On December 8, in response to a request by the European Commission (EC), the Commodity Futures Trading Commission issued an order exempting certain multilateral trading facilities (MTFs) and organized trading facilities (OTFs) authorized within the European Union (EU) from the requirement to register with the CFTC as swap execution facilities (SEFs).
The CFTC determined that requirements under the EU’s (1) new Markets in Financial Instruments Regulation (MiFIR); (2) amended Markets in Financial Instruments Directive (MiFID II); and (3) Market Abuse Regulation establish regulatory frameworks for MTFs and OTFs which satisfy the requirements of Section 5h(g) of the Commodity Exchange Act, which provides that the CFTC may exempt from SEF registration a foreign SEF that is subject to comparable, comprehensive supervision and regulation in the foreign SEF’s home country.
The order will go into effect on January 3, 2018, when requirements under MiFIR and MiFID II begin to apply. On that date, transactions that are subject to the CFTC’s trade execution requirements will be able to be executed on MTFs and OTFs listed in the order. The exempted SEFs will be able to offer trading in swaps that are not subject to the CFTC’s trade execution requirement to US person counterparties.
The order provides that the EC may request that additional MTFs and OTFs that satisfy the requirements of Section 5h(g) of the CEA be added to the list of MTFs and OTFs that are granted exempt SEF status under the order.
The CFTC’s order is available here.