CFTC Gives Approval on EU Uncleared Swap Margin Rules

The Commodity Futures Trading Commission (CFTC) today approved a comparability determination permitting substituted compliance with EU margin requirements for uncleared Swaps Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Read this Term, as well as a common approach over certain derivatives trading venues in both jurisdictions.

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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 Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term 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.

“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.”