On December 8, 2017, the CFTC issued an order exempting certain multilateral trading facilities (MTFs) and organized trading facilities (OTFs) authorized within the European Union (EU) from the requirement to register with the CFTC as swap execution facilities (SEFs). The order will become effective on January 3, 2018 when compliance is required for derivatives trading obligations under the Markets in Financial Instruments Regulation (MiFIR) and Markets in Financial Instruments Directive (MiFID II).

The CFTC order permits parties to satisfy Dodd-Frank swap exchange-trading (or trade-execution) requirements by entering into the transaction on one of these EU-authorized MTFs or OTFs.

On December 5, 2017, the European Commission (EC) issued Commission Implementing Decision 2017/2238, an equivalence decision in which it recognized 23 CFTC-authorized SEFs and 14 designated contract markets (DCM) as eligible trading venues for purposes of satisfying the new EU trading obligation under MiFIR (see Legal Update, European Commission adopts Implementing Decision recognising certain US trading venues under MiFIR). The EC decision came into effect on December 7, 2017 and enables EU counterparties to trade derivative instruments on the DCMs and SEFs that the EC has recognized as equivalent.

The CFTC order determined that certain EU-wide legal requirements including MiFIR and MiFID II, establish regulatory frameworks for MTFs and OTFs, that satisfy the Commodity Exchange Act (CEA) standards for granting an exemption from the SEF-registration requirement.

Under CEA section 5h(g) the CFTC may grant an exemption from the SEF registration requirement for a foreign swap exchange that it deems is subject to comparable, comprehensive supervision and regulation by the appropriate governmental authorities in the facility's home country.

Based on the CFTC's determination that the EC regulatory frameworks for MTFs and OTFs satisfy this standard, the order exempts the following MTFs and OTFs that are authorized and in good standing within the EU from the requirement to register with the CFTC as a SEF:

The order provides that the EC may request that additional MTFs and OTFs be granted exemptions in the future.

When the order becomes effective, swap transactions that are subject to the CFTC's trade execution requirement will be able to be executed on MTFs and OTFs that are listed in the order. These exempt SEFs also will be able to offer trading in swaps that are not subject to the CFTC's trade execution requirement to US person counterparties.

CFTC staff will further review the necessity of any staff action regarding real-time public reporting requirements under Part 43 of the CFTC's regulations. CFTC action may be necessary for certain publicly reportable swap transactions executed on an exempted MTF or OTF in order to account for the post-trade transparency requirements to which these transactions also will be subject in the EU under MiFIR.