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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 240

[Release No. 34-106225; File No. S7-2026-29]

RIN 3235-AN82

Exemption of Debt Obligations Issued by the European Union Under the Securities

Exchange Act of 1934 for Purposes of Trading Futures Contracts on Those Securities

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

SUMMARY: The Securities and Exchange Commission (the “Commission” or the “SEC”) is

proposing an amendment to designate debt obligations issued by the European Union as

“exempted securities” for the purposes of marketing and trading futures contracts on those

securities in the United States or to U.S. persons. The amendment is designed to permit futures

trading on debt obligations issued by the European Union to be regulated as futures on

“exempted securities,” subject to the Commodity Exchange Act. The proposal is intended to

increase U.S. persons’ access to the market for these products, which may improve opportunities

for hedging; lower transaction costs; contribute to greater market depth; reduce operational

friction; and increase competition.

DATES: This release was published in the Federal Register on September 2, 2026. Comments

should be received on or before November 2, 2026.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments:

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•

Use the Commission’s internet comment form (https://www.sec.gov/comments/s7-202629/exemption-debt-obligations-issued-european-union-under-securities-exchange-act1934-purposes-trading); or

•

Send an email to rule-comments@sec.gov. Please include File Number S7-2026-29 on

the subject line.

Paper Comments:

•

Send paper comments to Vanessa A. Countryman, Secretary, Securities and Exchange

Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number S7-2026-29. This file number should be

included on the subject line if email is used. To help the Commission process and review your

comments more efficiently, please use only one method. The Commission will post all comments

on the Commission’s website (https://www.sec.gov/rules-regulations/public-comments/s7-202629). All comments received will be posted without change. Do not include personally identifiable

information in submissions; you should submit only information that you wish to make available

publicly. The Commission may redact in part or withhold entirely from

publication submitted material that is obscene or subject to copyright protection.

Studies, memoranda, or other substantive items may be added by the Commission or staff

to the comment file during this rulemaking. A notification of the inclusion in the comment file of

any such materials will be made available on the Commission’s website. To ensure direct

electronic receipt of such notifications, sign up through the “Stay Connected” option at

www.sec.gov to receive notifications by email.

A summary of the proposal of not more than 100 words is posted on the Commission’s

website (https://www.sec.gov/rules-regulations/2026/08/s7-2026-29).

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FOR FURTHER INFORMATION CONTACT: Alexandra Oprea, Special Counsel, John

Guidroz, Assistant Director, Office of Derivatives Policy, or Carol McGee, Associate Director,

Office of Derivatives Policy and Trading Practices, at (202) 551-5870, Division of Trading and

Markets, U.S. Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is proposing amendments to 17 CFR

240.3a12-8 (“Rule 3a12-8” or the “Rule”) under the Securities Exchange Act of 1934

(“Exchange Act”). 1

I. Introduction

The Commission is proposing to amend Rule 3a12-8 to designate the debt obligations of

the European Union (“EU”) as “exempted securities” for purposes only of the offer, sale or

confirmation of futures contracts on the EU’s debt obligations. As discussed throughout this

release, the proposed amendment would harmonize the regulatory treatment of the debt

obligations of the EU with the regulatory treatment of the debt obligations of 11 EU member

states that are currently listed in Rule 3a12-8, which would subject futures contracts on the EU’s

debt obligations to the exclusive jurisdiction of the Commodity Futures Trading Commission

(“CFTC”), consistent with the CFTC’s exclusive jurisdiction over future contracts on debt

obligations of the 11 EU member states.

Prior to the Commodity Futures Modernization Act of 2000 (“CFMA”), 2 it was unlawful

under the Commodity Exchange Act (“CEA”) to trade a futures contract on any individual

security unless the security in question was an exempted security (other than a municipal

15 U.S.C. 78a et seq.

Commodity Futures Modernization Act of 2000, Pub. L. No. 106-554, 114 Stat. 2763 (2000), available at

https://www.govinfo.gov/content/pkg/PLAW-106publ554/pdf/PLAW-106publ554.pdf.

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security) under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act. 3 Debt

obligations of foreign governments are not exempted securities under the Securities Act nor the

Exchange Act. 4 The Commission, however, adopted Rule 3a12-8 5 under the Exchange Act to

designate debt obligations issued by certain foreign governments (the “Designated Foreign

Governments”) as exempted securities under the Exchange Act solely for the purposes of the

offer, sale or confirmation of sale (herein also referred to as “trading”) of futures contracts on

debt obligations of those governments (“Qualifying Foreign Futures Contracts”) in the U.S. or to

U.S. persons. 6 The foreign governments currently designated in the Rule include twenty-one

countries. 7

In 2000, Congress enacted the CFMA, 8 which lifted the ban on single security futures

and granted joint jurisdiction to the Commission and the CFTC with regards to security futures. 9

See Futures Trading Act of 1982, Pub. L. 97-444, 96 Stat. 2294 (1983), available at

https://www.congress.gov/bill/97th-congress/house-bill/5447/text (“Futures Trading Act of 1982” or “1982 Act”)

sec. 101(a) adding section 2(a)(l)(B](v) of the CEA, which provided that “ (n]o person shall offer to enter into, enter

into, or confirm the execution of any contract of sale (or option on such contract) for future delivery of any security,

or interest therein or based on the value thereof, except an exempted security under section 3 of the Securities Act . .

. or section 3(a)(12) of the. . . Exchange Act. . .”

See 15 U.S.C. 77c; and 15 U.S.C. 78c(a)(12)(A).

17 CFR 240.3a12-8.

See 17 CFR 240.3a12-8(b). See also Exemption of Certain Foreign Government Securities for Purposes of Futures

Trading, Exchange Act Release No. 20708 (Mar. 2, 1984), 49 FR 8595 (Mar. 8, 1984) (“UK and Canada Release”).

17 CFR 240.3a12-8(a)(1)(i) through (xxi). The Designated Foreign Governments are the United Kingdom of Great

Britain and Northern Ireland (“UK”), Canada, Japan, the Commonwealth of Australia (“Australia”), the Republic of

France (“France”), New Zealand, the Republic of Austria (“Austria”), the Kingdom of Denmark (“Denmark”), the

Republic of Finland (“Finland”), the Kingdom of the Netherlands (“Netherlands”), Switzerland, the Federal

Republic of Germany (“Germany”), the Republic of Ireland (“Ireland”), the Republic of Italy (“Italy”), the Kingdom

of Spain (“Spain”), the United Mexican States (“Mexico”), the Federative Republic of Brazil (“Brazil”), the

Republic of Argentina (“Argentina”), the Republic of Venezuela (“Venezuela”), the Kingdom of Belgium

(“Belgium”) and the Kingdom of Sweden (“Sweden”).

See supra note 2.

This regime applies to a “security futures product,” which is a security future or any put, call, straddle, option, or

privilege on any security future. See Exchange Act section 3(a)(56), 15 U.S.C. 78c(a)(56); CEA section 1a(45), 7

U.S.C. 1a(45).

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Security futures 10 based on individual securities and narrow-based indexes of securities, or any

interest therein or based on the value thereof, are subject to the joint jurisdiction of the

Commission and the CFTC, whereas commodity futures are subject to the exclusive jurisdiction

of the CFTC. The definition of “security future” excludes a contract of sale for future delivery of

an exempted security (other than a municipal security) under the Exchange Act. 11

For the purposes of the Rule, the debt obligations of Designated Foreign Governments

(“Designated Foreign Government Securities”) are exempted securities for purposes only of the

trading of Qualifying Foreign Futures Contracts and therefore are excluded from the definition of

security futures. As a result, futures contracts on the debt obligations of the governments listed in

the Rule may be sold in the U.S. or to U.S. persons subject to the applicable futures regulations

under the CEA and in a manner consistent with the definitions in the Rule.

The Commission is proposing to amend Rule 3a12-8 to designate the debt obligations of

the EU as exempted securities solely for the purposes of the offer, sale or confirmation of sale of

Qualifying Foreign Futures Contracts on those securities, thereby applying the same regulatory

treatment (e.g., board-of-trade execution, non-registration of the underlying securities, and

foreign delivery) to futures on EU debt obligations as is applicable to futures on the debt

obligations of Designated Foreign Governments that are EU member states. By deeming EU debt

obligations to be exempted securities for this purpose, the amendment would remove futures on

The term “security future” is defined in Exchange Act Section 3(a)(55) and in CEA section 1a(44) as “a contract

of sale for future delivery of a single security or of a narrow-based security index, including any interest therein or

based on the value thereof, except an exempted security under [section 3(a)(12) of the Exchange Act as in effect on

January 11, 1983] (other than any municipal security as defined in [section 3(a)(29) of the Exchange Act as in effect

on January 11, 1983]).” The term “security future” does not include any agreement, contract, or transaction excluded

from the CEA, 7 U.S.C. 1 et seq., under section 2(c), 2(d), 2(f), or 2(g) of the CEA, 7 U.S.C. 2(c), (d), (f), (g), (as in

effect on December 21, 2000) or Title IV of the CFMA. 15 U.S.C. 78c(a)(55); 7 U.S.C. 1a(44). The Securities Act

provides that the term “security future” has the same meaning as in the Exchange Act. See 15 U.S.C. 77b(a)(16).

15 U.S.C. 78c(a)(55)(A).

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EU debt from the security futures regime and place them under the CFTC’s futures framework,

which would permit them to be traded on U.S. futures exchanges and accessed by a broader

population of U.S. market participants. The increased access, in turn, may improve opportunities

for hedging, lower transaction costs, contribute to greater market depth, reduce operational

friction, and increase competition.

In March 2026, the CFTC and the SEC entered into a Memorandum of Understanding. 12

The SEC and CFTC have committed to coordinate, as appropriate, in areas of common

regulatory interest where collaboration can enhance regulatory effectiveness and market

integrity. 13 In matters involving common jurisdiction, the SEC and CFTC seek to coordinate to

reduce regulatory gaps and provide greater certainty regarding regulatory responsibility in

support of efficient markets and lawful innovation. 14 The revisions proposed herein to Rule

3a12-8 further these harmonization goals by eliminating asymmetric treatment and split

jurisdictional oversight of futures on EU debt obligations and futures on debt obligations of

Designated Foreign Governments that are EU member states, when the disparate treatment is not

grounded in meaningful legal or economic distinction.

II. Background

Prior to the passage of the CFMA, it was unlawful to trade a futures contract on any

individual security other than exempted securities under section 3 of the Securities Act or section

3(a)(12) of the Exchange Act. 15 Debt obligations of foreign governments are not exempted

See SEC & CFTC, Memorandum of Understanding between the U.S. Securities and Exchange Commission and

the U.S. Commodity Futures Trading Commission regarding Harmonization in Areas of Common Regulatory

Interest (Mar. 11, 2026), available at https://www.sec.gov/files/mou-sec-cftc-2026.pdf.

See id at 1.

See id.

See supra note 3.

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securities under either of these statutes, and thus the trading of futures contracts (and options

thereon) in the U.S. or to U.S. persons on single (non-exempt) securities and narrow-based

indexes of such securities was prohibited. 16

In 1984, the Commission adopted Rule 3a12-8 to designate debt obligations issued by the

UK or Canadian government as exempted securities under the Exchange Act solely for the

purposes of trading futures contracts on those securities in the U.S. or to U.S. persons. 17 As a

result, futures contracts on the debt obligations of the UK and Canada were permitted to be sold

in the United States, as long as the other terms of the Rule were satisfied. In proposing

Rule 3a12-8, the Commission explained that the Rule was designed to address the Commission’s

understanding that, in adopting the Futures Trading Act of 1982, Congress did not intend to bar

futures trading on certain foreign government debt obligations in the U.S., so long as the futures

were not settled in the U.S. and the underlying securities were not traded in the U.S. 18 Over time,

the Commission broadened the Rule’s coverage beyond the debt obligations issued by the UK

and Canadian governments to include the debt obligations of additional government issuers. 19

Id.

See UK and Canada Release, supra note 6 (“[Rule 3a12-8] would designate [UK and Canadian government

bonds] as ‘exempted’ securities under section 3(a)(12) for the purpose of permitting futures trading in this

country.”).

See Exemption for Certain Foreign Government Securities for Purposes of Futures Trading, Exchange Act Release

No. 19811 (May 25, 1983), 48 FR 24725 (June 2, 1983) (citing 128 Cong. Rec. H7492 (daily ed. Sept. 23, 1982)

(statements of Representatives Daschle and Wirth)). See also 128 Cong. Rec. H24925 (daily ed. Sept. 23, 1982),

available at https://www.govinfo.gov/content/pkg/GPO-CRECB-1982-pt18/pdf/GPO-CRECB-1982-pt18-6-2.pdf

(statement of Representative Wirth) (“I understand from the SEC that it intends promptly to take the necessary

administrative action to [exempt futures contracts based on the long gilt from the ban] so long as actual trading of

the underlying gilt-edged securities does not occur in this country. The SEC may also in the future wish to take

administrative action for the purpose of permitting transactions in foreign futures contracts on other securities issued

by foreign governments.”).

See Exemption of Japanese Government Securities Under the Securities Exchange Act of 1934 for Purposes of

Futures Trading, Exchange Act Release No. 23423 (July 11, 1986), 51 FR 25996 (July 18, 1986) (“Japan Release”);

Exemption of Certain Foreign Government Securities for Purposes of Futures Trading, Exchange Act Release No.

25072 (Oct. 29, 1987), 52 FR 42277 (Nov. 4, 1987) (Australia, France and New Zealand) (“Australia, France and

New Zealand Release”); Exemption of Certain Foreign Government Securities for Purposes of Futures Trading,

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The most recent modification (adding Sweden in 1999) occurred prior to the passage of the

CFMA, while the trading of futures on individual securities was still banned.

The Rule includes definitions that are intended to facilitate the trading of futures

contracts on Designated Foreign Government Securities in the U.S. or by U.S. persons while

requiring offerings of the underlying securities to comply with the Federal securities laws.

Specifically, for the exemption to apply, the definition of Qualifying Foreign Futures Contracts

requires that: (1) the futures contract be traded on or through a board of trade as defined in 7

U.S.C. 2 and (2) the futures contracts require delivery outside the United States, including any of

its possessions or territories. 20 Furthermore, the definition of Designated Foreign Government

Security requires that the underlying securities not be registered under the Securities Act nor be

the subject of any registered American depositary receipts. 21

In 2000, the CFMA lifted the ban on single security futures and created a new regime for

Exchange Act Release No. 26217 (Oct. 26, 1988), 53 FR 43860 (Oct. 31, 1988) (Austria, Denmark, Finland, the

Netherlands, Switzerland, and Germany); Designation of the Securities of Certain Foreign Governments as

Exempted Securities Under the Securities Exchange Act of 1934 Solely for Purposes of Trading Futures Contracts

on Those Securities, Exchange Act Release No. 30166 (Jan. 8, 1992), 57 FR 1375 (Jan. 14, 1992) (Ireland and Italy)

(“Ireland and Italy Release”); Exemption of the Securities of the Kingdom of Spain Under the Securities Exchange

Act of 1934 for Purposes of Trading Futures Contracts on Those Securities, Exchange Act Release No. 34908 (Oct.

27, 1994), 59 FR 54812 (Nov. 2, 1994) (“Spain Release”); Exemption of the Securities of the United Mexican States

Under the Securities Exchange Act of 1934 for Purposes of Trading Futures Contracts on Those Securities,

Exchange Act Release No. 36530 (Nov. 30, 1995), 60 FR 62323 (Dec. 6, 1995) (Mexico) (“Mexico Release”);

Exemption of the Securities of the Federative Republic of Brazil, the Republic of Argentina, and the Republic of

Venezuela Under the Securities Exchange Act of 1934 for Purposes of Trading Futures Contracts on those Securities,

Exchange Act Release No. 36940 (Mar. 7, 1996), 61 FR 10271 (Mar. 13, 1996) (“Brazil, Argentina, and Venezuela

Release”); Exemption of the Securities of the Kingdom of Belgium Under the Securities Exchange Act of 1934 for

Purposes of Trading Futures Contracts on Those Securities, Exchange Act Release No. 41116 (Feb. 26, 1999), 64 FR

10564 (Mar. 5, 1999) (“Belgium Release”); Exemption of the Securities of the Kingdom of Sweden Under the

Securities Exchange Act of 1934 for Purposes of Trading Futures Contracts on those Securities, Exchange Act

Release No. 41453 (May 26, 1999), 64 FR 29550 (June 2, 1999) (“Sweden Release”).

17 CFR 240.3a12-8(a)(2).

17 CFR 240.3a12-8(a)(1).

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security futures products, granting joint jurisdiction to the Commission and the CFTC. 22 Under

the CFMA, trading facilities offering security futures products to U.S. persons must be dually

registered with the Commission and the CFTC 23 and must ensure that the security futures

products comply with the listing requirements filed with both agencies. 24

The Food, Conservation and Energy Act of 2008 required the Commission, the CFTC, or

both, as appropriate, to take action under their existing authorities to permit, by June 30, 2009,

the trading of futures on certain security indexes by resolving issues related to foreign security

indexes. 25 In response, in 2009, the Commission granted conditional exemptive relief via an

exemptive order (the “2009 Exemptive Order”), 26 allowing specified U.S. investors conditional

This regime applies to a “security futures product,” which is a security future or any put, call, straddle, option, or

privilege on any security future. See Exchange Act section 3(a)(56), 15 U.S.C. 78c(a)(56); CEA section 1a(45), 7

U.S.C. 1a(45).

