EUROPEAN UNION: EU Commission and US CFTC Adopt Common Approach on Certain Derivatives Trading Venues

Tuesday October 17 2017

On the 13^th October 2017, it was announced that a common approach will be taken for the mutual recognition of EU and US derivatives trading venues.

This common approach is designed to ensure that EU counterparties are able to comply with the trading obligation under Article 28 of the Markets in Financial Instruments Regulation (“MiFIR”) by executing mandated derivatives on EU authorized trading venues or CFTC-authorized swap execution facilities (“SEFs”) and designated contract markets (“DCMs”).

Alongside this it is intended that US counterparties will comply with the trade execution requirement under Section 2(h)(8) of the Commodity Exchange Act (“CEA”) by executing swaps on certain EU authorized trading venues that are exempted from SEF registration pursuant to CEA Section 5h(g), as well as on SEFs and DCMs.

Once achieved both EU and US companies will be able to trade certain derivatives on their respective trading venues while complying with their trading obligations. This development has been brought about due to G20 Commitments which were made following the financial crisis which requires that certain commonly used derivatives be traded on the transparent venues.

In order for this common approach to take effect, both organisations will adopt legal acts which will legislate for this common approach.  The next steps for this to occur will be for CFTC staff to notify the EC of its list of eligible SEFs and DCMs.

Coincidently the EC will notify the CFTC of its list of eligible MiFID II/MiFIR and MAR compliant trading venues.

The CFTC staff and the staff of relevant national competent authorities under the coordination of the EC will also work towards concluding cooperation arrangements to ensure the effective exchange of information and coordination of supervisory activities.

For additional information please click the link above.