CFTC Staff Letter 24-11: Extension of No-Action Positions for UK Entities Post-Brexit

2. Comparability Determination for the European Union: Certain Transaction-Level
   Requirements; 3
3. Comparability Determination for the European Union: Margin Requirements for
   Uncleared Swaps for Swap Dealers and Major Swap Participants (with items 1 and 2, the “EU Comparability Determinations”); 4 and
4. In the Matter of the Exemption of Multilateral Trading Facilities and Organised
   Trading Facilities Authorized Within the European Union from the Requirement to Register with the Commodity Futures Trading Commission as Swap Execution Facilities (the “Exemptive Order”).5 Additionally, DMO is amending the terms of the DMO no-action positions in CFTC Staff Letter 22-16 to cover two additional multilateral trading facilities (“MTFs”) authorized in the UK that are not currently covered by such DMO no-action positions, but are similarly situated to those UK MTFs and organised trading facilities (“OTFs”) currently covered by the DMO no-action positions. Also, DMO is amending the terms of the DMO no-action positions in CFTC Letter 22-16 to remove from the scope of those no-action positions a UK MTF and a UK OTF, as a result of such facilities no longer being authorized in the UK. This letter is provided in accordance with the Joint Statement by UK and US Authorities on Continuity of Derivatives Trading and Clearing Post-Brexit of February 25, 2019. 6 It supersedes CFTC Staff Letter 22-16, and the Divisions’ no-action positions taken in this letter will become effective immediately upon issuance. No person may rely on CFTC Staff Letter 22-16 after the issuance of this letter.
   II. Background
   3 Comparability Determination for the European Union: Certain Transaction-Level Requirements (December 27, 2013), available at https://www.cftc.gov/sites/default/files/idc/groups/public/@lrfederalregister/documents/file/2013- 30981a.pdf. 4 Comparability Determination for the European Union: Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (October 18, 2017), available at https://www.cftc.gov/sites/default/files/idc/groups/public/@lrfederalregister/documents/file/2017- 22616a.pdf. 5 In the Matter of the Exemption of Multilateral Trading Facilities and Organised Trading Facilities Authorized Within the European Union from the Requirement to Register with the Commodity Futures Trading Commission as Swap Execution Facilities (December 8, 2017), available at https://www.cftc.gov/sites/default/files/idc/groups/public/@requestsandactions/documents/ifdocs/mtf _otforder12-08-17.pdf. See also In the Matter of the Exemption of Multilateral Trading Facilities and Organised Trading Facilities Authorized Within the European Union from the Requirement to Register with the Commodity Futures Trading Commission as Swap Execution Facilities: Second Amendment To
   Appendix A To Order Of Exemption (July 23, 2020), available at
   https://www.cftc.gov/International/ForeignMarketsandProducts/ExemptSEFs.
   6 Available at https://www.cftc.gov/PressRoom/PressReleases/7876-19. Pursuant to the Joint Statement, the Commission committed to extending existing regulatory relief granted by the CFTC to EU firms, including UK firms, to UK firms at the point of the UK’s withdrawal from the EU.