Section 6(h)(1) of the Exchange Act prohibits any person from effecting transactions in security futures products

that are not listed on a national securities exchange or a national securities association. Exchange Act section

6(h)(1), 15 U.SC. 78f(h)(1). A CFTC-registered designated contract market may notice-register with the

Commission. See Exchange Act section 6(g), 15 U.SC. 78f(g). See also Registration of National Securities

Exchanges Pursuant to section 6(g) of the Securities Exchange Act of 1934 and Proposed Rule Changes of Certain

National Securities Exchanges and Limited Purpose National Securities Associations, Exchange Act Release No.

44692 (Aug. 13, 2001), 66 FR 43721 (Aug. 20, 2001). A board of trade offering security futures must also be

registered with the CFTC. See CEA 2(a)(1)(D)(i), 7 U.S.C. 2(a)(1)(D)(i). Intermediaries must also be dually

registered. See Registration of Broker-Dealers Pursuant to section 15(b)(11) of the Securities Exchange Act of 1934,

Exchange Act Release No. 44730 (Aug. 21, 2001), 66 FR 45138 (Aug. 27, 2001).

Security futures must conform with listing standards filed with the Commission and must meet the criteria

specified in section 2(a)(1)(D)(i) of the CEA. See Exchange Act section 6(h)(2) through (3), 15 U.S.C. 78f(h)(2)

through (3). Notably, under Exchange Act section 6(h)(3), the underlying security of a security future must itself be

registered under section 12 of the Exchange Act. Exchange Act section 6(h)(3), 15 U.S.C. 78f(h)(3). Additionally,

section 5 of the Securities Act requires the registration of any offer or sale of a security in the U.S. unless it is

exempt. See Securities Act section 5, 15 U.S.C. 77e(a). A security future that is traded on a registered national

securities exchange and cleared at a registered clearing agency is exempted from the section 5 registration

requirement. Securities Act section 3(a)(14), 15 U.S.C. 77c(a)(14). The security futures products are also subject to

statutorily set minimum margin requirements. See Customer Margin Rules Relating to Security Futures, Exchange

Act Release No. 90244 (Oct. 22, 2020), 85 FR 75112 (Nov. 24, 2020). These requirements are intended to prevent

systemic risk and preserve the financial integrity of markets trading security futures products. See Exchange Act

section 7(c)(2)(B)(i) through (ii); 15 U.S.C. 78g(c)(2)(B)(i) through (ii).

Pub. L. No. 110-246, Sec. 13, 106, 122 Stat. 1651, 2197 (2008), reprinted U.S.C.A. Sec. 2.

See Order Under section 36 of the Securities Exchange Act of 1934 Granting an Exemption From Exchange Act

section 6(h)(1) for Certain Persons Effecting Transactions in Foreign Security Futures and Under Exchange Act

section 15(a)(2) and section 36 Granting Exemptions From Exchange Act section 15(a)(1) and Certain Other

Requirements, Exchange Act Release No. 60194 (June 30, 2009), 74 FR 32200 (July 7, 2009) (“Because of this

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access to foreign security futures products traded on certain foreign boards of trade. 27 Under the

2009 Exemptive Order, although foreign boards of trade that are not otherwise required to

access to persons located in the U.S., they can offer security futures to other U.S. persons who

are qualified institutional buyers (“QIBs”) 28 and to certain intermediaries effecting transactions

on behalf of a QIB or non-U.S. person. 29 By contrast, a foreign board of trade registered with the

CFTC as an “FBOT” may permit persons located in the United States to trade its listed futures

contracts via “direct access” 30 to its electronic trading system or access other foreign boards of

trade through certain types of brokers. 31

prohibition [imposed by Section 6(h)(1)], U.S. persons are currently unable to enter into contracts for narrow-based

index or single stock futures traded on or subject to the rules of a foreign board of trade”).

The term “foreign boards of trade” is used here in the same manner as it is used in the 2009 Exemptive Order: to

refer to foreign exchanges or contract markets. See 2009 Exemptive Order, 74 FR 32200 (“U.S. persons are

currently unable to enter into contracts for [security futures] traded on or subject to the rules of a foreign board of

trade”) & 32202 (“Foreign Exchange: The transaction must be effected on, or be subject to the rules of, an exchange

or contract market that is not required to register with the Commission under section 5 of the Exchange Act.”).

17 CFR 230.144A(a)(1).

See 2009 Exemptive Order, 74 FR 32201.

An “FBOT” is a specific type of board of trade that is registered with the CFTC. While generally foreign boards of

trade may provide access to U.S. customers to trade commodity futures through a Part 30 intermediary, a subset of

foreign boards of trade that are registered with the CFTC under Part 48 and that meet certain eligibility criteria are

permitted to provide “direct access” to customers located in the U.S. seeking to trade commodity futures under the

CFTC’s “FBOT” framework. See generally 17 CFR Part 48 (regulations establishing the FBOT framework) & 17

CFR Part 30 (regulations governing the offer and sale of foreign futures to U.S. investors). Throughout this release,

“FBOT” is used to refer to a foreign board of trade that is registered with the CFTC and permitted to provide direct

access to customers located in the U.S. seeking to trade commodity futures. See 17 CFR 48.2-48.4. For the

avoidance of doubt, under the 2009 Exemptive Order, neither traditional foreign boards of trade nor registered

FBOTs may offer direct access to persons located in the U.S. (QIBs or otherwise) to trade security futures; the

FBOT framework is only applicable to commodity futures and futures on exempted securities.

See sections 4(a) and 4(b) of the CEA; 17 CFR 48.4(b) (permitting registered FBOTs to grant direct access to the

following: any member or other participant entering orders for their proprietary accounts; futures commission

merchants (“FCMs”) submitting orders on behalf of their customers; and commodity pool operators, commodity

trading advisors, or introducing brokers (“IBs”) submitting orders for or on behalf of U.S. customers, provided that a

registered FCM or firm exempt from registration as an FCM acts a clearing firm and guarantees all transactions).

See also 17 CFR part 30 (describing the brokers that can intermediate foreign futures and options transactions to

U.S. customers).

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In addition to the above access-related requirements, the conditional pathway established

by the 2009 Exemptive Order also imposes requirements with respect to the lifecycle of the

transactions and types of underliers that qualify under the 2009 Exemptive Order. With respect to

the lifecycle-related requirements, it conditions applicability on several of the relevant activities

occurring abroad; for instance, the foreign security futures must be issued, cleared, and settled

outside of the U.S., in addition to satisfying other requirements. 32 With respect to the underlier,

the pathway established by the 2009 Exemptive Order is available for security futures that are

based on debt that is issued or guaranteed by a foreign government that is eligible to be

registered with the Commission under Schedule B of the Securities Act or that is based on a

security that is issued by a “foreign private issuer” 33 and has a primary trading market outside of

the U.S. 34 The conditional pathway established by the 2009 Exemptive Order is one of the only

currently-available pathways for U.S. persons to trade futures on debt issued by the EU.

Although the 2009 Exemptive Order allows for the trading of futures on EU debt

obligations under certain conditions, 35 because the debt obligations of the EU are not exempted

See 2009 Exemptive Order, 74 FR 32204 (noting the additional requirements of foreign physical delivery and

foreign offsetting transactions).

A “foreign private issuer” is a foreign issuer other than a foreign government, except for an issuer that as of the

last business day of its most recently completed second fiscal quarter has more than 50% of its outstanding voting

securities directly or indirectly held of record by U.S. residents and meets any of the following: a majority of its

executive officers or directors are citizens or residents of the United States, more than 50% of its assets are located

in the United States, or its business is principally administered in the United States. 17 CFR 230.405; 17 CFR

240.3b-4.

The underlying security must be (1) issued by a foreign private issuer and have its primary trading market outside

the U.S. or (2) a debt security issued or guaranteed by a foreign government that is eligible to be registered with the

Commission under Schedule B of the Securities Act of 1933. See 2009 Exemptive Order, 74 FR 32202. The

Commission has not addressed the status of the EU under either condition.

For example, if the issuer of EU debt obligations is a foreign private issuer or the debt security is issued or

guaranteed by a foreign government and is eligible to be registered with the Commission under Schedule B of the

Securities Act of 1933 and the other conditions of the Exemptive Order are met, the 2009 Exemptive Order would

be available. See 2009 Exemptive Order, 79 FR 32202 (explaining the requirements for the underlying security).

Apart from underlier-related requirements, the 2009 Exemptive Order also imposes lifecycle-related requirements,

including foreign settlement and clearing; foreign physical delivery; and foreign offsetting transaction requirements.

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securities, futures on EU debt are subject to different U.S. regulatory treatment 36 than futures on

the debt of the eleven EU member states that are Designated Foreign Governments. 37

As such, the Commission is proposing to amend Rule 3a12-8 to expand the definition of

“Designated Foreign Government Securities” to include “a debt obligation of the EU,” which

would render such debt obligations “exempted securities” under the terms of the Rule for

purposes only of the trading of Qualifying Foreign Futures Contracts. 38 As discussed in section

III.E, below, the Commission is proposing that the existing definitions in the Rule apply to

futures on EU debt obligations.

III. Discussion

For the reasons discussed throughout, the Commission is proposing to allow the debt

obligations of the EU to be considered exempted securities for the purposes only of the offer,

sale or confirmation of sale of Qualifying Foreign Futures Contracts in the U.S. or to U.S.

persons and to expand the definition of Designated Foreign Government Securities to include

debt obligations of the EU. 39 The trading of futures contracts on the debt of the EU is consistent

See 2009 Exemptive Order, 74 FR 32207. In addition, as the foreign underliers would not be registered in the U.S.,

the 2009 Exemptive Order only permits access to the products by QIBs, who were determined to be “in the category

of persons able to fend for themselves and ha[ve] access to the same kind of information that would be disclosed in

registration.” 2009 Exemptive Order, 74 FR 32202 n.39. Lastly, the 2009 Exemptive Order requires the transactions

to “be effected on, or subject to the rules of, an exchange or contract market that has its principal place of business

outside the U.S. and that is regulated as an exchange or contract market in a country other than the U.S.” 2009

Exemptive Order, 79 FR 32204.

See infra section IV.B.1.

Eleven of the twenty-one countries listed in the Rule are member states of the EU. These include France, Austria,

Denmark, Finland, the Netherlands, Germany, Ireland, Italy, Spain, Belgium and Sweden. See 17 CFR 240.3a128(a)(1)(v), (vii) through (x), (xii) through (xv), (xx), and (xxi).

Under section 3(a)(12) of the Exchange Act, the term “exempted security” includes “such other securities . . . as

the Commission may [exempt], by such rules and regulations as it deems consistent with the public interest and the

protection of investors . . .” Exchange Act section 3(a)(12), 15 U.S.C. 78c(a)(12).

Rule 3a12-8 applies solely to the futures contracts on the debt and does not affect the regulatory treatment of the

underlying debt securities. See 17 CFR 240.3a12-8. The underlying debt securities remain subject to the registration

requirements of the Securities Act, unless an exemption from registration is available. See Schedule B, 15 U.S.C.

77aa and 15 U.S.C. 77g(1)(a) (permitting foreign governments and political subdivisions to register securities). See

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with the public interest and the protection of investors because it would provide U.S. investors

and dealers with a vehicle for hedging the risks involved in holding debt instruments of the EU;

to facilitate this, futures on the debt of the EU should be subject to the same regulatory treatment

under the Rule as futures on the debt of eleven of its member states, which are included in the

Rule as Designated Foreign Governments. The proposed amendment would address the

regulatory treatment of EU debt obligations by: (i) adding the debt obligations of the EU to the

Rule’s definition of Designated Foreign Government Securities, which would designate such

debt as exempted securities solely for purposes of the offer, sale, or confirmation of sale of

Qualifying Foreign Futures Contracts on those obligations; and (ii) adding a definition of “debt

obligation of the European Union” to identify the instruments within the Rule’s scope.

The Status of the EU Under the Rule Relative to Other Designated Foreign

Governments

As a general matter, the regime established by the CFMA for security futures, as well as

the Commission’s 2009 Exemptive Order, address the regulation of security futures under the

Federal securities laws. Since the passage of the CFMA, the Rule has remained unchanged, and

as a result, market participants have continued to rely upon the Rule for transactions in

Qualifying Foreign Futures Contracts. U.S. investors, however, currently experience differing

access to hedging, asset allocation and risk management opportunities via futures referencing

debt obligations of the eleven member states of the EU that are Designated Foreign Governments

than they do for futures referencing EU debt obligations, as the latter are not currently included

also 15 U.S.C. 77d(a)(2) (exempting transactions not involving a public offering from section 5 registration

requirements of the Securities Act); 17 CFR 230.144A (providing a safe-harbor exemption from the registration

requirements for resales of restricted securities to QIBs); Resale of Restricted Securities; Changes to Method of

Determining Holding Period of Restricted Securities under Rules 144 and 145, Securities Act Release No. 6862

(Apr. 23, 1990), 55 FR 17933 (Apr. 30, 1990).

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in Rule 3a12-8. Their inclusion would create additional avenues, outside of the CFMA regulatory

framework and apart from the 2009 Exemptive Order, for investors to trade futures on EU debt

obligations: as futures on exempted securities, futures on EU debt obligations would be

accessible to investors on FBOTs providing direct access. 40

The EU and its debt obligations present distinctive economic and institutional

characteristics. 41 Accordingly, and as discussed further below, the Commission is proposing to

include the debt obligations of the EU in the list of Designated Foreign Government Securities in

Rule 3a12-8.

The Commission has considered the classification of the EU, particularly in the context

of bond issuance. 42 While it is not a nation-state (as the sovereigns included in the Rule), the EU

is a unique issuer 43 that appears to be increasingly viewed by market participants as a sovereign

See supra notes 30 through 32 and accompanying text.

See European Commission, Facts and Figures on the European Union, available at https://europeanunion.europa.eu/principles-countries-history/facts-and-figures-european-union_en (describing the EU’s shared

market, integrated economic area, regulatory alignment, and partial monetary integration (21 out of 27 countries use

the Euro as official currency)). Elsewhere, Commission staff has noted the “integration of the capital markets within

the European Union as a result of application of EU-wide laws and regulations relating to prospectuses,

transparency, trading and other matters.” See, SEC, Staff Guidance, Corporate Finance Interpretations: Securities

Act Rules (Dec. 8, 2016), available at https://www.sec.gov/rules-regulations/staff-guidance/corporation-financeinterpretations/securities-act-rules#277.03 (stating that for purposes of Rule 903(b)(1)(ii) eligibility, offerings

directed into the EU may satisfy the single country requirement). Commission staff statements represent the views

of the staff. They are not a rule, regulation, or statement of the Commission. Furthermore, the Commission has

neither approved nor disapproved their content. These staff statements, like all staff statements, have no legal force

or effect: they do not alter or amend applicable law; and they create no new or additional obligations for any person.

Bonds are the EU’s main funding instrument. See European Commission, Funding Instruments, available at

https://commission.europa.eu/strategy-and-policy/eu-budget/eu-borrower-investor-relations/funding-instruments_en.

As such, discussions regarding the EU’s debt obligations revolve primarily around bonds. This release uses the

umbrella term “debt obligations” to refer to both bonds and bills issued by the EU. References to “bonds” (and “EU

bonds”) are limited to instances in which the relevant source contains data that is specific to EU bonds.

As the European Commission is the agent executing issuances on behalf of the EU and the EU is the obligor

directly responsible for repayment, this release refers to the EU as the issuer, consistent with the approach used in

European Commission investor documents and in various reports. See, e.g., European Commission, EU Investor

Presentation: Investing in EU-Bonds & EU-Bills (Oct. 1, 2022), available at

https://commission.europa.eu/document/download/671431d2-89d7-4655-83d69bf5a09611df_en?filename=eu_investor_presentation_01oct2022.pdf (describing the role of “the EU as an issuer”

throughout); European Commission, EU Global Investor Call (Dec. 12, 2025), available at

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issuer in capital markets. 44 Correspondingly, EU bonds are often viewed as comparable to those

of sovereign member states of the EU. 45 In terms of classification, the European Central Bank

“ECB”) assigns EU bonds to the same haircut category as sovereign bonds. 46

https://commission.europa.eu/document/download/29385658-c97e-46b2-a089b01e3b70d6bc_en?filename=EU%20Global%20Investor%20Call%20Presentation_vf2.pdf (referring to “EU

issuances”).

