The Commodity Futures Trading Commission issued an express determination that certain laws and regulations of the European Union applicable to clearinghouses are comprehensive and comparable to those under which clearinghouses registered with the CFTC operate. As a result, going forward, the CFTC will permit European-based clearinghouses that are registered with it as derivatives clearing organizations and also overseen by a European national regulator to comply with local requirements to satisfy equivalent CFTC requirements regarding their financial resources, risk management practices, settlement procedures and default rules and procedures. The CFTC made this determination despite noting that, under its regime, future commission merchants must calculate initial margin for cleared customers on a gross as opposed to a net basis and that clearinghouses must collect additional margin for non-hedge positions of their customers. Neither requirement exists in the EU. The CFTC also observed that, while under its regime, customers of FCMs are shielded from losses by an FCM’s affiliates, in the EU customers of a broker are potentially exposed to proprietary trading losses. To help effectuate the CFTC’s determination, staff of the Division of Clearing and Risk also issued n0-action relief to EU-based DCOs from compliance with certain CFTC requirements for their non-FCM clearing members. Simultaneously with the CFTC’s and staff’s actions, the European Commission issued a formal determination that the CFTC has equivalent requirements as the EU in overseeing clearinghouses (CCPs). This paves the way for DCOs to apply to the European Securities and Markets Authority for recognition to clear exchange-derivatives transactions for EU-based persons and to obtain “qualifying CCP status” so that European banks will not have to take a large capital charge to clear transactions through them. Both the CFTC’s and the EC’s adopted measures follow announcement on February 10, 2016, of their “common approach for trans-Atlantic CCPs.” (Click here for background on the common approach in the article, “Common Approach to Transatlantic CCPs Finally Agreed by EC and CFTC” in the February 14, 2014 edition of Bridging the Week.)