INTERNATIONAL: ISDA Publishes Principles for USEU Trading Platform Recognition

Thursday February 25 2016

On 24^th February 2016, the International Swaps and Derivatives Association (ISDA) published a set of principles for achieving comparability determinations between US and European Union (EU) trading platforms.

The paper analyzes the regulatory frameworks in the US and EU, with the aim of determining whether EU trading platforms should be deemed comparable with those in the US. Underpinning the analysis is the principle that regulators should focus on broad outcomes and similarities, rather than conduct a granular, rule-by-rule comparison of the two frameworks.

In the EU, the revised Markets in Financial Instruments Directive and associated regulation (MIFID II/MIFIR) will introduce a requirement for certain derivatives to be traded on EU trading venues. In comparison, trade execution rules are already in place in the US, following the introduction of the swap execution facility (SEF) regime in October 2013. Under current rules, US persons can only trade on platforms that have registered as SEFs, subject to Commodity Futures Trading Commission (CFTC) oversight.

The paper argues that the CFTC should follow the principles outlined in a cross-border report published by the International Organization of Securities Commissions, and focus on similarities when making comparability determinations. If EU trading venues are determined to achieve the same objectives and protections set out in core principles for SEFs established by the US Congress, then the CFTC should allow those venues to be exempt from SEF registration and compliance with the SEF rules. Once deemed to be comparable, swap counterparties should be able to trade products subject to the US trading mandate on an EU trading venue, regardless of their US-person status.

Click on the above link for further details