As of 2025, the International Capital Market Association (“ICMA”) includes bonds issued by the EU in its

European Sovereign Bond Data report, a step which is “intended to reflect the growing scale of issuance and

turnover in EU bonds and a wider market shift toward the classification of the EU as a sovereign borrower.” See

International Capital Market Association, ICMA Publishes its Semi-annual Report that Provides Detailed Data on

EU and UK Sovereign Bond Market Trading Activity (Aug. 27, 2025), available at

https://www.icmagroup.org/News/news-in-brief/icma-publishes-its-semi-annual-report-that-provides-detailed-dataon-eu-and-uk-sovereign-bond-market-trading-activity-2/. See also International Capital Market Association,

Secondary Market Practices Committee, European Secondary Market Data Report – H2 2025 – Sovereign Edition

(Apr. 28, 2026) at 4, available at https://www.icmagroup.org/assets/documents/Regulatory/Secondarymarkets/ICMA-Secondary-Market-Practices-Committee-European-Secondary-Market-Data-Report-H2-2025Sovereign-Edition-April-2026-280426.pdf (analyzing sovereign bond trading activity for the full year of 2025 and

noting “the relative size and importance of EU bonds from a primary and secondary perspective” and “the increasing

market recognition of the EU’s sovereign status as an issuer”) (“ICMA H2 2025 Report”). See also Official

Monetary and Financial Institutions Forum, Commissioner Hahn: EU Bonds Moving Closer to Sovereign Status

(May 1, 2024), available at https://www.omfif.org/2024/05/commissioner-hahn-eu-bonds-moving-into-the-marketfor-sovereign-bonds/. See also European Commission, EU Global Investor Call (Dec. 17, 2025), available at

https://commission.europa.eu/document/download/29385658-c97e-46b2-a089b01e3b70d6bc_en?filename=EU%20Global%20Investor%20Call%20Presentation_vf2.pdf (stating that in 2024,

“ICE created the ICE European Union Index (EG00EU) by adding EU-bonds to the ICE Euro Government Index

(EG00)”).

See European Commission, Deepening the Market for EU-Bonds: EU-Bond Investor Survey: Summary of

Responses (Sept. 2023), available at https://commission.europa.eu/document/download/1bcb556f-8942-488d-b54fd4c6bc129aa4_en?filename=EU%20Investor%20Survey%20results.pdf (noting that 80% of investors saw EU

bonds as substitutes for core area government bonds). But see Alexandra Born et al., European Central Bank, Do EU

SURE and NGEU bonds contribute to financial integration? (June 6, 2024), available at

https://www.ecb.europa.eu/press/fie/box/html/ecb.fiebox202406_06.en.html (“While EU bonds fulfil[l] most of the

criteria to be a safe asset, market participants still consider them to be more like those of other supranational issuers

than the highest quality bonds of euro area sovereign issuers”).

Under the ECB’s collateral framework, bonds issued by the EU are assigned to Haircut Category I, alongside

sovereigns. See European Central Bank, Deriving the Haircut Category, available at

https://www.ecb.europa.eu/mopo/coll/risk/liquidity/html/index.en.html (noting that bonds issued by the European

Union are included in Haircut Category I, rather than in Category II, which consists of supranational issuers). With

respect to the U.S., while the EU is not explicitly treated as a sovereign under the U.S. Uncleared Margin Rules, it

does receive favorable treatment on par with central governments. See note 75 infra and accompanying text. It also

receives favorable treatment under U.S. regulatory capital requirements, with exposure to the European

Commission, the entity empowered to borrow on behalf of the EU, assigned a zero percent risk weight, the same

percentage of risk weight assigned to an exposure that is directly and unconditionally guaranteed by the U.S.

government. See 12 CFR 217.32(b) (placing the European Commission in the category of “certain supranational

entities and multilateral development banks” that receive zero percent risk weight).

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Rule 3a12-8 applies to the debt obligations of 21 sovereign nations, 47 over half of which

are EU member states. 48 Thus, as detailed below, the EU is substantially represented and

functionally captured in the Rule according to various measures, including Gross Domestic

Product (“GDP”) and bond market activity.

First, the eleven member states included in the Rule collectively account for more than

80% of the aggregate GDP of the EU. 49 The EU is thus substantially represented in economic

terms, as the bulk of its economic base is captured by the sovereigns already designated by the

Rule; its inclusion in the Rule would formalize this representation.

Second, the EU is substantially represented within the Rule in terms of sovereign bond

market activity as reflected in both total notional traded and transaction frequency. Close to 70%

of the actively traded sovereign bonds within the EU are reflected in the Rule via Italy, Germany,

France and Spain. 50 The Rule’s scope thus already overlaps with the EU’s core sovereign issuers.

The same four EU member states also account for more than half of all sovereign bond trades

See text accompanying supra note 7.

See supra note 37.

In 2025, the eleven member states that are included in the Rule accounted for 83.24% of the EU’s GDP, according

to staff estimates. To arrive at this figure, staff aggregated the GDP of the eleven member states and divided the

resulting figure by the total GDP of the EU ($21,243,212.57). The figures, stated in millions, used for the calculation

are as follows: Germany ($5,050,922.93), France ($3,366,315.93), Italy ($2,551,556.95), Spain ($1,906,453.31),

Netherlands ($1,332,767.65), Belgium ($725,466.46), Ireland ($721,701.36), Sweden ($668,998.66), Austria

($579,470.02), Denmark ($462,526.66) and Finland ($317,039.37). See World Bank Group, GDP (current US$ European Union), available at https://data.worldbank.org/indicator/ny.gdp.mktp.cd?locations=eu (showing 2025

GDP and relying upon figures from National Statistical Organizations and/or Central Banks, Organization for

Economic Co-operation and Development (OECD), and World Bank staff estimates).

International Capital Market Association, Secondary Market Practices Committee, European Secondary Market

Data Report – H1 2025 – Sovereign Edition (Aug. 27, 2025) at 17, available at

https://www.icmagroup.org/assets/documents/Regulatory/Secondary-markets/ICMA-Secondary-Market-PracticesCommittee-European-Secondary-Market-Data-Report-H1-2025-Sovereign-Edition.pdf (providing 42 months of

aggregated bond market data, covering the period of January 2022 through to June 2025) (“ICMA H1 2025

Report”). In terms of the total notional traded in the first half of 2025 within the EU, the top issuer countries are

Italy (40% of total notional (€6,730 billion)), Germany (11% of total notional (€1,897 billion)), France (11% of total

notional (€1,862 billion), and Spain (5% of total notional (€843 billion)). U.S. treasuries constituted 19% (€3,261

billion) of total notional volume and other issuers totaled 8% (€1,410) of the market share. See ICMA H1 2025

Report, 17.

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within the EU. 51 Across multiple dimensions, including number of transactions, notional traded,

and economic size (GDP), the Designated Foreign Governments included in the Rule represent a

substantial share of the EU market.

Rule 3a12-8 Inclusion Considerations

The Commission may expand the list of Designated Foreign Governments if it finds that

it is consistent with the public interest and the protection of investors. 52 To this end, and as

discussed in greater detail below, the Commission has considered credit worthiness, 53 trading

data 54 and the availability of investor information 55 in expanding the list of Designated Foreign

Governments in Rule 3a12-8. Credit worthiness underpins the safety (ability of the issuer to

satisfy the payment obligations) of the underlying debt. 56 Trading data evidencing high liquidity

reduces the risk of market manipulation, as more participants and larger volumes render it more

difficult for individual actors to engage in manipulative strategies. 57 The availability of investor

information allows investors to make informed choices and appropriately judge risks before

Four EU member states are among the top six issuers and account for close to 60% of the sovereign bond trades

within the EU: Italy: 39% (1,379,795 trades); Germany: 8% (283,586); France: 6% (218,936 trades); Spain: 5%

(175,809). The other two issuer jurisdictions are the U.S. (26% (947,654 trades)) and “other” European issuers (12%

(423,249 trades)). See ICMA H1 2025 Report, 23.

See 15 U.S.C. 78c(a)(12)(A)(vii).

See infra note 60 (noting that credit ratings were considered in the addition of Sweden and Belgium).

See infra notes 63 (Belgium’s and Sweden’s respective total trading volumes), 64 (Belgium’s and Sweden’s

respective average trading volumes), and 65 (Belgium’s and Sweden’s respective number of transactions).

See infra note 70 (noting that the availability of investor information was considered in the addition of Japan,

Australia, France and New Zealand).

See Ireland and Italy Release, 57 FR 1377 n.22 (noting that credit assessments reflect “capacity to pay interest and

repay principal”).

See infra note 166 (discussing the relationship between liquidity and manipulation risks).

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investing in the futures markets. 58 In addition, the Qualifying Foreign Futures Contracts are not

unregulated, but rather are regulated under the CFTC’s futures regulatory regime. 59

In the most recent determinations to amend the Rule to include Sweden and Belgium, the

Commission considered credit ratings 60 and trading data 61 as evidence of an active and liquid

secondary trading market for the security. The types of trading data evidencing an active and

liquid market that were considered by the Commission included public debt outstanding, 62 total

See infra note 93.

The CFTC regulates both domestic and foreign exchanges. First, futures are generally traded on Designated

Contract Markets (“DCMs”), which are governed by the CFTC rules set out in 17 CFR Part 38. See e.g., 17 CFR

38.651 (requiring DCMs to establish rules “designed to promote fair and equitable trading and to protect the market

and market participants”). Second, the CFTC has established a customer protection regime that is applicable to

Futures Commission Merchants (FCMs) holding customer assets. See e.g., 17 CFR 1.10 through 1.18 (reporting

requirements); 17 CFR 1.20 (segregation of customer assets); 17 CFR 1.22 (restrictions on use of customer funds);

17 CFR 1.31 through 1.39 (recordkeeping requirements); 17 CFR 1.44 (margin adequacy requirements); 17 CFR

1.55 (risk disclosure statements). Customer protections also extend to transactions on foreign boards of trade.

Foreign boards of trade that seek to provide direct access to persons in the U.S. must be registered with the CFTC

under its “FBOT” framework. See 17 CFR 48.3. To be eligible for registration, an FBOT must satisfy certain

investor protection-related requirements. See 17 CFR 48.2(b)(1) through (5) (requiring that an FBOT possess the

attributes of an established exchange, adhere to rules prohibiting abusive practices, enforce rules to maintain market

and financial integrity, be authorized by a regulatory process that examines customer and market protections, and be

subject to continued oversight by a regulator that has power to intervene in the market and the authority to share

information with the CFTC). FCM protections extend to U.S. customers who transact on registered FBOTs. See 17

CFR 48.4(b)(2) (listing FCMs as one of the types of intermediaries that may apply to an FBOT for direct access to

enter orders on behalf of U.S. customers). Other registered intermediaries, such as commodity pool operators

(CPOs), commodity trading advisors (CTAs), and introducing brokers (IBs), also may have direct access to transact

on behalf of U.S. customers, provided that the transactions are cleared by an FCM or a foreign clearing firm that is

exempt from FCM registration and located in a jurisdiction that the CFTC has determined to have a comparable

framework pursuant to 17 CFR 30.10. See 17 CFR 48.4(b)(3) and (4). The CFTC, through the aforementioned

comparability assessment (of the regulatory regime in the jurisdiction of the foreign clearing firm) analyzes whether

customers engaging with non-FCM intermediaries are afforded protections similar to those afforded to customers

engaging with FCMs. See 17 CFR 48.4(b)(3) and (4) (“provided that a futures commission merchant registered with

the Commission as such or a firm exempt from such registration pursuant to [17 CFR 30.10] acts as a clearing firm

and guarantees, without limitation, all trades”); 17 CFR Part 30, Appendix A (setting forth elements used to assess

comparability). In addition to the protections of the FCM regime, further protections specific to U.S. customers

transacting in foreign futures are provided in Part 30. See e.g., 17 CFR 30.6 (risk disclosure requirements), 30.7

(secured amount requirements) & 30.9 (anti-fraud provisions).

The Commission previously considered credit ratings as indirect evidence of liquidity. See, e.g., Sweden Release,

64 FR 29552 (considering whether “the particular sovereign debt had been rated in one of the two highest rating

categories by at least two nationally recognized statistical rating organizations”); Belgium Release, 64 FR 10565

n.15 (citing Moody’s and S&P ratings).

See infra notes 63-67.

See Sweden Release, 64 FR 29552 (“total Swedish public debt outstanding was equivalent to approximately $173

billion”); Belgium Release, 64 FR 10564 (noting that Belgium had an outstanding public debt equal to

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trading volume, 63 average trading volume 64 and the number of transactions. 65 For Sweden, in

addition to the market for bonds, the Commission also considered the market for bills, 66

including total and average trading volume, as well as the number of transactions. 67 Earlier,

when amending the Rule to include Mexico, Brazil, Argentina, and Venezuela, the Commission

considered primarily whether market evidence indicated that an active and liquid secondary

trading market existed. 68 Prior to the addition of those countries, the Commission principally

approximately $264 billion at the end of 1997). In adding the four countries prior to Belgium (Mexico, Brazil,

Argentina and Venezuela), the Commission similarly considered public debt outstanding. See Mexico Release, 60

FR 62323 (outstanding Mexican government debt amounted to approximately $87.5 billion face value as of March

31, 1995); Brazil, Argentia, and Venezuela Release, 61 FR 10271 (public and publicly guaranteed debt of Brazil,

Argentina and Venezuela amounted to approximately $86 billion, $55 billion and $74 billion, respectively, as of

Dec. 31, 1993).

See Sweden Release, 64 FR 29552 (noting that secondary market trading in Treasury bonds amounted to

approximately $1.2 trillion in 1996, approximately $1.3 trillion in 1997, and approximately $1.2 trillion in 1998);

Belgium Release, 64 FR 10566 (noting that the total value of bonds traded on an annual basis of approximately

$1.89 trillion in 1997, $1.86 trillion in 1996, $1.70 trillion in 1995, and $1.30 trillion in 1994).

For Sweden, the Commission was provided the monthly average daily trading volume, while for Belgium it was

provided the average daily trading volume across the entire year. See Sweden Release, 64 FR 29552 (noting that the

average daily trading volume ranged from approximately $2.1 billion for the month of July 1998 to approximately

$8.3 billion for the month of October 1997); Belgium Release, 64 FR 10566 (stating that the average value traded on

a daily basis was equivalent to approximately $7.60 billion in 1997, $7.44 billion in 1996, $6.79 billion in 1995, and

$5.23 billion in 1994).

For Sweden, the Commission considered the total number of transactions in a given year, while for Belgium, the

Commission considered the average number of transactions per day in a given year. See Sweden Release, 64 FR

29552 (noting approximately 109,100 transactions in benchmark Swedish treasury bonds in 1997 and 274,000 in

1998; 27,500 transactions in non-benchmark Swedish treasury bonds in 1997 and 7900 in 1998; and 2,000

transactions in inflation-linked Swedish treasury bonds in 1997 and 10,800 in 1998); Belgium Release, 64 FR 10566

(noting that the average number of Belgian bond trades on a daily basis was approximately 472 in 1997, 571 in

1996, 614 in 1995, and 636 in 1994).

It appears that the Commission analyzed total trading volume, average trading volume, and total number of

transactions for Belgian bonds, but it did not do so for Belgian bills.

Sweden Release, 64 FR 29552 (noting that secondary market trading in Swedish treasury bills amounted to

approximately $440 billion in 1996, approximately $488 billion in 1997, and approximately $447 billion in 1998);

64 FR 29552 (noting that the average daily trading volume from 1996-1998 ranged from approximately $1.2 billion

for the month of May 1996 to approximately $2.6 billion for the month of March 1997); 64 FR 29552 (noting

approximately 38,600 transactions in Treasury bills in 1997 and 76,800 transactions in 1998).

See, e.g., Mexico Release, 60 FR 62323 (amending the Rule to add Mexico because the Commission believed that

as a whole, the market for Mexican sovereign debt was sufficiently liquid and deep for the purposes of the Rule);

Brazil, Argentia, and Venezuela Release, 61 FR 10271 (amending the Rule to add Brazil, Argentina and Venezuela

because the Commission believed that the market for the sovereign debt of those countries was sufficiently liquid

and deep for the purposes of the Rule).

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considered whether the particular sovereign debt had been rated in one of the two highest rating

categories by at least two nationally recognized statistical rating organizations. 69 When adding

Japan, as well as when adding Australia, France and New Zealand, the Commission noted that

the availability of investor material in the English language was relevant to a U.S. investor’s

ability to make an informed decision. 70 All three criteria, credit worthiness, trading data, and the

availability of investor information, support the inclusion of EU debt obligations in the definition

of Designated Foreign Government Security.

1. Credit Worthiness of the EU

For purposes of including EU debt obligations in the Rule, the Commission is

considering the credit worthiness of the EU; however, the Commission is not considering credit

ratings as a means of measuring credit worthiness. 71 The Commission is taking into

consideration other means of measuring credit worthiness, such as the risk weight assigned by

the Office of the Comptroller of the Currency (“OCC”), Board of Governors of the Federal

Reserve System (“Federal Reserve”), and the Federal Deposit Insurance Corporation (“FDIC,”

together with the OCC and Federal Reserve, the “Prudential Regulators”) under the regulatory

capital requirements.

