kingdom was predicted to leave exit the EU by October 31st, 2019, the U.K. Parliament sought out a deadline extension that delayed voting on the new deal. Following Boris Johnson’s reelection, Brexit occurred on January 31st, 2020 at 11 pm Greenwich Mean Time. Brexit Creating Ongoing Issues in with Europe While the United Kingdom is in a transition period following its departure from the EU, the U.K. is negotiating its complete trade relationship with the EU, which is the United Kingdom’s largest trade partner. Terms of this trade agreement must be met by January 1st, 2021. Should terms of this trade agreement take longer than the projected resolution date of January 1st, 2021 then the U.K. must acquire an extension no later than June 1st, 2020. Failure to do so will result in the U.K. is subject to tariff and host rule changes exercised by the E.U. This situation is referred to as the “no-deal” Brexit and should this occur the consequences could result in a significant fallout of the U.K. economy. For the past few years, many banks and lenders operating previously in the UK had been given passporting rights to the European continent. The lingering uncertainty caused by Brexit resulted in many of these lenders relocating their European headquarters within continental Europe. Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades. The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minister Boris Johnson was elected Prime Minister the following month, who was well-known as a headstrong Brexit supporter. While the United Kingdom was predicted to leave exit the EU by October 31st, 2019, the U.K. Parliament sought out a deadline extension that delayed voting on the new deal. Following Boris Johnson’s reelection, Brexit occurred on January 31st, 2020 at 11 pm Greenwich Mean Time. Brexit Creating Ongoing Issues in with Europe While the United Kingdom is in a transition period following its departure from the EU, the U.K. is negotiating its complete trade relationship with the EU, which is the United Kingdom’s largest trade partner. Terms of this trade agreement must be met by January 1st, 2021. Should terms of this trade agreement take longer than the projected resolution date of January 1st, 2021 then the U.K. must acquire an extension no later than June 1st, 2020. Failure to do so will result in the U.K. is subject to tariff and host rule changes exercised by the E.U. This situation is referred to as the “no-deal” Brexit and should this occur the consequences could result in a significant fallout of the U.K. economy. For the past few years, many banks and lenders operating previously in the UK had been given passporting rights to the European continent. The lingering uncertainty caused by Brexit resulted in many of these lenders relocating their European headquarters within continental Europe. Read this Term.
The move means that UK firms can qualify for time-limited relief from other regulatory requirements, including uncleared swap margin rules and swap clearing requirements. These letters will permit UK firms to rely on longstanding CFTC staff relief related to a series of issues, including introducing broker registration, swap data reporting and the trading and clearing of certain swaps.
The temporary relief, which covers a transition period of up to one year, permits British firms to transfer swaps to an affiliate without such swaps becoming subject to the CFTC’s swap clearing requirement or uncleared swap margin requirement. Additionally, they will be able to access and use trading venues authorised by the agency to satisfy their regulatory obligations, including derivatives trading obligations.
The CFTC has taken a number of other steps to facilitate a smooth transition upon withdrawal of the UK from the EU. For example, it had signed agreements with UK authorities last year to provide mutual recognition of each other’s regulatory frameworks.
“The derivatives markets are among the most interconnected in the world, and the City of London is a critical part of that financial system. This relief will help ensure that our markets will not be adversely affected by the anticipated end of the transition period later this month,” said DCR Director, Clark Hutchison.
The current transition deal allows cross-border financial services to continue uninterrupted only until the end of 2020. However, if UK leaders fail to have their divorce settlement passed, it would leave US customers cut off from UK-based market operators especially when no contingency measures are set in place.
Without such an arrangement, clearinghouses may not get regulatory approvals, leading to operational problems such as US banks facing much higher capital charges when they use it to process their trades.
The US regulator effectively extended an existing no-action and exemptive relief for European institutions to their UK equivalents in anticipation of a no-deal Brexit Brexit Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades. The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minister Boris Johnson was elected Prime Minister the following month, who was well-known as a headstrong Brexit supporter. While the United Kingdom was predicted to leave exit the EU by October 31st, 2019, the U.K. Parliament sought out a deadline extension that delayed voting on the new deal. Following Boris Johnson’s reelection, Brexit occurred on January 31st, 2020 at 11 pm Greenwich Mean Time. Brexit Creating Ongoing Issues in with Europe While the United Kingdom is in a transition period following its departure from the EU, the U.K. is negotiating its complete trade relationship with the EU, which is the United Kingdom’s largest trade partner. Terms of this trade agreement must be met by January 1st, 2021. Should terms of this trade agreement take longer than the projected resolution date of January 1st, 2021 then the U.K. must acquire an extension no later than June 1st, 2020. Failure to do so will result in the U.K. is subject to tariff and host rule changes exercised by the E.U. This situation is referred to as the “no-deal” Brexit and should this occur the consequences could result in a significant fallout of the U.K. economy. For the past few years, many banks and lenders operating previously in the UK had been given passporting rights to the European continent. The lingering uncertainty caused by Brexit resulted in many of these lenders relocating their European headquarters within continental Europe. Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades. The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minister Boris Johnson was elected Prime Minister the following month, who was well-known as a headstrong Brexit supporter. While the United Kingdom was predicted to leave exit the EU by October 31st, 2019, the U.K. Parliament sought out a deadline extension that delayed voting on the new deal. Following Boris Johnson’s reelection, Brexit occurred on January 31st, 2020 at 11 pm Greenwich Mean Time. Brexit Creating Ongoing Issues in with Europe While the United Kingdom is in a transition period following its departure from the EU, the U.K. is negotiating its complete trade relationship with the EU, which is the United Kingdom’s largest trade partner. Terms of this trade agreement must be met by January 1st, 2021. Should terms of this trade agreement take longer than the projected resolution date of January 1st, 2021 then the U.K. must acquire an extension no later than June 1st, 2020. Failure to do so will result in the U.K. is subject to tariff and host rule changes exercised by the E.U. This situation is referred to as the “no-deal” Brexit and should this occur the consequences could result in a significant fallout of the U.K. economy. For the past few years, many banks and lenders operating previously in the UK had been given passporting rights to the European continent. The lingering uncertainty caused by Brexit resulted in many of these lenders relocating their European headquarters within continental Europe. Read this Term.
The move means that UK firms can qualify for time-limited relief from other regulatory requirements, including uncleared swap margin rules and swap clearing requirements. These letters will permit UK firms to rely on longstanding CFTC staff relief related to a series of issues, including introducing broker registration, swap data reporting and the trading and clearing of certain swaps.
The temporary relief, which covers a transition period of up to one year, permits British firms to transfer swaps to an affiliate without such swaps becoming subject to the CFTC’s swap clearing requirement or uncleared swap margin requirement. Additionally, they will be able to access and use trading venues authorised by the agency to satisfy their regulatory obligations, including derivatives trading obligations.
The CFTC has taken a number of other steps to facilitate a smooth transition upon withdrawal of the UK from the EU. For example, it had signed agreements with UK authorities last year to provide mutual recognition of each other’s regulatory frameworks.
“The derivatives markets are among the most interconnected in the world, and the City of London is a critical part of that financial system. This relief will help ensure that our markets will not be adversely affected by the anticipated end of the transition period later this month,” said DCR Director, Clark Hutchison.
The current transition deal allows cross-border financial services to continue uninterrupted only until the end of 2020. However, if UK leaders fail to have their divorce settlement passed, it would leave US customers cut off from UK-based market operators especially when no contingency measures are set in place.
Without such an arrangement, clearinghouses may not get regulatory approvals, leading to operational problems such as US banks facing much higher capital charges when they use it to process their trades.