MiFID2/MiFIR Derivatives Newsflash: EU/US "common approach" agreed for derivatives trading venues

A brief overview of a common approach for the mutual recognition of EU and US derivatives trading venues.

The European Commission and the United States Commodity Futures Trading Commission (CFTC) announced an agreed “common approach” in respect of the key issue of equivalence between the EU and US regulatory regimes for derivatives trading venues.

In the joint statement, the European Commission indicates that it will look to adopt an equivalence decision pursuant to Art 28(4) of MiFIR that will cover certain swap execution facilities (SEFs) and designated contract markets (DCMs) notified to it by the CFTC. In turn, the CFTC will look to grant an exemption from the requirement to register as a SEF to certain EU trading venues notified to it by the European Commission.

When finalised, this would mean that the MiFIR derivatives trading obligation could be met by trading on the eligible SEFs or DCMs, thus avoiding the irreconcilable scenario of an Over The Counter (OTC) derivative contract having to be traded on both an EU and a US trading venue.

By way of reminder, the MiFIR derivatives trading obligation could apply from as early as 03 January 2018 for Category 1 and Category 2 entities. Currently, the final draft Regulatory Technical Standards specifying the OTC derivative contracts subject to the MiFIR derivatives trading obligation are under consideration by the European Commission, having been published by ESMA at the end of September 2017.

In respect of the equivalence between the EU and the US, the next steps are for the European Commission and the CFTC to work “as expeditiously as practicable” to finalise this arrangement and also to exchange the lists of the relevant SEFs/DCMs and EU trading venues.

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