Regulatory capital rules and requirements promulgated by the Prudential Regulators,

which assign a zero percent risk weight to exposures to the European Commission (the EU’s

See, e.g., Ireland and Italy Release, 57 FR 1375 (amending the Rule to include debt securities issued by Ireland

and Italy where Ireland’s long-term sovereign debt was rated Aa3 by Moody’s and AA- by S&P, and Italy’s longterm sovereign debt was rated Aaa by Moody’s and AA+ by S&P); and Spain Release, 59 FR 54812 (amending the

Rule to include Spain, which had long-term debt ratings of Aa2 from Moody’s and AA from S&P).

See Japan Release, 51 FR 25997 (noting access to information in English). See also Australia, France and New

Zealand Release, 52 FR 42278 (noting the relevance of investor information regarding futures markets and the

underlying securities markets).

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) instructed the

Commission to remove from its regulations any references to credit ratings and replace them with alternative

standards of creditworthiness. See Pub. L. 111-203, sec. 939A(b), 124 Stat. 1376, 1872-90 (2010).

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issuance agent), serve as an indicator of credit quality and as indirect evidence of liquidity. 72

Debt obligations of the EU constitute a type of exposure to the European Commission. The zero

percent risk weight—the same percentage of risk weight assigned to an exposure that is directly

and unconditionally guaranteed by the U.S. government 73—assigned by the Prudential

Regulators to exposures to the European Commission reflects their treatment as high quality and

low credit risk obligations, which enhances their liquidity profile. The risk weights assigned by

the Prudential Regulators support the inclusion of the EU debt obligations in the Rule.

Furthermore, for the purposes of the U.S. Uncleared Margin Rules, 74 EU debt is treated

similar to how other central government, multilateral development bank and governmentsponsored enterprise (“GSE”) debt is treated, with haircuts assigned based on asset type and

Exposure to the European Commission, the entity empowered to borrow on behalf of the EU, is assigned a zero

percent risk weight under rules promulgated by the Prudential Regulators: “[Each respective institution] must assign

a zero percent risk weight to an exposure to the Bank for International Settlements, the European Central Bank, the

European Commission, the International Monetary Fund, the European Stability Mechanism, the European Financial

Stability Facility, or an MDB.” 12 CFR 217.32(b) (Federal Reserve); 12 CFR 3.32(b) (OCC); 12 CFR 324.32(b)

(FDIC). Each of the rules places the European Commission in the category of “certain supranational entities and

multilateral development banks.” See 12 CFR 3.32(b); 12 CFR 217.32(b); 12 CFR 324.32(b). Although risk weight

applies to an investor’s exposure rather than to the debt obligation itself, a lower risk weight renders it more

palatable for regulated investors (e.g., banks) to hold and trade the instrument (because the amount of capital that it

must hold to guard against default is lower); an increased likelihood of holding and trading the instruments may, in

turn, translate into increased engagement by market participants, thus indirectly increasing liquidity in the secondary

market.

Exposure to the European Commission, the entity empowered to borrow on behalf of the EU, is assigned a zero

percent risk weight under rules promulgated by the Prudential Regulators. See note 72, supra. Exposures to the U.S.

government, its central bank or a U.S. government agency are also assigned a zero percent risk weight. See 12 CFR

3.32(a)(1); 12 CFR 217.32(a)(i); 12 CFR 324.32.(a)(1).

See Staff of the CFTC Office of the Chief Economist, The Effect of Last Two Phases of the Uncleared Margin

Rule on Participant Swap Decisions (Jan. 2023) at 1, available at https://www.cftc.gov/sites/default/files/202302/j_of_soc_ada.pdf (describing the term “Uncleared Margin Rule” as referring to the regulatory requirements

regarding the exchange of collateral that were adopted after the 2008 financial crisis in order to mitigate systemic

risk posed by over-the-counter swaps that are not centrally cleared).

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tenor buckets. 75 It is in the same category as U.S. government debt, a tier below cash collateral. 76

Finally, as discussed in the Economic Analysis, the EU debt market has also developed

secondary-market infrastructure typically associated with an established sovereign-style curve, a

reliable bid-offer quoting system, and a EU Repo Facility. 77 Market infrastructure developments

and the regulatory treatment of EU Bonds, including the zero percent risk weighting by the

Prudential Regulators, both support the addition of EU debt obligations to the list of Designated

Foreign Government Securities because these factors are indicative of the credit worthiness of

the EU.

2. Trading Data

An analysis of trading data for the EU indicates that it is comparable to the sovereign

issuers listed in Rule 3a12-8, as discussed below. Bonds are the EU’s main funding instrument. 78

Table 1 provides an overview of the outstanding EU bonds and bond/bill issuance in 2025.

See 17 CFR 23.156(a)(1)(iv) (establishing collateral eligibility for “the European Central Bank or a sovereign

entity that is assigned no higher than a 20 percent risk weight under the capital rules applicable to swap dealers

subject to regulation by a prudential regulator”); 17 CFR 23.151 (defining “sovereign entity” to mean “a central

government (including the U.S. government) or an agency, department, ministry, or central bank of a central

government”); 17 CFR 23.156(a)(3)(i)(B) (standardized haircut schedule where “eligible government and related

debt (e.g., central bank, multilateral development bank, GSE securities identified in paragraph (a)(1)(iv) of this

section)” with a residual maturity of less than one year, between one and five years, and greater than five years

receive a 0.5%, 2% and 4% haircut, respectively). See also CFTC, Margin Requirements for Uncleared Swaps for

Swap Dealers and Major Swap Participants, 81 FR 636, 665 (Jan. 6, 2016) (stating that one of the fundamental

characteristics of margin assets is that they “be liquid and, with haircuts, hold their value in times of financial

stress”).

See 17 CFR 23.156(a)(3)(i)(B) (standardized haircut schedule assigning haircut by asset and tenor buckets where

only cash collateral receives a more favorable haircut (zero percent) than the category that would encompass EU

bonds).

See infra IV.B.3.

European Commission, Funding Instruments, available at https://commission.europa.eu/strategy-and-policy/eubudget/eu-borrower-investor-relations/funding-instruments_en. Auctions and syndicated transactions of the bonds

are facilitated by the EU Primary Dealer Network, which ensures the placement of EU debt with the widest possible

investor base. European Commission, The Role of the EU Primary Dealer Network, available at

https://commission.europa.eu/strategy-and-policy/eu-budget/eu-borrower-investor-relations/primary-dealernetwork_en.

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Table 1. EU Debt Obligation Metrics: 2025 Issuance and Comparative Amounts

Outstanding

EU Debt Obligations Overview

EU Bonds Outstanding in 2025

€702 billion

2025 Long-term Bond Issuance

€153 billion

2025 EU Bills Outstanding

€37 billion

2024 EU Bills Outstanding

€23 billion

2025 4th Quarter Issuance in EU Bonds

€32 billion

2025 4th Quarter Issuance in EU Bills

€13 billion

As shown in Table 1, the European Commission indicates that in 2025, the EU had €702 billion

of bonds outstanding and had a record high number of bond issuances, raising €153 billion via

long-term issuance. 79 It had close to €37 billion of EU-bills outstanding in mid-December 2025,

up from €23 billion at year-end 2024. 80 Recent fourth-quarter 2025 reports state that during this

period alone, the EU issued €32 billion in EU-bonds and €13 billion in EU-bills, representing

4.9% of total “European sovereign issuance.” 81 The amount in EU bonds outstanding and the

number of bond and bill issuances support the inclusion of EU debt obligations in the list of

Designated Foreign Government Securities in Rule 3a12-8 because it demonstrates a strong

interest in trading and investing in such bills and bonds, which supports a liquid market.

European Commission, EU Global Investor Call (Dec. 12, 2025), available at

https://commission.europa.eu/document/download/29385658-c97e-46b2-a089b01e3b70d6bc_en?filename=EU%20Global%20Investor%20Call%20Presentation_vf2.pdf.

Id.

Association for Financial Markets in Europe (AFME), Government Bond Data Report (March 23, 2026) at 3,

available at https://www.afme.eu/media/cfgke0pl/government-bond-data-report-q4-2025-2025fy.pdf (utilizing

European Central Bank data to illustrate that “total (bond and bill) issuance in 4Q25 continued at historically high

levels with volumes (including EU Commission issuance) representing the highest fourth quarter total on record”)

(“AFME Report”). Despite record levels, the share represented by EU bonds and bills dropped from 5.3% in the

fourth-quarter of 2024 to 4.9% in 2025. See AFME Report, 3.

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Table 2 demonstrates that there is a liquid market for EU bonds in the EU and UK

markets in relation to other government bonds, including those of the U.S. government and of

governments that are currently included in the Rule as Designated Foreign Governments.

Table 2. EU and Sovereign Bond Volume in the First Half 2025

Issuer Country

EU and Sovereign Bond Volume

Italy

Germany

France

Spain

Other Sovereign

Bonds Traded in EU

and UK Markets

Total

Notional Value (€bn)

€12,767.90

€8,419.70

€3,737.80

€3,643.60

€3,272.60

€1,355.10

€1,145.80

€2,230

€36,572.50

34.90%

23%

10.20%

10%

8.90%

3.70%

3.10%

6.10%

100.00%

As indicated in Table 2, EU bonds ranked seventh in terms of notional value of trades across the

EU and UK markets, with a turnover of €1,145.8 billion and a 3.1% market share, during the first

half of 2025. 82 The six issuers ranking above the EU were the U.S., Italy, Germany, UK, France

and Spain, which together accounted for 91% of the traded volume across the EU and UK

markets. 83 Notably, although constituting only 3.1% of the market share, the total volume of EU

bonds traded was four times higher in the first half of 2025 than in the first half of 2022,

signaling a positive trend. 84 By the end of 2025, the volume of EU bonds traded increased more

than five-fold since 2022. 85 Accordingly, the EU bond market has a liquidity profile based on the

ICMA H1 2025 Report, 10.

See ICMA H1 2025 Report, 15.

ICMA H2 2025 Report, 8.

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volume of trading that is comparable to the bonds of other Designated Foreign Governments that

are EU member states, which supports the inclusion of EU debt obligations in the definition of

Designated Foreign Government Security in Rule 3a12-8.

Table 3. Top 10 EU and Sovereign Bonds by Trade Size in the First Half 2025

Country

France

Germany

Sweden

Greece

United States

United Kingdom

Spain

Netherlands

Italy

Average Trade

Size

€ 12,111,253

€ 9,895,689

€ 7,158,445

€ 6,848,674

€ 6,661,479

€ 6,523,034

€ 6,163,187

€ 5,640,625

€ 5,410,896

€ 5,201,927

Median Trade

Size

€ 2,500,000

€ 824,833

€ 1,150,000

€ 831,369

€ 500,000

€ 2,773,348

€ 351,181

€ 404,000

€ 580,000

€ 2,500,000

25th

Percentile

€ 71,000

€ 60,000

€ 116,100

€ 169,190

€ 16,000

€ 883,284

€ 44,117

€ 40,000

€ 45,000

€ 190,000

75th

Percentile

€ 15,042,307

€ 7,213,443

€ 5,571,992

€ 5,128,428

€ 5,208,333

€ 6,469,412

€ 3,409,221

€ 4,878,352

€ 5,075,000

€ 5,349,214

As Table 3 demonstrates, in the first half of 2025, the average trade size for EU bonds stood at

€12,111,253 and the median at €2,500,000. 86 By comparison, larger sovereign issuers such as

France and Germany had average trade sizes of €9,895,689 and €7,158,445 and median trade

sizes of €824,833 and €1,150,000, respectively, while Swedish-issued bonds had an average

trade size of €6,848,674 and a median of €831,369. 87 In addition to outperforming peer issuers in

terms of average trade size, in the second quarter of 2025, the EU posted a 7% increase in

The data covers trades across EU and UK markets in the first half of 2025. See ICMA H1 2025 Report, 24. In the

UK, EU bonds traded at an average size of €16,875,432, 73% higher than in the EU, where the average stood at

€9,773,231; Spanish Bonos traded an average trade size of €7,950,096 in the UK, 66% above their average in the

EU at €4,794,177. ICMA H1 2025 Report, 29.

See ICMA H1 2025 Report, 24.

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average trade size relative to the first quarter of 2022, underscoring its positive momentum. 88

Accordingly, the trade size of EU bonds, which demonstrates that there is sufficient liquidity in

the market to handle larger order sizes, in relation to other bonds issued by Designated Foreign

Governments, supports the inclusion of EU debt obligations in the definition of Designated

Foreign Government Security.

Spain, a government that is included in Rule 3a12-8, provides a useful comparison, given

the similarity in trading volume of its bonds (“Spanish Bonos”), with which to analyze the

trading data of EU bonds. EU bonds and Spanish Bonos share similar volumes and represent

comparable shares in EU and UK markets. 89 During the first half of 2025, in the EU market,

Spanish Bonos record a total notional value of €843 billion and a market share of 5%, while EU

bonds record a total notional value of €620 billion and a market share of 4%. 90 Similarly, in the

UK market, the traded notional value of Spanish Bonos is €512 billion and for EU bonds it is

€526 billion, with each constituting 3% of the market share. 91 By the end of 2025, across the EU

and the UK, each constituted 4% of the total traded volume. 92

3. Investor Information

In addition to the market-based criteria discussed above, the Commission considers the

availability of investor information to be a relevant factor in the inclusion determination because

it enhances investor protection. For example, the Commission has historically considered the

See ICMA H1 2025 Report, 26 (“EU bonds have surpassed their previous benchmark and are trading at an

average size 7% higher than in Q1 2022. . . [w]hile all other countries in the peer group continue to trade below their

2022 averages [but are showing signs of recovery]”).

ICMA H1 2025 Report, 17.

ICMA H1 2025 Report, 17. These are higher than UK Gilts, which stand at €342 and a 2% market share. See

ICMA H1 2025 Report, 17.

See ICMA H2 2025 Report, 8.

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availability of information in the English language to weigh in favor of inclusion. 93 U.S. market

participants have sufficient access to reliable information (in the English language) about EU

debt obligations. The European Commission has a platform dedicated to investor relations,

providing various types of information and resources including key details related to the debt

instruments, various aspects of the issuance process, as well as transaction data. 94

In summary, the Commission’s consideration of the above-described factors suggests that

futures on the debt obligations of the EU should be subject to the same regulatory treatment

under the Rule as futures on the debt obligations of the Designated Foreign Governments.

Accordingly, consistent with the public interest and for the protection of investors, the

Commission is proposing to amend Rule 3a12-8 to include the EU as a Designated Foreign

Government.

Request for Comment

The Commission generally requests comment from the public on the proposed

amendment to Rule 3a12-8 to designate the debt obligations of the EU as exempted securities

solely for the purposes of the offer, sale or confirmation of sale of Qualifying Foreign Futures

Contracts on those debt obligations. More specific requests for comment are set forth below.

Responses supported by empirical data are particularly helpful.

See, e.g., Japan Release, 51 FR 25997 (“satisfied that United States citizens have sufficiently ready access to

information in English in which to make informed trading decisions”). See also Australia, France and New Zealand

Release, 52 FR 42278 (“all petitioners that requested that Rule 3al2-8 be expanded to cover the debt securities of

Australia, France and New Zealand noted in their petitions that United States investors should have sufficient access

to information in English concerning the relevant futures markets and underlying debt instruments”). But see UK

and Canada Release, 49 FR 8597. When adding the UK and Canada, the Commission declined to incorporate a

disclosure requirement into the Rule, but it noted that investors had access to information about the governments, as

both countries had government debt issues registered in the U.S. The Commission did not address the availability of

investor information when adding Sweden and Belgium.

See generally, European Commission, The EU as Borrower—Investor Relations, available at

https://commission.europa.eu/strategy-and-policy/eu-budget/eu-borrower-investor-relations_en.

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Q1.

Are the factors used by the Commission to determine whether the list of

Designated Foreign Governments should be expanded sufficiently broad? Should

the Commission revise its approach or consider additional criteria or factors?

Q2.

Are the measures of what constitutes a liquid and active secondary market in EU

debt obligations described in this release appropriate? If not, what other measures

of liquidity should the Commission consider?

Q3.

What are the commenters’ views regarding the sufficiency or robustness of the

factors and data used by the Commission in section III.B. to support its views of

the EU and its debt obligations? Should other factors or evidence be considered

by the Commission in deciding whether to add the EU to the Rule? If so, what

additional evidence should the Commission consider in deciding whether to add

the EU to the Rule?

Q4.

As discussed above, the Dodd-Frank Act instructed the Commission to remove

from its regulations any references to credit ratings and replace them with

alternative standards of creditworthiness. As a result, the Commission is taking

into consideration other means of measuring credit worthiness for the purposes of

including EU debt obligations in the Rule. Is the Commission’s consideration of

risk weight in the context of this proposal appropriate? Should other alternatives

be considered and if so, which?

Q5.

Is the Commission’s consideration of collateral eligibility as an indicator of

liquidity appropriate in the context of this proposal? Should other indicators of

liquidity be considered? Please explain.

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Q6.

Do commenters believe that the Commission’s assessment of the EU as a

“unique” issuer akin to a sovereign issuer in capital markets is accurate? Is the

assessment that EU debt obligations are comparable to those of sovereign

members of the EU appropriate? Are there other metrics that the Commission

should have considered in analyzing the EU’s status relative to other sovereigns or

supranationals?