In June 2016, the people of the UK voted by referendum to leave the EU. On March 29, 2017, the UK submitted notification of its intention to withdraw from the EU at the conclusion of a two-year period pursuant to Article 50 of the Treaty on European Union.7 In January 2020, the 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 (the “Withdrawal Agreement”). 8 The Withdrawal Agreement entered into force on February 1, 2020.9 Pursuant to the Withdrawal 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. To prepare for the expiration of the transition period, the UK government took actions to provide regulatory certainty, including passing the European Union (Withdrawal) Act 2018 (the “EU(W)A”), which, at the expiration of the transition period, incorporated relevant EU law and regulations into UK law and regulations, and granted existing authority vested in certain EU institutions to the Financial Conduct Authority (“FCA”), the Bank of England including the Prudential Regulation Authority (“PRA”), and His Majesty’s Treasury (“HMT”). The foregoing actions by the UK government aimed to preserve the regulatory status quo for UK entities benefitting from the Existing Commission Actions in all material respects following the expiration of the transition period. 10 Commission staff has been engaged with staff of the relevant UK authorities to learn about the regulatory and supervisory framework that now applies in the UK. 7 See Article 50 of the Treaty on European Union, available at https://eur-lex.europa.eu/legal￾content/EN/TXT/HTML/?uri=CELEX:12012M050&from=EN. 8 Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (Nov. 12, 2019), available at https://eur￾lex.europa.eu/legal-content/EN/TXT/?qid=1580206007232&uri=CELEX%3A12019W/TXT%2802%29. See also Questions and Answers on the United Kingdom's withdrawal from the European Union on 31 January 2020 (Jan. 24, 2020), available at https://ec.europa.eu/commission/presscorner/detail/en/qanda_20_104 (stating the President of the European Council, Charles Michel, and the President of the European Commission, Ursula von der Leyen, signed and the Prime Minister of the United Kingdom, Boris Johnson, would sign the Withdrawal Agreement on January 24, 2020). 9 See “The EU-UK Withdrawal Agreement”, available at https://ec.europa.eu/info/strategy/relations￾non-eu-countries/relations-united-kingdom/eu-uk-withdrawal-agreement_en. 10 The Financial Services And Markets Act 2023 (“FSMA 2023”) provides for the revocation of certain incorporated EU law in financial services, while empowering HMT and other relevant UK authorities to replace incorporated EU law with legislation or rules designed specifically for UK
markets in order to establish a “comprehensive FSMA model” under which the FCA and PRA are delegated to set regulatory standards “that work within an overall policy framework set by government and Parliament.” See FSMA 2023, Explanatory Notes, (June 29, 2023), available at https://www.legislation.gov.uk/ukpga/2023/29/notes/division/1/index.htm. The UK government has stated that it “expects that it will take a number of years to complete the process of revoking” incorporated EU law. FSMA 2023, Explanatory Note 31. As such, FSMA 2023 provides that revocations of incorporated EU law will not commence until HMT brings forth regulations to commence revocation.

Since 2019, the Divisions have issued staff letters which provided no-action positions benefiting certain swap dealers, as well as certain MTFs, OTFs, and their market participants. 11 These CFTC staff letters were meant to maintain the status quo of the Existing Commission Actions while the Commission worked with the relevant UK authorities to analyze relevant UK law and, where appropriate, replicate the Existing Commission Actions for UK entities. The Commission and the relevant UK authorities have not yet completed this work. Accordingly, the Divisions are further extending the time-limited no-action positions provided in CFTC Staff Letter 22-16, as described below.
III. Staff Positions
(A) MPD No-Action Positions
Pursuant to the EU Comparability Determinations and related Commission rules and guidance, the Commission has recognized that compliance by certain registered swap dealers with certain requirements under EU laws and regulations will constitute compliance with corresponding requirements under certain Commission regulations. Because the EU laws and regulations relevant for the EU Comparability Determinations have been incorporated into UK laws and regulations pursuant to the EU(W)A, MPD believes that temporarily extending the no-action position is warranted. Accordingly, MPD will not recommend that the Commission take enforcement action against a swap dealer registered with the Commission for failure to comply with Commission regulation(s)found to be comparable in an EU Comparability Determination if, in lieu of complying with such Commission regulation(s), it complies with the UK laws and regulations incorporated pursuant to the EU(W)A in the same manner and subject to the same conditions contained in the EU Comparability Determinations with respect to the corresponding EU laws and regulations. This MPD position will expire upon the earlier of either: (i) the effective date of any comparability determination issued by the Commission for the UK to the extent such FSMA 2023 Section 86. Until this time, EU law that HMT has not commenced revocation on will remain in place, including those requirements material to the Existing Commission Actions. 11 See CFTC Staff Letter 22-16, CFTC Staff Letter 21-24, Extended No-Action Relief in Connection With Certain Previously Granted Commission Determinations and Exemptions, in Response to the Withdrawal of the United Kingdom From the European Union (November 17, 2021) available at https://www.cftc.gov/csl/21-24/download, CFTC Staff Letter 21-17, Amended No-Action Relief in Connection With Certain Previously Granted Commission Exemptions in Response to the Withdrawal of the United Kingdom From the European Union (August 31, 2021) available at https://www.cftc.gov/csl/21-17/download, CFTC Staff Letter 20-39, Revised No-Action Relief in Connection With Certain Previously Granted Commission Determinations and Exemptions, in Response to the Withdrawal of the United Kingdom From the European Union (November 24, 2020) available at https://www.cftc.gov/csl/20-39/download, CFTC Staff Letter 19-08, No-Action Relief in Connection With Certain Previously Granted Commission Determinations and Exemptions, in Order to Account for the Anticipated Withdrawal of the United Kingdom From the European Union (April 5, 2019), available at https://www.cftc.gov/csl/19-08/download.

