On November 25, the European Securities and Markets Authority (ESMA) published a statement regarding the impact on the derivatives trading obligation (DTO) under Article 28 of the Markets in Financial Instruments Regulation (600/2014) (MiFIR) following the United Kingdom’s withdrawal from the European Union on December 31 (the Statement).

In the Statement, ESMA determines that the application of DTO will continue to apply without changes in the event of a no-deal Brexit or the absence of an equivalence decision issued by the European Commission following the end of the transition period. However, ESMA commits to monitoring the situation closely.

ESMA confirms that most UK trading venues that offer trading in derivatives subject to the DTO have established new trading venues in the European Union. Although trading activity on these venues is currently limited, the venues have on-boarded participants and members which should facilitate EU investment firms’ compliance with the DTO after the end of the transition period.

ESMA recognizes that in the absence of an equivalence decision, this system may create challenges for EU counterparties who have UK branches of EU investment firms. These EU counterparties are likely to be subject to the DTO in both the United Kingdom and the European Union and may require changes to their current business practices to ensure compliance with both.

The Statement is available here.