The Commodity Futures Trading Commission (CFTC) today approved a comparability determination permitting substituted compliance with EU margin requirements for uncleared swaps, as well as a common approach over certain derivatives trading venues in both jurisdictions.
The CFTC permits certain non-US swap dealers and major swap participants to comply with the margin rules of another jurisdiction if the agency determines that the foreign requirements are comparable to its regulations.
The CFTC found the margin requirements for uncleared swaps under EU law to be comparable to those under the Commodity Exchange Act and CFTC rules. This cross-border harmonization allows bilateral over-the-counter derivatives traded by US dealers on European Union to be governed by local regulations in most cases.
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“Any such swap dealer or major swap participant that complies with the EU’s margin rules would be deemed to be in compliance with the CFTC’s margin rules, but would remain subject to the CFTC’s examination and enforcement authority,” the agency said.
Derivatives Trading Venues
The CFTC also said that it has agreed with the European Commission on a common approach regarding certain authorized derivatives trading venues. Based on this, the EU regulator plans to rule that the practises of the CFTC’s authorized SEFs are compliant from a legal perspective, provided that they meet MiFIR, MiFID II and MAR requirements.
In turn, the CFTC intends to grant relief from its SEF registration requirement for EU authorized trading venues, provided that they satisfy the standard set forth in CEA Section 5h(g).
CFTC Chairman Christopher Giancarlo commented: “Today marks a significant milestone in cross-border harmonization between the European Commission and the CFTC. These cross-border measures will provide certainty to market participants and also ensure that our global markets are not stifled by fragmentation, inefficiencies, and higher costs. Indeed these measures are critical to maintaining the integrity of our swaps markets. I look forward to continuing to work with Vice President Dombrovskis and the European Commission staff in a cooperative manner to make further progress in harmonizing our regulatory frameworks.”
CFTC Commissioner Brian Quintenz added: “This is a significant accomplishment that will help prevent fragmentation of the global derivatives market, and it truly reflects the outcomes-based approach to comparability determinations which Chairman Giancarlo promised and which was sorely lacking during the prior administration. If the outcomes align with our own, comparability should be achieved.”