I support today’s action by the Commission to amend the order that exempts two types of trading facilities authorized within the European Union (EU)[1] from registration with the CFTC as swap execution facilities (SEFs).  As amended, the order will authorize an additional 16 trading facilities to access US eligible contract participants (ECPs) without complying with the CFTC’s regulations or being subject to the Commission’s oversight.  These trading facilities, located in France, Germany, the Netherlands, Spain, and the UK, include the first EU-authorized trading facilities located outside of the UK to benefit from the order.

Today’s amended order exemplifies the Commission showing deference to a foreign regulatory counterpart.  Congress established a framework for non-US trading facilities to be exempt from SEF registration if the Commission establishes that they are subject to comparable, comprehensive supervision and regulation.[2]  This provision directs the Commission to show deference to its foreign counterparts, when appropriate.  When exercised properly, deference eliminates duplicative regulatory burdens for market participants and conserves the Commission’s resources.  Other provisions of the Commodity Exchange Act also provide for a policy of international deference, including the provision exempting from registration comparably supervised foreign DCOs,[3] and, on a broader level, the provision limiting the Commission’s authority over foreign swaps activity to that having a “direct and significant connection” with US commerce.[4]

A successful policy of deference depends on the CFTC having foreign regulatory counterparts that honor their cross-border commitments.  In 2018, I stated that I would neither support the CFTC granting additional equivalence determinations within the EU nor would I support any relief requested by EU authorities until the EU re-committed to honoring its 2016 agreement with the CFTC on CCP oversight.[5]  That agreement had been in jeopardy since the EU’s issuance of EMIR 2.2 in 2017, which raised the possibility of EU authorities directly supervising US clearinghouses and requiring them to comply with EMIR.  Since then, I have objected to staff no-action relief to a CCP located in the EU[6] and to the Commission’s registration of three foreign boards of trade (FBOTs) located in the EU.[7]  Last week, however, the European Commission adopted three Delegated Acts regarding EU supervision of third-country CCPs, including those located in the US, and these Acts set clearly defined numerical thresholds at which point such CCP would be subject to European regulation and supervision as a “tier 2” CCP. [8] I believe these thresholds reasonably withhold European regulation until the CCP genuinely poses systemic risk to the European market, and, therefore are in the spirit of the 2016 agreement on CCPs between the CFTC and the European Commission.  I recognize that while these Delegated Acts remain subject to review by the European Parliament, their adoption is meaningful and warrants my approval of today’s action for EU trading facilities.  Furthermore, I note that European authorities currently permit US SEFs registered with the CFTC to access European market participants without subjecting those SEFs to EU supervision and regulation.

I would like to thank the staffs of the CFTC and the European Commission for their cooperation in support of today’s amended order.  I hope to be in a position to support additional acts of international deference in the future.