In order to reduce the risk of market fragmentation and to enhance trading liquidity between US and European markets, the US Commodity Futures Trading Commission (CFTC) and European Union (EU) regulators should establish clear and comprehensive regimes to facilitate mutual recognition of execution platforms and trading requirements. This paper is designed to assist the CFTC with implementing a framework for finding comparability through an analysis of the US swap execution facility (SEF) core principles in the context of the European regulatory framework, and to support the CFTC in developing a ‘registration-lite’ approach for EU trading venues.
In developing an approach to comparability, the CFTC should apply the principles outlined in the final report issued by the International Organization of Securities Commissions (IOSCO) Task Force on Cross-Border Regulation, and recognize the broad commonalities between the US and EU regimes, rather than focus on technical differences between the underlying rules.
We encourage the CFTC to compare the core principles for SEFs established by the US Congress with corresponding European regulations, with a view to determining whether the rules for EU trading venues achieve the same objectives and offer the same protections as the requirements set out in the SEF core principles. Where these requirements are satisfied, the CFTC should allow EU trading venues to be exempt from SEF registration and compliance with the SEF rules. In addition, parties to a swap subject to the US trading mandate should be able to satisfy their obligations by executing on an EU trading venue in accordance with applicable rules, regardless of their status as a US person or otherwise.