US and EU Announce Common Approach to Derivatives Trading Venues

The European Commission and the US Commodity Futures Trading Commission have published a joint statement announcing a common approach for recognizing certain derivatives trading venues authorized in the EU and the US for the purposes of the trading obligation. The Markets in Financial Instruments Regulation imposes a trading obligation on EU financial counterparties and non-financial counterparties for transactions in derivatives that: (i) have been declared subject to the clearing obligation under the European Market Infrastructure Regulation; (ii) are admitted to trading or traded on at least one EU trading venue (a regulated market, multilateral trading facility or organized trading facility) or a third-country equivalent trading venue; and (iii) are sufficiently liquid. The European Commission may adopt an equivalence decision declaring that certain third-country trading venues are subject to an equivalent legal, supervisory and enforcement regime to the EU requirements under MiFID II and the Market Abuse Regulation. The common approach signifies that it is intended that the European Commission will adopt an equivalence decision for swap execution facilities and designated contract markets regulated by the CFTC. Similarly, the CFTC will exempt MTFs and OTFs from the requirement to register as SEFs.

The EU trading obligation is scheduled to come into effect on January 3, 2018, unless the clearing obligation for a particular class of derivatives has not yet entered into force. The European Securities and Markets Authority published its final draft technical standards that provide for the trading obligation to apply to fixed-to-float interest rate swaps denominated in euros, US dollars and pounds sterling and to index credit default swaps (iTraxx Europe Main and iTraxx Europe Crossover). The European Commission has not yet issued any equivalence determinations for purposes of the trading obligation and that it is possible that the final RTS and such equivalence determinations would be coordinated in their timings.

View the announcement.