Michel Barnier (on behalf of the Commission) and Gary Gensler (on behalf of the US Commodity Futures Trading Commission (CFTC)) announced agreement on a "Path Forward" to mutual agreement on derivatives regulation, to address cross-border issues. Elements of the package agreed already are:
- for bilateral uncleared swaps, CFTC will issue no-action relief for certain transaction-based risk mitigation requirements. The EU’s "equivalence" regime can allow market participants to determine their own choice of rules;
- for the trading-execution requirement, CFTC will allow overseas exchanges that have received direct access no-action relief to also list swap contracts for trading by direct access to avoid market and liquidity disruption; and
- if the CFTC trading-execution requirement is triggered before 15 March 2014, CFTC will extend appropriate time-limited transitional relief in the form of no-action letters to EU-regulated multilateral trading facilities (MTFs) that have multilateral trading schemes, a sufficient level of pre- and post-trade price transparency, non-discriminatory access by market participants, and an appropriate level of oversight. CFTC and the Commission will also consult on potentially extending regulatory relief to trading platforms that are subject to requirements that achieve regulatory outcomes that are comparable to the Dodd-Frank requirements for swap execution facilities (SEFs) and will report on progress in January 2014.
The Commission, ESMA and the CFTC will continue to work on similar approaches to:
- straight-through-processing and harmonised international rules on margins for uncleared swaps and essentially identical processes on mandatory clearing obligations and regulating intra-group swaps/derivatives trades. They will also work to ensure that overseas guaranteed subsidiaries and branches of US and EU persons cannot operate outside the reforms agreed at G20 level;
- reporting to trade repositories. The regulators continue to work on consistent data fields, access to data and other issues related to privacy, blocking and secrecy laws; and
- central counterparties (CCPs). The only key difference between EU and US rules in this area is on CCP initial margin coverage and the parties will work together to reduce any regulatory arbitrage opportunities and to put in place a mechanism so CCPs that have not yet been recognised or registered in the US or the EU can continue their business operations.