determination encompasses the subject matter of the EU Comparability Determinations; or (ii) December 31, 2026. (B) DMO No-Action Positions In the Exemptive Order, the Commission determined that the EU’s regulatory frameworks for MTFs and OTFs, respectively, satisfy the standard set forth in section 5h(g) of the Commodity Exchange Act (“CEA”) 12 for granting an exemption from the requirement to register with the Commission as a swap execution facility (“SEF”) pursuant to CEA section 5h(a)(1). 13 Based on this determination, the Commission granted an exemption from SEF registration to each of the MTFs and OTFs listed in
Appendix A to the Exemptive Order, as such Appendix A may be amended by the
Commission from time to time. Facilities that are granted an exemption from SEF registration pursuant to CEA section 5h(g) are also eligible facilities upon which counterparties may satisfy the trade execution requirement of CEA section 2(h)(8). 14 Because the EU laws and regulations relevant to the Exemptive Order have been incorporated into UK laws and regulations, DMO believes that temporary no-action positions are warranted. Accordingly, DMO will not recommend that the Commission take an enforcement action against:
(a) An MTF or OTF that is authorized within the UK and listed in Appendix A to this letter (each, an “Eligible UK Facility”), for failure to register as a SEF pursuant to CEA section 5h(a)(1) and Commission Regulation 37.3(a)(1); or (b) A counterparty that is subject to the trade execution requirement pursuant to CEA section 2(h)(8), if such counterparty executes a swap that is subject to such trade execution requirement on an Eligible UK Facility. 15 12 CEA section 5h(g) authorizes the Commission to grant an exemption from SEF registration if the Commission finds that a “swap execution facility … is subject to comparable, comprehensive supervision and regulation on a consolidated basis by … the appropriate governmental authorities in the home country of the facility.” 7 U.S.C. § 7b-3(g). 13 Pursuant to CEA section 5h(a)(1), no person may operate a facility for the trading or processing of swaps unless the facility is registered by the Commission as a SEF or as a designated contract market. 7 U.S.C. § 7b-3(a)(1). CEA section 5h(a)(1) is implemented in the Commission’s regulations through Commission Regulation 37.3(a)(1). 17 CFR 37.3(a)(1). 14 Facilities that are granted an exemption from SEF registration pursuant to CEA section 5h(g) may also offer trading in swaps that are not subject to the trade execution requirement to U.S. person counterparties. 15 This no-action position does not affect any other requirements under the CEA or the Commission’s regulations. In particular, swap transactions executed on Eligible UK Facilities must still comply with:
(1) The reporting requirements of Parts 43 and 45 of the Commission’s regulations which continue to apply to counterparties that are subject to such reporting requirements; (2) The swap trading eligibility requirement of CEA section 2(e); and (3) The following clearing-related requirements:

The DMO no-action positions taken in this letter will expire upon the earlier of either: (i) the effective date of any exemptive order issued by the Commission pursuant to CEA
section 5h(g), for MTFs and OTFs authorized within the UK; or (ii) December 31, 2026.
IV. Conclusion
This letter, and the positions taken herein, represent the views of the Divisions only, and do not necessarily represent the position or view of the Commission or of any other office or division of the Commission. This letter and the no-action positions taken herein are not binding on the Commission. 16 The staff positions taken in this letter do not excuse persons relying on it from compliance with any other applicable requirements contained in the CEA or in Commission regulations. Further, this letter, and the positions taken herein, are based upon the facts and circumstances presented to the Divisions. Any different, changed, or omitted material facts or circumstances might render the staff positions taken in this letter void. Finally, as with all staff letters, the Divisions retain the authority to condition further, modify, suspend, terminate, or otherwise restrict the terms of this letter, and the positions taken herein, in their discretion. If you have any questions concerning this correspondence, please contact Roger Smith, Associate Chief Counsel, DMO, at (202) 418-5344 or rsmith@cftc.gov; Frank Fisanich, (i) When a swap transaction executed by a U.S. person on an Eligible UK Facility is a “customer” position subject to CEA section 4d, the transaction, if intended to be cleared, must be cleared through a Commission-registered futures commission merchant (“FCM”) at a Commission￾registered derivatives clearing organization (“DCO”); (ii) When a swap transaction executed by a U.S. person on an Eligible UK Facility is a “proprietary” position under Commission Regulation 1.3, the transaction, if intended to be cleared, must be cleared either through a Commission-registered DCO or a clearing organization that has been exempted from DCO registration by the Commission pursuant to CEA section 5b(h) (an “Exempt DCO”); and (iii) When a swap transaction is subject to the Commission’s clearing requirement under Part 50 of the Commission’s regulations, and is entered into by a person that, pursuant to CEA section 2(h)(1), is subject to such clearing requirement, the transaction must be cleared either through a Commission-registered DCO or an Exempt DCO; provided that, consistent with (i) above, if the transaction is a “customer” position subject to CEA section 4d, it must be cleared through a Commission-registered FCM at a Commission-registered DCO, and cannot be cleared through an Exempt DCO. If, as a result of the clearing arrangements that an Eligible UK Facility has in place, some swap transactions executed on the Eligible UK Facility are cleared by a clearing organization that is not a Commission￾registered DCO, the Eligible UK Facility must, as a condition of receiving the above no-action position from the SEF registration requirement, have a rule in its rulebook that requires the types of swap transactions described in clauses (i), (ii) and (iii) above, if intended to be cleared, to be cleared in a manner consistent with the requirements
described in clauses (i), (ii) and (iii), respectively. 16 See § 140.99(a)(2), 17 CFR 140.99(a)(2) (“A no-action letter binds only the issuing Division . . . and not the Commission or other Commission staff.”).

Chief Counsel, MPD, at (202) 418-5949 or ffisanich@cftc.gov; or Jacob Chachkin, Associate Chief Counsel, MPD, at (202) 418-5496 or jchachkin@cftc.gov. Sincerely, ___________________________________ Amanda L. Olear Director Market Participants Division ___________________________________ Vincent McGonagle Director Division of Market Oversight cc: Regina Thoele, Compliance National Futures Association, Chicago Michael Otten, OTC Derivatives National Futures Association, New York

Appendix A
List of UK Authorized MTFs and OTFs covered by this No-Action Letter Trading Facility Name Category (MTF or OTF) Home Country 360 Trading Networks UK Limited MTF United Kingdom Bloomberg Multilateral Trading Facility Limited MTF United Kingdom BGC Brokers LP - OTF OTF United Kingdom Creditex Brokerage LLP - MTF MTF United Kingdom Digital Vega MTF MTF United Kingdom Dowgate MTF United Kingdom EBS UK MTF MTF United Kingdom FX Connect - MTF MTF United Kingdom GFI Securities LTD - MTF MTF United Kingdom GFI Securities LTD - OTF OTF United Kingdom ICAP Securities OTF OTF United Kingdom Integral MTF MTF United Kingdom iSWAP MTF MTF United Kingdom Kyte Broking Limited OTF United Kingdom OTCX UK MTF MTF United Kingdom Refinitiv Transaction Services Limited MTF United Kingdom TP ICAP UK MTF MTF United Kingdom Trad-X MTF United Kingdom Tradeweb Europe Limited MTF MTF United Kingdom Tradition OTF OTF United Kingdom Tradition-NEX OTF OTF United Kingdom Tullett Prebon Europe OTF OTF United Kingdom Tullett Prebon Europe MTF MTF United Kingdom