Q7.

Is the fact that eleven EU member states already qualify as Designated Foreign

Governments under the Rule a relevant factor weighing in favor of adding the EU

to Rule 3a12-8? Given that more than half of the Designated Foreign

Governments included in Rule 3a12-8 are EU member states, do commenters

believe that the EU is already functionally captured in the Rule insofar as its core

issuers 95 are already included in the Rule?

Q8.

Do market participants agree that there is sufficient investor information

regarding EU debt obligations that is publicly available to allow them to make an

informed decision?

Q9.

To what extent do market participants currently rely on Rule 3a12-8? Given the

CFMA, as well as the 2009 Exemptive Order, should the Commission repeal the

Rule? If the Commission were to repeal the Rule, what, if any, additional costs or

burdens would be borne by market participants? For example, if the Commission

were to repeal Rule 3a12-8, to the extent that FBOTs would be unwilling or

unable to register with the Commission to offer futures on debt obligations of the

Designated Foreign Governments, U.S. investors could be harmed by the loss of

See supra notes 49 through 51 and accompanying text.

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these hedging and risk management opportunities. Alternatively, given that the

2009 Exemptive Order also addresses futures on foreign debt, 96 do market

participants view Rule 3a12-8 as obsolete, redundant or possibly a source of

confusion?

Q10.

Should the Commission consider amending the Rule to include the debt

obligations of additional governments and/or entities in the Rule or excluding any

governments from the Rule? For example, should the Commission include the

debt obligations of other member states of the EU in the definition of Designated

Foreign Government Securities (Bulgaria, Croatia, Cyprus, Czechia, Estonia,

Greece, Hungary, Latvia, Lithuania, Luxembourg, Malta, Poland, Portugal,

Romania, Slovakia, and Slovenia)? If so, taking into account the considerations

used by the Commission to add Designated Foreign Governments to the list of

governments in the Rule, as described in section III.B. above, please explain why

such additional governments and/or entities should be included in the Rule.

Q11.

Should Rule 3a12-8 apply to cash-settled perpetual contracts to the extent they are

structured as security futures (as opposed to security-based swaps) or should Rule

3a12-8 exclude such contracts? What potential impact would each approach have

on markets for the underlier and for the futures markets?

The 2009 Exemptive Order applies to security futures based on debt that is issued or guaranteed by a foreign

government that is eligible to be registered with the Commission under Schedule B of the Securities Act or based on

a security that is issued by a “foreign private issuer” with a primary trading market outside of the U.S. See supra

note 34.

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Definitions in the Rule

1. Proposed Definition of “Debt Obligation of the European Union”

Although there is a generally understood meaning of “EU debt obligations” in common

and market parlance, there is not a defined term for debt obligations of the European Union in

the Exchange Act, the Securities Act or the rules thereunder. Accordingly, the Commission is

proposing to add the following definition: “The term debt obligation of the European Union shall

mean debt that is issued by the European Commission on behalf of the European Union where

the borrowings are direct and unconditional obligations of the European Union.” 97 This proposed

definition is designed to be consistent with the approach used in official European Commission

documents, where the EU is typically identified as both issuer and obligor, with the

understanding that the EU issuances are executed by the European Commission. 98

2. Limitations in the Current Definitions in Rule 3a12-8

As discussed above in section II, Rule 3a12-8 includes definitions that are intended to

ensure that the exemption facilitates the trading of futures contracts on Designated Foreign

Government Securities in the U.S. or to U.S. persons while requiring that offerings of the

underlying securities comply with applicable Federal securities laws. Specifically, the definition

of Designated Foreign Government Security provides that such securities are neither registered

Proposed Rule 3a12-8(a)(3).

The EU is the issuer of the debt, while the European Commission, its executive body, is the representative, as the

European Commission is empowered by treaty to borrow on behalf of the EU. See European Commission, The EU

as a Borrower—Investor Relations, available at https://commission.europa.eu/strategy-and-policy/eu-budget/euborrower-investor-relations_en. The EU itself is the obligor. See European Commission, EU Investor Presentation:

Investing in EU-Bonds & EU-Bills (Oct. 1, 2022), available at

https://commission.europa.eu/document/download/671431d2-89d7-4655-83d69bf5a09611df_en?filename=eu_investor_presentation_01oct2022.pdf (“All EU borrowings are direct and

unconditional obligations of the EU, and the EU is legally bound by the Treaty on the Functioning of the EU (Article

323) to service EU debt”).

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under the Securities Act nor the subject of any registered American depositary receipts. 99

Additionally, the definition of Qualifying Foreign Futures Contract provides that futures

contracts on a Designated Foreign Government Security must (1) require delivery outside the

U.S., which includes any of its possessions or territories and (2) be traded on or through a board

of trade as defined in 7 U.S.C. 2. 100

The limitations in the Rule’s definitions ensure that (i) transactions remain subject to

oversight, namely that the transactions would fall under the CFTC’s futures regulatory regime

applicable to (both foreign and domestic) boards of trade; 101 (ii) a domestic market in foreign

government securities would not develop absent registration; 102 (iii) the futures markets would

not be used to avoid the registration requirements and other provisions of the Federal securities

laws; 103 and (iv) the development of a domestic market in the unregistered securities is deterred

by the foreign delivery requirement. 104 The limitations contained in these definitions will apply

to EU debt obligations to the extent that the EU debt obligations are included in the definition of

Designated Foreign Government Security.

17 CFR 240.3a12-8(a)(1).

100

17 CFR 240.3a12-8(a)(2).

See Exemption of Certain Foreign Government Securities Under the Securities Exchange Act of 1934 for

Purposes of Futures Trading, Exchange Act Release No. 24209 (March 12, 1987), 52 FR 8875 (March 20, 1987)

(finding that elimination of the location requirement to allow trading on domestic boards of trade to be consistent

with providing hedging opportunities and promoting competition among boards of trade) (“Location Restriction

Release”). The Commission believed that the CFTC’s “oversight of domestic boards of trade would provide

effective safeguards against abuse” and that its antifraud authority would perform a similar function with respect to

futures trading on foreign boards of trade. See Location Restriction Release, 52 FR 8877.

101

See UK and Canada Release, 49 FR 8598 (explaining that “[t]he exclusion of registered securities from the

exemption was proposed to prevent futures trading from disrupting regulated markets for registered underlying

securities”).

102

See UK and Canada Release, 49 FR 8598 n.23 (citing concerns regarding the “[c]ircumvention of disclosure

policies” and “inconsistency with the Commission's general policy requiring registration prior to the distribution” in

the context of the unregistered securities requirement).

103

See UK and Canada Release, 49 FR 8596-97 (“the conditions are designed to minimize the impact of the

exemption on securities distribution and trading in the United States”).

104

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3. Request for Comment

Q12.

Should a definition of “debt obligations of the EU” be included within the Rule?

If so, does the proposed definition of “debt obligations of the EU” adequately

identify which EU debt obligations would be eligible under the Rule or are

additional descriptors and/or definitions necessary to specify which debt

obligations would qualify under the Rule? If additional descriptors are necessary,

please identify and explain them.

Q13.

The proposed definition of “debt obligations of the EU” is consistent with the

approach used in official European Commission documents and is limited to

borrowings that are direct and unconditional obligations of the European Union.

Should the limitation to borrowings that are direct and unconditional obligations

of the European Union be included in the definition of “debt obligations of the

EU” or should it be removed? Should the definition be changed to include indirect

obligations, conduit financing, or other financing structures? Alternatively, should

such a limitation be added to paragraph (a)(1) of Rule 3a12-8, which would limit

the term Designated Foreign Government Security to only include direct and

unconditional debt obligations of the Designated Foreign Governments and the

EU?

Q14.

Should the debt obligations of the EU be subject to the requirements in the

existing definition that the futures contract be traded on or through a board of

trade? Please explain.

Q15.

Should the exemption for futures on EU securities require that the underlying EU

securities have been neither registered under the Securities Act nor been the

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subject of any American depositary receipt so registered, as required by the Rule’s

current definition of “Designated Foreign Government Security”? Is the definition

appropriately tailored to ensure that a market for the underlying securities does

not develop in the U.S. absent compliance with the Federal securities laws?

Q16.

The Rule’s existing definition of a “Designated Foreign Government Security”

requires that it be neither registered under the Securities Act nor the subject of any

American depositary receipt so registered. 105 This aspect of Rule 3a12-8 was

intended to ensure that a market for the underlying securities not develop in the

U.S. The Commission adopted Rule 144A under the Securities Act in 1990, 106 and

it has since become a typical means of offering sovereign debt to QIBs in the U.S.

or offshore via a private placement allowing for subsequent resale among

QIBs. 107 Should the Commission incorporate this development into the Rule by

amending the definition of “Designated Foreign Government Security” to mean

(1) a security not registered under the Securities Act of 1933 nor (2) the subject of

(a) an offering under Rule 144A under the Securities Act or (b) any American

depositary receipt so registered, and (3) representing a debt obligation of the

issuers listed in the Rule? Please explain.

Q17.

Should the Rule require that the futures contract not allow for delivery of the

underlying EU securities in the U.S. or in any of its possessions or territories? Are

105

17 CFR 240.3a12-8(a)(1).

See Resale of Restricted Securities; Changes to Method of Determining Holding Period of Restricted Securities

under Rules 144 and 145, Securities Act Release No. 6862 (Apr. 23, 1990), 55 FR 17933 (Apr. 30, 1990).

106

See Accredited Investor Definition, Securities Act Release No. 10823 (Aug. 26, 2020), 85 FR 64234, 64257 (Oct.

9, 2020) (noting commenters’ support for expanding the QIB definition in light of the growth of the Rule 144A

market).

107

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the definitions for Designated Foreign Government Security and Qualifying

Foreign Futures Contracts appropriately tailored to ensure that a market for the

underlying EU securities does not develop in the U.S. absent compliance with the

Federal securities laws? Please explain.

IV. Economic Analysis

Introduction

The Commission is mindful of the economic effects that may result from the proposed

amendment to Rule 3a12-8, including the benefits, costs, and the effects on efficiency,

competition, and capital formation. 108 This Economic Analysis discusses the expected economic

consequences of the proposed amendment relative to the baseline, which consists of the current

market and regulatory environment in the absence of the proposed amendment.

Under the current framework, futures on the debt of the twenty-one Designated Foreign

Governments (11 of which are EU member states) are treated as futures on exempted securities,

are subject to the exclusive jurisdiction of the CFTC, and may be traded by U.S. persons on

CFTC-registered FBOTs via “direct access” or through certain CFTC-regulated intermediaries.

Rule 3a12-8 requires that futures contracts on Designated Foreign Government Securities be

traded on or through a board of trade as defined in 7 U.S.C. 2., which would include both

domestic futures exchanges registered as DCMs, as well as FBOTs. 109 By contrast, futures on

Exchange Act section 3(f) requires the Commission, when it is engaged in rulemaking pursuant to the Exchange

Act, and is required to consider or determine whether an action is necessary or appropriate in the public interest, to

consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and

capital formation. See 15 U.S.C.78c(f). In addition, Exchange Act section 23(a)(2) requires the Commission, when

making rules pursuant to the Exchange Act, to consider among other matters, the impact that any such rule would

have on competition, and not to adopt any rule that would impose a burden on competition that is not necessary or

appropriate in furtherance of the purposes of the Exchange Act. See 15 U.S.C. 78w(a)(2).

108

See 17 CFR 240.3a12-8(a)(2). However, the Rule also requires that the futures contracts require delivery outside

the United States, including any of its possessions or territories.

109

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debt issued by the EU are treated as security futures, subject to the joint jurisdiction of the

Commission and the CFTC, and U.S. persons may access those security futures through the

conditional pathway established by the Commission’s 2009 Exemptive Order, which is generally

limited to QIBs and certain intermediaries acting on their behalf. Under that pathway,

transactions must be executed on, or subject to the rules of, an exchange or contract market that

has its principal place of business outside the U.S. with clearing and settlement occurring outside

the U.S.

This asymmetric treatment is not grounded in a meaningful economic distinction between

EU debt obligations and the debt obligations of the Designated Foreign Governments that are EU

member states; it reflects the fact that the Rule’s list of Designated Foreign Governments was

last expanded before the EU developed into a significant debt issuer. As discussed in the baseline

below, EU debt obligations have achieved a scale, liquidity profile, and credit quality

increasingly comparable to those of sovereign issuers already designated under the Rule. The

U.S. Prudential Regulators assign a zero percent risk weight to exposures to the European

Commission, which is the same risk weight assigned to exposures directly and unconditionally

guaranteed by the U.S. government. The ECB assigns EU bonds to the same haircut category as

sovereign bonds. 110 A growing share of market participants treat EU debt obligations as a

substitute for the debt of core euro-area sovereign issuers. 111 However, the current regulatory

treatment of futures on EU debt obligations does not reflect these economic characteristics.

The consequences of this disparity impact two categories of U.S. market participants.

First, U.S. investors that do not qualify as QIBs currently do not have access to futures on EU

110

See supra note 46 and accompanying text.

111

See supra note 44 and accompanying text.

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bonds, because the application of the 2009 Exemptive Order (i.e., the only currently available

pathway for U.S. persons to trade these instruments) is limited to QIBs and certain

intermediaries. Thus, non-QIB investors cannot transact in futures on EU bonds to hedge

exposures to EU debt obligations, even though they may trade futures on the debt of the 11

designated member states. Second, U.S. QIB investors that treat EU debt obligations and the debt

obligations of Designated Foreign Governments that are EU member states as substitutable

instruments for euro interest-rate hedging face more restrictive access conditions for futures on

EU bonds than for futures on the debt of Designated Foreign Governments. These differences

may lead to less efficient hedging and operational differences in cross-margining and collateral

management for participants who treat the two as economically equivalent. Some participants

may rely on imperfect proxy hedges in place of direct positions.

The proposed amendment is designed to address this disparity by applying the same

regulatory treatment to futures on EU debt as futures on the debt of Designated Foreign

Governments that are EU member states. It does so through two elements: (i) adding the EU to

the Rule’s list of issuers whose debt is designated as exempted securities solely for purposes of

the offer, sale, or confirmation of sale of Qualifying Foreign Futures Contracts on those

obligations; and (ii) adding a definition of “debt obligation of the European Union” to identify

the instruments within the Rule’s scope. This means that the Rule’s conditions (i.e., board-oftrade execution, non-registration of the underlying securities, and foreign delivery) would apply

to futures on EU debt obligations in the same manner as they currently apply to futures on the

debt obligations of the currently Designated Foreign Governments. By deeming EU debt

obligations to be exempted securities for this purpose, the amendment would remove futures on

EU debt from the security futures regime and place them under the CFTC’s futures framework,

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which would permit them to be traded on U.S. futures exchanges and accessed by a broader

population of U.S. market participants.

The proposed amendment to Rule 3a12-8 could have several economic effects. The

proposed amendment could create benefits such as the expansion of the number of venues

through which U.S. market participants may trade futures on EU bonds and could broaden access

to those markets for certain categories of U.S. traders who currently face restrictions (e.g., nonQIB investors). The amendment could also produce benefits that do not depend on trading

migrating to U.S. exchanges: (i) non-QIB investors that currently hedge EU debt exposures with

proxy instruments could hedge them directly, and (ii) participants holding positions in both

futures on EU bonds and futures on the debt obligations of Designated Foreign Governments that

are EU member states could manage those positions under a single regulatory framework.

At the same time, if U.S. futures exchanges start trading futures on EU bonds, the

proposed amendment to Rule 3a12-8 could make it more difficult for regulators to surveil trading

activity across jurisdictions, which in turn may make it more difficult to detect some forms of

market manipulation in the markets for EU bonds and futures on EU bonds. However, existing

data sharing agreements the CFTC has with FBOTs and MOUs it maintains with foreign

regulators are likely to limit this effect. 112 There is also the risk that liquidity could decrease for

futures on EU bonds if new trading venues increase fragmentation without a corresponding

increase in trading volume. In addition, liquidity could decrease for futures on the debt

obligations of Designated Foreign Governments that are EU member states if market participants

substitute futures on EU bonds for their use of futures on the debt obligations of EU member

states, although any such effect would depend on the degree to which participants regard the two

112

See infra section IV.B.4 for further discussion of surveillance between futures markets.

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instruments as substitutes. 113 The proposed amendment is not expected to impose direct

compliance costs on exchanges or market participants, because it permits, rather than requires,

the activity to which it applies.

The Commission has considered these and other economic effects discussed below. The

Commission is providing a qualitative assessment of them, supplemented by quantitative

information where available. The Commission is unable to quantify many of these effects for two

reasons. First, the Commission cannot reasonably obtain certain data that may inform its analysis

of those effects. Second, even where the Commission has some data, quantification is not

practicable due to the number and type of assumptions necessary to quantify certain economic

effects, which render any such quantification unreliable. Where feasible, the Commission has

incorporated available quantitative information, such as measures of the size and activity of the

relevant markets, to inform its analysis. The Commission’s inability to quantify certain benefits,

costs, and effects does not imply that the Commission believes such benefits, costs, or effects are

less significant, and the Commission requests that commenters provide relevant data and

information to assist the Commission in quantifying the economic consequences of the proposed

amendment to Rule 3a12-8.

