Washington, D.C. — The Commodity Futures Trading Commission today announced that it has unanimously approved an amended order that exempts two multilateral trading facilities (MTFs) and two organised trading facilities authorized within the European Union (EU) from CFTC swap execution facility (SEF) registration requirements. The exempted MTFs are Financial & Risk Transaction Services Ireland Limited (Ireland) and TRAD-X MTF (France). The exempted OTFs are Market Securities OTF (France) and Tradition España OTF (Spain). 

Section 5h(g) of the Commodity Exchange Act (CEA) provides the CFTC may grant such an exemption if it finds that a foreign SEF is subject to comparable, comprehensive supervision and regulation by the appropriate governmental authorities in the facility’s home country. The CFTC may likewise revoke exempt status when a facility is no longer authorized and/or in good standing in its home country.

On December 8, 2017, the CFTC issued an order determining that the EU regulatory framework for MTFs and OTFs satisfies the standard in CEA section 5h(g) to exempt a SEF from registration with the CFTC. [See CFTC Press Release No. 7656-17] Under the order, the European Commission is empowered, on an ongoing basis, to request such exemption for facilities meeting certain legal requirements be added to the list of MTFs and OTFs that were granted exempt SEF status under the order.

This amendment brings the total number of exempted MTFs and OTFs in the EU to 16.

United Kingdom-Based MTFs and OTFs Removed from Order of Exemption

In January 2020, the United Kingdom (UK) and the EU finalized the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community. Under this agreement, the UK left the EU as of the end of January 31, 2020 and entered into a transition period that expired on December 31, 2020. Therefore, UK-based MTFs and OTFs have been removed from the list of eligible MTFs and OTFs covered by the EU order of exemption under section 5h(g) of the CEA.

On February 25, 2019, the CFTC issued a statement in conjunction with the Bank of England, including the Prudential Regulation Authority, and the Financial Conduct Authority to provide regulatory certainty on the continuity of derivatives trading and clearing activities between the UK and U.S. In the joint statement, the CFTC maintained the CFTC would work to replicate the relevant EU substituted compliance and exemption orders, including the CEA section 5h(g) order. [Joint Statement by UK and US Authorities on Continuity of Derivatives Trading and Clearing Post-Brexit (February 25, 2019)]

CFTC staff issued CFTC Staff Letter 21-24 on November 17, 2021, which maintains the status quo of the EU order of exemption for UK MTFs and OTFs after the expiration of the Brexit Transition Period while the CFTC works on a determination for UK MTFs and OTFs under CEA Section 5h(g). The CFTC will continue to maintain the status quo of the EU order of exemption for UK MTFs and OTFs until it completes its work on a determination for UK MTFs and OTFs under CEA section 5h(g).

Despite being removed from the EU order of exemption, UK MTFs and OTFs, listed in Appendix A of CFTC Staff Letter 21-24, are still covered by the no-action position in CFTC Staff Letter 21-24.