Tuesday March 15 2016

News Source: Global Exchanges

Focus: Derivative Market Segment

Type: General




On 15th March 2016, the European Commission determined that the U.S. Commodity Futures Trading Commission (CFTC) has the equivalent requirements as the EU in regulating central counterparties (`CCPs`). This follows the announcement of 10 February 2016 by Commissioner Hill and CFTC Chairman Timothy Massad on a common approach for transatlantic CCPs.

This decision will ensure that both EU and US CCPs operate to the same high standards and at a comparable level of cost to their participants. It also alleviates the regulatory burden for US and EU CCPs, allowing compliance with only one set of rules. This will encourage market certainty and cross-border activity, avoiding fragmentation of markets and liquidity.

A CCP wishing to obtain recognition must apply to the European Securities and Markets Authority (ESMA). ESMA will then process the application in cooperation with the relevant regulators of the CCP that has applied for recognition. Under this equivalence decision, US CCPs seeking recognition in the EU will need to confirm that their internal rules and procedures meet certain conditions set out in the decision relating to the calculation of initial margins and the default fund.

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