Baseline

1. Current State of Market Access for U.S. Investors

U.S. investors can currently trade futures contracts on EU debt obligations through the

conditional pathway established by the 2009 Exemptive Order. 114 Under Rule 3a12-8, the

See infra section IV.C.2 for a discussion of the effects of cross product substitutions between futures on the debt

obligations of the EU and futures on the debt of Designated Foreign Governments that are EU member states.

113

See supra section II. Background and supra note 59 and accompanying text; see also Eurex, Eurex to launch

futures on EU bonds (Apr. 23, 2025), available at https://www.eurex.com/ex-en/find/news-center/news/Eurex-tolaunch-futures-on-EU-bonds--4411966.

114

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Commission designates the debt 115 of specific foreign governments as “exempted securities” for

purposes only of the offer, sale or confirmation of sale of a Qualifying Foreign Futures Contract.

As such, futures on the debt of these Designated Foreign Governments, 11 of which are EU

member states, 116 are subject to the exclusive jurisdiction of the CFTC. By contrast, futures on

EU debt are subject to the separate regulatory framework that applies to security futures, subject

to the joint jurisdiction of the Commission and the CFTC.

The 2009 Exemptive Order grants conditional exemptive relief permitting U.S. QIBs, 117

and certain intermediaries acting on their behalf, to trade foreign security futures on a non-U.S.

exchange, provided that the security futures are issued, cleared, and settled outside the U.S. 118

In contrast, under Rule 3a12-8, futures on the debt of Designated Foreign Governments

fall under the CFTC’s foreign-futures regime as “exempted securities” and are accessible by a

115

See supra note 39.

The 11 EU member states are France, Austria, Denmark, Finland, the Netherlands, Germany, Ireland, Italy, Spain,

Belgium and Sweden. See supra note 37.

116

A QIB is generally an institutional investor that, in the aggregate, owns and invests on a discretionary basis at

least $100 million in securities of issuers not affiliated with it. See 17 CFR 230.144A(a)(1); see supra note 28 and

accompanying text. The Commission granted the 2009 Exemptive Order as an exemption from Exchange Act

section 6(h)(1). See Order Granting an Exemption from Exchange Act section 6(h)(1) for Certain Persons Effecting

Transactions in Foreign Security Futures, Exchange Act Release No. 34-60194, 74 FR 32200 (July 7, 2009).

Additionally, as of 2025, one study estimated that 4,000-5,000 institutions in the United States qualified as QIBs.

See The Vanderbilt Terminal for Securities Tokenization Regulation, available at

https://sectokenization.com/offering-exemptions/rule-144a-institutional-token-resales.

117

See supra note 26. The 2009 Exemptive Order further conditions relief on the security futures being issued,

cleared, and settled outside the United States, without physical delivery in the United States. Both Eurex

Deutschland and ICE Futures Europe hold current Orders of Registration as FBOTs under 17 CFR Part 48,

permitting eligible U.S. members and participants to access their electronic trading platforms (CFTC, List of

Foreign Boards of Trade Registered with the Commission,

https://www.cftc.gov/IndustryOversight/IndustryFilings/ForeignBoardsofTrade). Eurex lists futures on the debt of

Designated Foreign Governments that are EU member states—including Euro-Bund (Bund), Euro-OAT (OAT),

Euro-BTP (BTP), and Euro-Bono (Bono) futures—as well as futures on EU bonds; ICE Futures Europe lists Long

EU Bond Index futures. Bund, OAT, BTP, and Bono are the debt securities of the Federal Republic of Germany, the

French Republic, the Republic of Italy, and the Kingdom of Spain, respectively. See Eurex, Eurex to launch futures

on EU bonds (Apr. 23, 2025), https://www.eurex.com/ex-en/find/news-center/news/Eurex-to-launch-futures-on-EUbonds--4411966; ICE Futures Europe Circular 24/143, https://www.ice.com/publicdocs/circulars/24143.pdf

118

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broader set of U.S. investors (i.e., they can be traded by both QIBs and non-QIBs). 119 An FCM

carrying such positions for U.S. customers must register with the CFTC (or, if a foreign firm,

qualify for exemptive relief under 17 CFR 30.10), hold customer margin as the “secured

amount” under 17 CFR 30.7, furnish the risk disclosure statement required by 17 CFR 30.6, and

file the required reports. 120 An IB soliciting or accepting such orders must likewise register (or

qualify for relief) and provide the required disclosures, with its business carried and guaranteed

by a registered FCM (or a § 30.10-exempt firm). 121 As of September 16, 2024, following CFTC

rule changes, U.S.-registered IBs may become direct members of Eurex, 122 and obtain full

electronic access to trade Bund futures, BTP futures, 123 and futures on the debt of other

Designated Foreign Governments during U.S. market hours. 124

119

See 17 CFR part 30 (Foreign Futures and Foreign Options Transactions); see also 17 CFR 30.1(a).

See 17 CFR 30.4 (registration); 17 CFR 30.7 (secured amount); 17 CFR 30.6 (risk disclosure statement); 17 CFR

30.10 (exemptive relief for foreign firms); see also CFTC, Foreign Markets and Products—Sales of Foreign

Products, https://www.cftc.gov/International/ForeignMarketsandProducts/foreignprodsales.html. As of May 31,

2026, the intermediary market comprised of 71 FCMs, 883 IBs, 1,068 CPOs, and 1,172 CTAs registered with the

CFTC and Members of the National Futures Association. The Commission is unaware, however, of the number or

identity of those intermediaries with access to FBOTs. See National Futures Association, Membership and

Directories, https://www.nfa.futures.org/registration-membership/membership-and-directories.html.

120

121

See 17 CFR 30.4; 17 CFR 30.6; 17 CFR 30.10.

An FBOT registered with the CFTC may grant “direct access”—the ability to enter orders directly into the

FBOT's trade-matching system—to U.S.-located participants specified by CFTC rule, including proprietary traders,

registered FCMs and IBs submitting customer orders (with a registered FCM, or a firm exempt under 17 CFR 30.10,

guaranteeing the trades), and registered or exempt CPOs and CTAs. See 17 CFR part 48. The IB category was added

by the CFTC’s 2024 amendments to part 48. See Registration of Foreign Boards of Trade, 89 FR 66201 (Aug. 15,

2024); CFTC Press Release No. 8935-24 (July 29, 2024); Eurex, U.S. Introducing Broker Direct Eurex

Access, https://www.eurex.com/ex-en/rules-regs/eurex-derivatives-us/us-introducing-broker-direct-eurex-access.

122

“Bund futures” means exchange-traded futures contracts on the notional long-term debt obligations of the Federal

Republic of Germany (Bundesanleihen), and “BTP futures” means exchange-traded futures contracts on the notional

long-term debt obligations of the Republic of Italy (Buoni del Tesoro Poliennali, or “BTPs”). See German Finance

Agency (Bundesrepublik Deutschland – Finanzagentur GmbH), Federal Bonds (Bund), https://www.deutschefinanzagentur.de/en/federal-securities/types-of-federal-securities/federal-bonds (last visited Jul. 25, 2026); Italian

Ministry of Economy and Finance, Department of the Treasury, Treasury Bonds—BTP (Buoni del Tesoro

Poliennali), https://www.dt.mef.gov.it/en/debito_pubblico/titoli_di_stato/quali_sono_titoli/btp/ (last visited Jul. 25,

2026). For a discussion of EU bond futures, see supra section III.B.

123

See supra note 118 for discussions on which exchanges list futures on the debt obligations of Designated Foreign

Governments that are EU member states.

124

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2. Differentiated Regulatory Treatments for Futures on EU Member State- and

EU Debt Obligations

Differentiated regulatory treatment exists between futures on the debt obligations of EU

member states that are Designated Foreign Governments and futures on debt obligations of the

EU, even though the characteristics of EU debt obligations have grown increasingly comparable

to those of the designated EU sovereigns. More specifically, the EU’s credit quality resembles

that of designated EU sovereigns, its issuance has grown to approximate an established

sovereign’s scale and structure, and its market liquidity is consistent with a sovereign-style

curve. 125 As a result, a growing EU-level cash and repurchase agreement (repo) transaction

market coexists with a futures market that remains more complete 126 for the debt obligations of

EU member states that are Designated Foreign Governments than for EU debt obligations.

Under the current regulatory framework, U.S. investors seeking to hedge EU debt

obligations face a different set of available instruments than those seeking to hedge the debt

obligations of EU member states that are Designated Foreign Governments under Rule 3a12-8.

Futures on the debt obligations of those member states are subject to the exclusive jurisdiction of

the CFTC and may be traded on U.S. futures exchanges by a broader set of U.S. investors (i.e.,

QIBs and non-QIBs), while futures on EU debt obligations are currently treated as security

futures and may only be accessed by certain eligible U.S. persons (i.e., QIBs) through registered

See infra section IV.B.3. See also Report from the Commission to the European Parliament and the Council,

COM (2025) 588 final, available at https://eur-lex.europa.eu/legalcontent/EN/TXT/?uri=CELEX%3A52025DC0588. See also European Commission, Ninth half-yearly report on the

execution of the EU borrowing and lending operations (Apr. 14, 2026): https://commission.europa.eu/strategy-andpolicy/eu-budget/eu-borrower-investor-relations/analyses-and-reports_en; European Commission press release,

available at

https://ec.europa.eu/commission/presscorner/api/files/document/print/en/ip_25_1597/IP_25_1597_EN.pdf.

125

In the sense of a state-contingent complete market where contracts are traded for every conceivable future state of

the world.

126

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FBOTs under the conditions of the 2009 Exemptive Order. 127 This regulatory asymmetry affects

both categories of U.S. investors, though in different ways: non-QIB investors do not have

access to futures on EU bonds, while QIB investors face more restrictive access conditions for

futures on EU bonds than for futures on the debt of Designated Foreign Governments. This

asymmetry in available hedging instruments may lead non-QIB investors to rely on strategies

such as proxy hedges when seeking to hedge exposures to EU debt obligations. 128

The asymmetry in the treatment of futures on the debt obligations of EU member states

and futures on the debt obligations of the EU may be associated with fragmented liquidity and

potential differences in transaction costs. The current framework may also affect operational

considerations such as cross-margining, collateral use, and broker connectivity for participants

who treat EU member state and EU debt obligations as substitutable instruments for euro rate

hedging purposes.

3. EU Debt Quality and Characteristics

EU debt issuance has grown substantially in scale and turnover and has developed

secondary-market support mechanisms, including dedicated quoting arrangements and

repurchase transaction infrastructure. EU debt obligations exhibit credit-quality characteristics

comparable to the debt obligations of EU member states that are currently Designated Foreign

Governments under Rule 3a12-8.

In less than a decade, EU debt has reached a scale comparable to that of EU sovereign

issuers currently designated under Rule 3a12-8, measured by outstanding debt and issuance

Trades on U.S. futures exchanges under Rule 3a12-8 are subject to the definitions discussed in supra section

III.D.2. See also supra section IV.B.1 discussing the current state of market access for different types of U.S.

investors.

127

For example, US non-QIB investors may use German Bund futures (or another highly correlated European

government bond future) as a proxy hedge.

128

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depth. 129 The EU issued €152.3 billion in long‑term funding in 2025, reaching a total outstanding

debt of €702 billion; 130 the EU executed 22 EU bill auctions throughout 2025, 131 ending the year

with outstanding short-term EU bills totaling €36.8 billion. 132 In comparison, at the end of 2024,

general government public debt of Germany, the largest economy in the European Union, stood

at approximately €2.51 trillion; Germany issued €290.5 billion in capital-market instruments in

2025 (via 77 auctions and two syndicated transactions) and €134.5 billion in Bubills (short-term

German treasury bills). 133 Belgium and Sweden were added as Designated Foreign Governments

in the most recent determinations to amend Rule 3a12-8. 134 In Sweden, the National Debt Office

reported central government debt of €110.50 billion (SEK 1,221 billion) as of May 2026, of

The EU first entered the market as a large-scale issuer in October 2020 through its first SURE social bond

program transaction, while the first NextGenerationEU program EU-Bond transaction took place on June 14, 2021.

See European Commission Newsroom, Introduction: Taking Stock and Looking Ahead (Dec. 16, 2025), available at

https://ec.europa.eu/newsroom/budget/items/914954/en; see also European Commission, NextGenerationEU:

European Commission raises €20 billion in first transaction to support Europe's recovery (June 14, 2021), available

at https://ec.europa.eu/commission/presscorner/detail/en/IP_21_2982. For a detailed description of EU as a

borrower, see https://commission.europa.eu/strategy-and-policy/eu-budget/eu-borrower-investor-relations_en.

129

See European Union: EU Transactions in Q4 2025, available at

https://ec.europa.eu/newsroom/budget/items/914832/en. Long‑term issuance in the first half of 2025 carried an

average maturity of roughly 12 years (based on six syndicated transactions and seven auctions). See Report from the

Commission to the European Parliament and the Council, 1 January 2025 to 30 June 2025, available at https://eurlex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52025DC0588.

130

With allocations of €805 million, €798 million, and €1.185 billion in separate maturities. See EU Transactions in

Q4 2025, available at https://ec.europa.eu/newsroom/budget/items/914832/en.

131

See European Commission — “BUDGET‑ EU Transactions in Q4 2025” (15 Dec 2025) available at

https://ec.europa.eu/newsroom/budget/items/914832/en; European Commission, EU Transactions in Q4 2025 (Dec.

15, 2025), available at https://ec.europa.eu/newsroom/budget/redirection/item/914832/en/2706. See also

https://commission.europa.eu/news-and-media/news/results-03-12-2025-auction-eu-bills-2025-12-03_en. See also

supra note 124.

132

See Bundesrepublik Deutschland - Finanzagentur GmbH, Investor Presentation Quarterly (July 2026), available

at https://www.deutsche-finanzagentur.de/fileadmin/user_upload/Institutionelleinvestoren/praesentation/Investor_Presentation_quarterly.pdf. See also Issuance Calendar Update Q4/2025 (Sept.

2025), available at https://www.deutsche-finanzagentur.de/fileadmin/user_upload/Institutionelleinvestoren/praesentation/2025_09_18_Issuance_Outlook_Q4_2025.pdf.

133

134

See supra section III.B.

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which €87.02 billion (SEK 961.5 billion) comprised government bonds. 135 Belgium’s federal

government had outstanding debt totaling €553.1 billion at the end of December 2025. 136

The composition of EU debt at the end of 2025 reflects an issuance structure that

approximates those of established sovereign issuers: roughly 95 percent of outstanding debt was

issued as bonds and about 5 percent as bills, with EU bonds serving as the dominant funding

instrument and EU bills providing short‑term money‑market flexibility. 137 This structure closely

mirrors the debt profiles of mature sovereign issuers already included in Rule 3a12-8, which

typically maintain a large, liquid benchmark bond curve supported by a smaller bill program

used for cash management and short‑term funding needs. 138

The trading volume in the secondary market for EU bonds has grown rapidly, and the

supporting market infrastructure is comparable to that of the bonds of other Designated Foreign

See Swedish National Debt Office, Government debt by markets, available at

https://www.riksgalden.se/en/statistics/statistics-regarding-swedens-central-government-debt/government-debt-bymarkets/. The central government debt of Sweden increased by €8.42 billion (SEK 93 billion) during 2025, available

at https://www.riksgalden.se/en/press-and-publications/press-releases-and-news/news/2026/higher-governmentdebt-but-lower-cost-in-2025/. Federal debt of the Belgian government rose by around €22.03 billion during the

second half of 2025, available at https://news.belgium.be/sites/default/files/news-items/attachments/202412/Borrowing_requirements_2025.pdf. All Swedish Krona (SEK) values were converted to EUR using Bloomberg

L.P., SEK-EUR X-RATE (SEKEUR:CUR), 0.0905 EUR, as of 4:31 PM EDT, July 24, 2026, available at

https://www.bloomberg.com/quote/SEKEUR:CUR. Note that at the same point in time, 1 EUR was valued at 1.1389

USD.

135

See Press Release from Belgian Debt Agency, available at https://news.belgium.be/en/federal-government-debtend-december-2025.

136

At the end of June 2025, for example, the EU had €661.6 billion in EU bonds outstanding and €33.3 billion in EU

bills outstanding, resulting in approximately 95 to 5 percent shares. See Report from the Commission to the

European Parliament and the Council, 1 January 2025 to 30 June 2025, at 3, available at https://eurlex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52025DC0588. By comparison, France maintained a similar

composition, with approximately €2.66 trillion in outstanding medium- and long-term securities (Obligations

Assimilables du Trésor, or “OATs”) and approximately €220 billion in outstanding short-term securities (Bons du

Trésor à taux fixe et à intérêts précomptés, or “BTFs”), resulting in roughly 92 to 8 percent shares. See Agence

France Trésor, Negotiable Debt Outstanding at 31 July 2026 (updated Aug. 7, 2026), available at

https://www.aft.gouv.fr/en/debt-key-figures; see also Agence France Trésor, OATs Debt Outstanding, available at

https://www.aft.gouv.fr/en/encours-detaille-oat (last visited on Aug. 24, 2026); Agence France Trésor, BTFs Debt

Outstanding, available at https://www.aft.gouv.fr/en/encours-detaille-btf (last visited on Aug. 24, 2026); Agence

France Trésor, Monthly Bulletin, available at https://www.aft.gouv.fr/en/bulletins-mensuels (last visited on Aug. 24,

2026).

