CFTC and EU Regulators Agree on a Common Approach for the Regulation of CCPs

by Eversheds Sutherland (US) LLP

Last week, the Commodity Futures Trading Commission (CFTC) and European regulators announced that they have reached agreement on a “common approach” regarding requirements for central counterparties (CCPs) (i.e., clearinghouses). Per their joint statement, the European Commission will, in the very near term, adopt an equivalence determination with respect to CFTC requirements for U.S. CCPs that will allow the European Securities and Markets Authority (ESMA) to “recognize” U.S. CCPs.

Why is this relevant?

Under the European Union’s (the EU) Capital Requirements Regulation, EU banks and their subsidiaries incur higher capital charges if they use a CCP that is not a “qualifying” CCP (a QCCP), i.e., a CCP that is not recognized or authorized by ESMA. These capital requirements are not currently effective; they have been delayed multiple times due to the failure on the part of the CFTC and European regulators to reach agreement to recognize each other’s CCP regulatory regimes as equivalent. The current compliance date for these capital requirements is June 15, 2016.

According to the CFTC’s and EU’s joint statement, the European Commission will propose its equivalence determination with respect to U.S. CCPs as soon as practicable, after which it will be voted on by the Member States of the European Union. Following this step, ESMA may complete the process for recognizing U.S. CCPs.

The CFTC’s and EU’s agreement comes just in time. The first deadline for the clearing of interest rate swaps under EU regulations is June 21, 2016,i and the frontloading window applicable to those market participants that are subject to the June 21 deadline opens on February 21, 2016.ii In light of this deadline, EU banks were expected to cease using U.S. CCPs in advance of the February 21, 2016, date in order to avoid the capital requirements.

The joint statement indicates that U.S. CCPs are expected to be recognized by ESMA by the June 21 clearing compliance date, and states that EU banks can continue to use U.S. CCPs during ESMA’s recognition process. This permits EU banks to use US CCPs to satisfy the EU clearing requirements. In turn, the joint statement indicates that the CFTC will “propose a determination of comparability with respect to EU requirements, which will permit EU CCPs to provide services to US clearing members and clients whilst complying with certain corresponding EU requirements.” The CFTC will also propose to streamline the registration process for EU CCPs wishing to register as derivatives clearing organizations in the United States.

What’s next?

The CFTC’s and European regulators’ actions to deem EU CCP requirements equivalent to U.S. CCP requirements do not fully solve the equivalence issue with respect to mandatory clearing. While it will now be possible to satisfy the clearing requirement of either jurisdiction by using an EU or U.S. CCP, the clearing requirements for particular products have not yet been deemed comparable. Thus, substituted compliance, which would permit compliance with one jurisdiction’s clearing requirement (or non-clearing requirement) to satisfy the other’s, is not yet available. This is not of major concern, because the EU’s clearing requirement for interest rate swaps, which is the only mandatory clearing determination that has been finalized in the EU thus far, is nearly the same as the U.S. clearing requirement for interest rate swaps.iii

The joint statement indicates that U.S. and EU regulators will continue to work together to harmonize all of their jurisdictions’ respective requirements for swaps.

i See Sutherland’s September 1, 2015 Legal Alert, “Coming Soon: Mandatory Clearing of Interest Rate Swaps Under EMIR,” for more information about the EU’s clearing requirement for interest rate swaps. Note that the compliance dates for the EU’s interest rate swaps clearing requirement are as follows:

Also note that, by virtue of remaining maturities established in the EU’s final regulatory technical standards for clearing, frontloading will only apply to Category 1 and 2 entities, and the frontloading period begins on February 21, 2016, and May 21, 2016, respectively.
ii While a misnomer, “frontloading” refers to retroactive clearing.
iii The classes of interest rate swaps required to be cleared in the EUare similar but not identical to those required to be cleared in the U.S. The differences between the clearing mandates include the following: (i) the U.S. rules require the clearing of forward rate agreements denominated in JPY but the EU rules do not and (ii) the maximum maturity for the overnight index swap class is two years under U.S. rules and three years under the EU rules.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Eversheds Sutherland (US) LLP | Attorney Advertising

Written by:

Eversheds Sutherland (US) LLP

Eversheds Sutherland (US) LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.