137

138

See supra section III.B for additional comparisons between EU bonds and the bonds of EU sovereign nations.

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Governments that are EU member states. 139 In the first half of 2025, EU bond trading volume

was on par with some of the major EU sovereigns, e.g., it was similar in size to the trading

volume on Spain’s bonds and about a third of the size of the trading volume of Germany’s. 140

This represents a more than five-fold increase in trading volume between the first half of 2022

and the end of 2025. 141 Since November 2023, the EU has implemented a quoting arrangements

system that encourages EU primary dealers to post reliable bid-offer quotes for EU bonds on

leading electronic trading platforms (MTS and BrokerTec); in the first month alone, 24 out of 37

primary dealers participated, delivering nearly €900 million in daily average trading volumes,

with peak days exceeding €2 billion. 142 The EU implemented the EU Repo Facility in October

2024, enabling primary dealers to access eligible EU bond securities from the EU on a temporary

basis via Eurex Repo and cleared through Eurex Clearing. 143

4. Surveillance Across U.S. Futures Exchanges, FBOTs, and Bond Trades

U.S. futures exchanges and FBOTs maintain various surveillance mechanisms. These

mechanisms are both embedded within each exchange, and facilitated through various

agreements, some of which are cross-border. Some of these mechanisms are enforced by the

CFTC through Memoranda of Understanding (MOUs) with market authorities in other countries.

EU member states have surveillance requirements set by the European Securities and Markets

Many market participants view the EU as a sovereign issuer. See supra notes 44 (describing ICMA’s inclusion of

the EU in its sovereign issuer report) and 45 (noting that in a European Commission survey, 80% of investors saw

EU bonds as substitutes for core area government bonds) and accompanying text.

139

140

See supra Table 2 for information on EU and sovereign bond trading volume.

141

See supra section III.B.2 for further discussions on EU bond trading volume.

See European Commission Newsroom, available at https://ec.europa.eu/newsroom/budget/items/810218/en,

https://ec.europa.eu/newsroom/budget/items/800637/en.

142

See European Commission Newsroom, available at https://ec.europa.eu/newsroom/budget/items/849939/en. See

also https://www.eurexgroup.com/xetra-en/newsroom/press-releases/list-press-releases/EU-Commission-joinsEurex-s-repo-market-4138824.

143

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Authority (ESMA). ESMA rules facilitate the sharing of information across the market for

futures on EU debt obligations and the market for EU debt obligations.

The CFTC requires U.S. futures exchanges to maintain active oversight of trades

conducted on their exchanges. 144 FBOTs are required to maintain similar mechanisms as a

condition of providing direct access to U.S. investors. 145 Furthermore, as a condition of

registration with the CFTC, an FBOT must agree to share transaction and clearing data with the

CFTC. 146 In addition, the CFTC maintains MOUs with foreign authorities to cooperate on

registration. 147

ESMA rules are particularly relevant, to the extent that debt obligations of the EU trade

within the framework of the ESMA. The ESMA has rules governing surveillance, including the

collection of client IDs and execution data. 148 European exchanges are also members of the

Intermarket Surveillance Group, a cooperative that facilitates the sharing of information among

self-regulatory organizations (SROs) for regulatory purposes. 149 In addition, the EU relies upon

sharing of trade data across member states, along with maintaining repositories containing over-

144

See 17 CFR 242.821(b) and 17 CFR 38.157.

145

See 17 CFR 48.7(b) and (g).

See, e.g., Exhibit H – Information Sharing Agreements Among the Commission, the Foreign Board of Trade, the

Clearing Organization, and Relevant Regulatory Authorities, available at

https://www.cftc.gov/sites/default/files/groups/public/@otherif/documents/ifdocs/orgiceeexhibthjun160927.pdf.

146

See, for example, the MOU on the sharing of information on derivatives clearing organizations that have applied

or may apply to the European Securities Markets Authority (ESMA) to be recognized as central counterparties,

available at https://www.cftc.gov/sites/default/files/idc/groups/public/@internationalaffairs/documents/file/cftcesma-clearingmou060216.pdf. A more concise summary of the MOU is available at

https://www.cftc.gov/PressRoom/PressReleases/7384-16.

147

See European Securities and Market Authority, Final Report: Guidelines on transaction reporting, order record

keeping and clock synchronisation under MiFID II (Oct. 10, 2016) at 7-9, 26- and 29, available at

https://www.esma.europa.eu/sites/default/files/library/20161451_final_report_on_guidelines_mifid_ii_transaction_reporting.pdf.

148

See Intermarket Surveillance Group, Overview, available at https://isgportal.org/page/isg_overview (last visited

Aug.19, 2026).

149

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the-counter (OTC) trade data. 150 However, there is no requirement compelling any EU regulatory

authority to share with any U.S. regulatory authority OTC trade data on debt obligations of the

EU. OTC bond trades may be relevant to coordinate surveillance in the futures market for EU

debt obligations and corresponding spot markets.

5. Competition in the Market for Trading Services

Exchanges in the futures market compete to supply traders with execution services. These

trading venues, which compete to match traders with counterparties, provide a framework for

trading and for the dissemination of trading information. Currently, the Commission’s 2009

Exemptive Order only allows QIBs or their intermediaries to trade futures on foreign sovereign

bonds not treated as exempted securities under Rule 3a12-8 (including futures on EU debt

obligations) on certain FBOTs. 151 The market for trading services in futures on EU debt

obligations currently consists of two exchanges: Eurex Deutschland 152 and ICE Futures

See European Commission, Derivatives/EMIR (December 4, 2025), available at

https://finance.ec.europa.eu/financial-markets/financial-markets-policy/post-trade-services/derivatives-emir_en and

European Commission, The implementation of market surveillance in Europe, available at https://single-marketeconomy.ec.europa.eu/single-market/goods/building-blocks/market-surveillance/organisation_en (last visited

Aug.19, 2026.

150

In addition, the 2009 Exemptive Order requires that the foreign security future be issued, cleared, and settled

outside the U.S. See supra notes 28, 29 and accompanying text.

151

Eurex Deutschland began offering clearing services for Euro-EU bond futures on September 10, 2025. See Eurex,

Fixed Income Derivatives: introduction of Euro-EU Bond-Futures (Apr. 23, 2025) at 1, available at

https://www.cftc.gov/sites/default/files/filings/orgrules/25/04/rules04282519706.pdf. These futures were announced

as physically deliverable contracts with maturities ranging from eight to twelve years. See Lucy Carter, MARKETS

MEDIA GROUP, Eurex launches EU bond futures (Apr. 23, 2025), available at https://www.fi-desk.com/eurexlaunches-eu-bond-futures/.

152

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Europe 153, which are CFTC-registered FBOTs. 154 In contrast, under Rule 3a12-8, futures on the

debt obligations of Designated Foreign Governments are allowed to be traded by U.S. investors

(including both QIBs and non-QIBs) on U.S. futures exchanges and FBOTs. 155 However, futures

on the debt obligations of Designated Foreign Governments that are EU members are currently

traded on FBOTs and not on U.S. futures exchanges. 156

Benefits and Costs

The benefits that may accrue from the proposed amendment to Rule 3a12-8 would

primarily affect U.S. investors who currently trade futures on EU bonds on FBOTs (i.e., QIB

investors), and U.S. investors who may wish to trade futures on EU bonds but currently cannot

do so under the existing regulatory framework (i.e., non-QIB investors). The EU may also

benefit from the proposed amendment if they spur more trading in EU bonds. To the extent that

futures on EU debt obligations begin to trade on U.S. futures exchanges, the proposed

amendment could make it more difficult for regulators to coordinate surveillance across

ICE Futures Europe began offering Long EU Bond Index futures on December 10, 2024. See Intercontinental

Exchange, Inc., ICE Launches Long European Union Bond Index Futures (December 10, 2024), available at

https://ir.theice.com/press/news-details/2024/ICE-Launches-Long-European-Union-Bond-IndexFutures/default.aspx. The cash-settled futures have as the underlying the ICE 8-13 Year European Union Index. This

index is a subset of the ICE European Union Index including all securities with a remaining term to final maturity

greater than or equal to 8 years and less than 13 years. ICE European Union Index tracks the performance of EUR

denominated debt publicly issued by the European Union in the Eurobond or Euro member domestic markets.

Qualifying securities must have a fixed coupon schedule and a minimum amount outstanding of EUR 1 billion. See

Intercontinental Exchange, Inc., Long EU Bond Future (2024), available at

https://www.ice.com/publicdocs/Long_EU_Bond_Future.pdf.

153

Eurex Deutschland and ICE Futures Europe became registered FBOTs on 10/31/2016. See Commodity Futures

Trading Commission, Foreign Boards of Trade (FBOT), available at

https://www.cftc.gov/IndustryOversight/IndustryFilings/ForeignBoardsofTrade (last visited on Aug. 19, 2026).

154

155

See supra section III.D.2.

As of June 11, 2026, neither CME Group nor ICE Futures U.S. currently trade products on sovereign futures

under Rule 3a12-8. See CME Group, CME Group All Products – Codes and Slate, available at

https://www.cmegroup.com/markets/products (last visited Aug. 19, 2026); Intercontinental Exchange, Inc., Products

- Futures & Options, available at https://www.ice.com/products/Futures-Options?filter=IFUS (last visited Aug.19,

2026). See supra note 118 for discussions on which exchanges list futures on the debt obligations of Designated

Foreign Governments that are EU member states.

156

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jurisdictions, which may make it more difficult to detect some forms of market manipulation in

the EU bond future and spot markets. However, these difficulties are likely to be mitigated by

existing CFTC MOUs with foreign regulators. It is also possible that liquidity could decrease for

futures on EU debt obligations and also for futures on the debt obligations of Designated Foreign

Governments that are EU member states, although any such effects would likely be limited due

to greater competition among futures exchanges and the degree of substitutability between

futures on EU debt obligations and futures on the debt obligations of EU member states. The

proposed amendment is not expected to impose direct compliance costs on exchanges or market

participants.

1. Benefits

The proposed amendment to Rule 3a12-8 would create benefits for U.S. investors and the

EU. U.S. investors may benefit from access to additional venues for trading futures on EU debt

obligations. U.S. non-QIB traders may benefit from gaining access to futures on EU bonds. The

EU may also benefit from an expanded market for its debt, which may lower transaction costs.

However, these benefits may be limited to the extent that trading in futures on EU bonds remains

primarily on FBOTs. For instance, the sovereign debt included in Rule 3a12-8 does not currently

have corresponding futures trading on U.S. futures exchanges. 157

Under the proposed amendment, U.S. investors would be able to trade futures on EU debt

obligations on U.S. futures exchanges in addition to FBOTs. In the absence of the proposed

amendment, these futures are currently considered security futures and thus could only be traded

on FBOTs, in accordance with and subject to the conditions specified in the Commission’s 2009

157

See supra note 156 and accompanying text.

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Exemptive Order. 158 These FBOTs may not be subject to the jurisdiction of the Commission as

securities futures exchanges, but they would still be subject to CFTC rules applicable to futures

exchanges. 159

Trading on U.S. futures exchanges could spur changes to FBOTs, to the benefit of QIBs.

The entry of U.S. exchanges into the futures market for EU bonds may increase exchange

competition, which could lower costs for QIBs. 160 For example, FBOTs could lower access fees

or introduce other incentives for QIBs to attract order flow away from U.S. futures exchanges. 161

They could also increase the number of futures products based on debt obligations of the EU

offered on each exchange. For example, an FBOT could offer EU futures products on 8 and 10year EU bonds, whereas before they might have only offered futures on 8-year EU bonds. 162

U.S. non-QIB traders would also be able to trade EU debt futures on U.S. futures

exchanges or on FBOTs. 163 The benefits to these traders would come from gaining access to

futures on EU debt obligations. 164 With the ability to trade these futures, non-QIB traders would

have a hedge against trades involving EU bonds. This could expand trading of debt obligations

The addition of EU debt obligations to Rule 3a12-8 would allow for the trading of futures on EU debt obligations

outside of the security futures regime. See supra notes 23-32 and accompanying text (describing the requirements

under the 2009 Exemptive Order).

158

See Commodity Futures Trading Commission, Foreign Markets, Products, & Intermediaries: Access to Foreign

Markets from the U.S., available at

https://www.cftc.gov/International/ForeignMarketsandProducts/foreignmkts.html (last visited Aug.19, 2026).

159

160

Spreads could also fall due to greater non-QIB participation. See infra note 165 and accompanying text.

Greater competition among exchanges could lower access fees. See, for example, Baldauf, Markus & Mollner,

Joshua, Trading in Fragmented Markets, 56 J. Fin. & Quant. Analysis (2021) (“Trading”).

161

Eurex lists a suite of German Federal government bond futures spanning the 2-, 5-, 10-, and 30-year maturities—

the Euro-Schatz, Euro-Bobl, Euro-Bund, and Euro-Buxl futures, respectively. See Bundesrepublik Deutschland –

Finanzagentur GmbH, Futures Market, available at https://www.deutsche-finanzagentur.de/en/federalsecurities/trading/futures-market (last visited Aug. 19, 2026).

162

Futures trades are subject to margin requirements. See supra note 24. Non-QIB traders could engage in futures

trades if they satisfy margin requirements, among other possible requirements.

163

Trades are currently limited to QIBs or their intermediaries, in accordance with the 2009 Exemptive Order. See

supra note 117.

164

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of the EU by U.S. non-QIB traders. Futures could also serve as a substitute for trading directly in

debt obligations of the EU, particularly if OTC trades in EU bonds are scarce in the United

States.

Access to futures on EU debt obligations would also allow non-QIB investors who

currently use correlated instruments, such as Bund futures or other EU member state government

bond futures, as proxy hedges for exposures to EU debt obligations to hedge those positions

directly. Because a proxy hedge of this kind introduces basis risk (i.e., the risk that the price of

the proxy instrument and the price of the hedged EU debt obligations do not move together),

replacing such a proxy hedge with a direct hedge using futures on EU bonds could reduce that

risk. The magnitude of this benefit would depend on how closely available proxy instruments

track EU debt obligations and on the extent to which non-QIB investors adopt futures on EU

debt obligations.

In addition, greater participation by non-QIB traders could contribute to greater market

depth and narrower bid-ask spreads, reducing transaction costs for QIB and non-QIB traders. 165

However, this effect depends on whether the proposed amendment results in a material increase

in trading activity, which is uncertain given that existing sovereign debt futures designated under

Rule 3a12-8 are not currently traded on U.S. futures exchanges. 166

More broadly, QIBs that treat debt obligations of the EU and the debt of Designated

Foreign Governments that are EU member states as substitutable instruments for euro interest-

See, for example, Stoll, Hans R., Inferring the Components of the Bid-Ask Spread: Theory and Empirical Tests,

44 J. Fin. 115 (1989), available at https://onlinelibrary.wiley.com/doi/epdf/10.1111/j.1540-6261.1989.tb02407.x

165

See supra note 156 and accompanying text. If trading activity does increase, leading to an increase in liquidity,

this could also lower manipulation risk. For example, see Comerton-Forde, Carole and Putnins, Talis J., Stock Price

Manipulation: Prevalence and Determinants 18 Rev. Fin. 23 (2014), available at

https://academic.oup.com/rof/article/18/1/23/1614377 ("Stocks with high levels of information asymmetry and mid

to low levels of liquidity are most likely to be manipulated").

166

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rate hedging, and that therefore hold positions in both types of futures, currently manage those

positions under two different regulatory regimes. By bringing futures on EU debt obligations

within the same framework that governs futures on the debt obligations of designated EU

member states, the proposed amendment could reduce the operational friction arising from

managing positions under two different regulatory regimes, for example, by enabling QIBs to

manage both types of positions on U.S. futures exchanges. 167 To the extent U.S. futures

exchanges and their associated clearing organizations offer margin offsets between the two types

of positions, QIBs could also reduce total margin requirements and improve collateral efficiency,

though whether such offsets would be available is uncertain.

The EU could benefit from lower borrowing costs if the proposed amendment spurs more

trading in EU bonds. This could occur if increased access to the market for futures on EU debt

obligations, or reduced transaction costs, made hedging EU bond exposures more viable. The

increased ability of U.S. non-QIB traders to hedge could cause demand for EU bonds to increase

in the secondary market, which could narrow bid-ask spreads and reduce the liquidity premium

that investors require to hold EU debt obligations. Lower liquidity premiums may, in turn, lower

borrowing costs in the primary market.

These benefits may be limited if there is no material increase in the number of market

participants. 168 This could occur for several reasons. For example, FBOTs may develop

competitive incentives to prevent order flow from migrating to U.S. exchanges, which could also

result in benefits that accrue to all U.S. investors. However, the lack of uptake on U.S. futures

Under the Proposed Amendment, non-QIBs could also manage their positions in futures on EU debt obligations

and futures on debt obligations of Designated Foreign Governments that are EU member states under the same

regulatory regime.

167

See supra note 156 and accompanying text. Sovereign debt futures included under Rule 3a12-8 seem to lack

uptake on U.S. futures exchanges.

168

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exchanges to sovereign debt futures included under Rule 3a12-8 may also indicate a lack of

interest among U.S. non-QIB traders. This behavior could repeat for futures on EU debt

obligations. Another reason could be that these contracts require delivery outside of the U.S., its

possessions, or its territories. 169

2. Costs

The proposed amendment to Rule 3a12-8 could create indirect costs. If U.S. futures

exchanges start trading futures on EU debt obligations, market surveillance could become more

difficult because of coordinating surveillance across jurisdictions. 170 However, this is likely to be

mitigated by existing CFTC MOUs with foreign regulators. There is also the possibility that

volatility and spreads could rise. There is a possibility that liquidity could be reduced in the

market for futures on EU debt obligations and also in the market for futures on the debt

obligations of EU member states, although any such effect would likely be limited. The proposed

amendment is not expected to impose direct compliance costs on exchanges or market

participants because the proposed amendment grants permissions, but does not impose any

obligations. The indirect costs described below may be limited if trading of futures on EU debt

obligations remains on current FBOTs.

There is a possibility that greater speculative trading by U.S. retail investors could

increase volatility in the market on EU debt obligations and the corresponding futures market. 171

169

See supra note 20.

Surveillance frameworks factor into the costs of the proposed amendment to Rule 3a12-8. The proposed

amendment to Rule 3a12-8 would permit the trading of futures on EU debt obligations on U.S. futures exchanges.

Since futures on EU debt obligations could be traded in the both the U.S. and the EU, surveillance in the markets for

EU debt obligations and their underlying securities could change. A potential cost of the rule is an increase in

surveillance issues that span different jurisdictions, which would be mitigated by the surveillance frameworks of the

U.S. and EU.

170

Futures for EU debt obligations could increase in popularity, particularly if new futures products are released for

retail investors. For example, Euronext recently issued mini-sized government bond futures for retail investors. See

171

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Academic research shows that retail participation in other derivatives markets, such as the

options markets, 172 can lead to increased volatility, and it is possible that this finding could hold

true for the futures market as well. To the extent such volatility does arise, non-QIB traders may

themselves be more impacted by adverse movements in their futures positions, particularly if

they lack the risk-management tools available to institutional participants. Non-QIBs’

participation in futures on EU debt obligations could increase if products are introduced similar

to those for futures on the debt of EU member states. 173 However, differences between the

options and futures markets, or lack of interest by non-QIBs, may limit speculative retail trading

activity in futures on EU bonds. 174

If the number of trading venues for futures on EU debt obligations increases without a

proportional increase in total participation and trading volume, order flow in those markets could

become fragmented. Fragmentation could reduce liquidity within individual venues, increasing

the adverse selection risk faced by liquidity providers. To offset that risk, liquidity providers may

widen their bid-ask spreads, raising transaction costs for all participants in the market for futures

on EU debt obligations. 175 However, as discussed above, greater competition among exchanges

could limit total cost increases if they also lower exchange access costs.

Euronext, Euronext launches an innovative suite of fixed income derivatives on main European government bonds

(September 22, 2025), available at https://www.euronext.com/en/about/media/euronext-press-releases/euronextlaunches-innovative-suite-fixed-income-derivatives.

See Brogaard, Jonathan, Han, Jaehee, and Won, Peter Y., Does 0DTE Options Trading Increase Volatility?

available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4426358. In addition, greater retail participation in

options markets seems to create greater volatility in the underlying stock. See Lipson, Marc L., Tomio, Davide, and

Zhang, Jiang, A Real Cost of Free Trades: Retail Option Trading Increases the Volatility of Underlying Securities,

available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4383463.

172

173

See supra note 171.

One difference between options and futures markets is the possibility of unlimited losses for both sides of a

futures trade. For options, unlimited losses are possible when selling uncovered call or uncovered put options.

174

175

Exchange fees could fall while spreads could increase in the market for futures on EU debt obligations. See, for

example, Trading supra note 161.

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A related but unique effect could arise in a different market: futures on the debt of

Designated Foreign Governments that are EU member states. This cost would result from

substitution between instruments. Participants that currently use member-state futures (e.g., Bund

or BTP futures) as proxies for hedging debt obligations of the EU may shift some of that activity

to futures on EU debt obligations once the latter become available on U.S. futures exchanges, or

to non-QIB traders on FBOTs. 176 Unlike the fragmentation effect described above, which

disperses existing futures order flow on EU debt obligations across more venues, this substitution

effect would reduce the total volume of activity in member-state futures markets. To the extent

such migration occurs, liquidity in the affected member-state futures could be modestly reduced,

which could widen spreads in those markets. Any such effect would likely be limited, and it

would depend on the degree to which participants regard the two instruments as substitutes and

on the extent of any increase in trading in futures on EU bonds.

Another potential cost of the rule is that, to the extent that futures on EU debt obligations

start trading on U.S. futures exchanges, it may be more difficult to conduct cross-market

surveillance. However, these costs associated with the proposed amendment may be limited to

the extent that all trading on futures on EU debt obligations remained on current FBOTs and the

proposed amendment did not result in changes in trading activity in the market for futures on EU

debt obligations. 177

Because futures on EU debt obligations could be traded in both the U.S. and the EU

under the proposed amendments, surveillance in the market for futures on EU debt obligations

See supra section IV.C.1. for a discussion of the benefits from U.S. traders no longer needing to trade proxies for

future on EU debt obligations.

176

177

See supra section IV.C.1. for a discussion of the possibility that the proposed amendment to Rule 3a12-8 does not

change behavior or participation in the market for futures on EU debt obligations.

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and the corresponding underlying markets could change. It may be more difficult to detect

market manipulation spread across multiple jurisdictions. A trader may manipulate prices in the

futures market in order to affect the underlying bond market. For example, a trader could engage

in wash sales at a particular price in order to raise futures prices, then sell bonds in the secondary

market at the time that the futures expire. This manipulation could take place on multiple futures

exchanges across different jurisdictions. However, both the EU and the U.S. have rules requiring

surveillance of futures markets and exchanges and the CFTC has existing data sharing

agreements with FBOTs and MOUs it maintains with foreign regulators. 178 This could mitigate

any gaps and coordination issues between the EU and U.S. regulatory regimes and limit

difficulties in detecting manipulation risks which cross jurisdictions. However, U.S. regulators

lack access to data on OTC trades in EU bonds, making manipulation in the secondary EU bond

market more difficult for U.S. regulators to detect. 179

Effects on Efficiency, Competition, and Capital Formation

1. Efficiency

The proposed amendment could affect market efficiency in three respects: its effect on

the informational efficiency of prices, its effect on the operational efficiency of managing

hedging positions, and its effect on the allocation of trading activity across substitutable

instruments.

With respect to informational efficiency, to the extent that the proposed amendment

results in additional trading venues and a broader population of market participants in the

178

See supra section IV.B.4 for a discussion of surveillance of futures markets.

179

See id.

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markets for futures on EU bonds, it could contribute to price discovery in those markets. 180

Futures markets can contribute to price discovery in underlying cash markets when futures prices

reflect information from a broad and competitive set of market participants. If the proposed

amendment were to increase participation in the market for EU debt obligations, this could

improve the informational content of prices for debt obligations of the EU, which in turn could

improve price discovery and therefore price efficiency in the cash markets for futures on EU debt

obligations through the arbitrage and hedging activity that links the two markets. 181 Furthermore,

increased participation could lower transaction costs, which could also improve price

efficiency. 182 However, these effects are not certain. The relationship between market

participation and price discovery depends on the informational quality of the additional order

flow. If additional participation consists primarily of less-informed traders, the effect on price

discovery could be limited or could introduce additional noise into prices.

Separately, if the proposed amendment were to fragment order flow across a larger

number of venues without a corresponding increase in total trading activity, it could reduce

rather than improve liquidity. 183 A reduction in liquidity could contribute to higher bid-ask

spreads, which could reduce price efficiency. 184

With respect to operational efficiency, the proposed amendment could reduce the costs

that participants incur in executing a given hedging strategy, independent of any effect on price

See supra section IV.C.1. for a discussion of the proposed amendment to Rule 3a12-8 on changes in market

participants and trading venues in the market for futures on EU bonds.

180

181

See id.

182

Id.

See supra section IV.C.2. for a discussion of greater fragmentation of order flow for futures on EU debt

obligations leading to adverse effects.

183

184

See id.

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discovery. QIBs that hold positions in both futures on EU debt obligations and futures on the

debt of Designated Foreign Governments that are EU member states currently manage those

positions under two different regulatory regimes; the proposed amendment could reduce the

associated operational friction, including potential issues that might arise in cross-margining and

collateral-management complexity, by bringing both types of futures within the same regulatory

framework. 185 Relatedly, non-QIB investors that currently hedge exposures to EU debt

obligations with proxy instruments could hedge those exposures directly, reducing the basis risk

associated with proxy hedging. Unlike the price-efficiency effects described above, these

operational efficiency gains do not depend on U.S. futures exchanges listing futures on EU debt

obligations or on a material increase in trading activity; they arise for any affected participant

upon the proposed amendment taking effect. The magnitude of these gains would depend on the

number of participants affected and, in the case of margin efficiencies, on whether the relevant

exchanges and clearing organizations offer margin offsets.

With respect to allocative efficiency, by applying the same regulatory treatment to futures

on EU debt obligations as to futures on the debt of Designated Foreign Governments that are EU

member states, the proposed amendment would allow market participants to choose between

these instruments on the basis of their economic characteristics rather than on the basis of

differing regulatory accessibility. To the extent participants currently select futures on EU

member-state debt obligations over futures on EU debt obligations because member-state futures

are more readily accessible, the proposed amendment could improve the allocation of activity

between the two instruments. Relatedly, the migration of hedging activity from futures on EU

See supra section IV.C.1 for a discussion of the reduction in cross-margining and collateral-management

complexity due to the proposed amendment.

185

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member-state debt obligations to futures on EU debt obligations could also reflect an

improvement in allocative efficiency, insofar as it represents activity moving to the instrument

that more closely matches participants’ underlying economic exposures. 186

2. Competition

The proposed amendment could increase competition among trading venues and

intermediaries in the market for trading services in futures on EU debt obligations.

To the extent that U.S. futures exchanges elect to list futures on EU debt obligations, they

would compete with existing FBOTs for order flow in the market for futures on EU debt

obligations. This competition could affect the terms on which trading venues offer access to

market participants, including exchange access fees, margin requirements, and other conditions

of participation. Whether this competitive dynamic would materially affect venue access

conditions is uncertain. If U.S. exchanges list futures on EU debt obligations, competition could

also arise among clearing organizations, potentially affecting clearing fees and the availability of

margin offsets for participants who clear multiple products at the same organization. 187

This competitive dynamic could produce effects even if trading in futures on EU debt

obligations continues to occur primarily on FBOTs. The prospect of U.S. futures exchanges

entering the market for futures on EU debt obligations could prompt incumbent FBOTs to

respond competitively, for example by lowering access fees, offering other incentives to retain

See supra sections IV.C.1. and IV.C.2. for a discussion of costs and benefits due to U.S. investors no longer

needing to use the futures on the debt obligations of EU member states as a proxy for futures on EU debt

obligations.

186

Some exchanges may utilize independent clearing organizations, and sometimes for specific products. For

example, CBOE Futures Exchange (CFE) uses the Options Clearing Corporation for all of its products. In addition,

CFE intends to use multiple clearing houses, with CBOE Clear U.S., LLC as the clearing organization for

financially settled bitcoin and ether futures. See Securities Exchange Act Release No. 102760 (Apr. 8, 2025), 90 FR

15180. No matter the arrangement by an exchange, clearing would have to take place overseas. See supra note 32.

187

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order flow, or offering a greater variety of futures products on the debt obligations of the EU. 188

To the extent FBOTs respond in this manner, the resulting benefits could accrue to the U.S.

investors that access those venues, including QIBs, regardless of whether trading migrates to

U.S. exchanges in material volume.

Competition among venues could also affect the cost of intermediation. If trading venues

compete for order flow by adjusting their access conditions or fee structures, intermediaries may

respond by adjusting their own fee structures or by registering to trade on additional venues. 189

This could affect the cost of intermediation for end users of markets for futures on EU debt

obligations. However, the extent of these effects depends on whether U.S. futures exchanges list

futures on EU debt obligations and whether the proposed amendment results in a material change

in the competitive dynamics of the market. 190

3. Capital Formation

The proposed amendment could improve capital formation, although there is a limited

possibility that it may reduce capital formation if there is an increase in fragmentation of order

flow across multiple venues without a corresponding increase in trading volume.

To the extent that the proposed amendment reduces transaction costs and improves

liquidity in markets for futures on EU debt obligations, it could support demand for EU debt in

secondary trading markets. 191 Greater secondary market liquidity can lower the cost of capital for

See supra section IV.C.1 on how FBOTs may respond to competition from U.S. futures exchanges for order flow

in the futures market for EU debt obligations.

188

See supra section IV.C.1 for a discussion of how trading venues may adjust their access conditions or fee

structures to compete for order flow due to the proposed amendment to Rule 3a12-8. See supra section IV.A.1. for a

discussion of the current state of the market for intermediary services.

189

See supra section IV.C.1. for a discussion of the possibility that the proposed amendment to Rule 3a12-8 has no

effect on the market for futures on EU debt obligations.

190

See supra section IV.C.1. for a discussion of why demand for EU bonds could increase in the secondary market

due to the proposed amendment to Rule 3a12-8.

191

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issuers by reducing the liquidity premium that investors require to hold EU debt obligations. If

the proposed amendment were to have the effect of reducing the liquidity premium, it could

modestly reduce the EU’s cost of raising capital.

However, this transmission mechanism involves several steps, each of which is uncertain,

and the overall effect on EU capital formation may be limited. The proposed amendment could

also affect capital formation through its effects on U.S. market participants. To the extent that the

amendment reduces the cost of accessing markets for futures on EU debt obligations for QIBs, it

could free up capital that might otherwise be absorbed by hedging costs, potentially making

additional capital available for deployment in other markets, including through domestic

reinvestment in U.S. capital markets. 192 However, the magnitude of this effect is uncertain and

depends on the extent to which the proposed amendment reduces hedging costs.

If the proposed amendment were to fragment order flow across a larger number of venues

without a corresponding increase in total trading activity, this could reduce liquidity and widen

bid-ask spreads in the markets for futures on EU debt obligations, as discussed above. 193 To the

extent that occurred, lower secondary market liquidity could increase the liquidity premium that

investors require to hold EU bonds, which could raise the EU’s cost of capital.

Reasonable Alternatives

1. Restrict proposed amendment to QIBs

As an alternative to the proposed amendment to Rule 3a12-8, the Commission could add

the EU to Rule 3a12-8 while restricting futures trading on U.S. exchanges of the debt obligations

of the EU to QIBs, thereby limiting the expansion of market access to the population already

192

See supra section IV.C.1. for a discussion of why access costs could decrease.

193

See supra section IV.C.1.

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permitted to trade futures on EU debt obligations under the 2009 Exemptive Order. This would

reduce the surveillance difficulties compared to the proposed amendment. 194 However, the

benefits could also be reduced. U.S. non-QIB traders would be unable to trade these futures,

which could reduce U.S. investors’ incentives to hold debt obligations of the EU because nonQIB investors would be unable to use futures to hedge those positions. 195 As a result, this

alternative could reduce capital formation for both the EU and the U.S. relative to the proposed

amendment. 196

2. Rescind Rule 3a12-8

As another alternative to the proposed amendment, the Commission could rescind Rule

3a12-8 in its entirety. This would remove the exempted security designation from the debt of all

Designated Foreign Governments currently listed in the Rule, making futures on those

governments’ debt subject to the same regulatory treatment as futures on EU debt obligations,

i.e., trading pursuant to the conditions of the 2009 Exemptive Order. Under this alternative,

futures on the debt of all currently Designated Foreign Governments, including the eleven EU

member states currently listed in Rule 3a12-8, would be treated as security futures and subject to

the joint jurisdiction of the Commission and the CFTC. Compared to the proposed amendments,

coordinating surveillance across jurisdictions would be less difficult, since futures trades could

only be effected through QIBs or their intermediaries 197 and the number of venues on which such

futures could be traded would be reduced. 198

194

Id.

195

See supra section IV.C.1. for a discussion of the benefits to U.S. non-QIB investors.

196

See supra section IV.D.3. for a discussion of the effects of the proposed amendment on capital formation.

See supra notes 28 and 29 for discussions on why only QIBs or their intermediaries would be allowed to trade

futures on EU debt obligations.

197

198

See supra section IV.C.2. for a discussion of surveillance issues.

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Non-QIB investors would be unable to trade the sovereign debt futures of those countries

currently included under Rule 3a12-8. QIB investors could trade the futures through FBOTs. 199 If

no FBOT regis

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